Is the launch industry on the rebound?by Jeff Foust
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| “Supply and demand has really equalized, and it happened quite quickly,” said Rob Peckham of Sea Launch. “The industry is as healthy as it’s been in a number of years.” |
Peckham said Sea Launch has a full manifest through the end of 2007: 12 launches in the next 23 months. (The first of those 12 took place last week with the successful launch of EchoStar 10.) The unique nature of Sea Launch’s operations—involving transporting the launch site and command ship from their home port in Long Beach, California, to the equatorial launch site in the Pacific Ocean and back—does put a limit on the number of launches they can perform. Peckham said the company was studying how it could optimize its operations, either to increase scheduled flexibility or potentially to add capacity.
Sea Launch isn’t alone in experiencing increased demand. Jean-Yves Le Gall, CEO of Arianespace, has seen the effects on the market, especially in the area of depressed launch prices. “If I compare prices now with demand that we observed two or three years ago, I think we have a range of increase of about 30 to 40 percent,” he said. Len Dest, executive vice president of ILS, said his company, which markets both the Atlas 5 and Proton, is “cautiously optimistic” about upcoming launch procurements.
The filling manifests across the board, have forced customers to start planning launch procurements farther in advance than in recent years. “A year or two ago it was a spot market, with people buying at discounted prices, but now the sophisticated [satellite] operators are buying long-term options for the future and locking up orders,” said Dest. “The spot market is gone,” Peckham concurred.
Bifurcating market
The nature of the commercial geosynchronous orbit (GEO) launch market is changing, though. Dest said that the market today consists of two distinct segments. One is comprised of large GEO communications satellites, weighing over four tons each. That market is served by all the major large commercial launchers, but they have a limited number of launch opportunities each year. When demand is high, as it appears to be today, “that’s good for us.”
A second market segment involves much smaller GEO communications satellites, weighing about two tons each. Orbital Sciences Corporation has carved out a niche building such satellites for operators who either don’t need a bigger, more capable (and more expensive) satellite or who want to add flexibility to their existing fleets of larger spacecraft. Other satellite manufacturers are taking note, including Lockheed Martin and EADS, which recently partnered with the Indian space agency ISRO on a joint small GEO spacecraft design.
The smaller satellites pose a challenge to some launch providers. With the exception of Arianespace, launch companies typically don’t fly more than one major payload on each flight, and the existing large commercial vehicles are oversized for such smaller spacecraft. This has led companies to pursue new options to better serve this market. “That’s a very tumultuous market,” said Dest. “There are a lot of entrants pursuing that market.”
| “That’s a very tumultuous market,” said ILS’s Len Dest of the small GEO satellite market. “There are a lot of entrants pursuing that market.” |
For example, Sea Launch has developed Land Launch, which uses almost exactly the same Zenit 3SL rocket but launched from the Baikonur Cosmodrome in Kazakhstan rather than from the floating Odyssey launch platform. Land Launch will focus on the smaller GEO satellites, which Peckham believes will comprise about a quarter of the overall market in the next few years. “There could be demand for three to four small satellites a year,” he said, “and it’s our aim to garner 33 to 50 percent of that market.”
Arianespace, which already offers commercial Soyuz launches through its Starsem joint venture with Russia, will operate Soyuz launches from its spaceport in Kourou, French Guiana starting in 2008. While Soyuz launches from Kourou will have a capability to launch small GEO satellites similar to that offered by Land Launch, Le Gall said the Soyuz capability will be primarily used to launch ESA and European government payloads that are too small to fly on an Ariane 5. “I don’t expect too much competition between Land Launch and Soyuz in Kourou,” he said.
ILS, though, doesn’t have a vehicle to serve the small GEO market effectively, although it has recently sold one Proton launch of an Orbital-built satellite. ILS could enter the market, Dest said, with the Angara, a new Russian vehicle under development. The medium-sized Angara 3, launched from Baikonur, could compete directly with Soyuz and Land Launch. However, the Angara program has been beset by funding delays from the Russian government, whose top priority is to develop the larger Angara 5 to launch payloads from the Plesetsk Cosmodrome in northern Russia that would normally fly on Protons at Baikonur. “When that program reaches the point when the Angara 3 addresses this market,” said Dest, “we’ll make a business decision” on whether to proceed.
And what of the NGSO market, which vaporized at the turn of the decade? Larry Williams, vice president of SpaceX, said that there may be signs of life there. There is a “quiet resurrection and revolution” going on as the surviving satellite operators of “Big LEO” (Iridium and Globalstar) and “Little LEO” (ORBCOMM) satellite systems make plans to replenish or replace their existing systems. “SpaceX has been approached by virtually every Big LEO and Little LEO operator,” he said. How much demand materializes, though, remains uncertain: while ORBCOMM is making plans to replacing its aging satellite fleet in the next few years, Iridium has stated that its existing constellation of satellites should remain functional through 2014. Globalstar, which has purchased contracts for launching eight replacement satellites in the next couple of years, has yet to decide what its next-generation system will look like: one possibility calls for ditching its NGSO constellation in favor of a single GEO satellite serving key regions.
