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Atlas V launch
An Atlas V lifts off from Cape Canaveral earlier this month, carrying a military satellite. Some commercial satellite operators are showing a renewed interest in the Atlas, if its launch prices can come down. (credit: United Launch Alliance)

Price, reliability, and other challenges facing the launch industry

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According to conventional wisdom, commercial customers of launch services care more about launch prices than those in government. Commercial users, after all, are trying to close a business case and generate as much profit as possible. Government users, on the other hand, are concerned about getting their payloads—often very expensive and performing critical missions—launched on schedule and safely, and have shown a willingness to help financially support their nations’ own launch systems.

That conventional wisdom, if it was ever totally accurate, is showing signs of breaking down. Commercial customers, particularly in the core market of geosynchronous communications satellites, have been less price sensitive than what some might expect, and are now expressing new concerns about the reliability of some vehicles. Government customers, meanwhile, are showing new sensitivity to price in this new era of constrained budgets, and are looking to competition from new entrants to help lower their costs.

Commercial customers look for reliable alternatives

At last week’s Satellite 2013 conference in Washington, DC, the CEOs of four of the biggest commercial customers for launch services—satellite operators Eutelsat, Intelsat, SES, and Telesat—commiserated with each other about their concerns regarding launch vehicle availability and quality, with price being a secondary concern.

“We have been disappointed… with the recent performance of the Russian launch vehicles, both the Proton and Sea Launch,” said Telesat’s Goldberg.

“Clearly, we’ve had issues with the Russian launchers,” said David McGlade, CEO of Intelsat, during a plenary panel session at the conference March 19. “I think the basic quality of the technology is good. I think maybe there’s maybe some workmanship or other issues that could have been avoided. I think they have to double down on their capabilities.”

McGlade was referring to separate problems affecting both the Proton and the Zenit-3SL launch vehicles. The Proton is returning to flight this week with the launch late Tuesday of the Satmex 8 satellite. On its previous launch, in December, the Proton’s Breeze-M upper stage shut down prematurely, placing the Yamal 402 satellite in a lower-than-planned orbit. The satellite was able to move to geosynchronous orbit using its own thrusters. Four months earlier, another Breeze M problem stranded two satellites in transfer orbits; those satellites could not be salvaged.

The Zenit-3SL has had its own problems. On February 1, a Zenit-3SL lifted off from its floating launch platform in the Pacific, only to experience an engine shutdown seconds after liftoff, dooming the rocket and its payload, the Intelsat 27 satellite. An investigation into the failure is ongoing.

“We were obviously deeply disappointed in that failure,” McGlade said of the Intelsat 27 launch failure, which ended a streak of 39 consecutive successful launches of Intelsat satellites. “We wish the best of luck to them to get beyond that,” he said, referring to the Zenit-3SL’s operator, Sea Launch.

Other satellite executives on the panel shared McGlade’s concern. “We have been disappointed, like my colleagues up here, with the recent performance of the Russian launch vehicles, both the Proton and Sea Launch,” said Daniel Goldberg, CEO of Telesat. “It is, frankly, surprising.” Like McGlade, Goldberg said the underlying technology of those vehicles was sound, and that the problem had to be related to quality controls with the production of the rockets.

International Launch Services (ILS), the company that markets the Proton commercially, expressed confidence they would soon pick up a brisk tempo of launches. “We are looking forward to an active 2013,” ILS president Phil Slack said during a launch services provider panel session at Satellite 2013 March 19. Following the Satmex launch this week, ILS plans one commercial launch per month from April through August, with one or two more for the remainder of the year. Counting Russian government launches, Slack said he expected 10 to 12 Proton launches for the year.

Kjell Karlsen, president of Sea Launch, said in the same panel session that the investigation into February’s launch failure will be wrapping up soon. “We anticipate our FROB [failure review oversight board] will be done by April,” he said. He did not disclose any information on the cause of the failure, although speculation has focused on defective equipment in the rocket engine of the Ukrainian-built first stage.

