Space industry insurers are nervously tallying up their accounts in the wake of 27 loss claims filed for satellite and launch failures last year.
The business faces a crisis after meeting more than $1.7 billion in claims, while expecting to pay out an additional $2 million for three as-yet unfiled claims, and having received only $950 million in premiums in 1998.
A single failure this year could wipe out the roughly $2.2 billion in profits accrued by the industry between 1990 and 1999. That came close on 11 March this year when a GE Americom communications satellite lost orientation, depriving customers of TV services for a few hours. Control was eventually restored.
Last year's losses continue a trend that first surfaced in 1997 when in-orbit satellite failures increased. Traditionally, launch failures have been the cause of payouts. Insurers allege that lack of testing, commercial pressures and increased technological complexity are to blame. Manufacturers disagree.
In 1998, 24 satellites and three launches failed. The launch mishaps included a Lockheed Martin Titan 4A booster, the failure of the Boeing Delta III's maiden flight and the loss of 12 Loral Globalstar satellites in a Russian Zenit 2 crash.
Speaking at the Satellite 99 conference in Washington DC last month, Christopher O'Gwen, assistant vice-president of US-based Aviation Underwriters, blamed satellite manufacturers for the increased failures.
"The trend is very disturbing. Clearly, commercial pressures force manufacturers to cut corners in testing satellites. One solution to this growing phenomenon of in-orbit failures is increased testing," he said.
Hughes Space and Communications, the largest manufacturer of communications satellites, has suffered systems failures with its HS-601s, but disagrees with claims that these resulted from lack of testing. The company says: "Yes, there has been a reduction in testing time, but the testing is being done in a shorter time as a result of improvements in technology."
Giovanni Gobbo, of space insurance underwriter Assicurazioni Generali, believes that another reason for what he calls a "worrying trend'' in breakdowns is simple: communications satellites today are bigger and more complex than they were 10 years ago, reflecting a quantum leap in technology.
"The reliability of a satellite is probably better overall, but there are far more components on board for single-point failures," says Gobbo, space department manager.
Hughes responds: "Satellites are much larger - and more are being launched - but the percentage failure rate is about the same." Failures get more publicity "because these satellites have become more highly visible and vital components of a global communications information explosion". An anomaly has greater impact on a much larger market, the company adds.
Under pressure
Gobbo also contends that manufacturers are under pressure to build spacecraft faster, particularly to meet the specific needs of each customer, especially those in the exploding mobile-communications-satellite market.
"There is a rush to deliver the satellites on time. Clients are under increasing competition. They are more demanding, wanting perhaps too much from a satellite in terms of new equipment. They are going to the limits."
More components are being purchased off-the-shelf and testing responsibility is being left to subcontractors instead of being handled by manufacturers. But satellite manufacturers reject allegations that their product is not up to industry standards.
"Yes, there is pressure to deliver, but faster delivery has been made possible by manufacturing technology," says Hughes. It is also the result of production-line spacecraft bus manufacturing. "Communications used to be the realm of government agencies and public telephone authorities so there was less pressure to deliver. Now, it is a realm of the commercial, entrepreneurial, privately funded organisation that needs investment and quick delivery."
Some manufacturers concede that their business plans assume a certain number of failures. Motorola, manufacturer of the low-earth-orbiting Iridium satellites, and Lockheed Martin, which builds the Iridium spacecraft buses, acknowledge that they have business plans that assume a number of failures and they plan production accordingly. For example, 12 of 86 Motorola-built, low-earth orbiting Iridium satellites so far launched have failed. Eight of those failures resulted in claims totalling $236.4 million last year. Lockheed Martin says: "There is no design problem. Satellite attrition was planned for in the design of the system."
A London-based underwriter says he feels "conned" at this number of failures, which did not match what Motorola said could occur when insurance cover was agreed (Flight International, 9-15 December).
Lockheed acknowledges that the design of each orbital constellation of six satellites and one spare in 11 orbital planes "allows for satellites to be replaced at a rate of 12 a year". If one Iridium fails, however, customers can be switched to another craft within minutes.
The same is not the case, however, with a single point failure of a much larger satellite in geostationary orbit, such as the Galaxy IV, a Hughes HS-601 spacecraft, which failed in May. The Galaxy IV's failure put 90% of the pagers used in the USA out of action for a weekend.
Hughes reconsiders
With three of its HS-601 High Power buses having experienced problems (although not all failed completely) out of seven launched, because of battery failures, Hughes is reconsidering its design strategy.
After having shifted to a policy of meeting customers' special requirements, Hughes says it is reverting to traditional production-line bus standardisation.
Gobbo does not believe there is yet a need to increase insurance premiums, but warns that the satellite manufacturing industry could be in for rough times. "If you were offered a TV set whose model failed as much as the satellites, you would go elsewhere," Gobbo says. "A TV set costs about $200 - a satellite costs $100 million".
Source: Flight International
