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Delta 4 launch
A Boeing Delta 4 Medium lifts off from Cape Canaveral on March 10. (credit: Boeing)

The launch industry depression: when will it end?

Unless you’ve been living in blissful ignorance the last few years, you’re probably painfully aware of the problems the commercial launch industry has been facing. The boom in launch demand in the late 1990s, primarily by geosynchronous (GSO) and nongeosynchronous (NGSO) communications satellites, has gone bust, undone by overcapacity from existing GSO satellites and the stunning business failures of companies like Iridium and Globalstar. The launch vehicle companies, trapped in a cycle of price wars in an effort to capture the few customers available today, are losing money and looking to governments to keep them alive.

The question of the moment, for those in industry and government, is when the current industry depression will end. At a forum on Capitol Hill in Washington last week sponsored by Women in Aerospace and the Society of Satellite Professionals International, executives of three major commercial launch services providers—Arianespace, Boeing Launch Services (BLS), and International Launch Services (ILS)—made no effort to sugarcoat or disguise the serious problems facing the launch industry today. Those executives, along with officials from the US Air Force and the White House, made it clear that the problems facing the industry today will not go away any time soon.

When forecasts go bad

The problems with the commercial launch industry can be traced back to the late 1990s. At that time, recalled Jayne Schnaars, vice president of BLS, there was a dramatic boom in the number of commercial launches, with a 300 percent increase—from under 10 to over 35 a year—between 1993 and 1998 alone. That trend was forecast to increase for at least several years: a 1998 forecast by the FAA and an industry group, the Commercial Space Transportation Advisory Committee (COMSTAC), predicted there would be 85 commercial launches in 2002. The main driver for that growth was the deployment of numerous constellations of NGSO communications satellite systems, like the Iridium and Globalstar systems that were being launched in the late 90s. Those forecasts drove the development of versions of the Ariane, Atlas, and Delta with the capacity and launch rate that could handle that large a market.

“The market is nowhere near where we thought it would be in 1998,” said BLS vice president Schnaars. “The commercial market is simply not there.”

However, the financial failures of Iridium and Globalstar, as well as ORBCOMM and ICO, dissuaded others from financing and deploying similar systems. Instead of the 85 commercial launches that had been forecast for 2002, only 24 actually took place: 20 carrying GSO satellites and four carrying NGSO payloads. That number also fell short of the revised FAA/COMSTAC forecast published earlier in 2002, which called for 32 launches, 27 of them to GSO. The one bright spot was that the 24 commercial launches was actually a 50 percent increase over the dismally low numbers of 2001.

“The market is nowhere near where we thought it would be in 1998 when we initiated these [launch vehicle] programs on largely commercial funding,” said Schnaars. “The commercial market is simply not there.” She noted that the Ariane 5, Atlas 5, Delta 4, Proton, and Zenit 3SL used by Sea Launch can combined support up to 70 launches a year, but current demand for such vehicles is much smaller: only about 15-20 launches a year. “We are praying every night for Teledesic to come back,” she joked, referring to the now-dormant satellite company that once planned to deploy a constellation of nearly 1,000 NGSO satellites.

The resulting huge overcapacity has created a “very aggressive market” for launch services, said Jim Rymarcsuk, vice president of business development for ILS, which markets the Atlas and Proton. At the same time, the introduction of new vehicles has put additional pressure not only on the vehicle operators, but insurers as well. The combination of launch failures and on-orbit satellite problems has caused the insurance industry to lose money, jacking up insurance rates. Insurance capacity—the total amount of coverage theoretically available at any given time—has dropped from about $1.4 billion in 1998 to $800 million in 2002 as insurers reduce their exposure or withdraw from the market entirely. Moreover, of that $800 million, only about $350 million is available for any given launch, barely enough in many cases.

page 2: is the worst yet to come? >>