“We are confident in the return of Sea Launch. We may not fly on Sea Launch this year but there will be two Zenit flights to verify the system again,” Karlsen said, referring to the Zenit variant that launches from Baikonur. One launch will be commercial, he said later, and the other will be for the Russian government.

The problems with the Proton and Zenit have suggested an enhanced emphasis on quality, even at greater expense, among potential customers. The biggest launch contract announced at the conference last week, for three Intelsat satellites, went to Arianespace, whose Ariane 5 rocket has had 54 consecutive successful launches stretching back a decade. Sea Launch reported signing only a “preliminary agreement” with EchoStar for a 2015 launch, and ILS announced no contracts at the meeting.

The Atlas and Delta are off the commercial market, said de Rosen, “because Uncle Sam is keeping them busy and rich.”

Satellite operators also showed renewed interest in two vehicles that are not major players in the commercial launch market: the Atlas V and Delta IV, both manufactured by United Launch Alliance (ULA). While the Atlas V has done a handful of commercial launches, its prices have typically kept it out of the commercial market, with both vehicles filling up their manifests with less cost-sensitive US government payloads instead.

“Not many years ago, Eutelsat, like many other satellite operators, used Delta and Atlas,” said Michel de Rosen, president of Eutelsat. “Well, these are not available any more, because Uncle Sam is keeping them busy and rich.”

The satellite executives hoped that ULA could find ways to lower the costs of their vehicles and make them more competitive. The Atlas V “is an excellent rocket, but historically their prices have been out of reach for our industry,” said McGlade. “If we can see a more competitive ULA, one where they can launch more rockets, do it on time, and maintain the reliability they’ve had, I think that’s certainly another option.”

Robert Cleave, president of Lockheed Martin Commercial Launch Services, which markets the Atlas V to commercial customers, hinted at the Satellite 2013 launch panel that the company might be making progress on that front. “We’ve got some great news coming out soon about that,” he said. Both a block buy of launch vehicles by the US government, plus an additional block buy by ULA’s shareholders, Boeing and Lockheed Martin, will drive down costs. “With that, our recurring price becomes very competitive in the marketplace.”

The wild card for the satellite industry may be SpaceX. The company has successfully flown its Falcon 9 five times in as many attempts, and is introducing later this year an upgraded version, the v1.1, with improved Merlin 1D engines and stretched propellant tanks for greater performance.

Barry Matsumori, senior vice president for commercial sales and business development at SpaceX, said at Satellite 2013 that the company is planning five more launches of the Falcon 9 this year, starting with the inaugural Falcon 9 v1.1 from Vandenberg Air Force Base in California in June, carrying the Canadian CASSIOPE satellite. That will be immediately followed in early July by SpaceX’s first commercial GEO satellite launch, SES-8, from Cape Canaveral; another GEO satellite, Thaicom 6, will launch in late July from the Cape. SpaceX will round out the year with the launch of the first group of ORBCOMM satellites and another commercial resupply mission to the International Space Station for NASA.

“Certainly, we’re very enthusiastic about SpaceX,” said Intelsat’s McGlade, a sentiment shared by other satellite operators at the conference.

If SpaceX is successful in demonstrating the ability to launch commercial satellites as reliably and less expensively than other launch companies, it could become a major player in the market, at least for smaller satellites: the Falcon 9 can place up to 4,850 kilograms into geosynchronous transfer orbit, but many commercial communications satellites today weigh in excess of six metric tons. (Intelsat signed a deal last year with SpaceX for an unspecified future launch of the Falcon Heavy, which will have more than enough capacity to address any planned commercial communications satellites.)

Even some competitors acknowledge that SpaceX could become a major player in the commercial launch market. “The role of SpaceX is a very, very key factor in the commercial launch services market,” said Naohiko Abe of Mitsubishi Heavy Industries, Ltd., which is marketing the Japanese H-2 rocket. “I think SpaceX is driving the market now.”

NASA deals with rising launch prices

While commercial customers are showing more interest in ULA’s Atlas and Delta vehicles despite their higher prices, the US government is looking for ways to bring down those prices as it tightens its own budgets. In addition to a block buy of those vehicles, the Air Force initiated a “new entrant” program that resulted in awards late last year of two launches to SpaceX, one on a Falcon 9 and the other on the Falcon Heavy.

