Arianespace may Need More Subsidies to Stay "Competitive"

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.

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