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Commercial aspects of semi-reusable launch systems
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Acta Astronautica 53 (2003) 53 – 63
www.elsevier.com/locate/actaastro
Commercial aspects of semi-reusable launch systems M.H. Obersteiner∗ , H. M%uller, H. Spies Daimler-Benz Aerospace-Raumfahrt Infrastruktur, Bremen, Germany Received 22 November 2001
Abstract This paper presents a business planning model for a commercial space launch system. The -nancing model is based on market analyses and projections combined with market capture models. An operations model is used to derive the annual cash income. Parametric cost modeling, development and production schedules are used for quantifying the annual expenditures, the internal rate of return, break even point of positive cash 3ow and the respective prices per launch. Alternative consortia structures, cash 3ow methods, capture rates and launch prices are used to examine the sensitivity of the model. Then the model is applied for a promising semi-reusable launcher concept, showing the general achievability of the commercial approach and the necessary pre-conditions. c 2002 Published by Elsevier Science Ltd.
1. Introduction Commercialization is expected to be one of the major driving forces for space industry’s future. A variety of initiatives have already been started to develop commercial, i.e. privately funded launch systems. In general, the major cost driver and, therefore, one of the critical issues of a commercial launcher program are the up-front cost, which have to be covered by the private sector investment. This requires a signi-cant part of the launch cost to be spend on interests or return on the invested capital. As a consequence, the launch cost optimization tends to turn down the development e9ort to a minimum. The result, a state-of-the-art expendable launcher based on available and proven technology then has to compete with the already
Paper IAA 97 1AA.1.3.08 Presented at the 48th International Astronautical Congress, October 6-20, 1997, Turin, Italy. ∗ Corresponding author.
existing launchers which are not burdened by the development cost, because they are typically already paid by governmental funding. Obviously, a di9erent approach is necessary to achieve a commercially viable launch system. The well-known approach is to dramatically reduce the recurring cost by making the launcher reusable and thus at least balance the obviously higher front end cost. Looking for an achievable approach as well as partial reusability has to be taken into account. This technical aspect and the complex funding, cash 3ow, rate of return, etc. interactions ask for a detailed discussion and evaluation of the balance of front end investment and recurring cost reductions. This has also to include risk coverage. The key questions to be answered in this context are which driving factors are critical for the economic viability of a commercial future launch system and which constellations of them are promising? To achieve valuable results, the model has to be put in a realistic “environment”. A market model which
c 2002 Published by Elsevier Science Ltd. 0094-5765/03/$ - see front matter PII: S 0 0 9 4 - 5 7 6 5 ( 0 2 ) 0 0 1 3 9 - X
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allows the consideration of alternative market development scenarios as well as the derivation of transparent market -gures is necessary. This will be a part of the baseline for the assessment of the pro-tability. In addition, a technical concept has to be -xed to establish cost and performance estimations and to determine the inputs for the operations model. For this reason a promising launcher concept has to be chosen. 2. Market development The entry for this analysis is the determination of the market demand for a future launch system. The considered timeframe covers the period from 2005 until 2015 which on one hand gives room for the development of a future system and on the other hand still remains within a fairly predictable future. Therefore the market behavior for the next 20 years has to be predicted. Standard trend analyses are mainly based on the collection of historic and actual market data and their projection into the future. However, within the next 20 years many e9ects are likely to in3uence the pre-conditions and assumptions used for the derivation of the expected market data and thus may lead to a complete di9erent situation as predicted. Therefore, the applicability of the data resulting from a simple extrapolation is questionable. In order to achieve a higher reliability on the market projection for the FLS, the scenario technique was applied within the market analysis. This technique allows the achievement of a broader information basis for the derivation of future market data as well as the consideration of alternative peripheral conditions. The market scenario for the FLS is derived from the scenarios as developed in the frame of previous market analyses. Main assumptions are made concerning the global and economic evolution, leading to the definition of three general environment scenarios: Scenario A: globalization. The future will be managed according to rational reasoning. Global cooperation will replace military con3icts. A global market place will be realized. Scenario B: trilateralization (three blocks). The economic, political and military powers will be distributed between the USA, Japan and Europe. Launchers have only access to their regional markets.
