European weakness in the competition between ArianeGroup and Space X

As the European Commission chastises the profitability of the future European heavy launcher Ariane VI in the face of competition and the recent shutdown of the Soyuz program has been pronounced after the Russo-Ukrainian conflict, one may wonder how this war of costs and technology can be won by Group Ariane.

The context of the New Space in the balance of power

The New Space revolution allows new private players to enter the game of large institutions in the field of satellites and access to space. Satellite miniaturization is an important pillar in this sector, allowing a reduction in project costs and access to LEO (Low Earth Orbit) type orbits. Space X is leveraging this structural and technological genesis to satisfy its desire for economic growth with its first Falcon X launcher. Its Ariane V launcher focused on the dwindling GTO (Geostationary Transfer Orbit) market.

Furthermore, its American counterpart is launching its Falcon Heavy launcher on February 6, 2018, specifically competing with the European group in its most lucrative market. Realizing a true symmetrical and asymmetrical war, Space X imposes itself as the predominant actor in the space access market strongly supported by NASA and the American State and taking advantage of its difference from the Level Playing Field, that is, a capacity, financial and regulatory difference. with the European player to increase its hegemony in the market. What strategy to impose to counter your opponent.

One of Space X’s main strengths stems from its ability to innovate. While the principle of space age reuse is not new having started with the American space shuttle, Space X still allows for a feat at a time when launchers have a single use. This mechanism is ensured by the capabilities of MRO (Main Repair and Overhaul) in connection with the new updated technologies of Factory 4.0 that allow up to 9 reuses of the launchers of the American company.

The American state, a spearhead of the cost war

The US State is an essential player in Space X’s competitiveness. Its financial and regulatory intervention allows the company to have a competitive arsenal that is highly unfavorable to old-world competition. This is reflected, in particular, in the acceptance of an over-invoicing of launch costs favorable to Space X in the amount of 150 million euros, allowing it to artificially influence its commercial launch prices between 50 million euros and 62 million euros. euros.

In comparison, the European system benefits from launch discounts based on the associated European subsidies that are heavily criticized by Space X as an unfair competitive advantage. In addition, to the great consternation of the players present in the American local market, Space X’s influence on the American State is strong and allows it to be privileged in the challenge of the principle of competition in relation to other players. such as Blue Origin and the institutional ULA (United Launch Alliance), allowing Space X to also benefit from very favorable local competition.

Weak actors and European standards

Furthermore, the American Act gives strong protection to the American satellite market, which focuses on state-owned launch systems, compared to the European market, which does not benefit from such a system. Europe, for its part, is struggling to deploy a protection system partly plagued by the weakness of some of its program partners who do not share the same views but have mixed interests favorable to the Americans.

Germany is a divergent actor, because it finances the European program and benefits from the associated technological spin-off on its soil, but in certain cases it prefers the American launcher to put its institutional satellites into orbit.
Germany is increasingly communicating in the opposite direction towards its European partners and is moving towards state protectionism.

Russian-Ukrainian conflict marks the end of Russian relationship, a boon for Space X

The beginning of the Ukrainian conflict also impacts the European space launcher sector, ArianeGroup loses its firing capability with the Soyuz launcher in cooperation with Roscosmos and the operating company Starsem. This capacity reduction allows Space X and its capability force to fit into the void left and benefit from European launch contracts.

Space X’s strategy is to consolidate its achievements in the space sector and continue to multiply the reusability of the same launcher to increase its profitability. Space X’s interest is also in its strategy to influence the US government and maintain its leading position in future space programs such as Artemis and the Deep Space Gateway space station project.

A look at European strategy

On the European side, the commotion, the impact of the American economic war on its adversary forces the European institutional to broadly review its initial strategy. Initially, the strategy aims to convince of the economic efficiency and capacity of the new and more efficient Ariane 6 launcher. This strategy takes the form of modifying the assembly line to make it linear and horizontal, which will reduce operational costs and coordination with Industry 4.0. ArianeGroup is also focusing on designing new reusable launchers by 2028. Themis and Callisto demonstrators should allow Europe to have reusable launch capabilities in LEO.

A tough economic war, but not yet lost

The pressure exerted by Space X on the European player is strong and Space X is consolidating its strategy with state aid. The intervention of the American player in the European market is increasingly frequent. The US company is taking advantage of Germany’s weakness as well as the loss of Soyuz to fill the European capacity void. Arianegroup’s competition in the reusable seems a bit lagging behind Space X’s lead, but there is a real need to increase launch capacity in the LEO (Low Earth Orbit) field to avoid losing potential market share in Europe.

To counter the cost war, Europe must increase subsidies allocated to the space sector where it can act in two direct vectors, either by increasing subsidies by country in the program or by joining new players. The introduction of new players would result in an increase in the total value of subsidies, but a greater distribution of productive activities. This technique is, however, strongly criticized by Space X which, however, does not openly communicate about the overloading methods used with the American State. Finally, the legislative aspect must be reviewed to allow for European protectionism at the level of strategic and technological sectors, which would make it possible to consolidate the European competitiveness chain. It will then be necessary to bring Germany to the negotiating table with a view to consolidating European unity to guarantee our sovereignty over access to space.

Thomas Leibbrandt (SIE 26 by EGE)

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