February 11, 2014
A combination of new competition from U.S.-based Space Exploration Technologies (SpaceX) and an unfavorable euro-dollar exchange rate means European governments may need to increase subsidies for operations of the Ariane 5 heavy-lift launch vehicle at Europe’s Guiana Space Center (CSG) in Kourou, French Guiana.
Arianespace Chairman and CEO Stephane Israel said the Evry, France-based company already is taking steps to remain competitive against Hawthorne, Calif.-based SpaceX, which launched its first two commercial missions to geosynchronous transfer orbit on a new, more powerful version of its Falcon 9 rocket in December and January.
In comments responding to a Feb. 11 audit of the French Accounting Court, Cour des Comptes, Israel said that since 2005 Arianespace has improved its competitiveness to the extent that some €200 million ($273 million) in annual subsidies from the 20-nation European Space Agency (ESA) have been halved. In addition, the reliability of the Ariane 5, which has seen 58 consecutive successes since 2002, has allowed the company to increase launch prices. The company also has reduced costs with a recent bulk buy of 18 Ariane 5 rockets that saved Arianespace 5%.
Nevertheless, Israel said the arrival of the medium-lift Falcon 9 as a competitor at the low end of the commercial communications satellite market, with prices substantially lower than what Arianespace charges for Ariane 5, means the company may be forced to ask ESA governments to increase price supports beyond the current €100 million per year.
“Given the weakness of the dollar and the situation with SpaceX, it is not out of the question that our effort to raise our competitiveness must be accompanied by increased government support for the exploitation of Ariane 5,” Israel said, adding that Arianespace launches are billed in dollars for some 80% of its sales, and that a 10-cent variation in the value of the dollar has an impact of around €10 million euros for a given Arianespace contract. With the Ariane 5 launching an average of six times per year, that equates to €60 million per year.
In its report, the French audit court also asserts that financing agreements between ESA members and France, which pays for more than two-thirds of operations and maintenance at CSG, are outdated and should be addressed when ESA meets at ministerial level in December to decide funding for the future of Europe’s launch sector, including continued development of a midlife upgrade to the Ariane 5, known as Ariane 5 ME, and construction of its smaller, less capable successor, the Ariane 6.
The court also urged the European Union (EU) to pick up some of the tab for infrastructure costs at CSG, where Arianespace has over the past three years launched a number of EU missions atop a European variant of Russia’s Soyuz rocket and the new Italian-led Vega light launcher.
The court noted that the economics of operating Soyuz at CSG have tended to put France at a disadvantage, and that the situation has degraded more recently as Russia insists on charging higher prices for each Soyuz rocket sold to Arianespace. In addition, the French government has spent about €500 million in taxpayer money to develop the Soyuz launch site in Kourou, an investment the accounting court says the state will never recoup.
But while the French government has been pushing to replace Soyuz with the introduction of Ariane 6 as soon as 2021, such a timeline would afford only two or three years of overlapping use of the two rockets, which the court says could leave Arianespace exposed to an unamortized debt of around €170 million invested in the Soyuz infrastructure development.