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Europe’s Arianespace struggles for relevance in SpaceX Era
For decades the Ariane rocket has been a symbol of European technological prowess — proof that the EU plays a vital role in the space race even if it may lack the glamour of the US and Russia’s manned missions.
Arianespace, jointly owned by Airbus and Safran, was the world’s first commercial launch company and until recently dominated the business of sending big communications satellites into geostationary orbit, 35,000km above the earth. But the latest delay to its €4bn next-generation Ariane 6, announced last week, has underlined the group’s vulnerability as it struggles to keep pace with disruptive forces unleashed by Elon Musk’s SpaceX in a drastically changed market.
Jan Wörner, director-general of the European Space Agency, is now hoping EU member states will stump up another €230m to put Ariane 6 on the launch pad by spring 2022, almost two years later than planned.
The rocket, along with the smaller Vega-C version, is Europe’s answer to Mr Musk’s pioneering, reusable Falcon 9, which has sent prices plunging in the $5bn-a-year satellite launch market. Although single-use, it will be more than 40 per cent cheaper than its predecessor the Ariane 5, which has been one of the world’s most reliable rockets.
According to Arianespace chief executive Stéphane Israël, it will be able to carry up to 70 small 150kg satellites, and serve not just government customers but the booming private market for “mega-constellations” delivering internet access from low-earth orbit. The problem is, it will still be substantially more costly than the Falcon models. And the longer the delay, the wider the price gap is likely to be.
A longer wait will also make it harder for Arianespace to hold its own in a market changing at great speed.
Bank of America estimates that the global space industry will grow from roughly $400bn in 2019 to $1.4tn by 2030. This is prompting new private sector rivals to emerge, including Jeff Bezos’s Blue Origin rocket company. Meanwhile, old adversaries such as United Launch Alliance — a joint venture of Lockheed Martin and Boeing — are expanding beyond traditional government services to the commercial market.
“When Arianespace, ESA and the national space agencies set out to develop Ariane 6 [in 2014] they underestimated how competitive the commercial space launch market would be by 2020,” said Caleb Henry, analyst at Quilty Analytics, a space industry research group.
Ever since SpaceX’s Falcon 9 took off a decade ago, life has been getting tougher for Arianespace. According to a report for Nasa in 2018, the average launch cost of $18,500 per kg between 1970 and 2000 was cut by a factor of seven with the Falcon 9.
Arianespace lost its crown as the world’s leading commercial launch provider to SpaceX’s lower-priced launches in 2017, when the US company sent more commercial satellites into orbit, according to France’s national auditor, the Cour des Comptes. This year, SpaceX is also expected to beat Arianespace in terms of the value of contracts won for future launches. At the same time, the commercial market in which it has operated for 40 years, and where it generates two-thirds of its €1bn annual income, has shifted.
For more than a decade, Ariane was responsible for launching the majority of the 20 to 30 annual launches of big communications satellites into geostationary orbit. But demand tumbled to fewer than 10 in 2018 and industry experts expect that a brief resurgence this year, the result of a one-off auction of broadcast spectrum, will fade fairly quickly.
“We are seeing fewer broadcast satellites being launched. If you watch Netflix you are no longer a customer of a broadcast provider. You are the customer of someone who gives you internet services and there are bold ambitions to have some of this internet in the sky done at low earth orbit,” said Rainer Horn, managing partner of SpaceTec Partners, which has advised the European Commission on space policy. “What was a strength in previous decades has become less easy to manage,” said Pacôme Revillon, chief executive of Euroconsult, a space industry consultancy.
Instead, the focus is shifting to smaller satellites, which cost far less to launch. Euroconsult estimates that an average of 990 satellites of all sizes will be launched every year for the next decade, more than four times the volume of the previous one. Most will be small satellites of less than 500kg. Arianespace was unable to exploit that market fully until September when it carried out its first “ride-sharing ” launch with a Vega rocket. But costs are still higher than SpaceX, which can offer customers frequent low-priced space on rockets already being deployed for Mr Musk’s own mega-constellation, Starlink.
If Europe wants to maintain independent access to space it will have to stoke government and institutional demand, according to Mr Israël. That is how SpaceX has succeeded, he argues, with its government contracts priced almost twice as high as those in the commercial market. “We are now facing a launcher which is highly supported by institutional demand, which allows [it] to come to market at cut prices,” Mr Israël said. “The question is, how will Europe organise itself?”
Europe’s space industry is pushing for Brussels to launch its own mega-constellation to provide what could be crucial internet services to industry. The UK government is already following the mega-constellation route in a bid to boost its space industry. This month it will become the biggest shareholder in OneWeb, the original mega-constellation rescued from bankruptcy in a deal with India’s Bharti Global telecoms group.
OneWeb is Arianespace’s biggest customer, with a contract worth more than $1bn to put 650 of its first-generation satellites into orbit by the end of 2023. But it might not be able to rely on winning the contract for the second generation if its launch costs remain high. “It could be a Japanese company next launching 300 sats for OneWeb,” said Mr Henry.
So the pressure is on for new European projects that will help to enhance the commercial offer.
European governments and institutions, unlike those in the US, do not generate enough volume to keep the bloc’s rocket production competitive with the new entrants, according to Mr Israël. “To develop non-institutional business, it is mandatory to rely on a . . . strong institutional business: this is the condition for a level playing field on the commercial market,” he said.
The relatively limited number of European launches is also why Europe did not opt for a reusable rocket in 2014, according to Mr Wörner. If there were, for example 10 launches a year, he said, the industrial system might only need to produce one launcher a year for European needs. That would render the production business unviable, he said. “The industrial situation may have to be reorganised and that could take years,” says Mr Wörner. “In 2014, the decision was to go fast as possible.”
That doesn’t mean reorganisation is impossible. ESA and the industrial partners behind Arianespace are already looking to the next generation, and reusable rockets are on the cards. But it will mean Europe’s system of allocating production work according to member states’ financial contributions will have to be re-examined, according to several industry executives.
Ariane rockets involve an industrial network of more than 600 companies in 13 countries “These are complexities that Mr Musk doesn't have as a vertically integrated player,” said Mr Horn. “He is selling the rockets, renting the spaceport, and producing most parts himself. He organises the logistics. There is less workshare and less dependency.”
ESA and Europe’s space industry have begun discussions on how work could be reorganised to eliminate some of the complexities, according to several people with knowledge of the subject. “We need to create the same conditions to propose competitive prices,” said one.
For now, however, the focus is the new rocket. “The priority is to make Ariane 6 a success,” said Mr Israël. “It is to make Ariane 6 fly.”