A Look into the Crystal Ball
(Source: RUAG; issued Aug 20, 2020)
Trends that might shape the post corona space sector are a smaller and leaner space industry, high demand for satellite services and opportunities for innovative players

How will the space market look after the corona crisis? Will it return to the growth it had until recently? Which developments will stay and which trends will emerge? In 2020, a slow-down of the market can be taken for granted. Back in 2019, the investment bank Morgan Stanley estimated that the global space market would nearly triple from 350 billion to 1 trillion U.S. dollars in 2040. This outlook changed, but it is too early to have a stable prognosis at hand. We have collected some trends that could shape the post corona space market.

Smaller and leaner

The pandemic showed that well-established companies with a strong customer base and robust portfolios like the U.S. rocket builder United Launch Alliance (ULA), have been less affected than smaller companies. In an interview with “Via Satellite” Tory Bruno, CEO of ULA, said that he does not expect the pandemic to impact ULA’s launch manifest because it services the government and large commercial customers. But how the space industry grows also depends on smaller companies. These young and growing businesses have been funded by private venture capital that will likely dry up as the crisis continues. This means: The space industry will probably emerge smaller and leaner – and it will be a long time until we see such a wide variety of companies again.

High demand for satellite services

Nearly all countries worldwide work on measures to control the spread of the coronavirus in order to react swiftly if more infections occur. For these activities satellite data is crucial (see page 12-13). According to the consultancy PwC the demand for satellite services including earth observation, communications, navigation services, space surveillance remains mostly unaffected and could even rise. The pandemic could drive a rebound of the demand for both governmental and commercial satellites. However, the timing and extent of this demand is difficult to predict. On the other hand, Northern Sky Research, a renowned satellite industry market research company, estimates that the demand for space services will likely be negatively affected in the energy, aviation, and cruise sectors. Potential losses on these markets may however be offset by a possible demand growth for cellular backhaul and consumer broadband.

Less money for space exploration

Because of the economic downturn, governments worldwide are spending billions on supporting the economy. Soon, the question will become more daunting: How can we pay these subsidies and where can the countries save money? In this context, space exploration is likely to receive less money, expects PwC. National space budgets – the biggest source for space exploration missions – are expected to be revised. The prospects of space exploration could be expected to be low in the medium term, until a stable economic growth period is achieved, concludes PwC.

In Europe, national and ESA budgets received a considerable boost at the end of 2019/early 2020. The consequences of the COVID-19 crisis on these budgets are unknown, writes ESPI, a European think thank for space. As of mid-July (the article’s deadline) the budget of the European Union for 2021-2027 has not yet been agreed but has been influenced by the pandemic in May. The proposal for the EU space program was reduced from the initial proposal of 16 billion Euros in 2018 to nearly 15 billion Euros (13.3 billion in 2018 prices). However, the detailed impact on the different program components, which are financed by the EU, like Galileo and Copernicus, are not yet known.

High political support for space

Political support for space activities appears to remain high. In June, the Council of the EU recognised the effects of the crisis on the space sector and emphasised the role of space programs for an economic recovery. Uncertainty remains with regards to the use of other instruments to support space activities and sector recovery, like the new temporary recovery instrument of the EU (750 billion Euros). In general, space is a sector heavily tied to institutional budgets and overall wider public agendas. It is therefore expected to be impacted by changing government priorities in many regions. Governments have a prominent role in driving orders and setting up programs.

Stable launcher industry

Around 100 launches have taken place worldwide last year. Because of COVID-19, some of the launches for 2020 have been postponed. But cancellations are rare. Thus, the launcher industry appears to remain stable. “We expect launcher manufacturers to be able to maintain their production pace,” says Holger Wentscher, who is leading Product Group Launchers at RUAG Space. A different story is the small launch sector or companies that are building small rockets to launch spacecraft the size of a mailbox. There are currently more than 100 small launch companies, says a report by the market research firm Quilty Analytics. So far only one of the companies in the small launch sector, Rocket Lab, has deployed satellites to orbit. Quilty Analytics projects there will be enough demand to sustain only two or three small launch providers in the long term. The small launch sector is capital intensive, risky and has very long development cycles. However, how big the effect will be, is unknown. Or as the leading space magazine “Spacenews” phrased it: “Shakeout in the small launch industry is coming, but nobody can predict when.”

Commercial market shaken up

In the first half of 2020, two major commercial companies, OneWeb and Intelsat, both global satellite operators, filed for bankruptcy. This shows that the commercial satellite market has been affected. Commercial customers are themselves confronted with financial issues and market uncertainties. Eurospace, the trade association of the European space industry, estimates that the commercial sector could suffer a reduction of sales of up to 1.2
billion Euros at the end of the year, corresponding to a 14% decrease in turnover decrease in 2020.

“Great companies find money”

Luce Fabreguettes, responsible for Missions, Operations and Purchasing at the European launch service provider Arianespace, says in an interview with “ViaSatellite”: “It is clear that the commercial market is shaken by the pandemic.” Grant Bonin, Senior Vice President of Business Development for Spaceflight, a launch services and mission management provider, adds: “The commercial space industry has enjoyed a very long, pleasant summer. We’re preparing now for a Canadian-type of winter.” But Bonin also sees chances for wellrun companies. “Great companies and great ideas find money and they find customers, almost regardless of the circumstances.” The post-corona space market will look different. “But companies with products that offer a unique added value are still needed. We are leading the market in eight niches. We will build on this. With new ideas and our excellent engineers we will further improve our position among customers,” says Luis De León Chardel, Executive Vice President a.i. RUAG Space, confidently.

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