By Tim Bowler BBC World Business Report

Companies such as Iridium and Globalstar were ordering whole fleets of communications satellites.

The hype about communications satellites providing services to mobile phone users encouraged many new companies to enter the market

This was in preparation for what they confidently predicted would be a surge in demand for satellite phones from people frustrated by the lack of coverage from land-based mobile networks.

But the promised demand didn't happen, and now the space business is in a rut, with lots of rockets that nobody needs.

Slump

In an upbeat corporate video, US aerospace giant Boeing extols the virtues of its new family of Delta 4 rockets.

But despite the confident tone, the industry is facing a slump.

Rocket launches

1997 - 60 1998 - 49 1999- 48 2000 - 44 2001 - 28 source - Boeing

Boeing, the largest rocket manufacturer, has axed 1,800 jobs in America. Lockheed Martin and Loral have been looking at a joint venture in a bid to cut costs, while in Europe, Arianespace has reported worse-than-expected losses.

Tim Furniss, spaceflight correspondent for Flight International, said there were two main reasons for the industry's problems.

Firstly, the hype about communications satellites providing services to mobile phone users encouraged many new companies to enter the market, which led to over-supply.

Secondly, Mr Furniss said, the dot.com collapse contributed to the industry's problems.

State-of-the-art

At Vandenberg Air Force base on the California coast, engineers are busy working on modifying one of the launch pads - Slick Six.

Boeing has axed 1,800 jobs in America.

They are preparing it for Boeing's new Delta rocket and modifications include changing the existing launch towers.

To go with its new rocket, Boeing has just built a state-of-the-art factory in Decatur, Alabama - revolutionising its production process.

Dan Collins, programme manager for the Delta rockets, said the old process was far more complicated.

Raw materials would start in Huntington beach where the aluminium plate would be machined.

The plate would then be taken to Long Beach, California, where the skin would be formed, and then it would be transported to Canada for further work and then back to Huntington Beach for assembly.

"All in all it travelled about 6,300 miles," Mr Collins said.

"Now with the Delta 4 we have the raw materials at the one end of the Decatur factory - 2.1 miles later we roll out the other end with the finished rocket.

"The key to us is the lowest sustainable unit cost."

Falling short

And costs need to be kept low. Five years ago people were predicting there would be 60 commercial rocket launches a year by 2002.

Manufacturers developed a new generation of rockets hoping to win new business. But while the rockets themselves are now ready, nobody wants them.

There will be just 21 commercial satellite launches this year.

Arianespace has made technical advances over the past few years but is still doing no better commercially than its US counterparts.

Philippe Berterottiere, in charge of sales and marketing for Arianespace, said the size of the market had halved while the number of competitors had doubled.

"We are facing two marketing challenges and as a consequence prices are falling down, so we are suffering from this situation," he said.

These days nobody is making any starry-eyed predictions about the profits to be had from space.

Indeed with many major customers for satellites such as telecoms firms going through a slump themselves, there will be no rapid pick up in this market anytime soon.