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The space industry – Europe at the crossroads
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Arrow  The European space sector has seen the best and worst of times in the last 10 years, in many ways paralleling developments in the telecommunications sector. Business surged in the 1990s, with expanding sales of satellite systems and services and the emergence of new industrial players, only to see growth stagnate as the new century ticked over. Now, after several years of flat growth, the sector sees promising opportunities linked to new EU initiatives in space and security.

Image © ESA
Image © ESA
Unlike in the US space sector, which benefits from enormous public spending from the government's space and defence budgets, Europe's space sector gets only a fraction of these resources from its public sector. Moreover, it depends on the global commercial space systems and services market for at least a quarter of its revenues. This means Europe's space players must be highly efficient in order to survive.

EUROSPACE is the AeroSpace and Defence Industries Association of Europe. Its President, Pascale Sourrisse, says, “There are a number of factors at play here. We have seen a sharp and sustained drop in the commercial market for satellite launches, but this has also been accompanied by a decline in government spending on space-related programmes. There is a very large gap between ourselves and our competitors in the United States, where 80% of space sector turnover comes from government contracts. In Europe that percentage is less than 50%.”

Concerted efforts have made it possible to establish a solid and highly competitive European industrial and technological base within the space sector, including a significant and recognised capability in the fields of launchers, science and technology, space-related applications and telecommunications satellites, but, according to Sourisse, the very viability of the European space industry is now at risk, with high profile restructuring and layoffs taking a heavy toll. “If Europe is to retain its knowledge base and hence its independent capabilities in space,” she says, “ we need to see immediate action on the part of our institutions to provide the support and direction we need.”

The space sector – a hostile environment

Operating in space offers unparalleled advantages, which, when capitalised upon, can lead to highly successful commercial ventures. However, the space environment is extremely harsh, hard to reach and hard to work in. Newcomers to the space industry face great difficulties stemming from the high level of interdependence among the civil and defence markets.

The market is also highly cyclical, capital investments are high, as are the risks. In addition to this, a number of administrative obstacles remain to be overcome at national and European levels. All of this leads to a tendency for space systems to perform poorly in terms of time to market, often yielding a significant advantage to terrestrial competitors.

Despite these obstacles, the space industry has demonstrated growth primarily in the telecommunications area, as satellite systems participate in the expansion of the global information infrastructure. The pace of this growth depends largely on the ability of space-based solutions to compete with terrestrial alternatives on price, availability, and customer satisfaction. The success of these applications defines, in turn, the prospects for the satellite manufacturing and launch sectors of the industry.

The romance often associated with space has little to do with the commercial space industry; its health is defined by the ability of space-based solutions to find a market in the face of vigorous competition from other technical solutions.

Big pond, many fish, all sizes

Though space manufacturers and sub-suppliers are spread across the whole of Europe, the sector is largely concentrated in four EU nations: France, Germany, Italy and Britain, in that order, with smaller but significant space activities undertaken in Belgium and Spain. Four large industrial conglomerates dominate the industry (Alcatel, EADS, Finmeccanica and Snecma) and account for 63 percent of its workforce.

EADS Space Transportation
The expense and risks inherent in space have encouraged widespread partnering at national and commercial levels, and have led to significant consolidation in the European industrial sector. These include the creation and expansion of the European Aeronautic Defence and Space Company (EADS), now a world-scale competitor to the American leaders, Boeing and Lockheed-Martin.

Formed in June 2003 with the merger of EADS Launch Vehicles with Astrium Space Infrastructure – EADS Space Transportation generated revenues in 2003 of €1.1 billion or around 23 percent of the sector's total turnover of €4.73 billion euros for the year. link 1

Arianespace – world leader in commercial space transport
Headquartered near Paris, Arianespace link 2 is the world commercial launch services leader, holding more than 50 percent of the global market for launching satellites into geostationary transfer orbit.

Founded 1980 as the first-ever commercial space transport company, it has won 250 launch contracts since its inception. It is currently responsible for the production, operation and marketing of the Ariane 5 launcher and is a partner in the commercial operations of Starsem's link 3 Soyuz launch vehicle.

Arianespace is backed by shareholders representing the best technical, financial and political resources of the 12 European countries participating in the Ariane programme.

