Yahsat Revenue Dip Amid Satellite Issues, Gains Profit Boost from Airbus Compensation

Yahsat, the United Arab Emirates’ leading satellite operator has reported a mixed financial performance for the first half of 2024. While an anomaly in an aging Boeing-built satellite led to a decline in revenue, the company's profitability was buoyed by compensation received from Airbus due to delays in the production of a next-generation mobile connectivity satellite.

Revenue Impact from Satellite Failure

Yahsat sales fell by 3% year-on-year, totaling approximately $200 million for the first six months of 2024. The dip in revenue is largely attributed to the failure of the L-band payload on Thuraya 3, a satellite that launched in 2008 and was a cornerstone of Yahsat’s mobile communications business.The anomaly, which occurred in April, has significantly impacted Yahsat's ability to provide mobile communication services.

Although the operator remains in control of Thuraya 3, most recovery efforts for the satellite's payload have been exhausted. The specific nature of the issue has not been disclosed, but a source familiar with the situation revealed that Thuraya 3 had a design life of 12 years. Despite the setback, Yahsat announced in May that it had managed to restore services within the Indo-China region.

Service restoration was achieved by extending the coverage of Thuraya 2, Yahsat's other L-band mobile connectivity satellite, which has been in service since its launch in 2003. However, Thuraya services over Australia and Japan remain disrupted and are unlikely to be restored.

Delays in Satellite Replacement

To modernize its L-band network, Yahsat contracted Airbus in 2020 to build Thuraya 4, with a planned launch on a SpaceX Falcon 9 rocket in the latter half of 2023. However, the launch has been postponed to the final quarter of 2024 due to schedule and cost issues. These delays have prompted Airbus to explore strategic options for its space business.

Airbus, which reported its first-half 2024 earnings on July 30, took a substantial charge of about a billion dollars for its space division. The company’s Airbus Defense and Space division, which recorded a 7% year-on-year revenue increase to 4.99 billion euros ($5.4 billion), was primarily driven by activities outside of satellite manufacturing.

During a recent earnings call, the CEO of Leonardo, the Italian aerospace giant, disclosed discussions with Airbus and France’s Thales about potential alliances to strengthen Europe's space industry.

Airbus and Thales Alenia Space, citing price and performance pressures, have suggested reducing their roles in the IRIS² project, Europe’s planned sovereign broadband constellation. Both companies reportedly proposed downgrading to suppliers rather than leading the consortium.

Compensation and Financial Stability

Despite the challenges, Yahsat received a significant financial boost from Airbus, which paid approximately $30 million in damages due to the delay of Thuraya 4. This compensation enabled Yahsat to report a stable profit of around $48 million for the first half of 2024, despite the introduction of a new corporate income tax in the UAE.

Yahsat continues work on finalizing a $5.1 billion contract to provide broadband services to the UAE government until at least 2043. Under this contract, Yahsat is set to receive an advance of about a billion dollars to fund Airbus’s work on two new geostationary broadband satellites, Al Yah 4 and Al Yah 5, scheduled for launch in 2027 and 2028.

In addition, Yahsat has recently ordered two low Earth orbit satellites from Airbus, which could be used to test direct-to-smartphone connectivity, a promising new frontier in satellite communications.

While Yahsat faced significant challenges in the first half of 2024 due to the failure of Thuraya 3 and delays with Thuraya 4, the company has managed to maintain profitability through strategic compensation agreements and continued governmental contracts. As Yahsat navigates these obstacles, it remains focused on expanding its satellite network and advancing its capabilities in mobile and broadband services.