Scenario C: balkanization. The emphasis of the scenario is based on national interests and regionalization of economical and political views. Development of new launchers is very limited. Based on todays trend and expectations a scenario close to the “Globalization” scenario is considered to be most likely and therefore chosen for the further analysis. The elements -xed and described in this scenario include • • • • • • • • • • •
military con3icts, development of the general economy, development of commercial space markets, development of space budgets, merging of space activities, stability of public funded space programs, trade barriers, public opinion, success of space activities, technological progress, sensitivity concerning environment and resources.
3. Market segments Based on the now -xed scenario the derivation of market data is done by segments. The segmentation is done by the following three criteria: • Target orbits (GEO, LEO Satellites, LEO heavy P/L). The segmentation according to target orbits allows the derivation of mission speci-c launcher design requirements (e.g. reboost capability). • Type of payload and/or utilization (Satellites, Space Station, Moon, Space Manufacturing, etc.). Launcher requirements concerning P=L masses, dimensions, interfaces, etc. can be derived from the segmentation according to the type of payload. • Market structure (commercial, public funded). The development of the market structure indicates the availability of private capital, speci-c customer needs, etc. To make the results comparable, todays average speci-c launch prices have been used as a correlation between the payload transportation demand and the market value (15; 000 USD=kg for LEO and 50; 000 USD=kg for GEO delivery).
M.H. Obersteiner et al. / Acta Astronautica 53 (2003) 53 – 63
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Fig. 1. Market segments and market demand (Russian market not included).
For the assessment of the total market demand, the derivation of average market -gures is more reasonable and reliable rather than the projection of the development of the annual -gures. The results of this assessment are shown in Fig. 1 comparing estimated average annual market demands for future launch vehicles according to the market segments, and sub-divided into commercial and government markets. The intention was to establish a global market projection with a single exception, the Russian market segment. Due to the former big number of launches, the rapid decrease during the last years and the problem of conversion into western economy, i.e. currency, a reasonable approach could not be -gured out. The projected future launcher market is dominated by the segment “Satellite GEO commercial” which mainly includes communication satellites for the geosynchronous orbit. A further group of signi-cant segments is given by “Satellite military GEO”, “Science”, “Satellite LEO and MEO commercial” and “LEO Station”. The other market segments do not show big enough volumina to justify the commercial development of a future launch system. Therefore the de-nition of reference missions which is important for the performance requirement and by this, for the sizing of the launch
vehicle, is based on the following dominant market segments: • • • •
Satellites GEO/MEO commercial. Satellites LEO commercial (constellations). Satellites GEO military. Space Station assembly and resupply.
4. Market capture model The di9erent target orbits require speci-c launcher performance and con-gurations. Mainly a change in upper or kick stages may be required including reignition and coast phase capability to meet, the customers’ need. Due to the end users requirements, those stages are part of the launch vehicle and a key success factor for the market capture and the improvement of the launcher’s economy. Besides the performance, the launch price is the most dominant key for market capture, at least for the commercial market segment. As the price is in3uenced by the other economic and -nancial parameters and vice versa, the launch price cannot be -xed but has to be further treated as a variable parameter. Obviously, an essential part of the market will be regulated, i.e. funded by governmental institutions
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and dedicated to domestic customers. Therefore, this market share cannot only be captured via commercial advantages (performance, cost, availability, etc.), but there is the need to have partners. Such kind of cooperation can either be done by industry or via governmental institutions. Splitted by the identi-ed market segments the following assumptions were made concerning the market capture rate: The commercial GEO satellite market is expected to be deregulated to a high extent, however, a strong competition from established launchers has to be taken into consideration. Due to the speci-c economic needs of the customers concerning this market segment, the following success factors are relevant for the competing launcher systems: • • • • •
established customer relations, proven availability, proven reliability, launch price, launch preparation procedure (timeframe).
The established launchers are expected to have a bene-t concerning these success factors. Similar to the GEO market, a deregulated commercial LEO satellite market is expected as well as a strong competition by established launchers. However, the future FLS is assumed to have bene-ts concerning the 3exibility with respect to service alternative orbits and to allow early access to the launcher and a quick launch preparation. The military GEO communication market is expected to remain regulated. However, due to the established cooperation concerning the development, production and operation of the FLS, the access to the regulated markets of the involved partner groups can be presumed. This gives a tactical bene-t towards the established competitors. Provided the fact that the military budgets of the participating countries represent the major global military activities, the FLS may cover more than 50% of the worldwide military GEO communications transportation market. On civil and military LEO government markets—in addition to the already mentioned success factors—the FLS can rely on bene-ts such as 3exibility concerning target orbits, easy and early access to the launcher and quick launch preparation times.
