ArianeGroup chief admits they can’t compete


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In a newspaper interview the chief of ArianeGroup, the private joint partnership of Europe’s main rocket contractors Airbus and Safran, can’t seem to understand why competition and lowering prices is a good thing.

Rather than give you one or two quotes, it is better that you click on the link and read the whole. thing. Essentially, the heart of the problem is that ArianeGroup is building their new Ariane 6 rocket as an expendable, not reuseable, and thus they it will not be able to compete in the launch market expected in the 2020s. They made this decision based on the political needs of the European Space Agency rather then financial needs of the launch market. As such, the launch market is abandoning them.

What is amazing is this CEO’s complete lack of understanding of these basic economic facts. It suggests some very deep rot in both ArianeGroup and much of Europe’s commercial aerospace sector. If the person in charge does not understand market forces, who else at the company will?

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9 comments

  • wodun

    What is amazing is this CEO’s complete lack of understanding of these basic economic facts.

    Marxist economics operates on alternate facts.

  • Edward

    From the article: “And then Charmeau said something telling about why reusability doesn’t make sense to a government-backed rocket company—jobs. ‘Let us say we had ten guaranteed launches per year in Europe and we had a rocket which we can use ten times—we would build exactly one rocket per year,’ he said. ‘That makes no sense. I cannot tell my teams: “Goodbye, see you next year!”‘

    Charmeau’s problem is that his priorities are different from SpaceX’s priorities. SpaceX is not a jobs program but a commercial space program. SpaceX needs to make a profit, and to do so it has to be more efficient than its competition, such as Ariane 5 and Ariane 6. Efficiency is what draws customers.

    As for subsidies, Charmeau is the cast iron pot calling the stainless steel kettle black. I’m fairly certain that Arianespace charges more when a customer requires additional services, just as SpaceX charges the Air Force more for its additional services. I wonder whether Arianespace would charge only an additional $40 million for the services the Air Force needs. Meanwhile Arianespace collects annual subsidies, directly from government, for no services rendered.

    Arianespace and the Europeans had their opportunity to build a reusable rocket and compete. It is clear that the market is far more than the mere 30 launches that would have made it worth their while. However, they chose the less efficient jobs over a more efficient European contribution to access to space. Did they learn nothing from the lessons of East German vs. West German economies?

    I just cannot work up any tears for Europe’s poor decision making skills. wodun has it right — once again, free market capitalist economics wins out over Marxist economics. Maybe in order to boost employment they should use spoons, as Milton Friedman once suggested.

  • Rich Cregar

    Anyone who followed the sad life cycle of the DeLorean will not be surprised to see the same political priorities that applied then to an automobile (jobs program) being applied today to spacecraft (jobs program). Will they be keeping the Gullwing Doors?

  • mkent

    I shed few tears for Ariane’s troubles with SpaceX. 20 years ago they could have had the same interview but with Boeing and Lockheed substituting for SpaceX. The fundamentals of American business vs. European socialism haven’t changed much in all that time.

    Having said that, Mr. Charmeau is correct about re-usability. Ariane (and ULA for that matter) can not adopt re-usability to re-take market share from SpaceX. It’s a money-losing proposition to even try. The market simply isn’t there for it.

    “It is clear that the market is far more than the mere 30 launches that would have made it worth their while.”

    No, not even close. The entire Western launch manifest over the last ten years has been about 40 launches per year. A dozen of those are U. S. government payloads off-limits to Ariane. The Indian and Japanese missions not already flying on Ariane are off-limits to them as well. Doing the math, the worldwide *commercial* market is fewer than 20 flights per year. Under those conditions, re-usability simply doesn’t pay.

    SpaceX went for re-usability because Elon wanted re-usability, not because it made financial sense. Europe could have done the same, but it would have meant even more subsidies for Ariane. Boeing? Lockheed? ULA? Orbital? Not a chance their boards would ever have allowed them to lose money like that.

    The irony is that Europe did the same thing to Boeing with the A-380. Now the shoe is on the other foot, that’s all.

  • Tom

    Its not that they can’t compete .. its that they won’t even try to compete and have simply resigned themselves to feeding off the government teat to continue their existence. Administrator Bridenstine should be making this required reading for all of his NASA rank and file with an added warning that anyone adopting the Arianespace mentality will be reassigned full-time to a very remote tracking station.

  • Edward

    The entire Western launch manifest over the last ten years has been about 40 launches per year. A dozen of those are U. S. government payloads off-limits to Ariane.

    Thinking like that is probably why Arianespace has chosen the death spiral it has found itself in. Meanwhile, SpaceX has reduced launch costs by so much that satellites are already flying that would not have flown under the old price structure. BulgariaSat-1 comes to mind.
    http://spacenews.com/bulgarian-satellite-to-launch-on-reused-falcon-9-in-june/

    Maxim Zayakov, chief executive of BulgariaSat, said the use of a reused first stage lowers the launch price and “makes it possible for smaller countries and companies to launch their own satellites.”

