PARIS — European governments have ordered a detailed audit of the sources and uses of money at the Arianespace commercial launch consortium and its industrial suppliers as a condition of granting the company’s request for what may be a permanent financial aid package to assure its ongoing financial viability, European government and industry officials said.
They said the audits, being led by the 18-nation European Space Agency (ESA) with the help of outside accounting experts, should settle the issue of whether Europe’s launch vehicle organization is unable to report a regular profit because it is overpaying its shareholder suppliers or otherwise wasting money, or because mediocre financial results are inevitable at any enterprise building and launching space-launch vehicles.
ESA Director-General Jean-Jacques Dordain said Jan. 14 that the audits, to be concluded before mid-March, have never been done in the 30-year history of the Ariane rocket family. ESA governments — presumably with the exception of the French government, whose CNES space agency is an Arianespace shareholder — have been in the dark all these years about what accounts for profit and loss at Evry, France-based Arianespace.
In an interview, Dordain said training a financial X-ray on Europe’s launcher sector will permit ESA to determine whether Arianespace and its contractors could find savings in rocket construction and operations.
Once armed with the audit results, Dordain said, ESA will ask its member governments to make a choice: Accept things as they are with minor changes, or permit Arianespace to cast a wider net when seeking suppliers.
Arianespace is tied by its protocols with ESA to using the industrial base ESA created when producing Ariane rockets. This industrial base was stitched together for reasons that often had little to do with economic rationale and everything to do with winning political approval for each new Ariane program. Despite industrial consolidation in recent years, the result remains an Ariane supply chain that is scattered throughout Europe.
Arianespace and its contractors are asking ESA governments for a new set of financial supports to offset their costs, and also to protect against future declines in the U.S. dollar relative to the euro. Arianespace and its suppliers incur costs in euros, for the most part, but sign commercial launch contracts in dollars.
Dordain stressed that the audits would not stop at the accounts of Arianespace and the major rocket-system contractors, but would include a close look at the second- and third-tier suppliers.
“Can we reduce production costs, or operations costs? Some of these costs have not been much reduced in recent years despite the fact that Arianespace is ordering launchers in batches,” Dordain said. “What our member states want is some transparency in this situation. These governments can then exercise their influence in their territories and at ESA.”
He said the near-term goal was to establish the financial realities of Ariane rocket production and operations, and then to agree on a two-year aid package that tentatively has been set at 120 million euros ($156 million) per year.
A planned conference of ESA governments in mid-2012 may then decide whether Arianespace should be dismantled in favor of a government agency that would manage Europe’s launcher operations, or whether ESA or individual European governments should join France among Arianespace’s shareholders. Dordain said many options could be considered in 2012. He declined to say whether he preferred one over the rest.
Without saying so directly, Dordain conceded during the interview that if Arianespace and its contractors need 120 million euros per year now, they may well need a higher level of support in the coming years. Fresh, potentially low-cost competition from the United States, China and India is on the way, threatening Arianespace’s 50 percent-plus share of the global commercial satellite launch market.
Francois Auque, chief executive of Astrium, whose Astrium Space Transportation division is prime contractor for Europe’s Ariane 5 rocket, said he welcomes the audits, even if he suspects that ESA governments already know what the results will be.
“We actually demanded the audits,” Auque said in a Jan. 12 briefing with reporters. “We want to get rid of this idea, which some apparently have, that there is lots of profit in this business. I want them to see that we don’t make money.
“The economics of Europe’s launcher system uses a very singular model,” Auque said. “Everywhere else, launchers are funded at nearly 100 percent by governments, although in Russia it is maybe 75 percent, at prices that make launch-vehicle manufacturers extremely happy. Do you see Boeing or Lockheed Martin in the United States complaining about the prices they get for U.S. government launches? No. Only in Europe is there this bizarre idea that the launch sector can live by the commercial market alone.”
Auque said that whether Arianespace’s ownership is modified, or a government agency takes its place, is equivalent to “not looking at the forest, but the trees. And in this case, the tiniest twig. It is irrelevant. The question is how Europe’s launcher sector can remain robust. The fact is, it is a miracle that Europe has been able to maintain a launcher sector given how much money governments invest in it.”