International Launch Services (ILS) has expressed its disappointment after it was reported that France-based rival Arianespace would get a two-year subsidy of ?250m from the European Space Agency (ESA).
ILS president Frank McKenna said in a statement in…
International Launch Services (ILS) has expressed its disappointment after it was reported that France-based rival Arianespace would get a two-year subsidy of ?250m from the European Space Agency (ESA).
ILS president Frank McKenna said in a statement in late March that the subsidisation of Arianespace “dis-incentivizes cost reduction and efficiencies, prevents other launch providers from competing on a level playing field, deters new providers from entering the market and is detrimental to the long-term health of the commercial launch industry.” In an interview with SatelliteFinance in mid-February, McKenna had already voiced his opposition to the governmental aid provided to the European launcher: “The subsidies Ariane receives in the form of direct cash infusions, expanded development funds, high priced ESA missions, capital injection from [the Centre National d’Etudes Spatiales] 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.” Faced with financial issues, Arianespace announced in October 2010 that its board started operations to increase the company’s share capital. Earlier last year, the company posted a ?71.2m technical loss for fiscal 2009/2010, which it said was due to the discharge of provisions for technical and commercial risks. Arianespace also reported full year sales of ?1.029bn, an increase on the ?955m recorded in 2008, but down on the ?1.046bn projected for 2009. As a result, Arianespace and the French government have called for financial backing to support the launch provider.
In addition, the Space Commission, part of the Air and Space Academy based in Toulouse, France, released a report last year saying that the European launcher capability is faced with organisational, financial and technical issues and needed to be reorganised to continue operating in an increasingly competitive environment.
In mid-December 2010, French president Nicolas Sarkozy announced that France would invest ?250m to help build a new launcher, as part of a broader stimulus programme aimed at supporting manufacturers unveiled a year ago.
He said at the time that the money invested would come on top of the recently-signed 2011-2015 contract, which gives an extra ?70m to ESA.
However, France and Germany, ESA’s main contributors, have expressed diverging views over state investment in the European space industry in recent months. Back in November, as France sought to increase its investment in ESA, Germany was questioning the Galileo programmes budget, calling for new cuts. Such differences have seemingly re-emerged over Arianespace’s subsidy.
Germany was reportedly less keen than France to provide more backing to Arianespace but supported France’s proposal in return for an agreement on ESA’s participation in the international space station through 2020.
Concerning Ariane’s subsidy, McKenna said that ILS is looking to file a State Aid Complaint with the European Commission and is evaluating legal options available through the World Trade Organization (WTO).
“The EGAS funding was specifically put in place in 2003 to help Ariane ‘get back on its feet’ according to ESA, as a short term recovery effort. ILS waited patiently for this 5-year funding period to end, along with the 175 million euro extension granted in 2007. Between the years of 2003-10, Ariane received over 1 billion euros from the EGAS program, and now, with these new price supports to Arianespace, we find it necessary to take all available steps to ensure fair competition,” said McKenna in the March statement.
During the March’s Satellite 2011 Conference in Washington, Arianespace chairman and CEO Jean-Yves Le Gall retorted that each company represented on the launch services panel, which included ILS, receives subsidies in one form of another, and added that some are provided in a transparent manner, “the Arianespace way”, while others are not. Arianespace could not be reached for comment before the press deadline.
However, in a statement about the Satellite Conference, ILS wrote: “There is no Russian federal directive to be in the commercial market that would generate any subsidization to sell commercial missions without a return.” Answering journalist questions at a press briefing in Washington, McKenna intimated that the Export-Import Bank of Russia may provide loan-guarantee support for ILS customers, on a selective basis. However, in an email to SatelliteFinance, ILS said that they do not currently utilise Russia’s Eximbank on any contracts.
With the 2009 financial crisis and the subsequent difficulties in obtaining debt financing, an increasing number of spacefocused companies have sought to secure export credit agency backing to raise funding. McKenna was quoted saying that, although such agencies can distort the market by keeping alive companies that would otherwise fail, those low-interest loans are a reality in the current industry.
