Boeing Revival As Satellite Market Softens

The return in force of Boeing to the weakening communications satellite market has rival manufacturers scrambling for the right response.

Boeing’s return, after a long absence related to poor program execution, lack of a suitable mid-range product and over-reliance on the military market, is all the more significant because it straddles all three of the industry’s major segments—fixed satellite service (FSS), mobile satellite service (MSS) and broadband.

In late December, the company landed a $1 billion order to supply a three-satellite MSS/FSS satellite system to the Mexican government, primarily based on its big 702HP bus. The award followed a deal last August to build three Ka-band MSS units for Inmarsat’s new Global Xpress broadband network, also based on the 702HP, and a four-spacecraft sale to FSS operator Intelsat in 2009 that draws on a new medium-power 702MP Boeing developed to broaden its market reach.

By cutting costs, adopting more rigorous design for manufacturing assembly and test processes and a more disciplined supplier management program, and introducing the new bus, Boeing was able to “enable a better fit for [its] commercial and government customers’ needs,” notes Jim Simpson, vice president of business development at Boeing Space and Intelligence Systems. “Boeing went out and invested in more cost-effective satellites to offer to the commercial marketplace,” says Rachel Villain, the chief space and communications analyst at Paris-based Euroconsult. “And that investment is now paying off.”

Together with additional purchases by the Pentagon of Wideband Global Satcom satellites, which use the 702HP bus, these sales have rejuvenated Boeing’s commercial satellite business. The company recorded six orders in 2012, after averaging barely one or two a year for much of the last decade.

Boeing’s success is coming at exactly the wrong time for rivals, who are beset by an expected drop-off in new satellite purchases as major fleet renewals by the Big Four FSS operators—Intelsat, SES, Eutelsat and Telesat—come to an end. A forecast slowdown in FSS growth could accelerate the trend (see p. 56). Some industry sages have predicted that commercially accessible geostationary satcom orders—the industry’s bellwether—could dip below 20 units in 2012-13, down from 26 in 2010 and a record 30 from the year before, although higher-than-expected growth in new applications like broadband and MSS and more generous export credit agency financing could cushion the fall (AW&ST Sept. 13, 2010, p. 25). Villain says the 20-order barrier might be breached as early as this year.

The supplier most affected by the Boeing revival is Space Systems/Loral, which has been the industry standard-bearer since it emerged from bankruptcy in 2005, particularly for high-throughput Ka-band satellites of the Global Xpress type. SS/L is building ViaSat-1, a 120-Gbps spacecraft to be launched in mid-year, and Jupiter, a high-throughput Ka-band satellite to be orbited in 2012 for Hughes.

Although it still managed six orders last year, matching Boeing’s total, continued concerns about profitability have convinced parent company Loral Space & Communications to consider selling the company or allying it with a military partner better able to access the government market (AW&ST Sept. 6, 2010, p. 50).

But even the two big European players, EADS Astrium and Thales Alenia Space, which have managed to stay neck-and-neck with SS/L and have a balanced civil/government order portfolio, are at risk. For one thing, the financing advantage afforded by French export credit financing agency Coface is increasingly being matched by the U.S. Export Import Bank. After deciding to help fund SES’s QuetzSat-1, under construction at SS/L, the Exim Bank recently agreed to consider a loan for Inmarsat’s GlobalXpress.

Astrium, which sold Inmarsat’s fourth-generation satellites and supplied the high-throughput KA-SAT to Eutelsat, saw satellite orders plummet to two last year, from seven the year before. TAS also experienced an order decline, but was compensated somewhat by continued strong payload sales and an order for the Iridium Next low-Earth-orbit satcom constellation.

In reaction, Astrium and TAS recently moved to develop a more potent version of their new high-power Alphabus platform with the European Space Agency and French space agency CNES, even though the bus is still preparing for its first demonstration mission. The existing bus’s sole application to date is Inmarsat’s IX-L fifth-generation L-band satellite. The new bus will offer payload power up to 22 kw, close to the upper capability of Boeing, Lockheed Martin and SS/L designs. The Europeans are also expanding sourcing and investment in lower-cost regions such as Russia and India.

But most worrisome to rivals is a new Boeing challenge in an area—space services—where the Europeans in particular had opened up a wide lead. The U.S. manufacturer has taken the initiative in the fast-growing segment of hosted payloads, supplying two to Intelsat and another pair for Inmarsat’s Global Xpress. It is also moving aggressively to market commercial capacity on behalf of the Pentagon, counting on its long-standing government ties, believed to have been a factor in the Global Xpress deal, which includes a large capacity pre-purchase by Boeing.

On Feb. 22, Boeing Commercial Satellite Services was set up to promote the company’s service business. In addition to capacity pre-purchase agreements, the U.S. company plans to consider a wide range of supply arrangements including the purchase of capacity on speculation, without a launch customer, says Steve O’Neil, president of Boeing Satellite Systems International.

Astrium CEO Francois Auque says his company is looking at options, including a possible U.S. acquisition, to help meet the overseas challenge, which could ultimately include Lockheed Martin and other American suppliers in addition to Boeing. For now, however, the Europeans can count on their head start and a more varied product mix.

Astrium and TAS are the leading suppliers of high-resolution radar and medium-resolution large-swath optical imaging services to the Pentagon and other government users. Astrium remains the leader in the third-party government satcom market. It was tapped in December to supply and operate the new European Data Relay System (EDRS), while TAS will help run the Galileo satellite navigation system.

Orbital Sciences Corp., which focuses on smaller spacecraft, is the sole big manufacturer relatively immune to the Boeing threat. OSC significantly burnished its manufacturing and government credentials last spring when it acquired Spectrum Astro from General Dynamics (AW&ST May 24, 2010, p. 61). In fact, the company was chosen by Boeing to supply the C-/Ku-band FSS satellite for Mexsat and was selected last month to assemble, integrate and test Iridium Next and help find U.S. government customers for its planned hosted payloads. On Feb. 17, it won an order to supply SES-8 to SES World Skies.

One of the few bright signs for the industry, notes Villain, is that a nascent challenge from the emerging space powers has yet to morph into a genuine export threat. Between them, Russia’s ISS Reshetnev and China’s CAST won five orders in 2010, the same number as the year before. And of these, only four are for non-domestic customers. Although a brand new rival, Argentina’s Invap, appeared on the scene, with two orders from the Argentine communications ministry, three other new entrants—OHB System of Germany, India’s Antrix and Canada’s Comdev—have yet to follow-up on their initial success, though OHB was selected to supply a satellite for the European Data Relay Satellite system. Reshetnev still remains dependent on Thales Alenia for the bulk of its payload technology, as does Invap.

However, CAST unveiled plans last November to build a large communications satellite bus in the 15-20-kw range and to develop a range of small satellite platforms to complement the existing 5-ton DFH-4 (AW&ST Nov. 15, 2010, p. 68). With deep pockets and solid political backing, it appears certain CAST will ultimately expand beyond the emerging markets it currently serves such as Nigeria, Venezuela, Laos and Bolivia.