Arianespace, the company that markets and operates the European Ariane series of expendable rockets, is going bankrupt.

The pride of the European (but primarily French) aerospace industry is hemmorhaging money so badly that it will require supplemental government funds to keep it from going under. That’s not necessarily a problem, except that they can no longer maintain the pleasant fiction that it’s a viable business.

Ariane had its origins in a stupid policy decision by the US in the late seventies, when we refused to launch a European satellite. From that point on, the Europeans decided that they would develop an independent launch capability, regardless of the cost. In the early 1980s, when Shuttle was still launching commercial satellites, Ariane was stealing much of the business that NASA had been counting on for Shuttle, not just with lower costs, but with better marketing, and gimmics like offering free financing for the launch (NASA insisted on payment up front, often months or years before the payload flew). Their pricing didn’t have to cover amortization of the development costs–like the Concorde, these were picked up by the government, providing an illusion that it was a profitable business.

When the Challenger was destroyed, and all commercial payloads were removed from the Shuttle, as a result of all of this subsidization, Ariane became the leader in delivery of commercial geostationary satellites.

But now they have a problem. This market is limited by both current economic conditions, and issues of orbital slots and spectrum allocation, and there’s a glut of supply for it, particularly since the entry of the privatized Russian program, and the Chinese Long March. It’s also suffered from some embarrassing failures of its new version of the rocket, Ariane V.

Yet this is the market that NASA is prodding industry to pursue with their Space Launch Initiative. It makes no business sense, but NASA hopes that if a new space transport can handle this market, it will also have enough performance to replace Shuttle, without NASA having to make serious changes in the way they do business.

Circumstances like this simply make it more and more clear that the SLI program must be reexamined and dramatically overhauled.