Arianespace: We'll defend market share without a price war

Arianespace in 2017 for the first time will conduct commercial missions to geostationary transfer orbit with its Europeanized Soyuz rocket. Fleet operators Hispasat and SES will be the first customers. Credit: Arianespace

Arianespace in 2017 for the first time will conduct commercial missions to geostationary transfer orbit with its Europeanized Soyuz rocket. Fleet operators Hispasat and SES will be the first customers. Credit: Arianespace

PARIS — Europe’s Arianespace launch-service provider on Jan. 4 said it would refuse to enter a price war with competitors SpaceX of the United States and International Launch Services, the U.S.-based seller of Russia’s Proton rocket, but would nonetheless take the necessary steps to maintain its 50 percent market share. 

With SpaceX grounded since a September explosion of its rocket during a prelaunch test, and Proton launches suspended since a June launch anomaly, 2016 should have been an excellent year for Arianespace.

In fact, the company’s revenue of around 1.4 billion euros ($1.5 billion) was flat from 2015 following seven Ariane 5 launches — two carrying just one passenger — plus two launches of the Europeanized Russian Soyuz rocket and two launches of the light-lift Vega vehicle.

Arianespace had hoped to conduct an eighth Ariane 5 launch but was limited to seven because of customer satellite-availability issues. 

Refusing a price war, but OK with a price skirmish 

Most commercial launches are contracted in U.S. dollars. The dollar’s strength relative to the euro in 2016 was unadulterated good news for Arianespace. But company Chief Executive Stephane Israel said SpaceX and ILS, despite their recent difficulties, continue to offer “very aggressive” prices that Arianespace will not match.

Arianespace by the numbers
Year Revenue Orders
2015 1.4 billion euros 2.5 billion euros*
2016 1.4 billion euros 1.1 billion euros
* including 1-billion-euro OneWeb contract.
Commercial orders represent 77 percent of current backlog. Government orders are 23%.
Backlog on Jan. 1, 2017: 5.2 billion euros
Backlog on Jan. 1, 2016: 5.3 billion euros

“We will not be drawn into a price war,” Israel said. “Reliability and quality has a cost, and these costs must be reflected in prices.” The company in 2014 reduced its prices for smaller satellites to meet the SpaceX challenge and has said it would do the same, when needed, for larger satellites.

The launch-price differential between Arianespace and SpaceX can be dramatic, depending on how each company assesses the value of a given customer. SpaceX’s prices of around $60 million per launch can drop to as low as $52 million. Arianespace’s prices vary based on a satellite’s weight, and whether it occupies the Ariane 5 rocket’s upper berth, for heavier payloads, or the lower berth.

The return of the $100 million launch contract

Customers in a hurry to launch heavy satellites to meet regulatory deadlines or customer commitments will pay $100 million or more for an upper-berth launch.

Unfortunately for Arianespace, the suspension of launches by its two biggest competitors occurred during a mediocre year for commercial launch orders. SpaceX’s Falcon 9 and ILS’s Proton are both scheduled to return to service this month.

By Arianespace’s count, the company won seven contracts for commercial satellites destined for geostationary transfer orbit, the destination of most telecommunications satellites. SpaceX won three, ILS two and the China Great Wall Industry Corp. (CGWIC) won one.

These figures do not include government satellites, which are usually restricted to national launch providers and are not subject to open competitions. Also not included are satellites are built and launched as part of bundled contracts by CGWIC.

50 percent of the market in a mediocre year

By this measure, only 13 commercial satellite launches to geostationary orbit were booked in 2016, the lowest tally in more than a decade. Arianespace’s seven contracts enabled Israel to say the company has maintained its goal of capturing 50 percent of the open market. 

Arianespace’s 2016 contract count includes two deals signed late in 2016 and announced on Jan. 4: Intelsat’s Intelsat 39 is scheduled for an Ariane 5 launch in 2018, and Sky Perfect Sat of Japan’s JCSat-17 will launch on an Ariane 5 in 2019. 

SpaceX’s launch delays, combined with its large backlog of government and commercial customers, forced two customers two move planned launches to Arianespace. Satellite broadband provider ViaSat Inc.’s ViaSat-2 and the Inmarsat S-band EuropaSat/Hellas Sat-3 both maintained their SpaceX reservations, but elected to confirm an earlier Ariane 5 date to meet their business requirements.

Arianespace will have difficulty accommodating any other new contracts for launches before 2019. Arianespace Senior Vice President for Sales Jacques Breton said that unless one or more existing customers encounters satellite construction delays, Arianespace has no room for upper-berth Ariane 5 launches until mid-2019.

Breton said Arianespace may be able to fit in one or two lighter satellites looking for lower-berth slots starting in late 2018 — again depending on the arrival schedule of customers currently booked for that period. 

Arianespace is planning up to six launches between late January and the end of April, which would be an unusually quick start to the year.

For Hispasat and SES, Soyuz launches to GTO

In order to make room in its lower berth and to get customers to orbit more quickly, Arianespace in 2017 will conduct its first-ever Soyuz launches to geostationary-transfer orbit.

In late January, the Hispasat 36W-1, formerly called AG-1, is booked for a Soyuz launch. Luxembourg-based SES’s SES-15 satellite is slated for a Soyuz launch in April. 

Operating from Europe’s Guiana Space Center spaceport on the northeast coast of South America, the Europeanized Soyuz can place into geostationary transfer orbit satellites weighing up to 3,200 kilograms.

Completing six launches by late April will be key to Arianespace’s goal of conducting 12 campaigns in 2017 Up to six Ariane 5 launches, three Vega launches and the two Soyuz GTO missions.

The Ariane 5 rocket is scheduled to operate until at least 2023 before being replaced by the lower-cost Ariane 6 rocket, to make its inaugural flight in 2020.

Ariane 5 enhancements: + 300kg performance, and more room under fairing

To increase the Ariane 5 flexibility, Arianespace is investing in two improvements that should be available n 2019. The first, comprising a series of small modifications to the rocket, will add 300 kilograms to its payload-carrying capacity to GTO. The second is the addition of a structure under therocket’s 17-meter fairing to add 1.5 meters of additional volume.

Israel said these two enhancements will broaden Ariane 5’s ability to carry two medium-size satellites at a time, just as today it can house one large and one small satellite under the fairing.

 

Peter B. de Selding