WASHINGTON — While demand for launches of smallsats is higher than ever, industry officials warned that price pressures and lack of access to capital could cause many companies to go out of business in the near future.
Executives with several launch companies said during a panel at the SmallSat Symposium in Mountain View, California, Feb. 7 that they are seeing strong demand for launch services but are struggling to make money as competition, particularly from SpaceX, drives down prices.
“I’ve been in the space business now for almost 30 years,” said Marino Fragnito, senior vice president and head of the Vega business unit at Arianespace. “I have never seen so much business. I have never seen so much demand for launches.”
However, he said it was currently difficult for his company and others to make money launching small satellites. “If we talk about 50 kilograms, 100 kilograms, this kind of satellite size, this is the size of the Transporter missions,” he said, referring to the series of SpaceX Falcon 9 dedicated rideshare launches. “The reference price is the Transporter price. With that price, nobody will make money.”
SpaceX currently charges $275,000 to launch a 50-kilogram smallsat to sun-synchronous orbit on a Transporter mission, far less than list prices for many dedicated smallsat launch vehicles. Those launches, taking place three to four times a year, can carry 100 or more satellites each.
Adam Spice, chief financial officer of Rocket Lab, agreed. “I think the fact is they’ve suppressed prices in the market. I think the fact is they’ve taken a lot of volume off of the market,” he said of Transporter missions. “That’s a reset that really wasn’t there in the model even only a few years ago.”
He said launch companies need to adapt by attracting more government business, which is less price sensitive and often has requirements that drive them to dedicated launches. He added that some commercial customers that fly initially on rideshare missions will shift to dedicated launches over time as they deploy operational constellations.
“What’s happening is that commercial companies are growing more mature in terms of small satellites and small constellations,” said Dan Hart, chief executive and president of Virgin Orbit. “That overlaps to a fair degree with some of the needs of the national security community.”
Bill Weber, chief executive of Firefly Aerospace, said his company’s Alpha rocket is attracting interest from customers who don’t feel like Transporter missions are a good fit. “They are saying, ‘Transporter does not work for our mission set,’” he said.
But some admitted they underestimated the cost and complexity of developing small launch vehicles. “I think there has to be a reflection of factoring in that delivering a reliable and regular launch service is expensive,” said Giulio Ranzo, chief executive of Avio, prime contractor of the Vega series of rockets. “Pricing needs to take this into account. There is no easy solution to finding a lower price launch service.”
Spice said that Rocket Lab had underestimated what it would take to develop and operate its Electron. “I’ve been with Rocket Lab now for about five years, and five years ago we had a certain idea of what it would take to operate the company and operate at a certain cadence, and we were just wildly off,” he said.
He added he saw an “abnormally” high rate of failures of small launch vehicles in recent months, an apparent reference to recent failures by Vega C, Virgin Orbit’s LauncherOne and ABL Space Systems’s RS1. “I don’t think it’s necessarily all that unpredictable when you think about the challenges that have been placed in front of these companies.”
The combination of pricing pressures from SpaceX, technical issues and limited access to capital will, Spice predicted, lead to a reckoning in the burgeoning small launch market. “You have a very strong muting function that SpaceX is providing to the small launch market, which I think ultimately will force survival of the fittest,” he said. “I think there will be a lot fewer players out there in a few years than there are today.”
That will particularly affect early-stage companies that need to raise capital that is difficult to do now given the current state of the market. “It takes capital to grow, and capital is really, really hard to come by,” he said.
“People underestimate how difficult the launch business really is,” he said. “I think we’re at the beginning of the bloodletting of aspirational launch companies.”
Weber offered a similar assessment, focusing on limited launch infrastructure like launch pads, comparing it to gates at an airport. “If you are a blueprint launch company right now, and you do not have real estate but you have what you believe is a good idea, you got to get that to market quick because the available space will be taken up by those with presence.”
Fragnito said that, despite those various challenges, the demand for launches made him more optimistic about the overall sector than previously. “I’m much more positive than a few years ago on the fact that more companies can survive,” he said. “The ones that will be able to operate successfully a launch system can survive because there is a lot of demand.”