With between 11 and 13 launch missions scheduled to take place from May this year, International Launch Services (ILS) is set for a busy 2011. The company expects to continue this into the future with hosted payloads for military and civil use seen as a key driver to growth. However, with the return of Sea Launch and the emergence of SpaceX from bankruptcy protection, some predict the launch industry will become increasingly competitive looking ahead.
Frank McKenna, president of ILS since 2006, tells SatelliteFinance senior reporter Pauline Renaud about the company's plans for the months and years to come, his views on the current launch industry and why the subsidies received by competitors create an unlevel playing field.
Pauline Renaud: How many launches is ILS scheduling this year?
Frank McKenna: In 2010, we conducted eight commercial missions along with four federal missions for a total of 12 Proton launches. This year will be another active year for ILS with seven-eight commercial missions and four-five federal missions. We will not be conducting our first mission until May due to spacecraft availability, so we will be operating under a compressed manifest in 2011. The addition of the Second Spacecraft Processing Facility (SSPF) in Baikonur early this year will allow us facilitate overlapping launch campaigns.
PR: What is your current launch capacity and are you looking to expand this in the future?
FM: Up to 14 Proton systems are produced annually and we have previously demonstrated a commercial launch rate of approximately once per month and can launch on 15-day centres alternating between Russian Federal and commercial missions. Once the SSPF is operational, the minimum span between commercial launches can be reduced to two-three week centres. We expect to continue at this rate for the foreseeable future.
PR: To that end, do you have any concerns about the ability of your supply chain to serve such an increase?
FM: No, that is not a concern. In fact, the consolidation of most of the suppliers and manufacturers of the Proton launch system under Khrunichev and resulting throughput in the factory has a direct impact on our ability to launch at a rapid pace and accommodate all of our customers.
To give you a quantitative idea of how this has happened over time, production has increased to support six launches in 2005 and 2006, seven launches in 2007, ten launches in 2008 and 2009 and 12 launches in 2010.
We have also benefited from a 2.6 fold increase in Breeze M production at Khimmash.
Production right now is well ahead of schedule with hardware available and ready to launch.
PR: How was ILS impacted by the Proton failure at the end of last year?
Has it caused any delay to your launch schedule?
FM: The GLONASS failure on 5 December 2010 was caused by an issue with the Block DM upper stage. ILS only flies the Breeze M upper stage on its commercial missions. The Ka-Sat mission was delayed one week while our customer, Eutelsat, had the opportunity to review the post flight data with ILS. After they reviewed the data, they agreed that Proton performed as designed and the Ka-Sat satellite was successfully launched on 27 December 2010. There has been no impact at all on future missions for ILS or Khrunichev either in terms of scheduling launches or acquiring launch vehicles.
PR: Is the company profitable and have you experienced revenue growth over the past couple of years?
FM: Both ILS and Khrunichev are financially stable and healthy businesses. Khrunichev's success, for example, has allowed it to reinvest in the business across the board with upgrades to the launch site infrastructure, quality improvements, as well as launch vehicle performance and product development.
Approximately US$300m have been reinvested by Khrunichev in the last five years.
PR: What areas/sectors are you targeting for further growth?
FM: We see a continued opportunity for ILS with hosted payloads for military and civil use given the economic and schedule advantages this has for governments and the many budget cuts and financial challenges that exist in support of global space programmes.
Hosted payloads are not new for ILS as we have launched Anik F1R for Telesat, which had a Wide Area Augmentation System (WAAS) for the Federal Aviation Administration (FAA).
Under contract, we have several missions with either hosted payloads or military applications: SIRIUS 5 for SES with a European Geostationary Navigation Overlay Service (EGNOS) for the European Space Agency; Yahsat 1B for Yahsat with a dual use payload for the United Arab Emirates Air Force; IS-22 for Intelsat, a commercial satellite with a UHF payload for the Australian and US militaries; and the Anik G1 satellite for Telesat with an X-band payload designed for military use.
We also see future possibilities in some of the new technologies and innovations that are being developed in the satellite industry such as more Ka-band satellites. ILS and Khrunichev are proud to enable this sort of industry growth as we did with the launch of the all Ka-band satellite for Eutelsat in December and with the launch of the SkyTerra 1 L-band satellite for LightSquared this past November.
PR: Do you have a new vehicle in development to serve future growth in the industry?
FM: Yes, under development is the Angara launch system, the next generation family of vehicles, to serve both military and civilian missions under the Federal Space Program as well as various international space programs.
