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Airbus CEO urges radical shake-up of space launcher industry

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(Globalpost/GlobalPost)

By Victoria Bryan and Tim Hepher

BERLIN (Reuters) - The head of Airbus Group <AIR.PA> has urged European countries to carry out a fundamental overhaul of the space rocket launcher industry and give companies a bigger role to avoid becoming "irrelevant" in the $6.5 billion global rocket-launch club.

His call for a bigger industry say in the public and private partnerships behind Europe's Ariane space rocket is a response to the arrival of low-cost U.S. based Space Exploration technologies (SpaceX), run by electric car mogul Elon Musk.

"I believe we are at a defining moment for Europe's future in space and Europe's launcher industry," Airbus Group Chief Executive Tom Enders told Reuters.

"We need a major reshuffling of the entire space launcher industry, and not just the industry part but what the government agencies do, in order to make that a profitable healthy business going forward," he said in an interview at the Berlin Airshow.

Musk's SpaceX company offers lightweight rocket launchers to send up communications satellites at lower prices than those currently on the market and is prompting others in the industry to see how they can bring costs down.

Europe aims to replace the Ariane 5 rocket launcher with an Ariane 6 by 2021, but is wrestling with unwieldy structures behind the design, manufacture and marketing of space launchers as well as strict conditions on the national share of work.

"Musk gives us the opportunity to shake up what has been quite a successful European space industry," he said.

"We either much improve and integrate our industrial structures or we'll become irrelevant."

Airbus Defence & Space says it is the world's second largest space business behind Lockheed Martin <LM.N> and had revenues of 5.78 billion in 2013 in its space activities.

Under the current system, government agencies such as CNES in France and the DLR in Germany design launchers, and pass the designs to Airbus Group to manufacture the product, which is then passed to a third party, Arianespace, to market.

Asked whether the shake-up called for consolidation, Enders said "we will look into that," but said discussions on the set-up for Ariane 6 were still at an early stage.

"We will not play the role of an object. We should be an actor and a leader and we will contribute as much as we can to that necessary reorganisation."

Airbus Group owns around 30 percent of Arianespace, whose biggest shareholder is the French space agency CNES. French aerospace group Safran <SAF.PA> owns just under 11 percent.

REDUCING COSTS

Arianespace signed 15 contracts in 2013 for geostationary satellites, which orbit the equator at the same rate as the earth spins, to be launched by Ariane 5, giving it a market share of 60 percent. Before the arrival of Ariane 6, Europe plans to introduce an upgraded Ariane 5 ME launcher from 2018.

Ariane 6 is aiming for a launch to cost around 70 million euros each time, less than half of the current cost per launch of the Ariane 5, and for 9 launches per year.

"One thing is clear. We need to reduce our costs significantly to be viable in the future and to do that we need a major reshuffling of the entire space industry," Enders said.

European Space Agency director Jean-Jacques Dordain said at the Berlin Airshow he was confident the agency could meet the "ambitious" cost targets, but highlighted budgetary challenges and said governance and work sharing remained open.

Enders said he hoped a decision on the industrial setup could be made in the next few months ahead of a meeting of ESA ministers in December 2014.

The targeted price of 70 million euros ($95.6 million) per launch would even be less than that offered currently by SpaceX, which says it can send up launches for under $100 million. At present an Ariane 5 launch can cost 150-200 million euros.

In the United States, the United Launch Alliance, owned by Lockheed Martin <LMT.N> and Boeing <BA.N>, says it provides launches for an average cost of around $225 million per launch.

Enders said the challenge facing Europe in space was equivalent to the threats surrounding Airbus when rivals Boeing and McDonnell Douglas merged almost 20 years ago, and would need similar political vision and industrial leadership to resolve.

Analysts say that merger forced Europeans to rethink their civil aerospace and defence industry and helped spur the creation in 2000 of EADS, recently renamed Airbus Group.

(Editing by Andrew Callus)

http://www.globalpost.com/dispatch/news/thomson-reuters/140523/airbus-ceo-urges-radical-shake-space-launcher-industry