Northern Sky Research

Falcon 9 Loss a Failure for Industry at Large?

Jun 23rd, 2015 by Carolyn Belle   More from this Analyst | Profile

Sunday’s Falcon 9 complete failure during a cargo resupply mission to the International Space Station (ISS) was a first for the vehicle, and the industry’s third in 2015. Valuable ISS supplies and scientific experiments were lost during the mission, but this event’s more lasting repercussions affect widespread stakeholders. 15 commercial and 3 government satellites are manifested for a Falcon 9 launch in 2015, but it is unlikely more than one additional mission will be completed before the end of the year. This spells in-service date and revenue delays for the commercial operators, and potential data lapses for government.

More significantly, the long-term reaction to Sunday’s failure could herald a perception change of SpaceX and a strained environment for the commercial satellite industry at large.

SpaceX Still Moving Forward

Coming on the heels of a $1 billion funding round and long awaited U.S. Air Force certification, the Falcon 9 failure is an unexpected hiccup in the SpaceX success story. How this could impact the potentially lucrative U.S. national security launch market is yet to be seen, but here SpaceX already faced steep competition from incumbent ULA.

Despite being the newest entrant to the commercial launch market, a low price and thus far good reliability have meant no trouble in winning commercial contracts. NSR’s Satellite Manufacturing and Launch Markets, 5th Edition, found that SpaceX enjoyed 21% market share of commercial GEO backlog at the end of 2014, a 5% jump over 2013. However, losing the position of rookie star does not denote corporate disaster. Indeed, the path to becoming a seasoned launch veteran inherently includes challenges; the ability to promptly identify the cause of failure, resolve issues, and return to flight is a step along the way.

The Falcon 9 now has a 5-year reliability rate of 89% compared to 100% and 85% for main commercial competitors Ariane 5 and Proton, respectively. The key difference that operators will draw between SpaceX’s failure and the Proton loss in May is the frequency of failure: though the reliability rates are similar, the Proton has experienced 4 complete and 4 partial failures in the last five years, compared to just 1 complete and 1 partial for the Falcon 9. Pending final conclusions of the technical review board, the SpaceX cause of failure could be viewed more favorably than Khrunichev’s consistent quality control issues. NSR therefore does not foresee SpaceX suffering a material loss of future business as a result of this event.

Hands Tied for Commercial Satellite Industry

At the start of 2015, 32 commercial GEO satellites were scheduled to launch by the end of the year. Half way through, a mere 8 have successfully launched and no more than 21 are expected to reach orbit before 2016. These Proton- and Falcon 9-driven delays, alongside postponed commercial LEO and government GEO/LEO missions, will have knock-on effects into the 2016 and 2017 manifests of both vehicles. Without Proton or Falcon 9 in operation in the near term and catching up after a return to service, do operators have any recourse?

In NSR’s view, not much. Arianespace is operating at full capacity. Sea Launch has been quiet of late on plans for a vehicle or launch site adjustment, but in 2014 had cited an ability to conduct GTO launches in 2015 or 2016 with sufficient client notice. MHI and Lockheed Martin are similarly under-booked for commercial launches, but given government obligations do not have a manifest that can accommodate additional clients in the next year. ¬†China Great Wall Industry Corp. remains out-of-bounds for most commercial payloads, and is also experiencing delays.

This emphasizes the importance of maintaining multiple vehicles and launch service providers as viable market players. Operators reference three LSPs as the minimum for a healthy market, but over the past two decades the market has supported only two primary players with an occasional tertiary player. The challenge is that higher reliability and lower costs are associated with frequent launches of a given vehicle, but the global market remains low volume to the extent that not all LSPs operate at optimal rates. Further, satellite operator contracting practices only occasionally support market diversity in lieu of best mission value for the company.

Bottom Line

Occasional launch failures are an expected, and even inevitable, element of space utilization. Sunday’s Falcon 9 failure is a momentary stumbling block that will impact clients in the near term but should not lessen SpaceX viability in the long term if the technical review is appropriately pursued.

Rather, the real implications of this failure are not for SpaceX or even affected clients but in how commercial operators will respond to experiencing two GTO vehicles out of service simultaneously. The long expressed desire to have a distributed launch services market could be more seriously pursued in coming years. Diverse technologies are being realized to solve trapped capacity in orbit, perhaps operators will now explore more solutions to freeing trapped capacity on the ground.

NSR is a leader in analysis of satellite manufacturing and launch markets, with experience providing strategic and advisory services tracking global demand, costing trends, and evolving technology & capabilities. Please contact Christopher Baugh for more information.