Eurospace annual facts & figures report is out

The annual Eurospace facts & figures report (27th edition) is out today. It is available to eligible entities. Click here for details and downloads.

Eurospace f&f Foreword, by Pierre Lionnet Research and Managing Director

2022 was a year of great achievements for the space sector worldwide, setting another record in terms of orbital space launches (182) putting into orbit almost 1000 tons of spacecraft. Some observers are already gloating over the fact that the space age has reached an inflexion point, that these large numbers will become the new routine, and are announcing a period of accelerated growth fuelled by the growing demand for satellite constellations. There would be a lot to say on these statements...

2022 was also exceptional as we witnessed the maiden launch of NASA's SLS (with the Artemis 1 cislunar mission), the first tangible step towards the Moon for American (and international) astronauts. More modestly, 2022 also saw the successful debut of VEGA-C, but regretfully also the untimely failure of flight 22 of VEGA and the loss of the two Pleiades satellites built by Airbus. The inaugural launch of Ariane-6 was also pushed back to 2023.

In the wake of the Russian invasion of Ukraine, and the sanctions imposed to European economic actors, the European industry has lost access to its Russian customers and suppliers. This has long and durable effects on the system and service offering of European space companies, translating in lower revenues from exports and the total disruption of Russian sourced supplies (such as Soyuz launchers, Fakel's electric propulsion systems). As another fallout from the Russian crisis, the Exomars cooperation between ESA and Roskosmos was suspended, and the launch service was scrapped.

In this growingly complex market and geopolitical environment, the European space industry’s activity, measured in an accurate and transparent way by Eurospace every year since 1996, exhibited four main trends:

• Employment growth is furthered in 2022, with more than 57000 Full-Time Equivalents (FTEs) registered in the sector, an 8% growth over 2021. As in 2021, the growth is mostly driven by the expansion of new and emerging start-ups in Europe that have thrived in recent years and have created more than 7000 employees in the sector in just 6 years. This new demand for space-qualified jobs creates a competitive tension on the workforce market, and large historic players have reported difficulties in filling up open positions. There are, in 2023, more than 3000 open positions in the European space industry, more than half with legacy industrial players, and the remainder is offered by emerging start-ups. A consequence of this surge in work demand is the uneven growth of workforce costs that conflate with the inflationary tension already registered last year on critical supplies (materials, energy, electronics) to reducing the competitiveness of European space systems.
• Institutional programmes for spacecraft systems are stagnating in the key application segments (telecommunications, GNSS and Earth Observation), after last year's marked growth (supported by the regular opportunities provided by the EU flagship programmes). Thankfully, this is compensated by the regain of interest (and business opportunities) provided by scientific programmes (and particularly robotic exploration, that is one of the main growth programme in the ESA perimeter).
• Institutional programmes for launcher developments, in contrast, exhibit a worrying slowdown, with a variety of causes (from the COVID-related delays in development activities to the technical difficulties of new and legacy European launchers) leading to the postponement of critical milestones and the reduced outflow of contract payments. The situation of Europe's launcher supply chain in 2022, already deeply affected by the Russian sanctions, remains a subject of concern for policy makers and customers alike. In 2023, with technical issues still plaguing the VEGA launcher, and Ariane 6 maiden launch likely further pushed to 2024, the European launcher sector is looking at the future with concern, and the emerging micro/small launcher segment in Europe is not yet there to provide viable alternatives and revenue opportunities.
• On a brighter side, Europe confirms its excellent position on the space systems export markets. Eurospace monitored the value of space systems export/import in the past decade and found that space systems exports represented 10B$ in the spacecraft segment, and 6B$ in the launcher segment, generating a net surplus to the European trade balance worth 900M$ every year in the past decade. This positive impact would be much higher if Europe was not the first destination for US satellite exports. Space systems imports not only reduce the positive impact of our exports on the trade balance, but they also diminish the local business opportunities for European space systems suppliers. If European customers, in particular on the institutional segment, applied an unfailing European preference, the European space industry would register close to one billion of additional revenues every year, and could support more than 6000 additional jobs.