Table 1 Market capture rates
Market segment
Capture rate (%)
Satellite GEO comm. Satellite LEO comm. Satellite GEO mil.com Satellite LEO budget LEO budget mil. Satellite MEO navigation Satellite GEO budget civ. Science LEO Station LEO space manufacturing
40 70 60 70 70 40 40 40 100 70
Civil government activities with respect to MEO Navigation, GEO and science are expected to be rather equally distributed worldwide. For this reason a higher in3uence of market barriers due to the regulated government activities is assumed. This results in a competitive disadvantage of the FLS with regard to other launcher systems. The established Space Station will mainly be serviced by the Space Shuttle and Russian Vehicles as well as Ariane 5. For the FLS, an addressable market of one 3ight per year is assumed to be realistic due to the involvement of strategic partners. Concerning future space activities like Space Manufacturing the FLS has to compete with other established launchers such as NSTS Space Shuttle. However, regarding the bene-ts concerning 3exibility and price, the FLS is assumed to achieve a higher market share than 50%. Table 1 summarizes the capture rates which are assumed for the single market segments during the reference year. The market model allows the variation of the capture rates on annual basis throughout the FLS life cycle. For the analysis reported here constant capture rates are assumed. 5. Pro tability When discussing a commercial approach for a future launch system, pro-tability is the essential element to be analyzed. A major criterion for evaluation of the pro-tability is given by the calculation of the Internal Rate of Return (IRR). It allows the comparison between
M.H. Obersteiner et al. / Acta Astronautica 53 (2003) 53 – 63
two alternative investment opportunities while taking into consideration the factor of time and the investor interest rates throughout the products life cycle. This method provides, the e9ective interest rate of an investment (the internal interest rate), which is compared with the minimum rate of return required by the corporation. This comparison allows the initial partners as well as future investors to judge the advantages and risks of an engagement in FLSs. It shall support a‘yes’ or ‘no’ decision and a comparison of alternative investments. An indicator for the economical risk and the feasibility of the analyzed launchers in relation to the projected overall market demand is given by the break even point (BEP). Both criteria (IRR and BEP) are used as indicators within the sensitivity analysis to analyze the in3uence of di9erent cost -gures, market demand -gures and interest rates. They are based on the overall pro-t/cost structure as given by the economic setup, in which the FLS will be developed, produced and operated. 6. FLS-$eet life cycle assumptions The minimization of -xed costs requires a limited size of the operating 3eet. In this paper a 3eet of three FLSs is considered as an own economic unit (concerning both development, production and operation abolition of the vehicles). The overall life cycle of this unit is de-ned to be 25 years starting in 2001. For the development a timeframe of 7 years is estimated including test and quali-cation. The start of the operational phase is planned for 2006 with -rst 3ights of the proto3ight model. 7. Account logic Sales revenue is directly derived from the captured annual market. Cost -gures are divided into variable (direct) and -xed (indirect) costs. While variable costs are directly linked to the production output, -xed costs are to a great extent independent from the launch rate. Each 3ight is de-ned as a production unit and therefore direct costs are assigned to each 3ight. Table 2 lists the considered pro-t/cost items.
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Table 2 Pro-t/cost items
REVENUE Sales revenue COST Direct cost Trasportation Consumables Operations (on ground, mission) Launch site user fee Recurring operations Indirect cost Programmatics Technical support Facility cost Facility maintenance/upgrading Interest cost
8. Pro t & Loss Statement The Pro-t & Loss Statement provides an annual summary of all relevant income and cost factors. The annual data (number of launches, costs, etc.) prepare the baseline for the derivation of the Internal Rate of Return and the Break Even Analysis. Starting point for the Pro-t & Loss Statement is the description of market as given by the analysis of the pro-t/cost structure. These market data and cost -gures are combined to a “reference year” which represents the -rst year of operation. From this year onwards an annual increase or a decrease of the respective values is de-ned. The pro-tability of a future launcher depends on the size of the captured market share. In order to re3ect this in the Pro-t & Loss Statement, capture rates are de-ned, based on the assessment of the competitiveness of the future launch system. For all market segments and classes of payload masses speci-c capture rates are estimated. Capture rates and total market demands result in the captured market demands for the FLS which completes the market data of the reference year. In total, the following factors characterizing the market for the FLS are identi-ed: • • • •
number of payloads, average annual capture rate, quantum upload mass, launch price.
