Arianespace reported full year sales of E1.029.3bn, which was an increase on the E955m recorded in 2008, but down on the E1.046bn the launch provider had projected for 2009 in its 2010 New Year’s statement.
The company also posted an E71.2m technical…
Arianespace reported full year sales of E1.029.3bn, which was an increase on the E955m recorded in 2008, but down on the E1.046bn the launch provider had projected for 2009 in its 2010 New Year’s statement.
The company also posted an E71.2m technical loss for the year, which it stated was due to the discharge of provisions for technical and commercial risks.
In light of this, the board of directors has proposed a capital increase to the Annual General Meeting of Shareholders, in order to “bolster the company’s financial structure and give it the resources needed for development.”
Arianespace CEO Jean-Yves Le Galle told SatelliteFinance that the capital increase is intended to cover the technical loss. The exact size of the capital increase has not been set, and will likely be decided at the company’s AGM in April.
The reason for the technical loss was that Arianespace has come to the end of a seven-year business cycle and is shifting to a new model. The technical loss is a result of expected revenue from provisions in the previous model that did not materialise over the course of the cycle
Le Galle said that, aside from this technical loss, Arianespace has successfully balanced its accounts, as it did in 2008 when it recorded a slight profit of E2.5m.
Prior to the announcement of these results, Le Galle struck a strident note in an interview with SatelliteFinance as he reflected on 2009, a year which saw Arianespace consolidate its position as market leader in a launch sector where it holds a virtual duopoly alongside International Launch Services.
When asked how the market had altered for Arianespace in 2009 he replied: “The only deviation we see compared to last year is the status of our competitors, with Sea Launch entering Chapter 11. Whatever the future of Sea Launch, this clearly demonstrates that you cannot sell launch services at very low prices while making losses over a long period of time.
“Last year, a lot of people said that the Chinese launcher Long March would be very successful, but I didn’t see many contracts signed with Long March – in fact, Eutelsat changed their W3B launch from a Long March manifest to fly with us.
“We are now expecting the first flight of SpaceX’s Falcon 9, but that was the same situation last year. To conclude, what we can see is that today the market is well served by Arianespace on one side and ILS on the other.”
Le Galle said that he expected the market for new launch deals to be quite active in 2010, as reflected by the fact that Arianespace has already signed three new contracts this year, as well as picking up a fourth through Eutelsat’s transfer of the W3B flight from Long March.
The Arianespace CEO said the company’s target for 2010 is to sign 10 or 12 new contracts to launch geosynchronous satellites.
For the first time, it will face competition for dual satellite launches, as ILS plans to introduce a number of Proton flights capable of carrying two medium-sized spacecraft into orbit.
Le Galle believes that ILS has some distance to go before it can match Arianespace’s ability to deliver two satellites on one rocket.
“Regarding the Proton Dual launches, we think that it is not so easy to perform their launches with just a 6 tonne capacity,” he said. “This is the same problem we faced with the generic Ariane 5 model, which is why we stopped flying it and started using the Ariane 5 ECA, because it is much easier to perform dual launches with a 10 tonne capability.”
Le Galle defends launch sector duopoly
The entry of Sea Launch into Chapter 11 bankruptcy protection and the subsequent hiatus in its service is a major source of concern for satellite operators worried about the security of their access to space.
However, along with his counterpart Frank McKenna at ILS, Le Galle insists that Arianespace and ILS are more than capable of serving the market without the need for a third company in the launch sector.
“It is not at all a worry,” he said. “Today there is overcapacity. I want to emphasise that out of the 22 new contracts signed last year, only 14 were new contracts. ILS has the capability to launch 8 Proton missions a year and we have the capacity to launch 12 Ariane 5 missions a year – that is 22-24 satellites in total.
“I do not see a need for new commerce. Of course, the operators are interested in having new commerce bring down prices, but what happened last year with Sea Launch going into Chapter 11 and the partial loss of Palappa-D1 on Long March clearly demonstrates that bargain price launches come at a cost.”
The one overriding fear the operators have is a launch failure for an Ariane 5 or Proton mission that could ground either service for months. Le Galle dismissed these fears, and said that Arianespace was capable of a swift return to flight in the event of any failure. Arianespace has not suffered a launch failure in the last 35 flights over a period of seven years.
This impressive record means that the company has no intention of dropping the prices for its flights. Le Galle warned that a price drop could lead to a drop in the quality of service offered, and that quality was the main priority for Arianespace.
Though, as with all launch companies, Arianespace would like higher profit margins on its flights, its relationship with the French government means that profit growth is not its main priority.
“We are quite a particular company,” said Le Galle. “By definition, we do not have to be profitable. We have just to be balanced, because if we made a lot of money that would raise the question as to why governments need to spend a lot of money to make Arianespace profitable. So, our objective is to be balanced, and we will continue in this way.”
Arianespace will diversify its business into the mid-sized satellite sector with the commencement of Soyuz launches from its base in Kourou, French Guiana, later this year. Contracts have already been signed for seventeen Soyuz flights, including five missions dedicated to launching the first batch of satellite for the European navigation system Galileo.
Soyuz will be followed to the commercial market by the light-lift launcher Vega in 2011. Vega will carry small satellites into space at a cost of E30-40m per flight.
Access to export credit financing has emerged as a bonus for Arianespace customers, as shown in British operator Avanti’s arrangement of a £65m guarantee with the French agency COFACE for the launch of its HYLAS-2 satellite.
Avanti gained the backing through its contract with Arianespace for the launch of a satellite. Le Galle said: “Avanti was aware of the fact that such facilities existed, and when we discussed the contract they asked if it was possible to be a candidate for COFACE backing, and the process continued from there.”
“We are proposing export credit facilities in connection with COFACE to all of our customers, and many of them are interesting, but this is normal. In the US you have the same with ExIm.
“We do not say that if you fly us with you will definitely take out a guarantee with COFACE, it is a natural process that depends on the company in question.”
