Launch providers sound a warning

The Satellite 2009 event was held in Washington last week and I am sure that those who attended came away with a feeling of optimism about the industry. While it cannot be denied that there will be some problems experienced as a result of the economic climate, the mood at the conference and in the exhibition was positive. Indicators of this could be seen through the growth that the event has experienced since last year – fifty new exhibitors took up their places on the show floor. There was high traffic and the conference encouraged discussion on emerging applications that are driving the satellite market today and will do in the future.

So it seems that demand for satellite-based services is expected to be steady in the future and though some projects may have to be postponed or even shelved due to the economic crisis, there is still enough going on to warrant a feeling of general well-being.

For the launch service providers, there has been a wish to convey the fact that strict financial discipline will see them through these turbulent times. All three of the main service providers, Arianespace, ILS and Sea Launch have considerable backlogs to clear and have signed new contracts that ensure steady business if the financial crisis does not touch upcoming manufacturing projects.

During the launch services panel at the Satellite 2009 conference, Jean-Yves Le Gall explained that manufacturing of satellites is continuing: “We see these telecommunications operators continuing to buy new satellites to replace their ageing ones. Some of their satellites probably will be smaller in size, but nevertheless, the telecom providers are indeed making investments to continue their operations – and even to expand their fleets somewhat.” He continued: “I think it is a real signal that our industry is on a solid footing.”

However, caution has been urged. ILS President, Frank McKenna told Satellite Evolution that the satellite industry must not become complacent. This current crisis could hold problems for the industry in future years, even if we are not experiencing it right now. “We have been looking at the possibility of a down turn in launching for 2 years now. Not many people have been predicting that and we don’t want to be pessimistic but the point is that you need to do your business planning to anticipate the contingencies that you need to implement. I think that currently there is a view that focuses on the large consolidation that has occurred in the operators over the last five or ten years and if we look at the financial statements of the four large operators, they declare the health of the industry. However, looking at a financial statement is like looking into a rear view mirror. There is inertia in our business that has lag factors that must be taken into account. The most recent crisis that occurred in this industry was the Asian crisis in the late 90s, early 2000s and it took six years to recover from that. This is much more significant. There is a large-scale stimulus and governmental reaction to deal with the banking malfunctions and the recession, but I do believe that the after effects of this are going to live on for some significant period of time. So we prepare for that.”

The satellite industry is enjoying a relative period of calm at the moment but the message from the launch leaders seems to be that sound financial management and anticipating problems ahead is the only way that significant impact of the financial problems that dog the global economy will be avoided or fought off. Yes, let’s enjoy that optimism but let us also bear in mind that this recession will not blow over soon. It is here to stay and the industry must be braced for the fact that it will feel the pinch sooner or later.

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