There will be a light, medium and heavy lift variant to cover the entire satellite mass spectrum and the Angara engines will utilise an environmentally-friendly liquid oxygen-kerosene mixture.
The first flight is scheduled for 2013 after the completion of the ground infrastructure in Plesetsk. After the vehicle is successfully introduced with the Russian Federal programme, commercial missions, managed by ILS, will follow.
PR: What are your views on the current state of the launch market and given that many of the large satellite operators are at the top of their capex cycle, do you foresee a fall in demand in a few years time?
FM: The commercial launch market for early 2011, and the rest of the year, looks very much like last year's market with about the same amount of satellite orders, yielding 22-25 commercial launches. Satellite orders were higher than expected last year, resulting in a healthy launch order year.
However, since we have reached the end of the peak of the replacement and recapitalisation cycle for the FSS market, we see the long-term average as tapering off to an average in the low 20s and perhaps even lower by 2014-2015. That decline will be partially offset by solid regional growth, Ka-band and some hosted payloads.
PR: With the return of Sea Launch and the emergence of SpaceX, is the launch industry becoming increasingly competitive and if so, how do you plan to retain your market share?
FM: Although Sea Launch has emerged from bankruptcy, they have yet to return to launch. They have to prove themselves over time in order to be considered a viable competitor in the market. SpaceX is focused on a different market than we are - the small to medium class payloads and securing additional US government business with their anchor customer, NASA.
Regardless of who the players are in the commercial launch arena, new entrants or re-entrants to the industry, ILS knows how to compete and will continue to offer the best overall value solution to all of our global customers.
PR: ISRO has just been removed from the US entities list. Does this move pose a threat to ILS's business?
FM: No. ISRO's PSLV and GSLV launch vehicles are not in the same market at ILS Proton, as they launch the small to medium class satellites. They will compete more directly with Ariane and SpaceX.
PR: Is the business model of the launch industry viable in the long term? Should some changes be introduced?
FM: We believe that the strongest and most viable foundation for success in our business is one that includes a balance of government and commercial missions. With an average backlog of 20 or more launches over the past three years, ILS Proton will be launching seven-eight systems per year for the foreseeable future and, overall, Proton is launching at the rate of about once per month including the Federal missions.
We have seen some changes in the makeup of commercial launch in terms of new entrants with SpaceX and Falcon 9.
Sea Launch has emerged from bankruptcy with plans to launch in the near future. But commercial launch is a difficult business - whether you are an industry veteran or a new entrant. It takes years, the right launch system, successful consecutive launches, a competitive cost structure, and strong financial backing to be viable in the market.
PR: What are your thoughts on the subsidies and potential European governmental support that Arianespace, which posted losses for fiscal 2009/2010, receives? Does this hinder competition for ILS or other providers?
FM: The subsidies Ariane receives in the form of direct cash infusions, expanded development funds, high priced ESA missions, capital injection from CNES as a shareholder, protectionist policies and export credit financing such as COFACE are clearly an indication that the Ariane 5 launch system is not commercially viable.
It is our belief that the subsidies that Ariane receives to keep their operations going are in violation of the treaties and regulations that govern fair and open competition principles of the EU. The subsidies distort competition in the marketplace and create an unlevel playing field for ILS and other providers and cause long-term harm to the health of the commercial launch sector pushing out any new entrants or re-entrants.
The EGAS funding for Ariane was put in place in 2003 to help "Ariane get back on its feet" as a short term recovery effort from a launch failure. ILS waited for this five-year funding period to end, along with the extension of 175m granted in 2007. In total, Ariane has received ?1bn from the EGAS programme and now they are asking for more (at least 120m per year) and continue to operate their commercial business at a loss.
PR: A few months ago, Arianespace said that ILS had some distance to go before it can match Arianespace's ability to deliver two satellites on one rocket. What are your views on this statement?
FM: ILS is in the fortunate position of being able to launch dedicated missions or dual launch on a commercial basis; Ariane cannot.
As we have seen, efforts have been underway for some time now in Europe for Arianespace to move away from the Ariane 5 in its current configuration to a more modular, single launch system like Proton and Angara. This is understandable, considering the frequent delays, manifest inefficiencies and financial losses that are associated with their Ariane 5 programme.
Proton has a long-term, demonstrated capability of launching multiple spacecraft for many years for Russian Federal missions (the Express and GLONASS missions are examples). The upcoming ILS Proton mission with the SES-3 satellite is the first commercial paired mission.
The Kazsat-2 satellite will be paired with SES-3 for SES. This Kazsat-2 mission will be inserted directly into GSO and the SES-3 spacecraft that will be delivered to GTO.