Israeli communications satellite operator Spacecom saw a third of its value evaporate after their satellite ‘Amos-6’ was destroyed in the explosion of the SpaceX Falcon 9 on Sept. 1. In the aftermath of the explosion, Spacecom shares plunged to a 10-year low of 49 per cent, the most on record, before trimming the drop to 33 per cent. Facebook and France-based satellite provider Eutelsat have announced that they have cancelled service agreements with Spacecom.
The 5.5-tonne Amos-6 was supposed to replace ageing satellite Amos-2. Israel’s defence ministry and most of Israeli communications companies, including the country’s fixed-line leader, Bezeq, and Yes were also expected to use the satellite.
“As a result of the loss of Amos-6, our service agreements with Facebook Inc. and Eutelsat Communications were cancelled. We are actively seeking alternative options for satellite providers following the loss, including building a new satellite, which may take an estimated 24 months,” David Pollack, Spacecom Chief Executive Officer was quoted as saying by Reuters.
Spacecom’s $285 million merger with Beijing Xinwei Technology Group is also under question.
“The price of the deal with Xinwei will be reduced, or it will be completely abandoned,” said Meir Slater, head of research at Bank of Jerusalem, adding that the successful launch of the satellite was a condition of the deal.
On Sunday, Spacecom said in a statement to Tel Aviv Stock Exchange that it is due $294 million in compensation for the loss. That includes recovering $205 million within 60 days from Amos-6’s builder, state-owned Israel Aerospace Industries.
Spacecom also said that it could seek $50 million or a free flight from Elon Musk’s SpaceX.
Impact of the accident on commercial Space transport Industry
Although the cause of the accident is still being investigated, SpaceX, Musk’s third enterprise, along with –Tesla Motors Inc and SolarCity Corp may also be affected by the explosion.
While the payoff of a successful satellite launch is incredible rewarding for commercial telecommunications customers, getting a satellite manufactured is time-consuming and expensive taking two years or more and costing $200 million to $400 million each.
Once in orbit, the upfront investment is paid back in a few years, and they then generate massive profits for the remainder of their useful life that can be as much as a decade. Revenue for satellite services last year was $127.4 billion, according to a report by Tauri Group, a research firm, for the Satellite Industry Association. The launch business though is small by comparison — $5.4 billion in revenue last year.
Waiting for launching a commercial satellite is financially painful for operators after successfully manufacturing them. While Iridium Communications, SES of Luxembourg, EchoStar and KT Corporation of South Korea queue up for their SpaceX launches scheduled for later this year, the danger of SpaceX launch timetable being delayed by a few months may be of serious concern.
The cost of SpaceX flight missions is at least 50 per cent less than what its main competitors charge in the industry. It has been able to do this by streamlining production techniques, designing a stripped-down launch-pad and stepping up the pace of launches. SpaceX has also been approved by NASA for cargo missions and certified by the US Air Force.
In a statement on Friday, the company said its business was “robust, with approximately 70 missions on our manifest worth over $10 billion.”But analysts suggest that if after investigations it is found out that the explosion occurred due to a design or manufacturing flaw or an operational error, launch rates for SpaceX flights may well go up.
The explosion is also a reminder of a safety concerns that threaten Space X’s long term expansion plans– for launching military and national security satellites for the Department of Defense and launching manned spaceflights for NASA. Space X faces competition from the United Launch Alliance, a joint venture of Lockheed Martin and Boeing.
Ultimately, recovering from delays to its aggressive launch schedule is the biggest challenge for SpaceX.
from Department of Private Space Inc.