Boeing Frontiers
August 2002 
Volume 01, Issue 04 
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Feature Story


Launch Services looks to provide the best value for its customers to create growth in a flat market


Space, "the final frontier": One would hope the late Gene Roddenberry, the creator of Star Trek, would be impressed with all that the space industry has accomplished to date—missions to Mars and nearly every planet in the solar system, as well as to various moons, comets and asteroids. Along with exploration, there have been tremendous advances in personal communications. While we are not all carrying "tricorders," we do have personal information platforms like Webenabled cell phones.

Over time, the launch industry has enabled mankind's dreams of exploring space, defending our borders and communicating globally to become reality. For the future, evolved launch capabilities are being developed that will enable scientific and technological advances to reach their full potential in space.

Upward mobility

To meet the growing need for larger and heavier payloads, four years ago the U.S. Air Force issued a request to its two primary launch contractors for an Evolved Expendable Launch Vehicle with East and West Coast launch facilities. This request matched growing payload requirements in commercial launch markets as well.

"Several years ago, we made a commitment to provide the Air Force with a new launch service that would deliver solutions to their future needs in space," said Gale Schluter, vice president and general manager for Boeing Expendable Launch Systems. "We took the high road and today we are delivering on our promise with the arrival of Delta IV."

Predictions of launch industry economics over the next few years hinge upon two possibilities: recovery of the satellite market, which experienced an all-time low in 2001, or a shakeout of launch providers.

Satellite-based broadband communications is thought by industry experts to be the way forward. The question is, how quickly will broadband catch on? While the U.S. government has stated its support of assured access to space, requiring two Evolved Expendable Launch Vehicle providers, the cost benefits of having two providers will diminish after reliability of a system is proven. "Delta IV will be that system," said Schluter.

Global competition

Two major global companies compete with Boeing in the launch services market today. International Launch Services, based in the United States, and Arianespace, from Europe, are vying for market share both in the United States and internationally.

There are also smaller niche players who, while focusing on their domestic market, keep the number of available pay-loads on the global market down. Rocket System Corp. of Japan with its H-2A rocket is one such example.

"Around the world national interests by governments require guaranteed access to space," said Will Trafton, deputy general manager of Expendable Launch Systems and president of Boeing Launch Services. "That is why there will always be companies that are supported by their government and niche players in the market."

In Europe, the industry is currently going through a self-imposed reorganization. The European launch service industry, which has traditionally relied upon its governments for support, is now being asked to justify itself—by those same supporters, who are unhappy with the high costs and low, if any, profit margins.

Europe's launch industry also is struggling with member state consortiums, who also are the industry's subcontractors, and companies that are unable to come to terms on mergers. Ultimately, Trafton believes, there will be room for only very few major launch service providers.

Looking forward

If the market is flat and there is little change anticipated in the near future, how does Boeing expand its launch services business, especially with a number of new launch vehicles coming online worldwide?

"By providing the best value to our customers, along with nothing short of world-class reliability and service," said Jim Simpson, vice president of Market Development and Sales for Boeing Launch Services. "Delta II and Sea Launch remain competitive, proven flight systems. As Delta IV comes online this year, we plan to increase our market share through reliable, on-schedule and accurate launch services with financial- and risk-mitigation plans that are beneficial to all involved."

"It's critical for space transportation providers to work closely with the satellite manufacturers and end-users in an integrated fashion," continued Simpson. "We must work with them early on in the business planning process.

Thermal shield for the RS-68 main engine, Delta IV"Aside from providing reliability, schedule assurance and accuracy," Simpson said, "the industry must look toward evaluating and accepting reasonable and equitable risk sharing with the end-user and satellite manufacturer. Appropriate risk sharing by launch providers will generate growth and provide mutual success and benefits to all."

During a recent launch service provider conference in Paris, John Rogacki, deputy associate administrator for Aerospace Technology at NASA headquarters, challenged launch service providers to look for new ways the industry might begin cooperating in order to stimulate the marketplace. From a NASA perspective he sees increased government spending as essential in light of the poor commercial market.

Two areas in which launch service customers are in need of support are access to commercial capital and an increase in capacity within the insurance market. Sources of financing for space-related products have changed dramatically over recent years. Today, a company needs a solid business plan and a lender that understands that plan in order to obtain financing, Simpson said

"The new insurance environment is inhibiting the ability to grow the space business and impeding the development of new satellite ventures," Simpson said. "Severely limited capacity within the insurance market is having a dramatic effect on the launch industry today. It has gotten to the point where some customers are foregoing insurance on their launches because the rates are just too high. New growth in the launch service market will come from new satellite ventures that do not have the cash or business reserves to take on such risk."

Boeing is the only aerospace company in the world that has an in-house finance company with a dedicated space lending activity. Through Boeing Capital Corporation, Boeing offers pre- and post-launch financing packages. Working closely with the launch services team, BCC offers customers a unique team of industry experts to help customers achieve their business goals.

Boeing Launch Services is also able to provide customers with an optional Launch Risk Guarantee for launch services. This guarantee ensures reasonable rates of insurance for the proven Delta II and Sea Launch vehicles and benefits Delta IV with competitive rates effective in 2003.

'Added value' partnerships key

"Today most customers make their decision on a launch provider based on incumbency, reliability and the financial package," Trafton said. However, as the launch services industry becomes more and more competitive, and discrepancies among pric-es become negligible, customers will look for the provider who brings "added value" to the table. They will look for a partner who understands their business, their needs and, most importantly, their goals.

It is this vision of partnership that Boeing has been working toward, not only within the launch and orbital business but also the Integrated Defense Systems business as a whole. "Anticipating and meeting customers' needs is what it's all about," concludes Schluter. "At the end of the day, we're all here to be successful. The only way to achieve success is to achieve it together."


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