ESA Industrial Policy Limits Ariane 5 Cost-savings Potential

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LE BOURGET, France — An outside audit of the manufacturers of Europe’s Ariane 5 rocket and the company that sells the vehicle has concluded that there are only marginal savings that could be realized unless European governments agreed to scrap their geographic-return rule, European government and industry officials said June 20-21.

Nonetheless, the 18-nation European Space Agency (ESA) is pursing what it calls its “due diligence” inspection of the costs of Ariane 5 production and operations by seeking bids for Ariane component contracts from companies not now doing the work, officials said.

These bids are expected by this fall. Whether ESA and the Arianespace commercial launch consortium will be able to switch to lower-cost suppliers for Ariane 5 elements is unclear. Any change to the current industrial makeup would risk alienating one or more governments whose financial support for ESA launcher efforts is viewed as indispensable.

But at the least, the new pricing benchmarks could be used to pressure existing suppliers to reduce their charges, officials said.

“We will issue requests for binding price quotations, and then it will be up to Arianespace to determine whether to enter into contracts,” Antonio Fabrizi, ESA’s launcher director, said here June 20 during the Paris air show. “This will be done between October and December and by the first quarter of 2012 we need to have proposals in hand for our ministers at their meeting in late 2012.”

ESA governments in January demanded ESA’s due-diligence audit as a condition for granting Arianespace’s request for about 120 million euros ($168 million) in financial aid in 2011, with an identical amount for 2012.

Some of these governments had expressed surprise that the heavy-lift Ariane 5 rocket, despite more than a decade of operations and 44 consecutive successes for the past eight years, was still unable to deliver a profit to Arianespace. Evry, France-based Arianespace is owned mainly by the French government and by the manufacturers of the Ariane 5.

The audit has been completed, and ESA governments agreed to the two years of financial aid. But they also wanted further data on Ariane 5 costs as they prepare a late-2012 meeting of ESA government ministers.

This meeting is likely to be asked to allocate 1 billion euros to complete work on a new Ariane 5 upper stage that would permit the vehicle to lift an additional 2,000 kilograms of payload into geostationary transfer orbit, the destination of most telecommunications satellites.

Including the 850 kilograms of adaptor hardware, the Ariane 5 can now carry about 10,000 kilograms into that orbit. By making minor adjustments to the rocket, its builders say they will be able to increase that lift capacity to 10,500 kilograms in a year or so.

Jean-Yves Le Gall, chief executive of Arianespace, said here June 21 that the due-diligence audit, which is part of what Fabrizi called a Procurement Process Review, uncovered no pockets of high profitability or waste of government money.

“There were no surprises in this due-diligence procedure,” Le Gall said during a press briefing at the Paris air show. “Neither Arianespace, nor our industrial contractors, were found to have hidden [profit] margins. I think that after this audit, common sense returned. We are well organized, and like all launch vehicles in the world, we need government support.”

Alain Charmeau, chief executive of Astrium Space Transportation of Les Mureaux, France, which is the prime contractor for Ariane 5, said the audit pointed out what may be a total of 5 percent savings that might be made. But he cautioned that any time a contractor is replaced, a series of component qualifications must occur, which add costs to the process.

“We opened all our accounts to ESA member states for the audit,” Charmeau said June 21. “We all have the same interest: that limited funds do not fund nonsensical expenditures.”

Charmeau said one of the requirements of the billion-euro Ariane 5 upper-stage program, called Ariane Mid-Life Evolution, is that the new stage and its 2,000 kilograms of additional performance in launching payloads into geostationary-transfer orbit cost no more than the current Ariane 5 ECA rocket to build or operate.

ESA Director-General Jean-Jacques Dordain and other ESA officials have said repeatedly that if their member governments are willing to drop the requirement that Ariane 5 contracts are distributed among a dozen nations in proportion to each nation’s contribution to the program, then substantial savings might be made.

European government officials have said privately that they need to show, beyond a doubt, to nations hesitant to fund the Ariane 5 enhancements and, in the near term, the start of an Ariane 5 successor, that money is not being wasted.

Fabrizi said ESA and the Ariane 5 industrial team have already succeeded in reducing the annual Arianespace price support to 120 million euros from 200 million euros a year.

“I hope that when we present a proposal to our ministers next year it will be even less than 120 million,” Fabrizi said, adding that ESA would not make public the results of the due-diligence review.

 

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