...face a perfect storm of oversupply. With lower launch demand and an increasing number of players, the market was headed towards a new price war a few years after the former one bankrupted one of the players. However, the market may well evolve in the opposite direction.

This is not a surprise in the sense that every driver is well known. NSR identified heritage, aka reliability, as the main aspect commercial GEO satellite operators consider when procuring launch services. But NSR also identified cost as a close second. Finally, NSR also emphasized the small difference between a normal, balanced situation and oversupply in terms of the number of players.

The recent Sea Launch and ILS failures are driving the space community to believe that the whole Russian Space Sector is affected by reliability issues. Launch failures always affect rockets’ attractiveness, but they are not death notes and it is possible to bounce back. However, the reliability-crisis spread to the whole Russian space sector and may consequently intensify satellite operators’ doubts over Sea Launch & ILS’ capability to get back on track. This could have severe consequences for Sea Launch, which is not backed by any state and can’t benefit from a captive market.

At the same time, Falcon-9’s recent launches experienced booster issues, but they did not end-up in a catastrophic failure. SpaceX is now working to introduce a new version of the Falcon-9, called v1.1, which features a higher payload capacity. Albeit based on Falcon-9 v1.0, the v1.1 will have new hardware. SpaceX already has a busy backlog and cannot afford any delay to launch the commercial payloads, but at the same time it is modifying some parts of the rocket. This situation bears watching as SpaceX continues their launch manifest.

Besides reliability, Falcon-9’s market availability may be affected by its understandable desire to enter the very lucrative U.S. captive market, and especially the EELV program, which until now was owned by ULA. To do so, SpaceX will have to prove Falcon-9’s reliability. If it succeeds, the number of EELV launches added to the contracts SpaceX already has with NASA and other clients may simply forbid SpaceX from adding any more launches to its backlog in the short to medium term.

To sum-it up, a market with a few providers doing a risky business where reliability is key can easily switch to oversupply when a few new providers enter the market; it can also quickly switch to scarcity when established players become unavailable or are losing THE factor necessary to success (reliability).

However there is no fate here and ILS, Sea Launch and SpaceX’s supply in the commercial market is not written in stone. Also, there are other contenders to look at such as Mitsubishi Heavy Industry, which is shaping-up by improving its rockets’ mass capabilities and lowering their cost, and may become an effective commercial player by 2016. In the end, reliability will play THE key role in determining the launch services market destiny for any player. (Story by Stéphane Gounair, Analyst, NSR Ireland.)