The satellite manufacturing landscape remains a tough place to do business, with a host of manufacturers still competing for relatively few orders.

Despite the intense competition, EADS Astrium remains one of the major players on the European satellite landscape, winning some high-profile manufacturing contracts in 2006. In June, EADS Astrium signed a contract with Middle East satellite operator, Arabsat for the construction of the BADR-6 satellite. In May, the manufacturer also won a key contract from Eutelsat for the Hot Bird 9 broadcast satellite, which will be launched in 2008.

Consolidation in the Fixed Satellite Services (FSS) arena likely will impact the number of new manufacturing contracts available in the future, but Antoine Bouvier, CEO of EADS Astrium, believes such consolidation will ultimately "strengthen the market".

In an exclusive interview with Satellite News, Bouvier discusses the challenges facing EADS Astrium and the industry and how the company aims to keep a step ahead in the satellite manufacturing arena.

Satellite News: What impact will FSS consolidation have on satellite manufacturers such as EADS Astrium?

Bouvier: It is more than just industry consolidation. It is a combination of consolidation, change in ownership of many players, including several IPOs, and private equity investment. Consolidation means further optimization of assets. Changes of ownership have also led to more financial scrutiny on new investments. So this combination has certainly led to reduced capital investment for new satellites, and this is probably one of the drivers behind the depressed market of the last few years.

However, we think in the medium to long term, this will strengthen the market. There will be more efficiency in the industry. New players will be stronger and have the opportunity to develop new business opportunities. This will translate into new orders for satellite manufacturers. In 2005 and to date in 2006, the have overall market has been around 20 orders, indicating that the short-term negative impact is behind us. This makes us more confident that the market itself has stabilized.

Satellite News: Do you believe the industry can continue to sustain the number of players currently involved?

Bouvier: We have declared for many years that the current scenario has not demonstrated it is sustainable. Even with 20 satellites per year we are suffering from overcapacity. It is always difficult to predict what will happen. The industry has shown that you can deliver strong growth, revenue figures, even in spite of the fact there is intense competition. The answer is ‘no’ but the answer has been ‘no’ for many years.

Satellite News: Could you explain the significance of the recent deals with Arabsat and Indian Space Research Organization (ISRO)?

Bouvier: We are pleased to have strengthened our market position. As for the Arabsat deal, this is a repeat satellite following the launch failure. We are pleased that they have reaffirmed their trust in Astrium and it is important for us that a valued customer reordered in a difficult situation.

We have signed two contracts with ISRO since the beginning of the year, W2M and Hylas. These are the direct result of the strategic alliance we entered into with ISRO last year. This is a long-term alliance where we are combining our strengths. ISRO is providing the Insat platform along with the spacecraft AIT, which has an extremely good record in terms of reliability. Astrium will also be the prime and responsible for the payload of the satellite. We are very pleased with this strategic alliance. We now have a product from 1 to 4 kilowatt payload power, which was previously missing in our product range. We think this will be a base for an enlarged cooperation with ISRO.

Satellite News: What levels of revenue growth and satellite orders are you looking for throughout the next 12 months?

Bouvier: In 2005, EADS Astrium produced 1.8 billion euros ($2.3 billion) in revenues. We are budgeting for a higher level of sales in 2006. In terms of orders, we are already significantly ahead compared with last year. We have also won major contracts from the European Space Agency (ESA), with Gaia, an astronomic mission, and we are in the final stages of negotiation for another one. Each of them are for more than 300 million euros ($383.4 million). On the commercial telecom market there is the potential for Astrium to gain another one, or perhaps two, additional orders this year.

Satellite News: What is the balance between commercial and institutional revenues and do you expect that to change throughout the next two years?

Bouvier: We have three main lines of business: commercial, military and institutional. Each accounts for about one-third of sales for Astrium. Our strategy is to grow each business line and maintain this balance. We want to leverage the synergies between the military, institutional and commercial businesses and to be in a better position to absorb market cycles. We also want to grow these synergies to develop new generic technologies in the future. We have had strong success across all three markets in 2006.

Satellite News: How do you see the military market developing over the next 12 months?

Bouvier: There are direct and indirect opportunities. The direct opportunities come from military programmes such as Skynet 5 and the SatcomBW. The development of military applications across EADS means we are in a unique position to serve the market with innovative solutions. The indirect impact comes from the growing presence of telecom operators on defence an institutional market. This fuels the growth for transponders and has an indirect impact on our business.

Satellite News: In terms of technology, could you tell us your thoughts on Ka-band satellites as well as the potential high-definition (HD) TV could have on satellite manufacturers?

Bouvier: We do not see a number of pure Ka-band satellites, but more and more Ka payloads on C-/Ku-band satellites. Clearly Ka-band applications will develop and we expect to a progressive ramp-up. There are some operational limitations, but the industry is developing new technical solutions to properly address them. The drivers will be new broadband applications mainly driven by the saturation of Ku-band. The market will become stronger and grow over the next few years.

A number of new HD services have been launched across Europe, following development of these types of applications in the U.S. and Asia. We think satellite has a clear advantage over cable or any terrestrial possibilities for HDTV. This is a natural growth opportunity for satellites. However, we do not see HDTV as a new killer application. There will be progressive implementation and it will support growth over the next years.

Satellite News: What are the major focuses in terms of research and development over the next 12 months?

Bouvier: We have a very ambitious R&D plan for Astrium as a whole. As regards commercial telecoms, we have two main focuses. Firstly, the next generation of flexible payloads which will offer customers even more possibilities with reduced costs compared with standard payloads. We have a long-term, 10-year plan to develop a new generation of equipment. The first significant application is the Hylas program for Avanti which will incorporate some next-generation equipment.

The second focus will be on the Alphabus platform. We are currently developing a large platform for the 12 to 20 kilowatt payload power range to complement our product line beyond the Eurostar range.

–Mark Holmes Contact, Remi Roland, EADS Space, e-mail, [email protected]