Depressed supply
However, one of the key factors that has filled launch manifests and raised launch prices is not a dramatic increase in demand but a decline in the supply—actual or anticipated—of commercial launchers. China, for example, has been effectively excluded from the commercial market since around 2000 because of US export control restrictions. China has tried to re-enter the market by launching so-called “ITAR-free” commercial satellites built in Europe, or domestically-built spacecraft, but is otherwise excluded from the vast majority of commercial launch opportunities.
| Boeing’s Dan Collins on why he won’t pick a date the ULA will be finalized: “Put it this way: I picked the Seahawks, too.” |
The best example, though, is Boeing, which withdrew the Delta 4 from the commercial market in 2003, citing weak demand and unaffordably low launch prices, and has kept the Delta 4 off the market since then. At the Satellite 2005 conference Dan Collins, vice president for expendable launch systems at Boeing, caused a stir when he declared that Boeing would bring the Delta 4 back on the commercial market as early as the end of the year. However, Collins almost immediately began to backtrack from that pronouncement and today the Delta 4 still only serves government customers.
At this month’s conference, Collins avoided the issue, ducking around questions about the Delta 4’s commercial future. Asked what it would take for the commercial market to become compelling enough to bring the Delta 4 back, Collins gave an elaborate non-answer, emphasizing his company’s commitment to its civil and military customers. “Delta 4 is focused on its customer base, and we are working with the government customer, and we’re focusing on that market and making sure we are providing reliable value-added services to the US government,” he said.
Meanwhile, while the Atlas 5 remains available commercially—it performed a single commercial launch in 2005, with another commercial mission scheduled for this spring—it is launching at a rate far lower than originally envisioned, and ILS has been winning more commercial Proton launch contracts than Atlas ones. Dest, though, said ILS remains committed to keeping the Atlas on the market, especially for launches of very heavy satellites. “As prices are rising in the industry overall, Atlas becomes extremely competitive,” he said. “We will continue to sell Atlases commercially.”
Hanging over both the Atlas and Delta is the fate of the United Launch Alliance (ULA), a joint venture to combine the management and manufacturing of both vehicles. The ULA was announced in early May with expectations that it would be up and running by the end of 2005. However, the ULA has yet to win the necessary regulatory approvals from the Federal Trade Commission and the Defense Department. Collins said they are making slow progress, but declined to predict when the final approvals would come through. “Put it this way: I picked the Seahawks, too.”
| “If we look back at 2001, 2002, 2003, we know exactly what happens when you introduce new launch vehicles into that marketplace: a lot of competition, a lot of introductory pricing, a lot of turmoil,” said Dest. |
Williams is concerned that the ULA, along with increased government support for the EELV program, could end up making the Atlas and/or Delta more cost-competitive on the commercial market, at the expense of SpaceX and other companies. “It artificially but dramatically improves the cost problems of the Delta and Atlas, and is incredibly unfairly anti-competitive,” he said. “Unfortunately, I’m not being hyperbolic when I say that it could severely undermine new privately-funded ventures in the launch industry that ultimately are critical to national and economic security.” SpaceX has been attempting to block the formation of the ULA in court, but late last week a federal judge dismissed the company’s complaint, according to a published report.
The more things change…
How much has the commercial launch industry changed in the last year? It’s useful to compare the comments made at this month’s conference with those at last year’s conference. (See “Stagflation, overcapacity, and the commercial launch industry”, The Space Review, March 28, 2005) For example, last year Jim Maser, president of Sea Launch, said his company’s manifests were full for the next two years, with five launches planned for 2005. Sea Launch actually carried out four launches last year, but won five new launch orders. That strong commercial manifest has apparently caused the company to scale back its efforts to win government business, an area where Sea Launch has been shut out because of its multinational nature. “We continue to make our capabilities known in Washington,” Peckham said, although another Sea Launch official suggested that the company would be spending less time on that than it had in the recent past.
One of the themes of last year’s panel was that despite strong near-term demand, the industry still struggled with overcapacity in the launch market in the long term. That concern, though, didn’t materialize at this year’s session, but it seems unlikely that it has gone away. Indeed, not only has there been no reduction in long-term capacity, SpaceX announced last fall plans to develop the Falcon 9, an EELV-class launcher that would compete with existing large commercial launchers. Meanwhile, China looks for ways to return to the commercial market, while India and Japan continue to consider entering the market.
The first big battleground may be in the small GEO satellite market, as new or repackaged vehicles try and compete for a relatively small number of orders. “If we look back at 2001, 2002, 2003, we know exactly what happens when you introduce new launch vehicles into that marketplace: a lot of competition, a lot of introductory pricing, a lot of turmoil,” said Dest.
Given that long-term forecasts for the GEO market call for only modest growth in launches over the next decade, that competition could spread to the overall commercial launch market, especially if rising near-term prices encourage new entrants or re-entrants. The overcapacity challenge still looms over the industry, despite the positive nature of the market today.