ESA, Industry at Odds over Ariane 6 Funding Responsibilities

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PARIS — European governments and the prime contractor for the future Ariane 6 rocket, Airbus Safran Launchers, have reached a tentative agreement on program development funding following an incendiary letter from the company alleging a nearly $1 billion shortfall, European government officials said.

But while both Airbus Safran Launchers and the European Space Agency signed a two-page document that appears to express a common view of Ariane 6 costs, the two sides agree that the underlying disagreement over who pays what remains unresolved.

“There are many, many questions to be solved over the division of responsibility between industry and government, and we all knew it would be a long road to settle,” one European government official said. “There is no catastrophe. The program is moving forward. But at some point these issues will need to be resolved.”

The document presented March 18 to ESA’s ruling council is designed to show a common analysis of the Ariane 6 situation by ESA, whose government ministers in December approved the multibillion-dollar project; and by Airbus Safran Launchers, which agreed to assume what in Europe is unprecedented responsibility for the rocket’s design, cost and future commercial profitability.

Government officials said the two-page document reaffirms that Ariane 6 development will cost 3.215 billion euros ($3.91 billion) between 2015 and the planned inaugural flight of 2020. The figure does not include the new Ariane 6 launch pad, which is being built under the authority of the French space agency, CNES.

Airbus Safran Launchers and ESA had settled on the 3.2-billion-euro figure well before ESA ministers in December agreed to finance the project and a companion effort to upgrade Europe’s Vega small-satellite launcher.

Vega and the heavy-lift Ariane 6 will use common solid-fueled rocket stages, Vega for its first stage and Ariane 6 for the strap-on boosters — two in the case of the Ariane 62 rocket, and four for the heavy-lift Ariane 64.

But with so little time between a late-summer 2014 agreement on the Ariane 6 design and the ESA ministerial conference, ESA and Airbus Safran were forced to leave open certain details.

“There are many, many questions to be solved over the division of responsibility between industry and government, and we all knew it would be a long road to settle,” one European government official said. “There is no catastrophe. The program is moving forward. But at some point these issues will need to be resolved.”

One of those details was how much of the 3.2 billion euros in Ariane 6 costs Airbus Safran Launchers and its subcontractors would be obliged to pay on their own.

Earlier this year, ESA told the company that the agency had identified about 400 million euros of the total that industry should finance. In addition, the agency said some 200 million euros that it had budgeted for technology work related to the solid-fueled strap-on boosters might not be needed.

For Airbus Safran Launchers, that meant 600 million euros that would be removed from the government share of Ariane 6 development financing, with up to 400 million euros the company would need to find on its own.

The company also identified another 200 million euros in costs whose funding source remained unclear, meaning a total of 800 million euros in charges for which it wanted ESA to assume responsibility.

In a letter to ESA, the company evoked the 800-million-euro figure. ESA and officials from several of its member governments said the letter appeared to be an attempt to scrap the previous agreement in the hunt for increased Ariane 6 government financing.

“If they are saying they need more money than we allocated, we stop the program,” one government official said. “If they are saying they cannot build the vehicle to the performance requirements we agreed to, then we stop the program. They cannot play bait and switch with us. There is no more money available for Ariane 6.”

The letter from Airbus Safran Launchers to ESA was first disclosed in the March 3 edition of the French financial newspaper, La Tribune.

By the time of the March 18 ESA council, Airbus Safran and ESA were able to present the two-page document outlining Ariane 6 costs, which had not changed, and evoking the 400 million euros in costs ESA wants industry to pay but that the company has not yet accepted.

“The letter was a way of signaling the uncertainties about these different costs and who would pay them,” one industry official said. “The idea was to put these issues on the table earlier rather than later. It was not intended as blackmail, or to suggest industry is walking away from its commitments.”

Since the December ESA ministerial approval of Ariane 6, Airbus Safran Launchers has been negotiating with its principal subcontractors — MT Aerospace of Germany, Avio of Italy and Ruag of Sweden, Switzerland and Austria — on their Ariane 6 component prices.

Subcontractor price commitments were not included in the figures that Airbus Safran Launchers and ESA agreed to. Instead, the prime contractor used estimates to arrive at the final figure presented to government ministers.

“People got the impression that all of a sudden things had changed," ESA launch director Gaele Winters said. "We are saying: Nothing has changed since the December council — nothing. The good news is that we now have a joint assessment of the situation” with the prime contractor. Credit: ESA/P. Sebirot
“People got the impression that all of a sudden things had changed,” ESA launch director Gaele Winters said. “We are saying: Nothing has changed since the December council — nothing. The good news is that we now have a joint assessment of the situation” with the prime contractor. Credit: ESA/P. Sebirot

ESA Launcher Director Gaele Winters said Airbus Safran Launchers will present a more-precise Ariane 6 development proposal to the agency by early May. In a March 28 interview, Winters said ESA expects to be able to complete negotiations in time for a late-June contract for the full development.

Winters declined to discuss the Airbus Safran Launchers letter, saying only that “it was a bit unfortunate, and appeared to mix cost and funding issues.”

“People got the impression that all of a sudden things had changed. We are saying: Nothing has changed since the December council — nothing. The good news is that we now have a joint assessment of the situation” with the prime contractor, Winters said.

Winters acknowledged that Airbus Safran Launchers has not agreed with ESA’s assessment that industry’s share of the development cost is around 400 million euros.

“They told us they have not signed off on the 400 million [euros], and this is correct,” Winters said. “It is an assumption we made, which we will look at next during the full Program Implementation review scheduled for mid-2016. Industry is prepared to invest in the program, and one important condition is that we need to be sure they have a fair rate of return on their investment.”

Winters said ESA is sensitive to the fact that additional costs borne by industry will find their way into the Ariane 6 pricing structure, which would undermine the vehicle’s competitiveness on the international commercial market.

Winters said the 200 million euros that ESA proposes to remove from the 3.2-billion-euro cost estimate is for elements the agency is not sure are needed but may ultimately be reinserted into the design. There is no urgency on this point, he said.

The French and German governments are the two biggest Ariane 6 backers.

Jean-Yves Le Gall, president of the French space agency, CNES, sought to minimize the difficulties of the program, saying tension between government and industry is to be expected at the early stage of such a large investment.

“Everyone knew the program would be challenging, but I see nothing at this point that should cause any alarm,” Le Gall said in an April 2 interview. “There are open issues, but this is to be expected.”

Johann-Dietrich Woerner, chairman of the German Aerospace Center, DLR — who will become ESA director-general in July — said he remains confident that today’s disagreement on funding will not upend the Ariane 6 program.

In a March 31 interview, Woerner said Airbus Safran Launchers’ funding concern “does not interest me in and of itself. It was a letter from an industrialist thinking he’ll get the money in any event. We have a fixed amount of money. Industry must now solve the problems.”

But he said ESA is open to discussing the 400 million euros penciled in as industry’s commitment.

Airbus Safran Launchers declined to comment for this article.