The SpaceX explosion's echoing impactThe New York Times
Steve Lohr Monday, 5 Sep 2016 | 12:00 AM ET
SpaceX’s Falcon 9 rocket taking off to deliver the JCSAT-16 communications satellite to space. SpaceX The explosion of a SpaceX rocket last Thursday will have an impact across the space industry, far beyond the losses on the launchpad at Cape Canaveral, Fla.
An Israeli satellite operator's deal to sell itself to a Chinese company is imperiled. Planned launches of communications satellites that support international mobile phone service and digital television are delayed and put in doubt. NASA's cargo deliveries to the International Space Station will probably be disrupted.
All of them are customers of the Space Exploration Technologies Corporation, or SpaceX, whose rocket exploded in Florida. The private space launch company, led by the entrepreneur Elon Musk, has a generally solid safety record.
But last week's setback and a failed launch last year, when its rocket carrying a NASA cargo fell apart in flight, are raising questions about SpaceX, a company that has risen rapidly by offering lower costs and promising accelerated launch schedules.
At this stage, there are more questions than answers. The key for SpaceX will be how quickly it can satisfy federal investigators, rebuild the damaged launchpad at Cape Canaveral and resume sending satellites into space. For commercial telecommunications customers, getting a satellite manufactured is time-consuming and expensive, taking two years or more and costing $200 million to $400 million each.
The launch itself is a high-risk step, but once in orbit the satellites are money spinners. The upfront investment is paid back in a few years, and they then generate hefty profits for the remainder of their useful life, which could be as much as a decade.
So once a satellite is ready to go, time on the ground — and delay — are financially painful. Among the commercial satellite operators lined up for SpaceX launches later this year are Iridium Communications, SES of Luxembourg, EchoStar and KT Corporation of South Korea.
''No doubt SpaceX will fix the problems, but if you're a customer time is money,'' said Scott Pace, director of the Space Policy Institute at George Washington University and a former NASA administrator. ''This will get customers looking at alternatives. It may give competitors an opening and slow down SpaceX.''
The large communications customers have the most money at stake in space. Revenue for satellite services last year was $127.4 billion, according to a report by the Tauri Group, a research firm, for the Satellite Industry Association. The launch business, though the gateway to space, is small by comparison — $5.4 billion in revenue last year.
In the market for launching large, geostationary communications satellites, the main SpaceX rival is Arianespace, a French multinational company. And there are others, notably International Launch Services, an American-Russian joint venture, which launches Russian-designed Proton rockets from Kazakhstan.
But Arianespace, which has an excellent safety record, is considerably more expensive than SpaceX. And the safety and performance record of the Proton rockets lags behind that of the SpaceX workhorse, the Falcon 9.
If the SpaceX launch timetable is delayed by a few months, industry analysts say, its customers will probably wait. If the delays stretch out further, other launch providers will look increasingly appealing.
Recovering from delays to its aggressive launch schedule — while losing momentum — is the challenge for SpaceX, not a financial squeeze. In a statement on Friday, the company said its business was ''robust, with approximately 70 missions on our manifest worth over $10 billion.''
The company said it was too early to predict when its launches might resume. In addition to the damaged launchpad, SpaceX has two others under construction. One is in Florida, which the company says should be ready in November. The other is at Vandenberg Air Force Base in California, which SpaceX said was in ''the final stages of an operational upgrade.''
A longer-term issue for SpaceX is whether the rocket explosion and its aftermath raise concerns about its plans to move into the field of manned spaceflights for NASA and for launching military and national security satellites for the Department of Defense. Its competitor for that business is the United Launch Alliance, a joint venture of Lockheed Martin and Boeing.
The list price for the SpaceX Falcon 9 is $62 million while the larger, more powerful Falcon Heavy is $90 million. There are further costs beyond the rocket itself, but analysts say SpaceX launches cost at least 50 percent less than what its main competitors charge. It has achieved that efficiency by streamlining production techniques, designing a stripped-down launchpad and stepping up the pace of launches.
Each innovation adds risk, said Phil Smith, an analyst for the Tauri Group. But SpaceX, he added, has been approved by NASA for cargo missions and certified by the Air Force, both of which have high safety and performance standards.
The explosion investigation and launchpad repair seem sure to scuttle SpaceX's aggressive launch plans this year. The company had hoped for as many as 18 rocket launches this year. It has had eight so far; last week's would have made nine. Over all, SpaceX has had 27 successful launches of Falcon 9 rockets.
The Florida accident is also rippling through the insurance market. Insuring the risk of getting a satellite into space comes in two stages. The preflight insurance is intended to mainly cover the risk of damage to the rocket and satellite on their way to the launchpad. Premiums are a fraction of a percent.
Launch policies, which take effect when the rocket is fired up, are costly, ranging from 5 to 15 percent historically.
But the Falcon 9 exploded during a prelaunch test. So launch policies did not kick in. And the insurance payout will fall on the roughly two dozen preflight insurers.
Richard Parker, managing director of Assure Space, an underwriting agency, is waiting to see the cause of the explosion. If it is a design or manufacturing flaw or an operational error, launch rates for SpaceX flights may well go up. His firm had underwritten a launch policy on last week's flight at 6 percent, he said.
One business casualty of the explosion is the $285 million sale of Space Communications, an Israeli satellite operator, to a unit of a Chinese company, Xinwei Technology Group. That deal hinged on the launch of Spacecom's Amos-6 satellite, an Israeli design.
The satellite was insured, but because of the explosion, Spacecom's five-year contract with Facebook and Eutelsat Communications of France to supply internet access to people in sub-Saharan Africa was canceled.
Spacecom's stock price fell 9 percent on Thursday, and another 34 percent on Sunday. In a news conference on Sunday, Spacecom executives said they were trying to renegotiate the deal with Xinwei and exploring other options.
—Kenneth Chang contributed reporting.
http://www.cnbc.com/2016/09/05/new-york-times-digital-the-spacex-explosions-echoing-impact.html
6 new categories and 72 new items added to the shop!
