Launch Services Providers Panel:
“Busy Agenda Ahead for Launch Services Providers”

The 14th annual Euroconsult World Satellite Business Week, held September 6-9, 2010 in Paris, France welcomed several hundred attendees including some of the most influential business executives in the commercial space industry. The session, entitled, “Busy Agenda Ahead for Launch Services Providers” moderated by Warren Ferster, Editor of Space News, included top executives representing businesses that serve both the commercial and government market: International Launch Services (ILS), Arianespace, Sea Launch, Lockheed Martin Commercial Launch Services, China Great Wall Industry Corp. and SpaceX. Each panelist provided brief opening remarks and responded to a range of topical questions concerning industry supply and demand, new technologies and opportunities, and outlook on the future of the launch industry. The following is a summary of ILS President Frank McKenna’s participation in the panel.

Launch Capacity and the Dynamics of Supply and Demand
McKenna stated that the given the numbers associated with Fixed Satellite Services (FSS) transponder additions between 2010-12, that we are entering the end of a fleet recapitalization cycle. This, he said, will eventually taper off, but the slow-down will be offset by solid regional growth, an increase in Ka-band innovations and some hosted payloads. The long term average for satellite orders appears to be roughly 20 per year for Geostationary Transfer Orbit (GTO) missions. The launch industry remains very competitive.  ILS has been preparing for the expected drop in demand and will continue to launch 8 commercial missions per year for the foreseeable future with a sustained backlog of 20 missions or more for the last three years supporting that launch rate. The Proton vehicle has surpassed launch rate records for any single system, maintaining a rapid pace of roughly one launch per month and 25 successful consecutive missions in the past 26 months, 16 of which were commercial launches. McKenna said that ILS and Khrunichev are serving the commercial telecommunications customers with quality, schedule assurance and exceptional business value; and will continue its leadership position in the industry for many years to come.

Facilitating Industry Growth and Future Plans
ILS will also facilitate the expansion of the hosted payload market with the launch of IS-22 for Intelsat, a commercial satellite with a hosted UHF payload with applications for the Australian Defense Force. The Anik G1 satellite for Telesat, will also have a X-band payload for military applications.  Both satellites are scheduled to launch in 2012.  Another hosted payload under contract for ILS Proton includes YahSat 1B for Yahsat with a dual use payload for the United Arab Emirates Air Force. ILS Proton is a high performance launch vehicle that can launch on schedule, offering extraordinary value for this market.  With solid experience working with dual use payloads, we expect there will be more opportunities to launch payloads with both civil and military applications in the near term.

ILS is proud to play an important role in fostering industry growth with new innovations such as KA-SAT for Eutelsat, the first satellite to operate exclusively in high-capacity Ka-band and SkyTerra-1 with its hybrid satellite and terrestrial 4G network services.   Both of these satellites will launch this year on ILS Proton with SkyTerra-1 scheduled for November and KA-SAT in December. A Federal Proton Glonass mission will take place in November as well.  The next launch for ILS Proton is the SIRIUS XM-5 mission for SIRIUS Satellite Radio on October 15. This will round up the year with 8 commercial missions and 4 Federal Missions for Proton.   This in an exceptional launch pace for ILS and the commercial launch industry, McKenna said.

The ILS/Khrunichev partnership is a proven, successful and sustainable business model with a concurrent Federal and commercial programs and outstanding talent and skill base.  As well, Khrunichev has invested more than 300 million dollars in the consolidation of the supply chain with modernized tooling and equipment and facility upgrades to further support growth and expansion. McKenna touched upon the increased production rate, unified quality system and evolutionary phased improvements of the Proton vehicle with demonstrated lift capability of up to 6.15 metric tons,  “all of these capabilities translate to real value and quality for our customers”, McKenna said.

Is New Commercial Launch Capacity Necessary?
As the two active primary launch providers, ILS and Arianespace, have been serving the commercial launch market well for the past fifteen months. With the anticipated reduction in satellite orders, the winding down of FSS replacement cycles, and possible merger and acquisition activity, there does not appear to be any constructive rationale to bring in any additional capacity. McKenna noted that spreading capacity across a wide spectrum of commercial launch providers has historically lead to cost and quality issues and can be extremely damaging to the customers and the launch companies.  “When there is price pressure below cost, losses are incurred and you will see providers unable to support the marketplace,” McKenna said. He added that overcapacity could lead another market shakeout similar to what happened with Sea Launch, and what was witnessed earlier with Lockheed Martin and Boeing, when the commercial launch market proved to be unprofitable for their businesses. Both companies effectively exited that segment of the market and primarily focused on serving the US Government market.  However, if it becomes necessary, these companies have the capability to reenter the market if there is an unexpected increase in demand for commercial launch in the near term. McKenna stated that a healthy supply base is optimal to meet the current and foreseeable levels of demand.

Addressing Possible Launch Downtime Concerns
A concern posed by the moderator, with two primary active commercial launch providers in the market, is the potential grounding of a launch vehicle due to a failure of some kind. McKenna noted that the major operators such as SES, Intelsat and Eutelsat have developed innovative launch backup arrangements with dual integration to mitigate the risk of not having an launcher available.

It is not cost effective for launch providers to dual integrate and maintain multiple launch vehicles in inventory. As well, customers are unwilling to pay for unnecessary insurance and inventory. McKenna noted that with the abrupt bankruptcy of Sea Launch, many stranded customers were able to move to ILS/Proton and were assured an on-time launch.

The Proton vehicle is a heritage system that is technologically well understood, with 359 launches in the past 45 years. In the event of a failure, Proton has historically returned to flight within a 90-days or less, which is significantly less time than it would take to seek out an alternative provider, provide inventory  reintegrate and launch. Additionally, three active launch pads at the Baikonur Cosmodrome allow for quick manifest recovery and added flexibility.  A second launch processing facility, to be completed in early 2011, will allow for shorter launch centers between commercial missions with overlapping campaigns more added flexibility for the ILS/Proton system.

On Supporting the Deployment of the Galileo Constellation
Responding to a question from the audience, on the Galileo program, after the award earlier of 5 Arianespace-Soyuz launches for 10 satellites, ILS Proton offers a cost effective solution that could launch the balance of the constellation at or below the established budget. “It became clear that funding shortfalls in the launch segment created an opportunity for Proton,” McKenna noted. The Proton vehicle is well suited for the program, McKenna said, can meet all of the technical requirements and, has a long history of launching multiple satellites, such as with the Glonass constellation. Proton is the “ideal solution to close our estimate of a  300 million euro funding gap in the program, ” said McKenna.

Market Impact of  Low Earth Orbiting (LEO) Satellites and ECA/COFACE Financing
The return of low-orbiting satellite constellations such as Iridium NEXT, GlobalStar and O3b are being handled by new launch supply entering the market in the form of Ariane Soyuz and SpaceX Falcon9.  All three programs are heavily financed by COFACE and/or Exim. The last two years have seen a dramatic increase in Export Credit Financing to over 3 billion dollars from historically under 500 million dollars a year.   “I think we’ve seen where the initial constellations were launched for these programs was on the balance sheet of the large multi-national companies. Now, it has shifted to the government subsidized financing thru sovereign guarantees. I don’t think this is a sustainable level for governments to get into commercial space markets,” McKenna said.

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