Let me conclude this by recalling that with its 57000 workers and 8.2B€ worth of sales, the European industry has delivered 96 satellites (worth 50 tons at launch) and 5 launch systems in 2022 (launching 28,5 tons to orbit), confirming its position as the 4th space power worldwide in terms of production output and capabilities.

According to Eurospace assessments, in 2022, China and the USA are the first space powers worldwide. China by the sheer impact of its institutional programme, active in all segments of military and civil space applications, science and exploration, and with a full suite of launch systems addressing all segments of launch requirements was able to launch more than 160 tons to orbit in the year. The USA, by the impressive record of activity of SpaceX relentlessly deploying the Starlink constellation (1722 satellites launched in 2022 for the constellation), and achieving every year a new record in cadence and reliability for the Falcon system (with 59 launches in 2022).

There is, however, some concern on the long-term viability of the high-volume/high-cadence model of SpaceX, whereas most of the launch and satellite production activity in the USA is now driven by the Starlink constellation. While the system has proven its technical worth and quality of service, the opacity surrounding SpaceX's finances gives way to a lot of guesstimates and hypothesis concerning the return on investment and the profitability of the approach; many analysts are not convinced that the economics are sound.

This is a general problem with all new space ventures, and in particular those promoted by the emerging start-up ecosystem, where equity is the sole funding for the new capability building, associated to the massive hiring spree and the exponential growth narrative purported by investment banks. The general enthusiasm that drove company creation in the space sector in the past 10 years is not supported by verifiable facts and the future of riches announced by market forecasters and the venture-capital crowd is not yet there.

There is only one certain fact today: if large-scale constellations, such as Starlink (or Oneweb) need to fund development and deployment costs in the same range of those experienced in the past by Globalstar or Iridium, their profitability is absolutely not guaranteed. These new constellations can only provide a positive economic outturn if they can be developed and deployed at a cost that puts them one or two orders of magnitude lower than their predecessors.

A major consequence of this, is that even if the constellations trend would provide renewed and expanded business opportunities for spacecraft and launch services suppliers, they can only be sustained if the prices for system and launch are driven down to such an extent that they would probably more than compensate the growth in volume, and eventually provide very limited revenue opportunities to the manufacturing industry.

Generally speaking the new space start-up environment is still very structurally underfunded (>50% of equity of the funds raised in the past decade been channelled to just three companies: SpaceX, Blue Origin and OneWeb), with only a small fraction of constellation promoters having secured even the funds to design and deploy their first prototypes. Indeed, most of the funding raised by space infrastructure start-ups is devoted to launcher development, rather than the design and building of spacecraft and constellations. Notwithstanding, there are some positive impacts for the European industry deriving from the growth of VC-funded start-ups: they can provide business opportunities for European vendors, such as Axiom Space procuring large shares of its commercial space station from Thales Alenia Space in Turin, ArianeGroup building a Lunar lander for iSpace, or Airbus delivering 15 of its Arrow satellite platforms to Loft Orbital.

Still, from an industry analyst perspective, there is growing concern with the rapid growth of the start-up ecosystem in Europe. The fact that 10% of industry workforce salaries are paid out of equity, rather than revenues, is a concern in the short to medium term. The effect of the emerging ecosystem is that the average worker productivity for smaller players (SMEs and start-ups) has dropped to an historic low of 68k€/worker (the sector average is 144k€); a blatantly insufficient figure to sustain the employment in the long term. In order to sustain durably the emerging eco-system of more than 400 new companies created in the past decade, and their >8000 employees in 2023, it would require about 1.2B€ of additional accessible demand every year. It is unclear today what customers would provide these additional business opportunities, even in the context of growing investment of European space institutions. The IRIS2 constellation will provide growing opportunities in the medium term. In the longer term, the progressive shift of European space policies allowing to embrace the defence dimension of space programmes may create a brand-new array of programme opportunities for the European industry. It is worth noting that the military/strategic dimension of space has always been extremely weak in Europe, setting it aside from the other three major space powers (the USA, China and Russia) where military programmes are leading the way from a capability and technology standpoint.