Despite these industrial giants, there are still plenty of smaller space firms operating in a majority of the EU's 25 member states. Some 200 small and medium-sized enterprises (SMEs) – with workforces of 100 and below – fill in the design and supply niches that complement the bigger players' activities.

The SMEs tend to cluster around three areas of activity: small systems-integration work; production of space equipment (often in partnership with one of the four large conglomerates); and software, engineering and research.

ESINET – creating opportunities for space SMEs
The objective of ESINET is to create links between EU national and regional space ‘incubators’ – organisations that help SMEs and larger companies to use space technologies or space systems.

Wallonia Space Logistics (WSL) is one such organisation. Its Managing Director Florence Ghiron says WSL and other groups in the ESINET link 4 network are convinced space means far more than satisfying scientific curiosity and gaining international prestige for Europe.

“Europe's space developments represent an untapped opportunity for technical and scientific innovations,” she says. “Not only can new space technologies be transferred to other industries to increase their competitiveness, but also new services can be created, using space systems to meet real market demands. This can include satellite application-based services for communication, travel and transportation, environmental monitoring, location-based services, and many others.”

What lies above

Currently, revenue growth in the space sector as a whole is still flat, but that promises to change in the coming years, as new multilateral or EU-funded programmes get off the ground. The International Space Station is a good example, where demand for European space manufacturing and systems expertise will certainly grow. Similarly, GALILEO – the multi-billion-euro joint EU-European Space Agency project to develop Europe's own network of navigation satellites – will give a boost to the sector. GALILEO aims to hoist a network of 30 satellites into space starting in 2008. Space-based environmental monitoring is also set to enjoy significant EU funding.

Most industrial actors agree that a high level of dependence on unsteady and unpredictable commercial markets is not in the long-term interest of the space sector. Increasing the number and size of institutional contracts, both civil and defence-related, is therefore crucial. The development and acceptance, at the highest political levels, of a coherent European Space Policy is seen as a basic stepping-stone in that process, allowing for the definition of the specific goals and programmes needed to meet its objectives. Such programmes, backed by financial support commensurate with the importance of these objectives, will provide the stable foundation that has so far been lacking.

Challenging public institutions
Speaking in Brussels in 2003, Alain Gaubert, Secretary General of Eurospace link 5, stated, “I am not saying we want government help for the space industry. What I am saying is that government needs space and can be an important space customer and this is what will help the space industry.”

SNECMA ’s Jacques Cipriano has said, “We hear all this talk about ‘commercial market, commercial market’. Look, the commercial market represents 5% of the total space market. So when we speak with great satisfaction about Europe holding 50% of the commercial market, we are really looking at 50% of 5%! Let’s face it, people. The real space market is the institutional market. Without it we are talking peanuts!”

Though the bulk of GALILEO 's activities will be commercial, it is also designed to handle military functions such as surveillance and mapping, and secure communications.  As demand by EU authorities for more reliable military intelligence grows, this will swing more supply and systems-integration work to Europe's space sector. At the same time the EU has substantially raised its financial support for security-related research and development, having launched its Preparatory Action in Security Research earlier this year. Supported research will ultimately include the design, use and protection of space-based communications and surveillance networks.

Economic benefits beyond the space industry

The benefits of space achievements are increasingly being felt by European citizens and by a variety of industries going well beyond the limits of the traditional space sector. Space technologies offer countless possibilities in terms of practical ground-based applications. As such, they represent increasing opportunities for players other than those within the traditional space industry, including small- and medium-sized enterprises, service providers, content providers and private and public users.

Space is also a crucial link in the competitive knowledge-based society. Digital television, third generation mobile communications and the Internet are good examples of service platforms to which space-systems contribute.

Speaking at the Madrid instalment of the EU Space Policy Green Paper process in 2003, Spanish Secretary of State Pedro Morenés said, “Space represents potential benefits to a wide range of industrial sectors, not just for what we call the traditional space companies. The kind of scientific and technological innovation that comes out of the space industry can have important ramifications in many other areas and will have direct effects on the well-being of European citizens.”

At this critical juncture, therefore, priority is being given to the ongoing process of transferring space technologies from the research sector to the commercial sector. EU officials say it is equally essential to support research aimed at industrial applications and value added services that go beyond the strict context of space.

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