Chief Executive Replacement Signals Shift at Sea Launch

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  Space News Business

Chief Executive Replacement Signals Shift at Sea Launch

By PETER B. de SELDING
Space News Staff Writer
posted: 17 July 2008
12:30 pm ET






The Sea Launch Co. board of directors has dismissed President Robert A. Peckham, replacing him with Chief Financial Officer KjellKarlsen, to demonstrate its frustration with the company’s profitability and near-term launch manifest, Sea Launch officials said.

The decision, made at a July 2 board meeting in and announced July 7, comes as Sea Launch prepares for the fourth of a planned six launches this year with the scheduled July 15 liftoff of the EchoStar 11 satellite for direct-broadcast television provider Dish Network.

Peckham did not attend the board meeting because he had been called as a witness in a court case in Los Angeles in which satellite operator ICO Global Communications is suing Boeing Co. of Chicago because of a former satellite-delivery contract. The case does not involve Long Beach, based Sea Launch. Peckham was called to testify because of a former position he held with Boeing’s satellite division.

After EchoStar 11, Sea Launch plans the launch of the Galaxy 19 satellite for Intelsat of Bermuda and Washington, and will close out the year with the launch of the Sicral 1B military telecommunications satellite for the Italian Ministry of Defense.

The company also is preparing to begin regular operations of its Land Launch variant, which is basically the same Zenit-3 rocket used by Sea Launch, but operated from the Russian- run BaikonurCosmodrome in Kazakhstan instead of Sea Launch’s floating platform located on the equator in the Pacific Ocean.

Two Land Launch campaigns are planned for this year, and three for 2009, Karlsen said in a July 8 interview.

It is the company’s 2009 manifest, with just two Sea Launch missions scheduled, that the company’s board found unacceptable. Sea Launch’s two direct competitors – Europe’s Arianespace consortium, which operates the Ariane 5 rocket from Europe’s Guiana Space Center in French Guiana; and International Launch Services (ILS) of Reston, Va., which sells commercial launches of Russia’s Proton-M vehicle, also from the Baikonur site – are showing full manifests.

At a time of robust health in the commercial satellite market, Sea Launch has not been able to take advantage of the fact that ILS’ Proton-M has been grounded since a March failure and is not expected to return to flight until August.

Sea Launch’s situation is at least partly explained by the fact that its suppliers – RSC Energia of Korolev, Russia; and the Ukrainian team of SDO Yuzhnoye and PO Yuzhmash of Dnepropetrovsk, Ukraine – have not furnished Sea Launch with enough rocket hardware to meet demand. Peckham repeatedly had said the supply-chain issues were related to the rapid inflation in raw-materials prices in that forced Sea Launch to renegotiate its purchases.

As is the case with ILS and with Arianespace, Sea Launch’s shareholders include its principal hardware suppliers. Boeing is a 40 percent shareholder, but the two Ukrainian companies have a combined 15 percent equity stake in the company; RSC Energia has 25 percent and Aker ASA of , owns 20 percent. Sea Launch’s floating platform, a converted oil-production facility, was built in

Because of this setup, the company’s shareholders are in effect negotiating with themselves when they seek to increase rocket-hardware production and negotiate new supply-contract terms.

Karlsen said Sea Launch management and its suppliers have agreed to a production rate that will average nine to 10 vehicles per year – Sea Launch and Land Launch operations combined – starting in 2010 or 2011. That production rate will not be reached before then, which partly accounts for the limited operations forecast in 2009, he said.

The company and its suppliers have a contract that will be renewed starting from the 39th launch. The planned July 15 launch will be Sea Launch’s 28th launch.

Karlsen said a long-planned refurbishment of Sea Launch’s command ship will shut down operations for a month or two in 2009, and this maintenance would have reduced the company’s capacity that year in any event.

Karlsen said the board also is insisting that Sea Launch redouble its efforts at cutting costs, an effort he said Peckhamalready had begun.

“There are going to be small changes,” Karlsen said. “Rob had a focus on costs and I will have an increased focus on costs. We run a pretty tight ship already, but there are small things you can do. For example, we can look at the speed our vessels use to travel from home port to the launch site to determine whether we can save fuel. Certain operating-cost targets have been set by the board.” In a July 10 interview, Peckham said he understood that replacing a chief executive is a common practice when a company wants to signal a change in direction.

“It has been an honor and a privilege to serve Sea Launch,” Peckham said. “I wish nothing more than their continued success. The company and the people will always have a special place in my heart.”