The European rocket challenging SpaceX and Rocket Lab in the growing U.S. small satellite market

A host of small satellites manufactured in the United States are set to launch on a rocket from South America on Saturday, in a mission that represents the foreign competition to U.S. rocket builders like SpaceX and Rocket Lab.

The Vega rocket, built by Italian aerospace manufacturer Avio and operated by French rocket company Arianespace, has a multinational European background. But, after almost a year hiatus following a launch failure, Arianespace is hoping Vega’s return to flight will help the company claim a larger part of the growing U.S. market of small satellites.

“Vega is super important for us in different ways, and for the small satellite market in particular. It makes us capable of delivering basically any mass to any orbit at any time,” Arianespace Vice President of Sales Stella Guillen told CNBC. “Vega is a very important solution for the increase in demand, especially in the U.S., for access to space for small satellites.”

The rocket last launched in July 2019, on an ill-fated mission that did not reach orbit, after a failure caused Vega to break apart two minutes after liftoff. The rocket’s 16th launch, scheduled for Saturday from French Guiana, represents Vega’s return to flight after months of Avio diagnosing the source of the failure.

Additionally, this launch will see Vega carry 53 spacecraft ― an increasingly common practice in the industry known as “ridesharing.” This is the first demonstration of the satellite dispenser Arianespace developed to make more of these launches possible.

“This Vega launch is important because it’s not easy to put a bunch of different satellites, all kinds of different applications, together in one launch,” Guillen said.

Guillen added that Arianespace has seen a steady increase in the number of small satellites, or “smallsats,” launching per year since 2017. Analytics firm Bryce Space and Technology noted that last year saw 389 small satellites launched, with 45% of all global launches including smallsats ― nearly double the 24% of launches with smallsats in 2012.

Smallsats are generally considered to be spacecraft that are 400 kilograms or less. Technological improvements have led to satellites shrinking in size and cost, with small form factors becoming increasingly capable in a variety of tasks, such as imaging, communications, scientific research and more. Guillen declared that the U.S. smallsat market “is very important” to Arianespace, noting it is a target for both Vega and the more powerful Vega-C rocket, set to debut later next year.

“Vega and Vega-C were developed for this small satellite market,” Guillen said.

She also highlighted that the majority of the satellites on this Vega launch were U.S. built. Of the 53 spacecraft Vega is carrying, Arianespace notes that 39 were built by U.S. companies, including Maxar, Planet, Spire and Swarm.

Arianespace plans to continue to price both versions of the rockets at around $40 million per launch, with Vega lifting up to 1,500 kilograms to Sun-synchronous orbit, an industry benchmark, and Vega-C lifting up to 2,200 kilograms to SSO. Both in capability and pricing, Vega sits between SpaceX’s more powerful Falcon 9 rocket ― most recently priced at about $62 million for an estimated 18,200 kilograms to SSO ― and Rocket Lab’s smaller Electron ― which can lift 150 kilograms to SSO for about $7 million.

“We’ve always faced competition for many, many years,” Guillen said.

That competition has become more fierce in the time Vega has been offline, Bryce Space and Technology Vice President Janice Starzyk explained. Rocket Lab has been launching dedicated smallsat missions with increasing regularity in the past year, while SpaceX unveiled that it would offer rideshare flights every few weeks for as little as $1 million for 200 kilograms. Elon Musk’s company this week disclosed that more than 100 spacecraft have signed on since it announced the rideshare program.

“The SpaceX offering is fairly revolutionary for smallsats because of its flexibility and price,” Starzyk told CNBC. 

That means Vega will have to launch more often than it has in the past to attract smallsat customers away from SpaceX. Historically, Vega has had a launch cadence of up to 3 flights per year. But “two or three or four a year is not going to be able to compete,” Starzyk said. 

That’s why Guillen says Arianespace plans for Vega to be launching at least five or six times per year by 2022 ― and even more as demand continues to climb.

“Between Vega and Vega-C, up to 10 launches [a year] would be great,” Guillen said. “Closer to a launch per month would be fantastic for rideshare options.”

While Rocket Lab may not be able to lift as many satellites at once, Starzyk noted that “what they’re offering is more control.” Rocket Lab’s missions are often of only a few satellites at a time, so the company can put its customers directly into the orbits they’re targeting.

“There is something still to be said about having control over your schedule and knowing when you’re going to go,” Starzyk said.

In Starzyk’s view, the risk for any of these companies launching privately built smallsats, including on rideshares, is that “nobody’s been able to make any money here.” She emphasized that smallsats come with equally small budgets, so Starzyk expects that there is room in the market for no more than one other small rocket builder in addition to Rocket Lab. With several well-funded companies aiming to reach orbit within the next year ― such as Virgin Orbit, Astra, Firefly and Relativitiy ― it is yet to be seen how the market will shake out.

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