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Odyssey Launch Platform
The Odyssey floating launch platform returns to home port in February after suffering some minor damage in the Zenit-3SL launch failure. (credit: Sea Launch)

When bad launches happen to good companies

Over the last decade the commercial launch industry has experienced a series of ups and downs. The industry was doing quite well in the late 1990s, riding the telecom boom and the development of several large constellations of low Earth orbit communications satellites. The boom went bust early this decade, and the industry went into the doldrums, with a sharp drop in launch demand and even the withdrawal of vehicles like the Delta 4, which Boeing took off the commercial launch market because prices had dropped dramatically in response to the low demand. In the last couple of years, though, the market has improved, with increased demand and rising prices (see “Is the launch industry on the rebound?”, The Space Review, February 20, 2006).

Overlaid on those long-term trends, though, are events that have short-term, but serious, effects on the industry, most notably launch failures. No vehicle is immune from them (although Lockheed Martin/United Launch Alliance would likely happily point out their long unbroken record of successful Atlas launches), and they can happen at any time. Arianespace had a setback when the inaugural Ariane 5 ECA failed in late 2002, and International Launch Services (ILS) suffered a failure of the Proton M last year. Now it’s Sea Launch’s turn, with the dramatic failure of its Zenit-3SL in late January on its floating launch pad in the Pacific Ocean. What sort of impact will such a failure have on an industry that already has tight manifests and increasing prices?

Sea Launch rights itself

In the immediate aftermath of the failure, the situation looked grim for Sea Launch. A webcast of the launch—copies of which spread across the Internet thanks to video-sharing sites like YouTube—showed the Odyssey launch platform engulfed in a fireball as the Zenit-3SL appeared to fall back onto the platform an instant after liftoff. However, the vessel survived the explosion in remarkably good shape, with the only major damage the loss of a 250-tonne steel flame deflector. Rob Peckham, president and general manager of Sea Launch, said during a panel session at the Satellite 2007 conference in Washington a few weeks after the accident that all the Odyssey needed was “parts and paint”.

The investigation into the launch failure is ongoing, although Sea Launch confirmed in a press release last week that the failure was caused by an “anomaly” in the vehicle’s first stage engine that caused it to shut down (Russian media reports last month indicated that the shutdown was caused by some kind of particulate contamination in the engine, a detail not included in the Sea Launch release.) The announcement, though, didn’t indicate when the overall investigation would be complete, echoing Peckham’s comments in the February forum. “We’re going to leave no stone unturned, and we’re going to get to the bottom of this,” he said. “When is that going to be? I don’t know.” Peckham did say that he hoped to carry out two more launches this year, with the return to flight launch in October.

“We’re going to leave no stone unturned, and we’re going to get to the bottom of this,” Peckham said. “When is that going to be? I don’t know.”

The Sea Launch investigation has not only forced it to stand down, it has also delayed the introduction of the Land Launch service, which would use a nearly-identical variant of the Zenit-3SL, the Zenit-3SLB, to launch smaller satellites from the Baikonur Cosmodrome. These delays have caused several customers to change their launch plans. SES Americom moved its AMC-21 satellite from Land Launch to Arianespace in February, and HNS followed in March, shifting its large Spaceway 3 satellite from Sea Launch to Arianespace. Just last week, Intelsat announced that it was moving two satellites planned for separate Land Launch flights onto a single Ariane 5. What’s noteworthy about the shifts is that, despite continued statements from the industry about full manifests, both HNS and Intelsat were able to secure Ariane launches for later this year.

Even before the Sea Launch failure, though, there were concerns in the industry about schedule slips for both Sea Launch and Land Launch, which Peckham blamed on supply chain issues in Russia and Ukraine. “Customer interest in Sea Launch and Land Launch last year and the year before was more than we had anticipated, and it was more than our factories could handle,” he said. “We feel as bad as anyone for the delays we have caused specifically on the Land Launch program.” He said that they are ramping up production “in a methodical fashion”, but claimed the delays were not the result of bad planning. “We would never go out and offer anything that we did not firmly believe that we could deliver.”

Tough times for new entrants

With strong demand and—at least temporarily—constrained supply, the present would seem to provide a golden opportunity for companies to enter or reenter the commercial launch market. However, Boeing has shown little, if any, interest in bringing the Delta 4 back, focusing on government sales though the new United Launch Alliance joint venture. However, SpaceX has shown an interest of trying to crack the market in a couple years with its Falcon 9 vehicle under development, which promises to be considerably less expensive than existing vehicles. That lower cost, though, won’t necessarily translate into customer interest, even in the current market.

