Maxar considering exiting GEO satellite manufacturing business

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WASHINGTON — Maxar Technologies, owner of satellite manufacturer Space Systems Loral, may shut down its geostationary manufacturing line as a result of a multi-year order drought that management considers the new norm.

Maxar executives said exiting the business of building large telecom satellites, which operators typically pay $100 million or more for, is one of three mitigation strategies the company is considering. The other two are partnering with another satellite manufacturer, or “right-sizing its GEO operations in Palo Alto,” California, to match “a more conservative long-term demand outlook,” according to a Bank of Montreal report of a closed-door meeting in June.

Maxar confirmed the report July 23, telling SpaceNews that pressure on SSL has led the company to consider “strategic alternatives.”

“We have experienced material satellite order declines in recent years, as a result of end market supply and demand factors and additional capacity coming on orbit from [high-throughput satellites] and [low-Earth-orbit] constellations,” Maxar said in an emailed statement. “SSL has responded appropriately to manage its workforce and costs during this challenging time. As previously stated, we are continuing to review strategic alternatives for our GEO communications satellite business to improve its financial performance. No final decision has been made. At the same time, we continue to see strong growth in our US Government and LEO communications and Earth observation businesses and remain encouraged regarding the potential in these markets.”

Maxar declined to comment further, citing its upcoming quarterly earnings call at the end of the month.

Maxar will decide on the three outcomes by year’s end, according to a research note from Thanos Moschopoulos, the Bank of Montreal analyst who attended the meeting. If Maxar goes with the most drastic option — exiting the GEO business altogether — the company would likely keep some operations for robotics and smaller LEO satellites, Moschopoulos wrote.

The continued drought

Maxar’s SSL division is one of the top manufacturers of commercial telecom satellites. The company has tied or come in first for winning the largest number of GEO comsat orders every year since 2013, according to Bank of Montreal numbers.

The number of annual GEO comsat orders have dropped dramatically over the last few years. After averaging 20 or more satellite orders a year, the industry saw just 19 GEO comsat orders in 2015, 15 orders in 2016 and eight orders in 2017, according to the bank’s numbers.

Five GEO comsats have been ordered so far this year. Two of those orders (BSAT-4b for Japanese operator BSAT, and Amos-8 for Israeli operator Spacecom ) went to SSL while Northrop Grumman Innovation Systems was chosen to build Intelsat’s Galaxy-30, Thales Alenia Space was chosen to build Eutelsat’s Konnect VHTS and China Great Wall Industry Corp was chosen to build Cambodia’s Techo-1 satellites. The bank did not count the two satellites China Great Wall is building for NigComSat in exchange for a stake in the state-owned Nigerian company.

One of SSL’s 2018 orders is not fully finalized. Spacecom delayed its downpayment on the $112 million Amos-8 satellite upon news that the Israeli government may procure a satellite from domestic manufacturer Israel Aerospace Industries and co-locate it with Spacecom’s fleet at 4 degrees West.

Maxar is “not anticipating a rebound in the market,” Moschopoulos wrote. “[I]ts outlook for the market has become more cautious than it had been just six months ago.”

Howard Lance, Maxar’s chief executive, said in May that the company was seeking to align its direct labor with the declining amount of factory work at SSL. As satellites ship out for launch this summer — SSL shipped the first of three last month — that provides “opportunity for further rationalization of those resources,” he said.

Lance said Maxar was continuing to evaluate “other ways that we can better align our costs longer term with what we believe will be a sustained lower level of GEO market orders.”

Small satellite opportunity

Maxar, which was formed last year when Canada’s MDA added DigitalGlobe to a portfolio that already included SSL, has gradually repositioned itself as a U.S. company in order to do more business with the U.S. government. Lance said some small satellite work for the U.S. government and some commercial customers was dampening the impact of the GEO slump.

SSL, working with the University of Toronto’s Space Flight Laboratory, built one of two prototype LEO satellites for Canadian fleet operator Telesat. The satellite was lost in a November Soyuz failure, but Moschopoulos wrote that SSL should still be favorably positioned in the competition to build Telesat’s 117-broadband-satellite constellation.

“Maxar should be well positioned for this contract given its long history with Telesat (having built the majority of Telesat’s existing GEO fleet) and given that it has a Canadian manufacturing presence, which is just a 90-minute drive from Telesat’s global headquarters in Ottawa,” Moschopoulos wrote.

He added that the Canadian government’s plan to invest 100 million Canadian dollars ($76 million) into LEO satellite technology over the next five years “might provide Telesat with some added incentive to favor a Canadian manufacturer.” Maxar, though mostly a U.S. company, has its MDA Corp. facilities in Canada and recently purchased Canadian robotics specialist Neptec for $32 million. Telesat and MDA Corp. have both expressed interest in the fund.

Moschopoulos cautioned that losing the Telesat LEO competition could be “problematic for Maxar’s LEO aspirations,” given that only a few large LEO constellations are expected to be built. Airbus is building OneWeb’s first 900 LEO satellites, Thales is positioned to build LeoSat’s 84 satellites and SpaceX is building some 4,500 satellites in-house.

“This is consequently a key contract to watch” he wrote.

Telesat’s only operational LEO prototype was supplied by Airbus subsidiary Surrey Satellite Technology Ltd. in the United Kingdom.

Maxar has internal use for its small satellite manufacturing thanks to its ownership of DigitalGlobe. The company is building DigitalGlobe’s WorldView Legion constellation of remote-sensing satellites, for which the first launch is scheduled for 2021 aboard a SpaceX Falcon 9 rocket.

Maxar said as recently as May that it continues to expect satellite operators will order eight to 12 GEO comsats this year, with manufacturers in the U.S., Europe and Asia contending for bids.