Space industry sees growing effects of coronavirus outbreak

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WASHINGTON — As the economic impact of the coronavirus outbreak grows worldwide, executives believe the space industry will not be immune from its effects but also may not be hurt as badly as other sectors.

The spread of the coronavirus disease, formally known as COVID-19, continues to grow both in the United States and other countries. The World Health Organization reported more than 109,000 cases worldwide as of March 9, including 3,809 deaths. In the United States, the Centers for Disease Control and Prevention reported 423 cases and 19 deaths, also as of March 9.

One of those U.S. cases involves a NASA employee at the Ames Research Center in California. Ames officials announced late March 8 that an unidentified employee has tested positive for COVID-19 and, as a result, the center was closed to all but “essential personnel” until further notice. Employees were expected to telework if possible until the center resumes normal operations.

In a March 9 statement, NASA Administrator Jim Bridenstine said that, in addition to restricting access to Ames, it was postponing three Earth science airborne science campaigns, some of which would have involved flights from Moffett Field, California, where Ames is based. NASA has not announced any other travel or related restrictions linked to the coronavirus outbreak.

“As the coronavirus (COVID-19) situation evolves, we’ll continue to closely monitor and coordinate with federal, state, and community officials to take any further appropriate steps to help safeguard the NASA family,” Bridenstine said in the statement. In a March 2 interview, he said NASA was taking its approach to the outbreak on a day-by-day basis, with different responses likely at different centers depending on conditions.

The effects of the coronavirus outbreak were also apparent at the Satellite 2020 conference here, which started March 9. Conference organizers said shortly before the start of the conference that 12% of exhibitors and an estimated 10% of attendees had canceled plans to attend because of the outbreak. Lineups of conference panels were in flux as some speakers dropped out.

During one panel discussion March 9, which took place as stock markets in New York opened for trading and immediately plummeted, executives and analysts said they expected space companies to feel the economic effects at a scale similar to other industries.

“I think for the time being it’s more of a transitory effect,” said Chris Quilty, president of Quilty Analytics. “Companies with exposure to the supply chain and transportation markets are going to be more impacted.”

“Obviously, if everybody is feeling depressed and afraid for their lives, that will have a general dampening effect on people’s enthusiasm,” said Mark Rigolle, chief executive of constellation startup KLEO Connect. Rigolle, formerly head of LeoSat, said his new venture has strong financial backing from Chinese investors who are focused on the long term, and not short-term stock market fluctuations. “I wouldn’t correlate public markets with private transactions.”

Among those companies that could feel the worst effects of the outbreak, panelists said, are those that provide satellite broadband connectivity for aircraft, given declines in air travel. Service providers like Global Eagle and Speedcast could see their current struggles exacerbated by a drop in demand.

“That is probably the first area where we’re going to see the tipping of the scales” because of the outbreak, argued John Finney, founder of antenna startup Isotropic Systems. “It will force consolidation at the service provider level. It will, potentially, have companies just simply go into liquidation.”

An economic downturn will also hurt major satellite operators, who have in some cases seen their stock prices drop precipitously with the ongoing C-band spectrum proceedings in the United States. “It’s not a safe haven,” said Quilty. “If you’re looking for a place to park money as a pandemic happens, the industry has moved along with the overall market.”

Another area of concern is that an economic downturn triggered by the coronavirus outbreak could hurt startup companies in general. On March 5, Sequoia, a leading venture capital firm whose portfolio has included space companies, published a memo calling the outbreak a “black swan” event with potentially adverse impacts on both revenue of startups and their ability to raise money.

“Do you really have as much runway as you think? Could you withstand a few poor quarters if the economy sputters?” Sequoia asked its portfolio companies in the memo. “Private financings could soften significantly, as happened in 2001 and 2009. What would you do if fundraising on attractive terms proves difficult in 2020 and 2021?” The firm suggested companies evaluate their capital expenditure plans and consider reducing staff.

Finney did not specifically mention that memo in his comments on the panel, but offered similar advice. “Are we spending our capital wisely? Do we have the right level of headcount? In other words, can we do more with less people?” he said.

“There is no book titled, ‘How to Thrive as a Company During a Global Pandemic,’ but we are holding the pen,” he said. “Ultimately, this is a true test of leadership for anybody that is in the satellite industry and out raising money right now.”

Space, though, may still fare better than some of hardest hit sectors of the economy. During a March 9 event at the British Embassy here, where the Royal Aeronautical Society gave Virgin founder Richard Branson its Transatlantic Leading Edge Award, Branson noted that much of Virgin’s holdings are in travel-related industries like airlines, cruise ships and hotels, beyond its stakes in space tourism company Virgin Galactic and small launch vehicle company Virgin Orbit.

“We survived 9/11 and other financial crashes over the last 36 years, and I’m sure our teams will survive this,” he said. “Having said that, maybe going to space is not such a bad idea.”