“The prices increased, frankly, due to the market. The market changed,” said Norman of NASA launch contract pricing.

NASA is also acutely aware of increasing launch prices and the effect they have on the agency’s science missions. At the Space Studies Board’s Space Science Week meeting in Washington on March 6, Jim Norman, NASA’s director of launch services, noted that prices had gone up, in some cases significantly, between the older NASA Launch Services (NLS) I and current NLS II contracts.

“The prices increased, frankly, due to the market. The market changed,” he said, referring to the competition between Boeing’s Delta IV and Lockheed Martin’s Atlas V that ended when the two companies merged those efforts under the ULA joint venture. “We no longer had the competition when NLS I was put into place, nor was the projected demand for satellites and for launches the same.” While the price for “intermediate-class” vehicles was $100–125 million under NLS I, the first such vehicle contracted under NLS II, an Atlas V for the MAVEN Mars mission, cost $187 million.

Norman, in his presentation, addressed another issue about launch vehicle pricing: why NASA’s prices appear to be so much higher than for other customers. For example, while SpaceX markets the Falcon 9 at $54 million per launch, NASA’s first satellite launch contract (excluding ISS resupply missions) for the vehicle, for the Jason-3 Earth sciences satellite, was announced as $82 million last year.

The difference, Norman explained, is that the awards made under the NLS contract vehicles include additional services, including payload services and mission-unique requirements, that go above the list price of the launch vehicle. “Under our NLS II contract we actually have some very good terms,” he said, including “grace days” that allow the payload to be up to several months late without any penalty. “It is true that NLS prices are higher than what you might be able to see on the Internet. You don’t necessarily get everything that you necessarily need to attain orbit with that pricing.”

While Norman said he was optimistic for competition at the medium class of vehicles, with the introduction of the Falcon 9 and the first flight of Orbital Sciences Corporation’s Antares now planned for mid-April, there are concerns at the smaller end of the market. “Small class is a tough nut to crack,” he said. “We’ve got several providers, several rockets, but not as many missions.”

Orbital, for example, offers the Pegasus XL and the larger Taurus XL. The Pegasus has a good track record—its last launch failure was in the mid-1990s—but its small size and relatively high price mean it has only one mission on its manifest, NASA’s IRIS satellite later this year. The Taurus, meanwhile, has experienced back-to-back failures, both due to payload fairing separation problems. Lockheed Martin and ATK have been seeking to reintroduce the Athena launch vehicle, but so far have not announced any new customers (see “Athena rising?”, The Space Review, February 11, 2013).

Another option is the Minotaur line of rockets from Orbital, but NASA’s use of those rockets, which incorporate excess Minuteman and Peacekeeper ICBM motors for their lower stages, runs into policy issues. “It is, frankly, a difficult policy issue for us,” Norman said. “We have to go through a rather detailed analysis. The law requires a determination to be made by the NASA administrator. Even when the determination is made, you are still subject to protest.” NASA is using a Minotaur V to launch its LADEE lunar mission later this year—an award that was protested, unsuccessfully, by SpaceX—but Norman said future use of the Minotaur was uncertain. “The bar to be able to use a Minotaur, especially for NASA, seems to be extremely high,” he said. “We have not had a program, in my opinion, that I believe would pass the LADEE test.”

In addition, he said, changes in the Air Force’s contract have made the Minotaur more expensive than it previously was. The Athena IIc and Taurus XL, he said, have similar performance to the Minotaur IV, and the Taurus and Minotaur share the same issues with the payload fairing that caused the Taurus failures. Norman said there’s been “very good work” recently addressing the payload fairing problems for both vehicles.

In some cases, he said, small NASA missions might be better served by going with a Falcon 9, which is far more capable than the smaller vehicles but “not bad” in comparison of costs. “Our advice, as we provide it to the projects, is that it’s not just the size of the rocket. We also need to look at it from a price point standpoint as well.”