Iridium: Aireon Air Traffic Venture Can Fly without Another Investor

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PARIS — Iridium Communications’ partnership with Nav Canada on a global aircraft tracking system using special terminals to be added to Iridium’s second-generation constellation is not dependent on any other investor coming forward, Iridium Chief Executive Matt Desch said June 19.

In an interview, Desch said that while Iridium will not rule out the arrival of other investors in the newly created Aireon LLC joint venture, which he said will need “on the order of hundreds of millions of dollars” to build and integrate the terminals, it is definitively under way even if Iridium and Nav Canada remain the only shareholders.

McLean, Va.-based Iridium said it had selected Harris Corp. of Melbourne, Fla., to provide terminals — called ADS-B 1090 MHz Extended Squitter receivers — to be installed on space that Iridium has set aside for third-party payloads on its next generation of 66 operational satellites and six in-orbit spares.

The $3 billion Iridium Next mobile satellite services constellation is scheduled for deployment between 2015 and 2017. The satellite construction contract, with Thales Alenia Space of Cannes, France, includes nine ground spares, meaning Harris will build 81 receivers.

Harris confirmed the contract June 19 with its own |announcement.

In a June 4 presentation to investors, Harris said it expects its business in selling so-called hosted payloads — sensors and instruments that ride as piggyback passengers aboard satellites performing other missions — to generate revenue of $250 million between 2012 and 2017.

Harris spokesman Marc Raimondi said June 20 that the figure referred to the entire hosted payload business Harris expects to win during that five-year period, not just to Iridium. He declined to give the value of the Aireon contract. One industry official said the work is valued at more than $100 million.

ITT Exelis, also of McLean, which already provides ground-based ADS-B — Automatic Dependent Surveillance Broadcast — towers as part of the U.S. Federal Aviation Administration’s (FAA) ongoing upgrade of its air traffic management system, is providing systems engineering to Aireon. ADS-B is based on high-integrity GPS navigation satellite signals.

Desch said neither Harris nor Exelis is investing in Aireon. He declined to disclose the Aireon ownership split between Iridium and Nav Canada, a private company that provides air traffic management services in Canada. Desch also declined to estimate the annual revenue that Aireon could expect to generate by selling its aircraft tracking service to the world’s air traffic management agencies.

Desch said Nav Canada’s involvement is a certainty despite the fact that it will take a couple of weeks for the formal arrangement between the companies to be finalized.

In a statement issued June 19 with a news conference unveiling Aireon, Iridium said Nav Canada’s involvement as an investor “is subject to the completion of formal agreements in the near future,” but that the Canadian air traffic management authority intends to be Aireon’s first customer.

Air traffic authorities in the United States, Canada, Australia, Europe and elsewhere have already begun to deploy ADS-B towers to replace radar-based receivers. Don Thoma, an Iridium executive vice president who has been named Aireon chief executive, said ITT Exelis is building some 800 ADS-B towers using its own investment, and then selling access to the data as a service to customers.

The FAA’s service contract with Exelis, which was signed in August 2007, is valued at $1.8 billion, including options, through 2025. It includes the construction and installation of some 800 ground stations, and three control centers, throughout the United States, and the operation of the system until the contract’s end date.

Each ground station is about the size of a small refrigerator.

To be able to send data to the ADS-B towers, airlines have begun to outfit their planes with ADS-B terminals, Thoma said, meaning little or no capital investment is needed beyond the Harris-supplied hardware for the Iridium satellites to relay the information. The FAA estimates that installation of the basic ADS-B system, not including an upgrade that would display ADS-B data on pilots’ screens, will cost between $32,000 and $175,000 per commercial jet.

Thoma said Aireon is adopting a similar service-provision model in which the private sector undertakes the capital expense of deploying the system and in return receives an annual service fee from the government users.

Nav Canada Chief Executive John Crichton said the current system of managing air traffic outside the range of ground radars or the new ground-based ADS-B towers limits airlines’ ability to save fuel and time by using more-efficient routes, at different altitudes, that take advantage of fast-evolving wind conditions.

Because of the imprecision of the current system over the poles, oceans and certain remote areas on land, Crichton said, a huge amount of fuel is wasted each year in confining aircraft to predetermined flight paths. By providing higher-accuracy data on aircraft positions, the Aireon service should result in substantial fuel savings because the planes would not require as much spacing between one another.

Russell G. Chew, managing director at Nexa Capital Partners LLC and a former chief operating officer at the FAA, said during the news conference that using higher-precision ADS-B data could result in between $6 billion and $8 billion for the first dozen years in fuel savings on the North Atlantic and North and Central Pacific routes alone.

Carbon emissions would be reduced as well — the equivalent of removing 2 million cars per year from the highways.

Desch said the Aireon terminals would use most of the space and power that Iridium had been setting aside for hosted payloads. He said there nonetheless remains room on each Iridium Next satellite for one or two additional hosted payload instruments. But given Iridium’s development calendar, any new hosted payload sponsors must arrive quickly.

The Iridium Next satellites being built by Thales Alenia Space will be shipped to the United States for final work before launch. Orbital Sciences Corp. of Dulles, Va., is responsible for the satellites’ final assembly, integration and testing at Orbital’s Chandler, Ariz., facility.

The satellites are scheduled for launch into low Earth orbit on Falcon 9 rockets operated by Space Exploration Technologies of Hawthorne, Calif.