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WASHINGTON D.C., November 20. /Ivan Lebedev for TASS/. The US International Launch Services (ILS) company, being a subsidiary of Russia's Khrunichev State Research and Production Space Center, has been promoting the Proton carrier rocket on the international space launch market for over 20 years. In September, the company got a new president, Kirk Pysher, who had been the company's vice-president for three years before the appointment. In his first interview o this post, Kirk Pysher has told TASS of the tasks that the company is facing, its plans in the area of commercial launches, the new marketing strategy and the impact of western sanctions.
- What are the main challenges you will have to deal with as the new president of ILS? What are the main goals that are set for ILS by Khrunichev Space Center in a short and in a long term?
- Our primary and immediate goal is to focus our attention on restoring customer confidence and trust in our companies, ILS and Khrunichev, and our product, the Proton Breeze M launch vehicle. We plan to accomplish this by first focusing on improving overall communication with our customers and between our companies. Open, honest and timely communication is the foundation for which the rest of the business can be built upon. This is something that we can achieve immediately and continue to improve upon.
Secondly, we will focus on developing partnerships with our customers, engaging them in our process, finding mutually beneficial solutions and improving the overall customer relationship from the time that we make initial contact through delivery of our final report. Additionally, we need to deliver a reliable, safe and timely launch service.
Khrunichev, as the designer and manufacturer of the Proton Breeze M launch vehicle is focused on improving the reliability of the vehicle and restoring market confidence. They are implementing improvements to the Quality Management System (QMS) with factory efficiencies with more automated processes, reducing the amount of touch labor. They are retraining and recertifying specialists and incentivizing essential employees with better wages. They are also reducing overall company general and administrative expenses-selling unused property and eliminating non-core programs. These improvements are being conducted in phases and it is expected that it will take three years to fully implement the improvement program. One year into the process, steady progress has already been made.
- A year ago there was a change in leadership at Khrunichev Space Center, the majority owner of ILS. Andrey Kalinovsky who was appointed Khrunichev General Director took some steps to solve financial problems of the company and improve its production quality. How has it impact ILS activities?
- Mr. Kalinovskiy, who came to Khrunichev from Sukhoi Civil Aircraft, has a history of successfully implementing broad-based improvements to overall product lines including quality. During his tenure at Sukhoi, he completely overhauled the production of the SuperJet 100 program, a cooperative program involving the US, France and Italy. He is in the process of doing the same at Khrunichev: streamlining the production of the Proton launch system and creating a new, state of the art production facility for the Angara launch system.
We see the changes in leadership at Khrunichev and their efforts to improve the overall business as a positive step towards rebuilding market trust with improved reliability and cost competitiveness of the Proton vehicle. Though these changes are going to take time to implement and realize results, the new management at Khrunichev is dedicated to following through. As I mentioned before, the overarching goals are achieving an outcome that restores confidence and trust in us and our product by improving vehicle reliability and customer relations.
- This year ILS worked out and presented to its customers new marketing policy. What is it based on? What are the most important parts of this program? Does it call for price reduction for Proton launches?
ILS recently announced multi-launch agreements with two of the world’s largest satellite operators. On October 30, 2015, ILS announced a multi-launch agreement with Eutelsat and on November 11, announced another similar agreement with Intelsat for five missions. In exchange for a commitment for a bulk buy of Proton launches, ILS and Khrunichev are partnering with our customers and providing flexible, assured access to space at competitive prices.
With these long term commitments for a fixed number of launch vehicles over time, Khrunichev can work with its component suppliers to control cost of the vehicle production for several years.
While these multi-buy agreements offer certain advantages to those customers, they also provide a stable baseline business for commercial Proton, which in turn adds value and benefit for all commercial satellite operators.
- Khrunichev and ILS leadership openly said that Proton failures during the last four years have undermined customers' confidence in this vehicle. What are you doing to get back their trust? Do you see any positive signs?
Trust is not something that is earned or reestablished overnight. It will take some time to gain back confidence and trust over the long term through both successful launches and reliable customer service.
On the positive side, our customers have made it clear that they want Proton to remain in the market and require launch diversity for better access to space. The recent new business for ILS embodies our customers’ commitment to this. However, we need to consistently deliver on our customer commitments and demonstrate continued improvement in the reliability of our vehicle and customer service.
- How many commercial Proton launches did ILS make this year? How many more you are going to make by the end of 2015? How many contracts do you have for 2016 and 2017?
ILS has launched four commercial missions this year. Our next launch will be the Eutelsat 9B satellite in January 2016. We have 15 missions currently in our backlog.
- Have you already started to market Angara on the international market? What types of this new vehicle do you offer to your customers?
The new Russian Angara A5 heavy-load rocket was successfully test-launched on December 23, 2014. Infographics by TASS
Yes, we are actively marketing the Angara vehicle to our global customers. ILS is currently marketing the Angara 1.2 vehicle from Plesetsk and will begin to offer the Angara 5 vehicle from the new Vostochny Cosmodrome in the 2025 timeframe.
One of the benefits of the new Angara family of vehicles is its modular design. The vehicle is built around a common URM - Universal Rocket Module - that can be combined into specific configurations that provide the flexibility to launch a full range of mass classes to all types of orbits. The successful initial test flights of both Angara 1.2 and Angara 5 configurations were conducted in 2014.
The Angara 5 vehicle - with 5 clustered URMs as the main stage - is the heavy-lift variant that will eventually replace Proton. Following completion of the Vostochny Cosmodrome, Russian Federal missions will gradually transition from Proton to Angara starting in the 2021 timeframe with the Commercial transition starting in the 2025 timeframe.
Given that Proton will remain in the commercial market for at least ten additional years as one of the primary heavy-lift vehicles, it is important to note that ILS and Khrunichev are committed to the continued support and improvement of the mainstay Proton until the full transition to Angara is completed.
- How would you characterize the situation on the international market of commercial launches? How has it changed with the emergence of the new aggressive competitor - SpaceX with its Falcon 9? Do you see any serious threat from the new players like China and India?
Undoubtedly, the emergence of SpaceX in the market has provided increased pressure on pricing in commercial launch. For ILS, the strength of the US dollar relative to the Ruble has enabled us to be more competitive in this largely dollar-denominated business. We believe that Arianespace has benefited from the current exchange rate, as well. For the long term, the European governments have committed substantial funding to a new Ariane 6 program to better meet commercial pricing targets. Similarly, Khrunichev received support and funding from the Russian Federation to improve the long-term competitiveness of the Proton and Angara launch systems.
As far as Chinese launch vehicles, we do not see any changes on the horizon to US export control policy, which prevents these vehicles from competing on the global market. The Indian launch program may become a larger player on the international market for small to medium launch vehicles, if the US export policy becomes more open to their participation.
- Have US sanctions against Russia and restrictions on transfer of high technology equipment to Russian entities affected in any way the work of ILS? Do you have all the necessary licenses from the State Department? Do you envision any future problems because of the western sanctions? Do they scare your customers?
- There has been no direct impact to our business relating to US sanctions or restrictions against Russia. All of our licenses have been approved and ILS has all of the necessary US State Department authorizations in place to execute our manifested launches.
In the more than 20 years that ILS has operated in the commercial launch market, we have never had a license revoked, denied, nor has any mission been delayed due to export or regulatory procedures. While the implementation of sanctions against Russia in 2014 caused concern with our customers initially, our recent contract awards show renewed customer confidence in the strong and lasting cooperation with Russia in global space activities.