Renewed Arianespace Subsidies Prompt Protest Threat from ILS

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WASHINGTON — The European Space Agency (ESA) on March 17 formally committed to extending Europe’s participation in the international space station through 2020 and agreed to a fresh round of price supports for the Arianespace commercial launch consortium.

The ESA decision on Ariane 5 price supports, which will total 240 million euros ($318 million) over two years, drew an immediate reaction from Arianespace’s principal competitor, International Launch Services (ILS).

Reston, Va.-based ILS, which commercializes Russia’s Proton heavy-lift vehicle, said it is weighing a formal protest of the price supports, characterizing them as an “inordinate and direct subsidization of … commercial operations.”

ILS President Frank McKenna has long criticized ESA’s continued cash support for the Evry, France-based consortium and its Ariane 5 rocket, which is long past its development phase.

 “ILS is extremely disappointed with the outcome of the [ESA] Council meeting though it was not unexpected,” McKenna said in a March 17 statement. “Arianespace cost reductions of 250 million euros would have been a far better solution. But these additional cost subsidies, totaling approximately 250 million euros over two years to fund Ariane’s operations, will continue to create a distortion of the market.

“The ongoing subsidization of Ariane dis-incentivizes cost reduction and efficiencies, prevents other launch providers from competing on a level playing field, deters new providers from entering the market and [is] detrimental to the long-term health of the commercial launch industry. ILS is evaluating all avenues of recourse to stop such inordinate and direct subsidization of Ariane’s commercial operations.”

In a briefing with reporters on March 14, McKenna conceded that filing a protest to one or more international governmental organizations such as the European Union or the World Trade Organization might appear quixotic. But he said ILS is determined to create a public record of protest.

Arianespace Chief Executive Jean-Yves Le Gall, in a March 15 debate with McKenna and other launch service providers during the Satellite 2011 conference here, accused McKenna of turning a blind eye to ILS’s own subsidies from the Russian government.

“There are hidden subsidies, and subsidies that are transparent,” Le Gall said. “There is a huge effort made by the Russian government to support the launch sector. Proton, Soyuz, Zenit — all the vehicles receive subsidies. But it is not support that is made to the launch company. In Baikonur, there are thousands of people working full-time, and all these people are free to the launch operation.”

The Baikonur Cosmodrome in Kazakhstan is Russia’s principal launch base and the site of Proton launches.

“We have 1,500 people at the Guiana Space Center and we must pay these people. All of the companies up here receive subsidies,” Le Gall said, referring to the companies serving the commercial space-launch market.

The Arianespace price supports and renewed space station commitment, approved  during a March 17 meeting of the 18-nation ESA’s ruling council, were tied together by the fact that ESA’s two biggest contributors, France and Germany, were initially on opposite sides of the two issues.

Germany, which leads Europe’s investment in the space station and wanted a major commitment to 2020, was less enthusiastic about a fresh round of Ariane 5 price supports. France, which is the main backer of the Ariane 5 launch system, has long been tepid in its support for the international space station.

Each nation was obliged to support the other’s proposals in order to assure approval of its favored project. Arianespace has reported small losses in the past two years despite the fact that its principal product, the Ariane 5 rocket, has posted 42 consecutive successes.

The prospect of continued losses caused Arianespace and the French government to ask ESA governments for additional financial backing. These governments said they would first need to perform financial due diligence on Arianespace and its industrial shareholders, who build Ariane 5 components.

ESA and Arianespace officials say it would be easy for Arianespace to save money on Ariane 5 production if the company were allowed to rationalize its supply base. As it is now, Arianespace is obliged to continue to use a far-flung network of suppliers in Europe as part of ESA’s policy of guaranteeing that work flows to individual nations in return for their financial support for ESA.

ESA governments are expected to review the Ariane support issue again in 2012 during a meeting of European space ministers. By then, it should be clearer whether it is ESA, or the European Commission, that should take charge of what is likely to be a multiyear price-support program to assure the financial viability of Arianespace.

Meanwhile, during the ESA ruling council meeting on March 17, the 10 ESA nations taking part in the international space station not only agreed to a political statement supporting station operations to 2020, but also identified their likely financial backing through the period.

Bernardo Patti, ESA’s space station manager, said in a March 17 interview that ESA governments committed to funding Europe’s 8 percent share of space station operations and maintenance, at a cost of about 150 million euros per year.

This obligation will be paid to NASA not in cash, but in services. The agency already has agreed to provide three more Automated Transfer Vehicle (ATV) cargo carriers to deliver supplies to the station, a program that fulfills Europe’s obligations through 2017. The remaining three years’ charges, totaling 450 million euros, will be paid by some other hardware development program yet to be decided by ESA and NASA.

Patti reiterated previous statements by ESA Director-General Jean-Jacques Dordain that the agency would like its remaining contribution to build on technologies developed for the ATV while at the same time being useful for a NASA-led future exploration program.