State funding has played a large role in shaping Germany's space programme. But with the government cutting contributions, can the sector prosper?
A subscale reusable spaceplane prototype due to be drop-tested over Sweden this week illustrates Germany's leading role in shaping Europe's future in space. Built by Bremen-based EADS Space Transportation, the Phoenix spaceplane is designed to prove the feasibility of a reusable space transport system. It is a national research programme that is expected to form part of the European Space Agency's (ESA) recently approved Future Launch Preparatory Programme to pave the way for the next generation of launch vehicles.
But the German government is not increasing its space spending, which in 2001 was c970 million ($1.14 billion), and senior executives see government policy as the biggest threat to their industry. "This really is a concern. The German budget is stalling and in real terms, in cash value, is declining. On the euro level it is level, but in buying power it is going down," says Dr Fritz Merkle, chief technology officer for OHB-System.
Bremen-based OHB-System is one of the largest companies in a space sector that, according to aerospace industries association BDLI, last year employed around 5,000 of the 70,000 people in the German aerospace industry, and accounted for over c1 billion of its c15 billion in total sales. BDLI managing director Hans-Joachim Gante echoes Merkle's view: "Any more cuts to the national programme would threaten the future of the companies involved. We must do everything we can to preserve the national space research programme and to broaden it in the not too distant future."
Government policy would be less important if state funding did not constitute such a large amount of space spending. As in other countries, the German space industry has a commercial side, with the sale of launchers and satellites for Earth observation and telecommunications, but overwhelmingly its revenue stems from a government-led institutional market.
Government agencies buying space equipment and services for civilian uses such as navigation or exploration, or military uses such as reconnaissance, make up most of the market. According to industry, the civil/military split is 70:30. For the likes of small and medium-sized space enterprises such as OHB-System with its 200 employees and Munich-based Kayser-Threde, the main customers are ESA and the German government. Contracts range from subsystems for the European Columbus laboratory module for the International Space Station, to the SAR-Lupe synthetic-aperture-radar reconnaissance satellites under development by OHB-System for the German military.
Kayser-Threde is working on a telescope for the German government's Max Planck Society, a network of government research laboratories. "We are almost exclusively focused on microgravity, but we also get contacts for Earth observation. On the national level our main competitor for this is OHB," says Dr Eckart Wulf, the firm's senior strategist.
Commercial market
Beyond these government contracts there is the commercial market. Even with the concerns over government funding, the state has represented a far more stable revenue stream than the commercial sector. In 2002, world demand for commercial satellites plummeted and there were just six contracts worldwide. That recovered to 20 in 2003 and the market is expected to stabilise at around 20-25 a year from 2005 purely to replace old satellites.
The company most exposed to these potentially damaging fluctuations is EADS Space, which nonetheless has captured 20% of the world market for satellites to be launched this year with five institutional and four commercial spacecraft.
EADS is the biggest player in Germany's space market, through three companies: satellite builder EADS Astrium; EADS Space Services (satellite services); and EADS Space Transportation (launch vehicles and orbital infrastructure). Astrium is based in Munich and Friedrichshafen, Space Services in Ottobrunn and Space Transportation in Bremen, Ottobrunn, Friedrichshafen and Lampoldshausen.
Because of its size, with 3,100 employees in Germany, EADS Space is prime contractor on several programmes and has led the national Phoenix reusable launch-vehicle research project. Its Astrium subsidiary is prime contractor for the TerraSAR-X 1m-resolution Earth-observation radar satellite, which is being developed under the first public/private partnership of its kind in Germany, with German aerospace centre DLR funding construction and launch next year, and Astrium contributing to implementation by developing and marketing geo-information tools.
During the recent downturn, EADS Space underwent major restructuring, not only because of the market difficulties, but also to deal with the legacy of its founding in 2000 through the merger of many European companies. "We started with a kind of club of national entities and now we have one company with streamlined functions and the same turnover with 30% less staff," says chief executive Francois Auque. In the downsizing required to cope with the difficult commercial market, no company suffered more than another, he says. "I would say it's about the same everywhere with an exception, which is Spain, where the staff reduction was almost zero." The job cuts have been slightly less in the UK, he says, due to the ramping up of the Skynet 5 military communications satellite programme.
Removing duplication
"This was really a very costly process, but at the end of the year we will deliver our commitment to go back to black," Auque says. The restructuring also saw movement in the work each site did in an effort to remove the duplication Auque and his team saw among the many inherited space firms. "This is a real challenge with a very substantial cost, but when we have finalised it at the end of this year, EADS Space will be a very efficient economic organisation," he says.
Because commercial satellite work is at the centre of its operations, EADS Astrium has seen an almost straight swap of propulsion and communications technologies between Germany and the UK. "There were antennas in both Germany and England," Auque says. "Tomorrow the antennas will only be in England. Satellite propulsion was in England and Germany, tomorrow it will only be in Germany."
Whatever the outcome of the new Astrium structure, Auque is confident it will contribute to his firm's profitability. "Something that is less well known is that today EADS Astrium has the strongest backlog in terms of [orders for] commercial telecommunication satellites," he says.
In Germany, EADS Space's companies have still to compete against OHB-System and others for shrinking government funding. Kayser-Threde's Wulf is ready to take on the European giant, saying: "On the national level [we] can compete for prime contractor work and do quite well."
Neither Kayser-Threde, OHB-System, or any of the other German firms except EADS operate in all areas of the space industry. "They enter segments of the market that are very limited and are complementary," says Auque. "Maybe there is 10% or 20% of competition, but 80% is complementary. So there is a lot of subcontracting because they cannot do what we can do." As far as Auque is concerned the international market for commercial geo-stationary telecommunication satellites is closed to all but a few companies because of the technological and financial barriers.
All-German
But in the domestic market, Wulf believes EADS Space's European identity has given Kayser-Threde an advantage as it is an all-German firm. "Our order intake has been above expectations. One reason is that we have benefited from the internal [restructuring] of EADS, which is no longer seen as a German company by the German ministry."
With talk of a European Union space programme it remains to be seen if space will remain in any way a national endeavour. One outcome of shrinking national budgets could be a new European space budget, forged from the coffers of a newly expanded 25 member-state union.
But for now the German space industry is dependent on government cash, subject to the vagaries of politics, while the commercial sector still fails to take off and become the main source of revenue.
ROB COPPINGER / LONDON
Source: Flight International
