Arianespace Needs Aid To Avoid Loss in 2010

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PARIS — Europe’s Arianespace commercial launch consortium on Jan. 4 said revenue for 2010 dropped by about 10 percent compared to 2009 and that the company will report a loss unless it receives requested financial aid from European governments.

The Evry, France-based company conducted six launches of its heavy-lift Ariane 5 rocket in 2010, down from seven in 2009, and this is the main reason for the revenue drop, to slightly more than 900 million euros ($1.2 billion), in 2010.

In a press briefing here, Arianespace Chief Executive Jean-Yves Le Gall said the company would normally report a loss when it closes its books this spring but may be able to avoid it if the 18-nation European Space Agency (ESA) agrees to a new series of subsidies to offset operating costs at Arianespace and its contractors.

ESA governments in mid-December agreed in principle to some sort of cash injection. But the agency’s resolution left out any reference to a proposed package totaling 120 million euros per year for at least two years.

The fact that Arianespace has been unable to report consistent profit despite a generally favorable business environment has caused some European government officials to question publicly whether Europe’s space-launch system should be overhauled.

Ideas that have been floated include charging an annual fee to satellite operators that use orbital positions covering Europe, with the revenue going into a fund that could be tapped by Arianespace during lean years. Another proposal would transform Arianespace into a government agency owned by ESA member states. Arianespace is owned mainly by the industrial contractors that build the Ariane 5, with the French government retaining a 33 percent equity stake.

ESA governments have agreed to decide in March on the kind and amount of cash assistance to give Arianespace. Whether the aid would be available immediately is unclear, but Le Gall said that whatever package is approved could be used to offset the provisional losses of 2010 to permit Arianespace to avoid reporting a loss when it closes its books in June.

The current request for financial aid is being questioned in some European governments because, unlike the six-year package — valued at more than 1 billion euros — that expired at the end of 2010, the current request comes at a time when Arianespace might be expected to be in prime financial health.

Gone are the price wars of the past decade, when Arianespace found itself selling some launches for much less than what is needed for financial viability. Sea Launch Co. of Long Beach, Calif., which practiced some of the most dramatic price cuts, was forced into bankruptcy and will be returning to the market, albeit as a smaller player, only in late 2011.

International Launch Services of Reston, Va., which markets Russia’s Proton rocket, has gradually increased prices. China’s Long March rocket, also a competitor to the Ariane 5, remains off limits to most commercial satellite operators because of a U.S. government prohibition on exporting U.S.-built satellite parts to China.

India’s rocket, which one day may eat into some of Arianespace’s business, has yet to enter the market as a player. Space Exploration Technologies of Hawthorne, Calif., which intends to develop a heavy-lift version of its Falcon 9 rocket, is still in the early operating stages of a smaller variant of that vehicle.

Meanwhile, Ariane 5 has emerged from several difficult years to become a reliable vehicle that has racked up 41 consecutive launch successes since 2003. Arianespace’s market position has permitted it to purchase vehicles in bulk from its suppliers, allowing these contractors to cut costs.

But the company has been dogged by launch delays due to glitches in the Ariane 5 ground system and to satellites that are late in arriving. The vehicle’s business model depends on launching two satellites at a time into geostationary transfer orbit, the destination of most commercial satellites.

One industry official familiar with Arianespace’s financial state said no matter how reliable the Ariane 5 becomes, the company is at the mercy of exchange-rate fluctuations that can be dramatic. “We are asking for an aid package equivalent to about 10 percent of our annual revenue,” this official said. “That’s not so much. We have regularly seen the dollar-euro rate fluctuate by more than 10 percent in a given year.”

Most commercial launch contracts are signed in dollars, while most of Arianespace’s costs are incurred in euros.

Le Gall said Arianespace’s backlog, valued at 4.3 billion euros, is proof that the company continues to be successful on export markets. This money, he said, goes directly into plants making Ariane 5 components in Germany and elsewhere in Europe, not just France. He said it is unrealistic to assume that Arianespace can survive with little or no government aid to support operating expenses.

The Arianespace backlog includes 29 satellites to be launched aboard Ariane 5 into geostationary orbit, valued at 2.2 billion euros; 18 launches aboard Russian Soyuz rockets being marketed by Arianespace, valued at 1.1 billion euros; and six Ariane 5 launches of Europe’s Automated Transfer Vehicle cargo carrier used for the international space station, a contract valued at 1 billion euros.

In 2011, Arianespace expects to conduct six Ariane 5 launches. Le Gall said a seventh is unlikely because a few large satellites slated for launch in late 2011 are expected to be behind schedule. In addition to these launches, Arianespace expects to inaugurate operations of the Europeanized Soyuz rocket from Europe’s Guiana Space Center space port with two launches in 2011. Europe’s Vega small-satellite launcher is expected to make its inaugural launch in the second half of 2011, Le Gall said.

Arianespace is also a shareholder in Starsem, a company that handles commercial Soyuz launches from Russia’s Baikonur Cosmodrome in Kazakhstan. Three commercial Soyuz missions are planned from Baikonur in 2011, all carrying mobile-communications satellites for Globalstar of Milpitas, Calif.