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M.H. Obersteiner et al. / Acta Astronautica 53 (2003) 53 – 63
These factors are the baseline for the calculation of the annual achievable market demand, which represents the annual income within the Pro-t & Loss Statement. On the cost side, both indirect and direct costs need to be assessed for each year. While indirect costs can be considered as constant in a -rst approach, the direct costs are linked to the number of launches and by this vary from year to year. Therefore, it is necessary to derive the annual launch rate. So far only the annual upload mass and number of satellites are investigated. Based on these data, the annual launch rate is calculated considering the loading factor, the average payload propulsion system structure mass and the additional DV requirement for suborbital launch. 9. Business development The business development for the FLS-3eet is laid down indicating business opportunities as well as alternatives for the capitalization of the commercial development and operation of the FLS. A major point of interest of the business development process is the documentation of the pro-tability of the FLS. As indicator of the pro-tability the internal return rate (IRR) is selected. The calculation of the IRR considers both time factor and interest rate of all cash related activities. All expected receipts and disbursements are discounted throughout the lifetime of the FLS-3eet to the reference day (today or day of -rst acquisition payment). The di9erence between all discounted receipts and disbursements is de-ned as the capitalized value. The calculation of the IRR is performed by comparing two capitalized values of the FLS that are based on alternative interest rates. A further point of interest concerning the business development is to guarantee the liquidity of the business unit throughout the complete life cycle. Therefore, an analysis of liquid resources or Cash Flow is incorporated into the Pro-t & Loss Statement. The liquidity analysis also considers the return of borrowed capital as well as the inpayment of proprietary capital. Concerning the funding of the FLS-3eet, two approaches are considered in this paper. Both have in common that the manufacturing and the operation of the FLS are covered by one economic entity. The di9erence is to be seen in the funding approach.
While the -rst approach foresees a complete internal funding by producers, the second approach considers a complete private funding by producers and customers. As a result for the second approach, a higher market capture can be assumed; however, lower launch prices have to be considered as compensation for the customer’s involvement in the development and production phase. The provision of borrowed capital is a major issue concerning the economic feasibility of a commercial FLS. For this reason the opportunities for the acquisition of funds play an important role within the business development. This leads to the selection of the stock corporation as form for the business unit. As a result the involvement of additional partners and the increase of own capital resources via equity -nancing is supported which increases the independence from the capital market. 10. Launcher concept In this paper the quanti-cation of cost -gures is based on parametric cost modeling, development and production schedules. Therefore the derivation of cost -gures requires the description of a baseline launcher concept. As reference the HTHL HOPPER concept (horizontal take-o9 and landing) is selected in this paper. This concept combines the merits of single stage reusable launch vehicles with those resulting from velocity staging. A small fraction of the total velocity demand is shifted from the launch vehicle to the cargo to improve the performance and to alleviate the technological challenge. The HOPPER launches horizontally using a railguided sled requiring a lower installed thrust compared to a vertical-launch version. After ascending to the exosphere for safe deployment of the cargo, the HTHL HOPPER immediately reenters and glides to a distant landing site for horizontal landing. This landing site will be 180◦ to the East of the launch site allowing a two-site operation of the vehicle. This “Antipode— Pop-Up” is then maintained and prepared for its next mission that brings it back to the initial launch site. Launch vehicle and cargo have to be considered as a cooperative entity. The cargo will be heavier and longer, needs extra propellants, higher thrust and rapid
M.H. Obersteiner et al. / Acta Astronautica 53 (2003) 53 – 63
