Company is renegotiating contracts and is asking shareholders for more funds

Arianespace has cut its next order package and is trying to renegotiate supply and launch contracts in an attempt to turn in a profit by next year-end. The European launcher consortium has cancelled its order for 50 Ariane 5 ESC-A and ESC-B launchers, claiming the satellite market is too soft to justify it. Instead it will order only 30 launchers, all ESC-As.

But Arianespace's complex structure has made cost-cutting a long and difficult process. "We have been talking about this for the last five years," the company says, admitting that cost cuts are still imminent. Renegotiation has resulted in a 50% reduction in the cost of the newest batch of Ariane 5 launchers compared to the unit cost of the first batch, ordered in 1995. Ending production of the smaller Ariane 4 next February will cut about 50 jobs and also help the consortium cut costs.

Arianespace says it faces unfair competition from US launch operators, including Boeing and Lockheed Martin. While Arianespace has to meet half the operating costs of the European Space Agency (ESA) Kourou Space Centre in French Guiana, it argues that US operators pay only a fraction of the cost of launching from Kennedy Space Center in Florida or Vandenberg AFB in California.

Kourou is an obvious area for efficiency savings, Arianespace says. "Some of our manufacturers, such as EADS, are also activein Guiana....We can streamline the operation." More staff cuts are possible, but not in the Ariane 5 project team, it adds. "The reorganisation could produce new roles at Kourou for EADS, ESA and Arianespace. We will adjust to avoid duplicating functions at Kourou."

Arianespace plans to ask its shareholders for more funds. If it cannot raise the €200 million ($197 million) of extra capital needed, it will have difficulty reaching its target of profitability by the end of 2003.

Source: Flight International