Thu. May 23rd, 2024

Avio leans on defense business amid lull in launches

Tyler Mitchell By Tyler Mitchell May10,2024

WASHINGTON — With Ariane 6 yet to begin launches and Vega C still grounded, Avio is relying on its growing defense propulsion business to pick up the slack.

The company reported May 8 net revenues of 78.8 million euros ($85 million) in the first quarter of 2024, up from 59.8 million euros in the first quarter of 2023. The company had an adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of 3.4 million euros for the quarter, up from 2.6 million euros a year ago.

That increase in revenue was driven by work outside of its core business producing solid rocket motors for the Ariane and Vega launch vehicles. Work on defense propulsion projects grew from 7 million euros in the first quarter of 2023 to 15 million euros in the first quarter of 2024, while other technology development projects saw revenue increase from 3 million to 14 million euros in the same timeframe.

Avio expects that trend to continue. The company reported 80 million euros in orders in the first quarter for defense programs, producing motors for air-defense missiles. The company had only 120 million euros in defense orders in all of 2023.

“Defense propulsion in the last few years was not an important part of our portfolio,” said Giulio Ranzo, chief executive of Avio, in a May 9 earnings call. That is changing as the order backlog grows to nearly two and a half times that for the Ariane 6. “It’s now becoming a very important of our backlog.”

That is important to the company, he said, as it deals with a lull in space propulsion work. “It helps to generate profit and absorb fixed costs at a time when P120 production is not yet where it should be,” he said. P120 is the solid motor used in the first stage of Vega C and in the solid rocket boosters for Ariane 6.

“It also provides great opportunity for growth to come,” he added, referring to a chart that showed a projected 22% annual increase in defense motor production through the late 2020s.

Production of P120 motors is low in part because of delays in the introduction of the Ariane 6. “The delay accumulated in the Ariane 6 program was such that we have essentially filled all of the possible inventory capacity, so we could not manufacture any more,” Ranzo said.

Motor production will increase once Ariane 6 begins launches and starts using that inventory of motors. P120 production, which is currently less than 10 motors annually, will grow to 15 in 2025 and higher in 2026 and beyond.

The first Ariane 6 launch remains scheduled for a window between the middle of June and the end of July, with no updates from the European Space Agency, ArianeGroup or others on a more precise date.

“Our experience says that last-minute problems are always possible when you come along with a completely new system,” Ranzo said. “It seems to me we’re going in the right direction for a flight in July.”

Avio is also preparing for a key test of the redesigned Zefiro-40 motor used on the second stage of the Vega C. That stage was implicated in the failure of the second Vega C launch in December 2022 because of faulty material used in the motor’s nozzle. The material was replaced but a static-fire test in June 2023 also failed, leading to a redesign of the entire nozzle.

That static-fire test is scheduled for the end of May, Ranzo said, keeping the company on schedule to return Vega C to flight by the end of this year. The final launch of the original version of Vega, which does not use the Zefiro-40 motor, is scheduled for September.

Despite the hiatus in Vega C launches, the rocket secured an order April 30 when ESA signed an agreement for the launch of the Solar Wind Magnetosphere Ionosphere Link Explorer, or SMILE, mission jointly developed by ESA and the Chinese Academy of Sciences. Vega C will launch SMILE into a highly elliptical orbit in late 2025 to study the interaction of the solar wind with the Earth’s magnetosphere.

The launch contract with SMILE is between ESA and Arianespace, which continues to market the Avio-built Vega C. However, Arianespace and Avio agreed at the European Space Summit last November to transfer the Vega C launch service provider responsibilities to Avio.

Ranzo said Avio is still negotiating with ESA and Arianespace when to make that handover. He expects a period of transition lasting a year to a year and a half with Avio working in parallel with Arianespace before taking over from Arianespace.

“We do this to make sure that we provide the best continuity of service to customers and that the transition is smooth,” he said. Avio is setting up an organization within the company to take on that launch services role, including sales, mission preparation and customer support. That will incur more costs for Avio but also allow it to capture revenue that currently goes to Arianespace for Vega launches.

“In the medium term, we expect to have improvement on the profit side,” he said, but added he could not quantify that growth yet.

Tyler Mitchell

By Tyler Mitchell

Tyler is a renowned journalist with years of experience covering a wide range of topics including politics, entertainment, and technology. His insightful analysis and compelling storytelling have made him a trusted source for breaking news and expert commentary.

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One thought on “Avio leans on defense business amid lull in launches”
  1. It’s interesting to see how Avio is shifting its focus to defense propulsion amidst the slowdown in launches. The increase in revenue driven by defense projects shows a strategic move that seems to be paying off. It’s crucial for companies to adapt to market conditions and capitalize on new opportunities. Looking forward to seeing how this trend unfolds for Avio in the future.

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