activation. The launch vehicle is not able to escape into a stable orbit. For GEO, MEO. Space Station, lunar and planetary escape missions, a separate expendable upper stage will be developed. It is based on ARIANE 5 EPS a pressure fed GTO stage using storable propellants. The Pop-Up concept mission pro-le requires about 10 N thrust for every kilogram upper stage mass (loaded including payload). The total take-o9 mass of the HTHL HOPPER will be 650 Mg allowing 19; 500 kg to be delivered into a 250 km circular LEO due East or 5600 kg into a polar orbit. The net GEO payload is estimated to be 3000 kg or 5500 kg GTO requiring a separate upper stage. The HTHL HOPPER uses three high pressure main engines with cryogenic propellants (LH2/LOX). The total thrust acceleration at take-o9 will be 0:9g. The structural design of the vehicle is based on non-integral loadsharing tanks, CFRP cold protected structures and a lightweight aeroshell. Three CFRP LH2 tanks, internally insulated and two Al-Li LOX tanks with external insulation contain 563 Mg propellants. The thermal protection system consists C/SiC hardcover on the windward side, 3exible external insulation (FEI) leeward, C/SiC hot structures on nose and front give, wing and -n leading edges, wing 3aps and rudders, and the body 3ap. Internal insulation blankets are placed under nose and leading edges. 11. Launcher performance The operations-cycle of the HTHL HOPPER begins with the payload integration. In case of a GTO mission, the payload is mounted to the completely -lled and tested upper stage. Both are transferred into the I 4:7 m × 12 m cargohold of the HTHL HOPPER. Cargo and upper stage are processed horizontally and moved through the opening aft of the vehicle using a railsystem. After sealing the cargo bay doors, the Pop-Up, being mounted to the launch skid, leaves its processing shelter on rails. At the launch area automated -nal checkout and fueling of the Pop-Up vehicle is performed. Take-o9 acceleration is done by the vehicle’s three main engines with the HOPPER attached to a railguided launch skid until take-o9 velocity is reached. After being released, the wings provide suQcient
59
aerodynamic lift for a safe take-o9. Using a railguided skid for take-o9 instead of a vehicle-own, undercarriage reduces the weight of the take-o9/landing gear by a factor of 6 and allows safe storing. The HTHL HOPPER reaches an altitude of about 120 km at main engine cut-o9 and gains another 20 km until the payload is released and the expendable GTO-upper-stage or the payload’s LEO-injection motor is ignited. Reentry of the Pop-Up occurs directly after the cargo deployment. The vehicle’s gliding characteristics and 3ight path carries it halfway around the Earth. When, for example, being launched from Kourou, French Guyana, the HTHL HOPPERs downrange landing site can be on Australia’s western coast. This landing site is being used as the second launch site for the vehicle. Therefore, a complete duplication of the ground infrastructure is necessary with exception of maintenance facilities for major vehicle overhaul. The vehicle lands horizontally on a commercial runway using its on-board landing gear. At the second launch site the vehicle is serviced and prepared for the next launch, that brings it back to the primary launch site. This two-site operation allows the launch system to 3y into all inclinations and avoids the operation of multiple downrange landing sites and ferrying back the launch vehicles to the launch site. It is assumed that all technologies necessary for the development of this vehicle are available and proven and that the existing experience in launch system design and operation is suQcient to directly enter in the development only considering economic reasons for the scheduling. 12. Risk coverage A commercial approach has also to take into account a -nancial margin to cover any kind of risk which in the end will in3uence the cost and schedule. Having in mind the general demand for keeping cost low, the goal has to be to avoid risk as far as possible. Cooperation gives the potential to reduce the risk by • reduction of the overall cost (e.g. development, production, operation) by using the existing global potential in terms of advanced technologies, operations experiences, infrastructure like launch
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M.H. Obersteiner et al. / Acta Astronautica 53 (2003) 53 – 63
Fig. 2. Sensitivities in relation to development costs.
and landing sites (e.g. Kourou, Edwards AFB) sharing of investments (tailored to company a9ordables), • adding of industrial capabilities. Therefore, it is assumed that via adequate cooperations the already above-mentioned technology and experience basis is assured and there is no need for a signi-cant -nancial margin for risk coverage. 13. Sensitivity analysis—discussion of critical factors The derivation of strategies for the commercial development and operation of an FLS requires the knowledge of the major in3uencing factors on the pro-tability (IRR) and the commercial risk (BEP, break even time). The following driving factors are identi-ed: development costs, operations costs, capture rates, launch price, interest rates. In order to analyze their e9ects on IRR and Break Even -gures, a variation of the values of these factors is executed around their reference value.