During the Satellite 2007 panel session, Gwynne Shotwell, vice president of business development for SpaceX, asked DirecTV senior vice president James Butterworth whether he would be interested in a Falcon 9 at a price of $35 million a launch. Butterworth was noncommittal, at best. “DirecTV is not driven by the price of either the launch vehicle or the satellite,” he said. “What DirecTV is really most interested in, both from our launch vehicle providers and from our satellite providers, is quality, reliability, and on-time delivery.”

“A new entrant is fine,” he continued. “I still marvel at the number of people who try to become launch vehicle manufacturers. If you can come up with a vehicle that can loft our payloads, we will definitely talk with you.” However, he added, “my guess is that you won’t be at that price when you’re ready to launch.”

“I still marvel at the number of people who try to become launch vehicle manufacturers. If you can come up with a vehicle that can loft our payloads, we will definitely talk with you,” said DirecTV’s Butterworth.

New launch vehicles entering the commercial market also face another hurdle: getting launch insurance at affordable rates. Shotwell said she hoped that the first insured launch of the Falcon 9 (which will be the second flight overall; the first launch will not be insured) would be able to get insurance at a premium of somewhere around 15-16 percent. Chris Kunstadter, vice president of XL Insurance, had a one-word initial response: “Interesting.” Statistics have shown that the first and second launches of new vehicles traditionally have had high failure rates, which he said would mean higher insurance premiums. “First launch, second launch, out through the fifth, sixth, seventh, eighth launch are generally riskier—we have to recognize that—and that is reflected in the rates.”

Customer concerns

As the commercial launch market has shifted in the last few years from a buyers’ to a sellers’ market, launch customers have started to feel the pinch, and not just in increased launch prices. Schedule slips in particular have caused grumbling among satellite operators as they try to figure out how long they’ll have to wait for a launch or even who is in the queue ahead of them.

A few years ago, Arianespace, Sea Launch, and Mitsubishi Heavy Industries (which markets the Japanese H-2A rocket) created the Launch Services Alliance to provide mutual backup services should one company’s vehicle encounter problems, in much the same way ILS, prior to last fall, provided its own mutual backup between the Atlas and Proton vehicles. Butterworth, though, was unimpressed with the Alliance. “As far as I know, I think we’re the only ‘victim’ of the Alliance to date. It didn’t do anything for us. It’s nice on paper and everything, but it didn’t advance our launch date a minute.”

Butterworth argued for more transparency among launch services providers, so that they know who is scheduled to launch, and when. “If we actually had some transparency in who’s on the manifests, heck, I could go to the other operators and offer to buy their slot or swap slots with them,” he said.

Jean-Yves Le Gall, CEO of Arianespace, said such an approach wouldn’t work for his company, given uncertainties regarding exactly which satellites will be ready for launch and when. “The launch manifest I have in front of me today is a launch manifest which deals with the next two flights, a four- or five-month prediction,” he said. Beyond that, “we have a number of satellites which are supposed to arrive, but we will see when they really arrive.”

Those problems are magnified for smaller satellite operators, who launch spacecraft less frequently and don’t have the same resources as big companies like DirecTV. Paul Brown-Kenyon, COO of Malaysian satellite operator Measat, noted the problems his company had both with delays in their most recent launch, Measat-3, and with their next satellite, Measat-1R. “For a small operator, being able to launch a satellite on time is critically important. We haven’t got the flexibility of a large operator to move customers around.”

“If we actually had some transparency in who’s on the manifests, heck, I could go to the other operators and offer to buy their slot or swap slots with them,” said Butterworth.

Brown-Kenyon was particularly concerned about the Measat-1R delays, which could have posed problems for the company had the Measat-3 launch failed as an existing satellite in orbit reached the end of its life. “You can’t assume anything anymore, in terms of manufacturing schedules or launch schedules. You need to literally put in two, three, four years of margin to replace an asset just in case, in case there’s an issue on the manufacturing side, an issue on the launch side, or you need to replace a satellite because of a launch failure. For a small operator, you can’t work with that type of risk.”

Launch providers have also complained about delays, in this case in the delivery of satellites from manufacturers. That problem, though, appears to have diminished recently. “Satellites are being delivered in accordance with their schedules,” said Peckham. “But that is a complete change from the reality we lived in in 2000, 2001, 2002, and 2003.”

While the industry remains highly competitive, Peckham said he has seen a show of support for Sea Launch as it tries to get back onto its feet after its January launch failure. “The outpouring of support that we’ve received has been heartwarming,” Peckham said. “Everybody up here takes a risk,” he said, referring to the conference panel that included not only launch companies, but also satellite operators, manufacturers, and insurers. “We need to keep doing this as a team, as an industry… We have to be in this together, we have to stay in it together, to continue to succeed.”