Mexico's Centenario satellite undergoes pre-launch preparations for its ill-fated launch aboard an ILS Proton.

PARIS — Managers of Russia’s Proton rocket said they are slashing prices for commercial launches and restructuring contracts with big customers to win back their loyalty after the rocket’s recent failures.

The contract modifications include schedule priority on Proton’s launch manifest for commercial missions and other benefits not directly related to prices, they said.

The first success of the new policy is the recent win of a launch contract from satellite fleet operator Hispasat of Spain, which purchased a launch from Proton commercial sales manager International Launch Services and another from SpaceX of Hawthorne, California.

Industry officials said ILS and its owner — Proton builder Khrunichev State Research and Production Space Center of Moscow — priced the contract at around $65 million, which is close to what SpaceX customarily offers for launches aboard its Falcon 9 rocket.

The Hispasat contract, announced Sept. 14, was the first for Reston, Virginia-based ILS in over two years, a period during which Europe’s Arianespace and SpaceX have effectively divided the commercial market between them.

In a briefing here during the World Satellite Business Week conference organized by Euroconsult, Khrunichev General Director Andrey V. Kalinovsky said the Hispasat win was an example of the new face Proton is presenting to fleet operators whose size makes them potentially regular users of Proton.

“What happened with this customer is just an occasional thing,” Kalinovsky said. “It was done as part of the program we developed with ILS. It is not all about pricing. A portion of our customers lost confidence in us and this is much more scary than a pricing issue.”

Kalinovsky said the decline of the Russian ruble gives Khrunichev leeway on pricing, but that this is likely to last only a year or two. Longer term, he said, Khrunichev and ILS are crafting different contract types for repeat customers, regardless of the ruble’s movements against the U.S. dollar and the euro.

ILS’s new president, Kirk Pysher, said the company will do all it can to use the foreign-exchange advantage while it lasts.

“Clearly we are taking advantage of the drop in the ruble,” Pysher said Sept. 15 during a panel discussion among launch service providers. “It is a durable pricing that we will continue to offer as long as we have the current exchange rates.

“But we are also partnering with our strategic customers and offering good deals. Gwynne [SpaceX President Gwynne Shotwell, also on the panel] and her team are challenging us in this area and we are reacting. The ruble has definitely helped us in that regard.”

The Proton rocket has suffered failures in each of the last four years. The most recent one, in May, destroyed a Mexican government telecommunications satellite insured for $300 million.

Andrey Kalinovsky
Khrunichev General Director Andrey V. Kalinovsky. Credit: ILS

Since then the rocket has returned to flight with two launches. Kalinovsky said the Turkish government’s Turksat 4B satellite was next up, with launch scheduled in October. An unspecified Russian government mission will follow in November, with the Express-AMU1/Eutelsat 36C telecommunications satellite — co-owned by the Russian Satellite Communications Co. of Moscow and Eutelsat of Paris — to launch in December.

Commercial fleet operators Eutelsat, Intelsat and EchoStar are among those awaiting early 2016 launches.

The European Space Agency’s ExoMars 2016 mission, which had been set for a January Proton launch, has been delayed to mid-March following discovery of a hardware defect on the spacecraft. The two-month slip could open a Proton commercial launch slot in January. ILS officials said Sept. 22 that the company is still evaluating its manifest.

In a surprising comment, Kalinovsky said the state of the commercial launch market before SpaceX’s arrival in 2012-2013 allowed the Proton team to remain commercially viable despite its failures because there were few alternatives to Proton and Ariane 5.

With SpaceX now active in the market that is no longer the case.

Before being named to his post in August 2014 by the Russian space agency, Roscosmos, Kalinovsky was a top manager at Russia’s Sukhoi aircraft manufacturer.

He said that around five years ago Sukhoi quality control slipped — “You can ask [Russian airliner] Aeroflot about that,” he said — and it took a couple of years to fully redress the situation.

Khrunichev, he said, faces the same challenges of integrating into its work force engineers that, unlike their elders, are no longer willing to wait 10 years to be certified as specialists in the Khrunichev factory.

“I won’t say it’s good or bad — that’s another question,” Kalinovsky said of the new crop of Khrunichev recruits. “But these new young people are different, that’s for sure. They want it all, here and now. We have to account for that fact and adjust our work accordingly.”

One way to demonstrate a changed Khrunichev to skeptical customers is by offering commercial fleet operators greater access to Khrunichev’s quality control procedures and manufacturing practices, Kalinovsky said. ILS, as the customer-facing entity for Proton commercial sales, will also be given more access.

Khrunichev now expects that Proton will be active on the market through 2025 before being replaced by the new Angara family of vehicles, which has now begun test flights. Kalinovsky said about 2,000 people work on Proton assembly in Moscow, with about the same number working in Omsk, Russia, where Angara is assembled.

Peter B. de Selding was the Paris bureau chief for SpaceNews.