The reference value is given by the data related to the HTHL HOPPER concept. Figs. 2–6 show the behavior of IRR and break even -gures as a result of this parameter variation. Figs. 2 and 3 con-rm the results of previous investigations concerning the importance of cost reductions for the commercialization of space activities. However, the comparison with Figs. 4 and 5 show that a variation of the launch price or of the capture rate has an even higher in3uence on the pro-tability than development and operations costs. Therefore, in order to succeed in the establishment of a commercial launcher, the capture of a market share larger than 50% is to be achieved and pro-table launch prices have to be maintained. On the other hand, the FLS system must be able to allow competitive price policies. However, one result of the sensitivity analysis is that low prices—as market penetration strategy—do not promise a successful approach for the establishment of new commercial launcher systems. Other launcher qualities except prices need to be used for the improvement of the market (e.g. availability, reliability, etc.). This means, the launcher con-guration must allow the service of the most important market segments in order to cover a maximum market share. This aspect led to the selection of the heavy HOPPER concept as reference launcher instead of
M.H. Obersteiner et al. / Acta Astronautica 53 (2003) 53 – 63
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Fig. 3. Sensitivities in relation to operations costs.
Fig. 4. Sensitivities in relation to capture rates.
the small concept in order to service the important GEO-market segments and by this to enable a higher pro-tability. A further nontechnical approach for the improvement of the worldwide market share has to be seen in the establishment of strategic cooperations. International partnership may open additional markets. The highest in3uence on the pro-tability is given by the interest rates on borrowed capital. In other words,
the minimization of the debt–equity ratio is mandatory for the successful commercial development and operation of an FLS. This can be achieved by extending the -nancial basis through incorporation of a broad and strong group of initial partners (development, production and operation). In addition to this, the raising of own funds (which implies the acceptance of a higher own -nancial risk)
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Fig. 5. Sensitivities in relation to achievable launch price.
Fig. 6. Sensitivities in relation to interest rate and debt–equity ratio.
or the equity -nancing via stock exchange are reasonable approaches for the reduction of the debt–equity ratio. 14. Conclusions Based on the following assumptions: • 3eet size of 3 vehicles, • 50% market capture of a 5.8 BUSD/year global market, • todays launch prices,
• no debt capital involved, • technologies and design experience available, • no signi-cant -nancial margin for risk coverage necessary, the commercial development, production and operation of a HOPPER-type launch vehicle can be considered feasible. The investigated launcher achieves an IRR of 14.4% with a break even at 150 launches. According to the market data as provided by the market model the break even will be achieved 5.5 years after the -rst 3ight (market entry).
M.H. Obersteiner et al. / Acta Astronautica 53 (2003) 53 – 63
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The sensitivity analysis con-rmed the importance of development cost and operations costs as well as launch prices on the pro-tability. On the other hand, this analysis proved the in3uence of capture rates and interest rates in dependence of the debt equity ratio. As a result, the low price approach to achieve higher market penetration gets questionable which will not necessarily exclude moderate price reductions. To establish essential cooperations to
Both market model and IRR as well a Break Even models provide reliable -gures and proves to be reasonable tools for the analysis of alternative market situations and launcher concept. The further proceeding foresees the analysis of other launcher concepts and the derivation of optimization strategies concerning -nancing strategy, involvement of partners, price policy and market demand.
• enlarge the capital basis and by this reduce the debt equity ratio and interest costs, • reduce technical and economic risk, and • open new geographic markets and so enlarge the total market capture,
For further reading
seems to be more promising.
[1] J. Lassmann, M. Obersteiner, D. Wolf, M. Sodomann, Assessment of Semi-Reusable Launcher Concepts; IAF-96V.3.03, 47th International Astronautical Congress, Beijing, China, October 7–11, 1996. [2] M. Obersteiner, H. M%uller, Scenarios Future Launchers, Dasa internal Report, December 1996.
