In the final Space Tech speaker spotlight interview, Mindy Emsley spoke to industry expert Paola Leoni about the trends shaping the global space industry, the technologies being invested in and why improvements in the launch sector will open up new applications and markets.
Paola has more than 20 years’ experience in strategy advisory for large corporates in Europe, USA and Asia-Pacific. In the space industry she has worked extensively on business strategy issues such as: entry strategy in new markets, business model and value chain optimisation, business planning, industrial partnership, corporate governance and stakeholder management, competition strategy, M&A and post-merger integration, business performance optimisation, risk management, organisational transformation and change management.
ME: Mindy Emsley
PL: Paola Leoni
ME: Please tell us about your role at Leoni Corporate Advisors. What excites and challenges you about your work?
PL: Leoni Corporate Advisors is a European strategy consulting firm, of which I’m the founder and Managing Partner. We are a global independent team of strategists, with a strong passion for the aerospace industry.
After more than 20 years in strategy consulting, working both with USA and EU-based companies, we decided to create a new concept of an independent and management-owned company, free of vested interests and aiming to take personal responsibility for the success of our clients.
Aerospace is fascinating: it is a relatively small global community, harnessing the huge human capital of the greatest engineers and scientists, cooperating to shape humanity’s future. It’s a privilege for us being part of this community and providing the industry with our business acumen and financial sensitivity and creativity.
ME: Launchers are now the second largest area of space manufacturing in Europe after commercial satellites. What do you think has driven the growth of this sector? What do you foresee will be the most relevant industrial trends reshaping the face of the European industry in the next 10 years?
PL: Europe along with the USA and Russia is among the most prominent global space players. While Russia, and most recently the USA, focus mainly on availability of launch services, Europe focuses on reliability. With the highest fleet reliability globally, Europe is able to offer to its commercial and institutional customers the highest quality of the service, and has therefore been the leader of the launch market since the 1990s. Nonetheless, European success is hindered by Russian market penetration, which is driving the highest market volumes due to its aggressive price competitiveness, consistent internal demand and market-driven international cooperation.
The most relevant industrial challenge that the European industry will face in the next 10 years is the development of the new fleet, which will address the availability of launch services. The higher Ariane 6 rate and the increased versatility of Vega will be the main drivers for success in the launcher business.
New fleet development, combined with increasing international cooperation (especially with the USA) and renewed geopolitical tension with Russia, will offer an important opportunity for the European space industry to regain market share from Russian players, and also re-insource some supply and rebalance overall space industry turnover, thus gaining more a central role in the global space industry.
ME: What are the main trends reshaping the global space industry? What role is the EU playing in the global space playground and do you think international cooperation may be beneficial to the European industrial base?
PL: The two major forces reshaping the space industry will be technology and competition:
The penetration of electric propulsion and improved satellite manufacturing techniques will drive polarisation between large and small satellites. The deployment of small-sat commercial constellations will make LEOs the most active orbits in the next 15 years. This will completely disrupt the current launch industry value chain by defining new service models. Understanding this service innovation is vital to accurate forecasting of future satellite markets.
New market entrants and increasing demand for space access from consolidated space-faring nations will foster the renewal of all the major launch fleets. This will open the market to new players developing smaller, cheaper and more readily available LVs, thereby fostering increased competition in the launch industry, especially in the small launch vehicle market segment.
The EU holds a leading position in the global space industry, providing affordable access to space through design-to-cost developments, delivering higher launch service availability and enhanced launch system versatility.
International cooperation among consolidated space-faring nations, incumbent players and newcomers to the space industry should help European players share development investments and risks, while enabling wider market access and commercial opportunities. Key points to consider:
• International/global partnerships can leverage institutional investment – developing and investing in common projects, thereby enabling faster time to market and lowering risk
• Investment convergence and cross-shareholding in the private sector – jointly working on and investing in specific projects to share risks and investments (e.g. SpaceX/Google), technological and service solutions enabling a lower cost of kg to orbit
ME: There has been a change in the governance of the European launcher sector, which is now based on a balanced sharing of responsibility, cost and risk by ESA and the industry. What opportunities does this pose for the space supply chain? How does this impact EU industrial taxonomy?
PL: The consolidated space-faring nations (e.g. USA, EU) have long started the process of the progressive shift of responsibility for space access towards industry. Investments and eventually revenues and margins have been shifting from the public to the private sector.
In 2012 ESA began investigating the feasibility of a new approach for European space access, aimed at making Europe’s launch services fully self-sufficient. We have been involved as business strategists from the very beginning (NELS programme) and we have seen the controversial birth of the A6 and a shift in the balance of power, which encompasses the two main European prime contractors (Airbus Defence & Space and Avio/ELV) leading the entire supply chain.