    Meanwhile, SpaceX has a manifest of forty or so satellites to launch:
    http://www.spacex.com/missions

    Tom wrote: “Its not that they can’t compete .. its that they won’t even try to compete and have simply resigned themselves to feeding off the government teat to continue their existence.

    This sounds just about right. The Europeans will continue to subsidize Arianespace in order to keep the jobs going. That is the priority, not inexpensive access to space. Marxist economics, as wodun noted.

  • Edward

    mkent wrote: “Mr. Charmeau is correct about re-usability. Ariane (and ULA for that matter) can not adopt re-usability to re-take market share from SpaceX. It’s a money-losing proposition to even try. The market simply isn’t there for it.

    Thinking about this topic overnight, I realized an interesting point.

    Arianespace may think that trying to adopt reusability is a money-losing proposition, but SpaceX found it to be a winning strategy. Arianespace thinks that reusability is not worth the development cost unless it can launch 30 times a year, yet SpaceX performed this very same development during a time when it was launching fewer than eight times a year. Development costs were not so very great for SpaceX as Mr. Charmeau imagines that they must be for Arianespace.

    SpaceX is staying in business and making enough profit to develop multiple space systems despite not yet flying 30 times in a year (it’s current launch rate suggests that it will not reach 30, even for this year). Arianespace’s business model apparently does not match the capability of SpaceX’s, and Arianespace does not seem willing to make enough changes to its business model to do so.

    Interestingly, Musk has said that he spent at least half a billion dollars developing Falcon Heavy, sounding like he thought that was a lot of money. Perhaps it is a lot of money for the small SpaceX company, but government space programs can burn through more than that much money each year as they spend years to develop their new rockets.

    The difference is one of priorities. Commercial space’s priority is profit via efficiency, but government space’s priority is employment via inefficiency — for several governments, not just the US and Europe.

    Coincidentally, this morning Robert posted an essay that demonstrates the effectiveness of SpaceX’s portion of commercial space, and how it is affecting the rest of the space industry.
    http://behindtheblack.com/behind-the-black/points-of-information/a-close-look-at-spacexs-new-domination-in-the-commercial-launch-industry/

    Musk has declared he wants “a new space race,” telling reporters after the successful launch of Falcon Heavy in February that he thinks the historic flight will “encourage other companies and countries” to be ambitious in the same way as SpaceX.

    Musk may be failing at generating this space race, because Russia has announced that it is not pursuing a competitive space program, and Mr. Charmeau is admitting that Arianespace is staying out of the race, too. This is too bad, because Arianespace became more commercialized just for the purpose of entering this race.

    It is now up to Blue Origin, Orbital ATK, (hopefully) ULA, the small-satellite launch companies, and any other newcomers to make this race for efficiency happen.

  • Anthony Domanico

    I found Mr. Charmeau’s argument to be grossly hipocritical. On the one hand he implies SpaceX is charging our government too much and later he says he is hoping to charge the EU the same exact amount! Lol

    How are you doing Edward? I haven’t been online in a bit. Have I missed much?

  • wodun

    I saw Anthony Domanico revived this topic so thought I would add a comment too!

    Edward said, Arianespace thinks that reusability is not worth the development cost unless it can launch 30 times a year

    They don’t understand how price affects customers. I think there is a bit of an unknown quantity here, who can predict who will take advantage of lower prices? Obviously we can see who already is but there will be others with creative unforeseen ideas coming along.

    The guy also referenced his work force sitting idle if they only built one rocket a year. Well, you wouldn’t just build one rocket a year. You would build a bunch. SpaceX puts out what, one a month? While SpaceX has their workforce transition to other projects, ArianeGroup could just have them do inspections and refurbishment of their rockets and/or also work on payload projects.

    Musk may be failing at generating this space race, because Russia has announced that it is not pursuing a competitive space program, and Mr. Charmeau is admitting that Arianespace is staying out of the race, too.

    Launch is expensive and complex. Developing a new system isn’t cheap and the system has to compete with what is out there. Its a tough sell right now. Because there is a national security or pride component here, ArianeGroup should consider it worth the effort but in terms of the “space race” is it?

    This new space race isn’t about launchers but about what can be done in space. That means taking advantage of existing launchers, that many companies/countries can’t develop, to participate in the race. For some countries, this means skipping a step to leap forward and for other countries, it means taking a step back and losing a capability but still leaping forward. It really isn’t important how they get to space, it is important what gets done there.

    So Musk isn’t failing at generating a space race but greatly increasing the number of groups who can participate.

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