The SpaceX Effect and a Changing Launch Market

Four days away from its fourth flight,  and the first of 12 under NASA’s CRS program, the impact of changes in the launch industry being wrought by SpaceX and its Falcon 9 is being felt literally around the planet.  In Europe, Russia and Japan,  launch operators are grappling with how to address the fact that lower prices appear to be a fact of life.

In some cases, such as the widely reported problems plaguing  the Russian launch industry, change was coming one way or another, but the reality of SpaceX’s  success in securing commercial satellite launches is shaping the nature of the response.  In an unusually blunt assessment,  Vladimir Popovkin head of the Russian space agency Roscosmos, observed that if his nation did not accelerate the painful process of consolidating a space industry built for a very different era, and conduct “sweeping changes” that it could expect to become uncompetitive as early as 2015.   Elsewhere, in a tentative step, the Japanese Space Agency JAXA announced that it was privatising  most of the launch operations for the H-IIB vehicle by turning them over to manufacturer Mitsubishi Heavy Industries. The reason for the change was  “to secure Japan’s international competitiveness.”

In what may be the most intriguing of changes underway, after completing its 51st consecutive successful launch of the Ariane V last Friday,  the European Space agency and Arianespace are facing what could be an interesting meeting in early November, as major partners France and Germany press for respective options in when and how to evolve or replace the Ariane V. The key element, explicitly acknowledged,  is that the entry of SpaceX into the GEO launch market, highlighted by 3 additional orders from SES placed several weeks ago,  presents a serious long-term challenge to the commercial viability of the Ariane V, particularly given the fact that member nations want to get out of the business of paying a launch subsidy (150 million this year) as quickly as possible.

On the other hand, as reported by Space News,  based on a letter sent to Secretary of Defense Leon Panetta, apparently members of the Alabama and Colorado Congressional delegations are happy to continue paying much larger launch subsidies, (over 1 billion this year alone) to United Launch Alliance for a years to come to in order to maintain a very tilted playing field against SpaceX, Orbital Sciences and anyone else seeking to compete for EELV business.    The letter comes in response to mounting pressure in Congress to both eliminate the costly and confusing Launch Capabilities Contract (subsidy) highlighted in a very different letter sent to Secretary Panetta from the House Select Committee on Intelligence arguing for an end to the subsidy and a transition to fair and open contracts.

It is interesting, if very disappointing, to note that rather than acknowledging like ESA, Russia and Japan, as well as Bob Dylan, that the “Times they are a-Changin” supporters of the EELV program in its current form are still arguing that the lack of launch opportunities on the global  market justifies a continued monopoly. Worse, as evidenced by the letter, some are willing to promote a bizarre and factually inaccurate interpretation of the framework contained in the three agency New Entrant certification strategy in order to maintain the preferential treatment for as long as possible. Doing so is almost certain to prevent innovation, and is likely to be far more  harmful to the U.S. industrial base than the rapidly decreasing risk of opening up launch opportunities to providers such as SpaceX, which is being vetted independently by  the commercial satellite industry.

While it is true that future prospects for the commercial satellite launches are relatively stable, the makeup of providers is very much in play.  SpaceX has essentially shaken up the pot, meaning the door is open for everyone, even ULA,  in devising a response. The fact that pretty much the entire rest of the world launch industry, including market leaders in Russian and Europe, recognize the need to change in order stay competitive is a clear indication that opportunity exists.

So as the song says “Come senators, congressmen, Please heed the call.”  Its the future on the line.

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2 Comments on "The SpaceX Effect and a Changing Launch Market"

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  1. gm says:

    when the Falcon-9 will reach (within 5+ years) the proven reliability and the successful launch record of the Atlas V or Ariane5 its competitors may surely cut their prices to compete with SpaceX

  2. Coastal Ron says:

    Just so everyone knows, “gm” is Gaetano Marano, who claims to have invented most of the space technology now being used.

    The Falcon 9 has already impressed NASA from an operational standpoint, and they stated after the COTS C2+ mission that after three successful flights the Falcon 9 had already bought down a lot of the risk with a new rocket. IIRC, NASA has stated that they will buy new rockets after they have had five successful launches, so Falcon 9 is not far off from being able to be ordered by NASA missions under the NLS II contract. And, of course, SES and others are buying Falcon 9 now, even though it doesn’t have 5 years of launch history. I guess the market doesn’t use the same criteria as “gm”.

    The DoD/NRO is definitely of two minds on this, but that’s not surprising because it involves two of their largest contractors – Boeing and Lockheed Martin. There is a lot of “overlap” between those two companies and virtually every facet of the DoD/NRO satellite business, so preferences on who to use would be likely to creep across products. For instance, it’s not unusual for someone to exit the military and walk into a senior-level position at a company overseeing the same program they were working on in the military. There are strong incentives to keep that career path open.

    As to “gm” assertion that Ariane 5 will just “cut their prices”, anyone that follows this topic (apparently not “gm”) knows that ESA is already having to subsidize the Ariane 5, so the only way to lower prices on the Ariane 5 is to ask the ESA member governments to increase the subsidy even more. That is not the direction they are going, as they are looking at lowering their costs, either buy building a new rocket (i.e. Ariane 6) or making changes to the Ariane 5 (which will take years to implement). They are 5+ years away from fielding their response to SpaceX, and SpaceX may have already implemented even newer cost reduction strategies (like reusability) by that point.

    It’s a tough market to be in right now if you’re not SpaceX.

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