The 14th annual Euroconsult World Satellite Business Week held September 10-15, 2012 in Paris, France, welcomed several hundred attendees including some of the most influential business executives in the commercial space industry. The session entitled “Launch Service Providers Seek the Right Tempo,”  on September 12, was moderated by Warren Ferster, Editor of Space News and included top executives from the commercial and government launch market: International Launch Services (ILS), Arianespace, Sea Launch, Lockheed Martin Commercial Launch Services, China Great Wall Industry Corp. and SpaceX.

Ferster opened up the launch panel with a summary of the current commercial launch industry with new entrants such as SpaceX, the re-entry of Sea Launch and industry veterans such as ILS and Arianespace, all actively competing for launch orders in a softening market. Panelists responded to a wide range of industry topics and questions posed by the moderator. The following are McKenna’s remarks and responses to questions during the panel.

Return to Flight and Status of Investigation of August 7 Russian Federal Mission
There have been seven Proton launches performed this year; five commercial and two Russian Federal Missions.   On August 7, the seventh Proton launch of the year, the Russian Federal mission with the Telkom 3/Express MD-2 satellites, failed to reach the intended orbit. The Russian State Commission issued a report which identified a component in the pressurization system that was not manufactured to specifications.  This caused a shutdown of the Breeze M Main engine by the Breeze M flight control system during the 3rd burn of the mission.

The ILS Failure Review Oversight Board (FROB) was established after the anomaly and was comprised of representatives from nine ILS customers, two insurance underwriting representatives and an independent outside subject matter expert. The FROB concluded its review on September 11 and concurred with the findings and corrective action plan of the Russian State Commission.  The corrective actions will include broad and thorough oversight of all rework procedures, testing, support equipment, and personnel, both at the Khrunichev (KhSC) production facilities and in Baikonur. ILS and KhSC will also develop specific initiatives to enhance the long-term Quality Management System (QMS) that has been in place and operating at all KhSC production facilities.

The return to flight mission will be the ILS Proton launch of the IS-23 satellite for Intelsat S. A. of Luxembourg in mid-October. Following that mission will be a Russian Federal launch.  By the end of the month, the remainder of the Proton launch manifest for this year will be established. We expect that there will be 2-3 additional Proton missions before the end of the year.

Quality Assurance Measures
ILS will be conducting a comprehensive and independent review of the quality systems, processes and measures following the August 7 Russian Federal mission anomaly.  It is expected that the series of risk-based audits and new initiatives will be implemented in the fourth quarter of this year.

The modern framework of the Quality Management System (QMS) began in 2008, when forty-six unique short term, intermediate and long-term quality initiatives were defined and funded, involving not only quality but also the design and production of the Proton vehicle.  This led to a unified QMS for ILS and KhSC. Since that time, most Proton suppliers and manufacturers have been integrated under KhSC, the Proton production rate has increased substantially and all phased enhancements to the vehicle have been successfully flown.

Proton Launch History/Robust Production Throughput
McKenna spoke about the launch pace of the Proton vehicles with some facts and figures:
•    There have been 29 consecutive successful commercial launches since July 2008.
•    ILS has a backlog of 19 missions and has held an average of over 20 for five years.
•    Proton has also conducted 45 flights over a four-year timeframe. This is a higher launch rate than all other commercial launch systems combined.

Khrunichev Leadership; Vladimir Nesterov Legacy
Over the past seven years, Vladimir Nesterov held the position of director general at Khrunichev, the majority owner of ILS and one of the pillars of the Russian space industry with over 43,000 employees and multiple product lines from launch vehicles and launch vehicle upper stages, communication and earth observation satellites to rocket engines and Space Station modules.

McKenna said that during Nesterov’s tenure, Proton production has increased dramatically and all of the suppliers and manufacturers of the Proton system have been vertically integrated.  Nesterov was instrumental in the development of the next generation Angara system, which will conduct its maiden flight in 2013.

On September 3, 2012, Russian President Vladimir Putin signed a Presidential Decree accepting Nesterov’s resignation as director general of Khrunichev, with Vasily Sychev appointed as acting Director General.  Sychev was formerly acting in the capacity of First Deputy General Director at Khrunichev.   The position will be formalized with a permanent replacement announced when the governmental process is completed.

Competing and Creating Value in A Dynamic Marketplace
There has been reduction in commercial communications satellites ordered over the past two years after operators have largely completed their planned replacement cycles.  At the peak, there were 26 commercial launches to GEO, but this has tapered off and will return to a long-term average of roughly around 20.

Important dynamics have reshaped the small-to medium-lift marketplace. SpaceX has won nearly $1 billion dollars in commercial business without a real flight record; a tremendous achievement. Those missions would most likely have been awarded to Arianespace, who has enjoyed a monopoly in that market segment until SpaceX’s arrival. “This creates an interesting dynamic in the marketplace,” said McKenna, “and we are happy to participate in it.”

McKenna said that ILS developed the ILS Proton Duo offering in direct response to operators’ demand for lower costs/kilogram to orbit and the concerns regarding the monopoly position of Arianespace and the sharp rise in prices for the small to medium satellite launches.

ILS Proton can offer a performance rocket to bring satellites using electric propulsion for orbit raising to a higher transfer orbit. This capability would reduce orbit-raising time from 6 months down to 4 weeks. ILS Proton can offer the capability to launch electric propulsion satellites in a single or stacked configuration to support the smaller to medium size satellite trend.

Is There Room in Commercial Launch for Several Players?
With reduced demand and an increase in the number of launchers competing in the market; this will surely create stress in the launch industry. As we have predicted, oversupply will be damaging to the marketplace and will result in a restructure of the industry.  In the near and long term, 2-3 players can adequately accommodate the market and demand.

ILS and Khrunichev are now preparing to launch the 75th ILS Proton mission next month with the IS-23 satellite for Intelsat S.A. with plans for 3-4 additional Proton launches by the end of the year.  We thank our customers for their support, confidence and trust as we safely return to flight.  As always, our focus is always to launch successfully with sustained quality and performance.