Re-organise to survive?

A warning was sounded to the satellite industry this week as Sea Launch filed Chapter 11 and although they intend to operate as normal after the filing and to go through a process of re-organisation, this is a definite sign that this financial crisis is still threatening our industry.

At the CommunicAsia and CASBAA events in Singapore last week there was almost a feeling of cosiness in the air. People were using words such as resilient and strong to describe the satellite sector and there was a sense of determination that the credit crisis would not affect the industry to any great extent. Of course, there was a lot of talk about being cautious, but the general feeling was one of optimism. Space Systems Loral has very recently signed orders for four satellites – two for Intelsat, one for HNS and one for ABS. This means that satellite services are still in huge demand and therefore so is the need for capacity. Satellite manufacturers are doing great business.

But what of the launch sector? The news from Sea Launch is far from encouraging. Of course this is good news for Arianespace and ILS, as their market share could potentially increase, but it is a very negative for the launch services sector and the operators that rely on it, as it means less competition. Competition is good. It keeps companies on their toes and helps to drive quality up and prices down. There have always been debates about the cost of satellite launches. Operators have often complained of inflated prices and competition within the industry can help to keep this issue in check. Sea Launch have taken a very innovative approach to their launch service, using a converted oil platform to launch their vehicles that provides a direct route to orbit. They have tried to keep costs for their clients down, and recovered admirably from the launch failure that happened in 2007. However, this event could have contributed to the situation the company now finds itself in.

So what has gone wrong for Sea Launch? The filing stated that its liabilities are in excess of $2 billion and the decision to go Chapter 11 was probably prompted by the fact that no deal was reached with Hughes that won a $52 million arbitration award after they cancelled a launch contract with Sea Launch. In addition, the launch service provider has experienced supply chain problems that has meant fewer launches have been able to take place. Whatever the combination of events, it is a sad day when any company is forced to take this action.

Months after the 2007 launch failure I interviewed the CEO of Sea Launch at the time, and I was struck by the way the company had pulled together to establish what had gone wrong, how it could be put right and when they could get back to operations. There was no defeatist attitude and Sea Launch comprises of a dedicated bunch of hardworking people. This news has unfortunately overshadowed this week’s successful launch of the MEASAT-3a satellite.

However, the re-organisation of the company could be the answer to their problems, and with 8 Sea Launches and 2 Land Launches in their backlog, let’s hope that they can find a way out of their current troubles to fulfil them.

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