Astrium Services Cleared to Buy New Spot Satellites

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LE BOURGET, France — Astrium Services on June 18 confirmed it has won the approval of its corporate parent, aerospace giant EADS, to purchase two optical Earth observation satellites to assure the business continuity of the Astrium-owned Spot Image company despite the absence of any government financial support.

Astrium Services Chief Executive Eric Beranger said the company will continue to seek some form of backing from the French government, notably the French Ministry of Defense, which like the U.S. Air Force has been a major customer for Spot Image imagery for more than two decades.

Both militaries use Spot medium-resolution imagery to construct maps that guide fighter jets and cruise missiles.

At a press briefing at the Paris Air Show here, Beranger declined to disclose the estimated cost of building, launching and insuring the two satellites, called Spot 6 and Spot 7, but said the likely total was “several hundred million” euros. Industry officials have estimated the cost at around $500 million.

Astrium Services in mid-2008 became the dominant shareholder of Spot Image of Toulouse, France, purchasing the shares held by the French government since Spot’s founding in the mid-1980s. Spot Image has agreements to market data from high-resolution satellites owned by South Korea and Taiwan, but most of its annual revenue comes from the medium-resolution Spot 5 satellite, which was launched in mid-2002 and has a contractual five-year service life.

Spot Image officials now expect Spot 5 to operate through 2014, but acknowledge the risk that the spacecraft could fail without warning, as happened with a previous Spot satellite and the French Defense Ministry’s Helios 1B military reconnaissance satellite, which used a design similar to Spot’s.

The French government has purchased Spot satellites since the product line began, although Spot’s increasing revenue base has permitted the company to finance the ground segment and Astrium has contributed to the cost of a stereo-imaging capacity on Spot 5 in partnership with the French government.

“We recognize our responsibilities as the major shareholder in Spot Image,” Beranger said. “We believe in the business and we want to assure business continuity. But we also need some form of [government] support. The most logical would be a commitment to buy images, in return for secure access [to the satellites’ capacity] at a preferred price.

“If we end up where you have players in the market who are supported by their governments, and where others do not have such support, you are going to have distortions in the market that could not be sustained forever.”

Infoterra, an Astrium subsidiary that is focusing on radar satellite data, has created a financial partnership with the German space agency, DLR, to build the TerraSAR-X satellite, in orbit for two years, and the TanDem-X satellite to be launched this fall.

In the United States and Canada, private-sector companies operating Earth observation satellites have secured government financing to help with satellite construction in addition to imagery-purchase guarantees.

No other company has been able to build and launch an Earth observation system and sustain a business without government financial participation at some level. A German start-up company, RapidEye AG of Munich, initially planned to build its five-satellite constellation without direct financial aid, but ultimately was forced to seek DLR backing to continue operations.

“The business model is shifting, and we are now in the middle of the shift,” Beranger said, describing the evolution of the Earth observation sector from 100 percent government financed for nearly 100 percent government markets, to one in which the private sector can share the investment by counting on future commercial and government revenue.

Astrium Services reported revenue of about 815 million euros ($1.13 billion) in 2008 and company officials have said they expect a 10 percent increase in 2009. Beranger said Astrium Services likely would be taking out substantial debt of its own for the Spot 6 and Spot 7 satellites in addition to financing part of the investment from the company’s cash flow.