Space Shuttle disaster unlikely to have major effect on market, which is already suffering from overcapacity

The loss of the Space Shuttle Columbia on 1 February is likely to have only a limited effect on commercial satellite builders and launch providers, who are already struggling with plunging demand.

Since 1986 the Shuttle fleet has not carried commercial payloads, and even government scientific and military satellites are now lofted by cheaper expendable launchers. During the past four years, the shuttle fleet has been devoted to tasks that could not be performed by unmanned craft, such as construction of the International Space Station, maintenance of the Hubble Space Telescope and Spacelab scientific missions.

Commercial satellite launches are set to drop again this year. Even before the collapse of the internet bubble economy in 2000, Arianespace warned that commercial derivatives of the US-developed Evolved Expendable Launch Vehicles would bring a glut of launch capacity in the early years of this century. Despite delays in the development of the Boeing Delta IV and Lockheed Martin Atlas V boosters, they still represent a potential oversupply of boost capacity.

However, the new launchers are still not cheap enough to stimulate greater demand. The late 1990s growth of the commercial sector was heavily dependent on the growth in internet traffic and commerce, which has now evaporated. With an established oversupply of orbital communications capacity in geostationary orbit, the obvious area for growth is low-Earth orbit. However, low-orbit constellations such as Globalstar and Iridium did not realise the forecast demand for their services, and the airline crisis has meanwhile cut demand for inflight communications services, one of the brightest potential markets.

The manufacturers of satellites and launchers, led by Boeing and Lockheed Martin, have been reporting slow growth in sales and they predict continued sluggish sales to come. Boeing says the 2003 commercial market will "remain difficult" and Lockheed Martin blames "industry-wide oversupply and deterioration of pricing in the commercial launch market".

The situation would be worse but for continuing growth in US government spending in space, especially in the military sector. The US Air Force's total space acquisitions budget is set to rise from $2.1 billion in fiscal year 2002 to $3.7 billion in FY2003. And although Boeing and Lockheed Martin are the top USAF suppliers, with a total of $18 billion in contracts last year, they also face further loss of revenue.

The two companies manage the United Space Alliance joint venture, which operates the shuttle and brought in $1.8 billion in revenue last year. If, as seems likely, the fleet is grounded for any length of time, the financial damage will be severe. After the loss of the Challenger in 1986, the fleet was grounded for more than two years.

Source: Flight International