This new governance model allows the space agencies to focus on groundbreaking programmes and exploration, relying on private industry for all the necessary services, products and technology developments needed to maintain current and prospective space infrastructure. This will call for more consistent industry-driven capital backing.
This new model, which still clashes with the government imperative of securing reliable and available access to space for geopolitical reasons, offers several opportunities for the industry to take on responsibility designing the launcher system and related development choices. It will be possible to harness these new opportunities only if the European industry, wisely guided by ESA, will be able to shift away from the strict geo-return policy currently applied, moving towards a fair contribution paradigm
This will have a significant impact on the European space industry, since competences will be the main success factor. Only a few consolidated players, with proven experience in the industry, will lead design and development choices, while the smaller player will specialise in specific products or services.
This concentration is a great opportunity for the entire European space industry, since higher specialisation will foster lower cost and higher production rates, enabling higher market penetration and European market success.
ME: The proliferation of small satellites has reignited the debate on the cost of access to space. How are European players facing this issue?
PL: Traditional access to space only addresses primary customer needs; therefore up to now the scarce availability and quality of launch opportunities for small secondary payloads has historically limited small-sats penetration. Thanks to technological and manufacturing developments, thousands of satellites are expected to be launched in the next five to 10 years, driven by the trend towards constellations. Since both commercial and institutional small-sat operators will not be paying more for launch services than what the payload costs, today’s launch service value proposition will be challenged.
Globally, there are two main approaches to increasing the availability of affordable launch services for small sats:
• Development of new small and cheap dedicated launch vehicles based on a design-to-cost approach delivering ‘no-frills’ launch services to budget-constrained customers
• Evolution of current launch vehicle fleets, considering the cost and scheduling requirements of small sats, maintaining the traditional large launch vehicle paradigm, but working on technological and service solutions enabling a lower cost of kg to orbit
The European industry is committed to cost reduction and increased payload capabilities through the development of several adapters that can accommodate the main payload and several small ones. This enhances fleet capabilities with improved slot availability and lower launch costs for customers. These European efforts are enabled by an increasing dialogue between launcher and satellite manufacturers cooperating and finding common grounds to deliver optimal time to market, technological solutions and affordable service to customers.
ME: Reusability has been a hot topic for the space industry for some time now. What do you foresee is the potential impact of reusable engines on future launch costs? How are European companies responding to this trend?
PL: Reusability is a fascinating topic and several times in space history we have already demonstrated the capability to design, manufacture and operate reusable launch vehicles; the shuttle experience is one such example.
Nonetheless, due to higher refurbishing cost and concerns about reliability, the industry has moved towards reliable and cost-effective expendable vehicles.
Even with all the hype about reusable LV, or LV stages, what is missing so far is demonstration: to date no one has re-collected, analysed and refurbished an entire system, or a stage/segment of a launch vehicle.
Furthermore, reusability hinders the basic concepts of manufacturing efficiencies and scale economies, which have been by far the most critical drivers in lowering the cost of a launch vehicle. SpaceX themselves would not be able to drive down the Falcon 9 cost without the mass manufacturing of the Merlin engine (10 each flight, meaning over a 100 per year in SpaceX original intention of one launch per month).
Although different solutions are under analysis in Europe, reusable modules are not being considered and the European space industry is focusing on making Ariane 6 and Vega C reliable and affordable.
ME: Which new products and technologies are European space companies investing in to support next-generation systems, applications and markets?
PL: Currently European industry is responding to the market push with the development of Ariane 6 and Vega C, enabling affordable and reliable access to space.
ESA and the European agencies remain focused on research. Through its main launcher programmes and other ancillary programmes, Europe is investigating technologies for the future such as the LOX/methane propulsion, an essential propulsion technology to enable human space exploration.
Furthermore, electric propulsion developments will further push the boundaries of current space infrastructure, enabling new concepts and activities related to in-space logistics: smaller satellites released into a parking LEO orbit and electric orbiting tugs taking care of in-orbit delivery, and supporting maintenance activities, etc. These new technologies and applications will again disrupt the launch industry and satellite industry value chain.
ME: How will improvements in the launch industry impact the final applications market? Which new applications and markets will emerge? And how can the space industry prove beneficial to mankind?
PL: Space is increasingly part of our lives without us even noticing. Several services we take for granted on a daily basis, such as communications, land and maritime navigation, Earth observation and meteorology to name a few, rely completely or partially on space infrastructure.
The most critical factors in unleashing the potential of the future space economy will be:
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