A Space Industry in Crisis | Business| Economy and finance news from a German perspective | DW | 02.08.2004
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Business

A Space Industry in Crisis

Though Europe has ambitious projects that will benefit the aerospace sector, the collapse of the once lucrative commercial satellite business has pushed companies like EADS Space Transportation into loss leaders.

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A streetcar in Bremen advertises EADS Space Transportation

Exploration of new frontiers is nothing new for Bremen. During medieval times, the northern city was part of the Hanseatic League, trading with far away and exotic countries. Today, the city is building vessels that travel to other parts of the solar system.

As home to the German branch of EADS Space Transportation, Bremen is the site of development and construction for many of the spacecraft used in the European space program. The Columbus Research Module, which represents Europe's greatest contribution to the International Space Station (ISS), the Automated Transfer Vehicle that will shuttle supplies to the station and the Ariane 5 rocket that will launch it are all being assembled or tested in the production hall here.

But Bremen's status as a German space industry giant has been imperiled in recent years following the bursting of the telecommunications market bubble. In contrast to the European Space Agency, which has found increased momentum, the commercial space services market in Europe has been languishing. Especially hard-hit has been EADS Space Transportation -- a subsidiary of Airbus-maker EADS, which is jointly owned by German, French, British and Spanish companies.

Ariane 5 Trägerrakete der ESA European Space Agency

The Ariane 5 is the current launcher the European Space Agency uses to send satellites and other payloads into space.

ISS gives business a needed boost

Development for the ISS is currently coming as a boost for EADS Space Transportation, which has struggled with heavy losses in recent years due to a massive slump in the commercial satellite business. Nevertheless, the company has still had to cut its staff in Germany and France by 25 percent as part of a major reorganization. The dearth of new satellite business has diminished the demand for the Ariane rocket launchers (illustration) that are the company's mainstay. Since the crisis began in earnest in 2000, EADS Space, the EADS subsidiary that oversees all of the aerospace giant's space operations and builds everything from satellites to nuclear weapons, has bled more than €500 million in red ink. The downturn has also forced considerable consolidation in the European industry, culminating with the merger of the space businesses of France's Alcatel and Italy's Finmeccanica in June.

"Four years ago, we had 15 to 20 (civilian) satellites needing commercial transportation into space," Mathias Spude, director of communications at EADS Space told DW-WORLD. "Last year we had only seven. We've seen a dramatic reduction in the size of the commercial market. Thus, the need for commercial launchers like Ariane, which we build, has reduced dramatically. We're in an extremely difficult situation."

Unlike their American competitors, like Boeing and Lockheed-Martin, whose business models rely heavily on government and military launches, the European industry is largely reliant on the commercial launch market. With satellites that once had a shelf life of only 7.5 years now able to fly for as many as 15 years, and ever greater data capacities, the demand isn't as high. Nor have high-speed Internet in the sky initiatives taken off as European companies had hoped.

Can subsidies save the day?

Earlier this month, EADS Space Transportation inked a €1 billion contract with the European Space Agency that calls for preparations for the operations of the Columbus, which is nearing completion and is expected to launch in 2006, as well as the production of six Automated Transfer Vehicles, cargo shuttles that will be used to deliver supplies to ISS and also retrieve its rubbish. EADS Space Transportation will create a joint venture with Italy's Alenia Spazio, which will hold 25 percent of the shares, in order to carry out the contract, which runs through 2013. In total, 30 space companies in 10 European countries as well as several Russian companies will deliver parts for the project.

Ariane 5

The European spacerocket Ariane 5 sits on its launching pad in Kourou, French Guyana.

The deal is part of the European Guaranteed Access to Space Program (GASP), essentially a subsidy program intended to safeguard a minimum of three launches per year of the European Ariane 5 rocket in order to maintain the critical size of the space industry. The program also includes provisions to license Russian Soyuz launchers to increase capacities at Europe's Arianespace launch facility in Kourou, French Guyana (photo). In May, EADS Space also signed a contract to become the primary contractor in the building of some 30 Ariane 5 launchers at a total value of €3 billion. The Ariane rocket is especially important for Germany, where the program has led to the employment of 30,000 people.

EADS Space Transportation has a number of other projects on deck, including its role as the main partner in the consortium that is creating Europe's Galileo constellation of satellite navigation systems. In addition, EADS will likely get a piece of the pie in the joint EU-ESA Global Earth Monitoring and Surveillance (GMES) project, which will send satellites into orbit to track climate change, weather, natural disasters and other Earth phenomenon.

"We are sure that in the medium term we will have a profitable business," said Spude. "If it weren't so, our shareholders would have to reconsider whether they keep us or not." But Spude and others at EADS Space are optimistic. Through layoffs and restructuring, the company says it will break even this year, and Spude said EADS Space expects to become profitable again in 2005.

Space Center in Bremen NASA

The Space Park Bremen theme park includes a full-size model of ESA's Ariane 4 rocket

And what about Bremen, the city that is home to a space-themed amusement park (photo) and a host of other industry-related attractions including EADS?

"As long as we have space activity in Europe, I'm sure Germany will be involved. And if Germany is involved, then it will be in Bremen," said Spude. "We have the tradition, the political support, excellent expertise and the competence of the people who create all these space systems."

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