SSL’s Amos-8 contract in doubt as Maxar eyes a GEO exit

PARIS — One of the two commercial satellite contracts Maxar’s Space Systems Loral (SSL) announced this year now appears in doubt.

This setback comes as parent company Maxar Technologies contemplates exiting the geostationary communications satellite business long dominated by SSL.

In March, SSL announced that it had been chosen to build the BSAT-4b satellite for Japan-based BSAT and the Amos-8 satellite for Israel-based Spacecom.

On Sept. 3, Israel’s Ministry of Science announced that Amos-8 — a replacement for the Amos-6 satellite destroyed during SpaceX’s Falcon 9 fueling mishap in 2016 — will be built in Israel with government financial support.

Israel’s only satellite builder, the state-owned Israel Aerospace Industries (IAI), complained this spring that Spacecom’s selection of SSL to build the Amos-6 replacement put the health of IAI’s satellite assembly line in jeopardy.

In announcing the approval of government funding for “the development and construction of a new communications satellite, Amos-8, to be developed and built in Israel,” Ophir Akumis, Israel’s minister of science and technology said:

“The decision has long-term strategic significance and meets the vital existential needs of the State of Israel. The development and production of the satellite in Israel will enable the maintenance of complete independence in the field of satellite communications. Its construction in Israel will preserve knowledge and expertise in the field acquired over the decades in the local industry.”

In a Sept. 11 interview with SpaceNews during World Satellite Business Week here, Opher Doron, vice president and general manager of IAI’s space division, said he was grateful for the Israeli government’s decision.

“In the GEO business, our main customers are the Israeli customers,” Doron said. “We’re very happy that the government decided a week ago that it will have an Israeli communications satellite, and we are in the process now of getting that program started. Without that order we would have closed down the GEO line.”

Spacecom and SSL declined comment when asked about the status of the Amos-8 award.

SSL’s own public tally of GEO satellite contracts lists the BSAT-4b award but not Amos-8.

Eyeing the Exit

With commercial geostationary satellite orders hitting a 15-year low last year, Maxar Technologies is weighing “strategic alternatives” that include exiting the GEO business with or without a buyer for its Palo Alto, California-based operation.

Maxar indicated in July it was eyeing an exit when it outlined a series of options for SSL’s struggling GEO business that ranged from “right-sizing” its already reduced Silicon Valley operation to shutting it down if it can’t find a partner or buyer to keep the doors open.

Maxar has since all but taken the least-radical option — layoffs and other such belt-tightening efforts — off the table. It’s currently focusing on a narrower set of options call into question SSL’s continued presence — at least as a standalone supplier —  in a shrinking commercial GEO market.

In a Sept. 6 presentation at the RBC Capital Markets investor conference in Las Vegas, Maxar executives highlighted the three strategic alternatives it is exploring for SSL’s GEO communications line of business:

• partnering with another satellite manufacturer;
• selling the business; or
• shutting it down after completing any satellites already under contract.

That last option, at least, would allow Maxar to lease or sell its valuable Silicon Valley real estate. Maxar told investors that SSL’s Palo Alto, California, property could be worth $150 million to $200 million.

Maxar expects to decide around the end of the year what to do with a business that’s built more commercial GEO comsats than any of its more diversified competitors.

During the World Satellite Business Week conference here, Maxar’s SSL group president, Dario Zamarian, acknowledged Maxar no longer sees simple layoffs as an adequate response to the prolonged, possibly permanent downturn in GEO satellite sales.

“The primary options that you’ve seen are the ones that we have claimed… partnership; sale; and if things don’t work out, we are prepared to maintain our commitment to the customers fully, both for the contracts we have in place right now, as well as for the on-orbit support,” Zamarian said during a Sept. 12 panel discussion with his counterparts at competitors Airbus, Boeing, Lockheed Martin, Northrop Grumman and Thales Alena Space.

Asked if Maxar remains “committed to the GEO business,” his answer did not provide much reassurance for SSL employees anxious about their jobs.

“SSL is still in business. SSL is still here. We are still pursuing business…We are still trying to figure out how to build the business,” he said. “At same time, [the] market is not the same as it used to be. If this was a temporary change, [it] would be one thing, but we believe there are some more structural challenges that the industry overall needs to figure out.”

By discussing the possibility of an exit, satellite industry analysts said, Maxar increased the likelihood that it won’t win the additional business it needs to justify keeping its GEO operation going.

“They knew that once they raised the raised the possibility of exiting the GEO business, they signaled their lack of commitment to it, orders would stop and the exit would be self-fulfilling,” said J. Armand Musey, president of Summit Ridge Group satellite and telecom financial advisory firm.

Zamarian acknowledged that discussing its strategic options openly (“maybe too openly, but nevertheless that’s where we are”) makes it harder to bring in new GEO contracts.

“I appreciate the challenge that presents,” Zamarian said.

Orders for new GEO communications satellites have become relatively few and far between, prompting Maxar to pivot SSL toward building smaller satellites and constellations of non-geostationary satellites, such as the 117 low-Earth-orbit satellite system it is in the running to built for Canada’s Telesat.

In 2017, only eight openly competed GEO satellites were ordered industrywide — a far cry from the 20 or more satellites considered normal until recently. With 2018 more than half over, just six commercial GEO satellites have been ordered worldwide, according to Euroconsult analyst Nathan de Ruiter said.

With Airbus, Boeing, Lockheed Martin, Northrop Grumman and Thales Alenia Space fighting for the dwindling number of GEO contracts satellite operators are still awarding, SSL appeared to be doing comparatively well this year, winning two of those six commercial tenders: BSAT-4b and Amos-8.

Regardless how the Amos-8 issue plays out, SSL still has the BSAT order.

Of the five commercial GEO orders besides Amos-8, two have gone to Airbus, one to Thales Alenia Space, one to Northrop Grumman Innovation Systems and one to SSL. Boeing and Lockheed Martin have not won any commercial GEO orders this year.

SpaceNews senior staff writer Jeff Foust contributed to this story from Paris.