Russian Airline Owner To Challenge Musk, Bezos In Space

Russian Airline Owner To Challenge Musk, Bezos In Space

A Russian airline entrepreneur wants to join the space race, challenging Elon Musk’s Space Exploration Technologies Corp. and Jeff Bezos’ Blue Origin LLC with a plan to launch commercial rockets.

S7 Group, the owner of Russia’s S7 Airlines, agreed to buy the floating rocket platform Sea Launch from a group of investors and aims to restore its operations after a more than two-year hiatus, the family-owned company said. S7 Group co-founder Vladislav Filev described the deal as an “admission ticket” into the aerospace industry.

“Why are we doing it? Just because it’s beautiful,” Filev said in an interview in Moscow before heading to Guadalajara, Mexico, to sign the deal.

S7 faces significant challenges in trying to revive Sea Launch, which was created by Russian, Ukrainian, Norwegian companies and Boeing Co. of the U.S. in 1995. Its operations were suspended in 2014 amid Russia’s conflict with Ukraine, which supplied Zenith rockets to the project. The business remains prone to accidents like a recent SpaceX explosion.

Sea Launch Co., which operated the project, filed for Chapter 11 U.S. bankruptcy protection in 2009, two years after one of its rockets blew up. When it emerged in 2010 its assets were transferred to new entities under the control of RSC Energia, an aerospace company whose biggest shareholder is the Russian government. Boeing no longer has a stake and has sued Energia and its Ukrainian former partner, seeking $356 million that the U.S. aerospace company says it is owed, according to a regulatory filing.

Filev didn’t provide a value for the transaction to acquire the Sea Launch brand and assets from investors linked to RSC Energia. Two people familiar with situation, who declined to be identified as the information is not public, said the price is about $100 million. The project may also require additional investment, including building a new rocket if Ukraine won’t restore the supply, Filev said.

S7 Group has no debt and will pay cash, Filev said. The company is controlled by Filev’s family and generated revenue of more than $1.3 billion last year. The airline operates 66 Boeing and Airbus Group SE jets and serves 145 routes in 27 countries.

When talk of a possible deal for Sea Launch surfaced over the summer, news reports in Russia compared Filev, 53, to SpaceX and Tesla Motors Inc. founder Musk. Filev, who has been in the aviation business for more than two decades, aims to join a group of entrepreneurs, including Musk and Blue Origin and Inc. founder Bezos, who are driving investment in the space business.
Filev said economic sanctions against Russia, which have contributed to a weak ruble, could help Sea Launch in its quest for profitability.

“I think we will be highly competitive, as 80 percent of the costs are in rubles,” he said.

S7 signed the contract with Energia on Tuesday, ensuring that it will help to re-start the project, Russian airline said in the statement. The agreement also cover development of the transport infrastructure in space, it said.

Energia’s CEO Vladimir Solntsev said that S7 may invest $150 million into the project and that he is sure that it will be successful, Tass newswires reported from the press conference in Guadalajara.

The deal on Sea Launch is subject to approval from the U.S. State Department because the launches have been operated from a command point in Los Angeles. A review could take six to nine months, Filev said. After that S7 Group will need about 18 months to restart launches, he said, though that could take longer if S7 needs to build its own rocket.

Sea Launch sent nearly three-dozen rockets into space from 1999 through 2014, using a Pacific Ocean platform near the equator. It will be able to handle 50 to 70 launches in the next 15 years without modernization, Filev said.

“There is a multi-year waiting list for launches, so we believe that our service will be in demand,” Filev said, adding that he would devote most of his time to Sea Launch.