Acta Astronautica 53 (2003) 53 – 63
www.elsevier.com/locate/actaastro
Commercial aspects of semi-reusable launch systems M.H. Obersteiner∗ , H. M%uller, H. Spies Daimler-Benz Aerospace-Raumfahrt Infrastruktur, Bremen, Germany Received 22 November 2001
Abstract This paper presents a business planning model for a commercial space launch system. The -nancing model is based on market analyses and projections combined with market capture models. An operations model is used to derive the annual cash income. Parametric cost modeling, development and production schedules are used for quantifying the annual expenditures, the internal rate of return, break even point of positive cash 3ow and the respective prices per launch. Alternative consortia structures, cash 3ow methods, capture rates and launch prices are used to examine the sensitivity of the model. Then the model is applied for a promising semi-reusable launcher concept, showing the general achievability of the commercial approach and the necessary pre-conditions. c 2002 Published by Elsevier Science Ltd.
1. Introduction Commercialization is expected to be one of the major driving forces for space industry’s future. A variety of initiatives have already been started to develop commercial, i.e. privately funded launch systems. In general, the major cost driver and, therefore, one of the critical issues of a commercial launcher program are the up-front cost, which have to be covered by the private sector investment. This requires a signi-cant part of the launch cost to be spend on interests or return on the invested capital. As a consequence, the launch cost optimization tends to turn down the development e9ort to a minimum. The result, a state-of-the-art expendable launcher based on available and proven technology then has to compete with the already
Paper IAA 97 1AA.1.3.08 Presented at the 48th International Astronautical Congress, October 6-20, 1997, Turin, Italy. ∗ Corresponding author.
existing launchers which are not burdened by the development cost, because they are typically already paid by governmental funding. Obviously, a di9erent approach is necessary to achieve a commercially viable launch system. The well-known approach is to dramatically reduce the recurring cost by making the launcher reusable and thus at least balance the obviously higher front end cost. Looking for an achievable approach as well as partial reusability has to be taken into account. This technical aspect and the complex funding, cash 3ow, rate of return, etc. interactions ask for a detailed discussion and evaluation of the balance of front end investment and recurring cost reductions. This has also to include risk coverage. The key questions to be answered in this context are which driving factors are critical for the economic viability of a commercial future launch system and which constellations of them are promising? To achieve valuable results, the model has to be put in a realistic “environment”. A market model which
c 2002 Published by Elsevier Science Ltd. 0094-5765/03/$ - see front matter PII: S 0 0 9 4 - 5 7 6 5 ( 0 2 ) 0 0 1 3 9 - X
54
M.H. Obersteiner et al. / Acta Astronautica 53 (2003) 53 – 63
allows the consideration of alternative market development scenarios as well as the derivation of transparent market -gures is necessary. This will be a part of the baseline for the assessment of the pro-tability. In addition, a technical concept has to be -xed to establish cost and performance estimations and to determine the inputs for the operations model. For this reason a promising launcher concept has to be chosen. 2. Market development The entry for this analysis is the determination of the market demand for a future launch system. The considered timeframe covers the period from 2005 until 2015 which on one hand gives room for the development of a future system and on the other hand still remains within a fairly predictable future. Therefore the market behavior for the next 20 years has to be predicted. Standard trend analyses are mainly based on the collection of historic and actual market data and their projection into the future. However, within the next 20 years many e9ects are likely to in3uence the pre-conditions and assumptions used for the derivation of the expected market data and thus may lead to a complete di9erent situation as predicted. Therefore, the applicability of the data resulting from a simple extrapolation is questionable. In order to achieve a higher reliability on the market projection for the FLS, the scenario technique was applied within the market analysis. This technique allows the achievement of a broader information basis for the derivation of future market data as well as the consideration of alternative peripheral conditions. The market scenario for the FLS is derived from the scenarios as developed in the frame of previous market analyses. Main assumptions are made concerning the global and economic evolution, leading to the definition of three general environment scenarios: Scenario A: globalization. The future will be managed according to rational reasoning. Global cooperation will replace military con3icts. A global market place will be realized. Scenario B: trilateralization (three blocks). The economic, political and military powers will be distributed between the USA, Japan and Europe. Launchers have only access to their regional markets.
Scenario C: balkanization. The emphasis of the scenario is based on national interests and regionalization of economical and political views. Development of new launchers is very limited. Based on todays trend and expectations a scenario close to the “Globalization” scenario is considered to be most likely and therefore chosen for the further analysis. The elements -xed and described in this scenario include • • • • • • • • • • •
military con3icts, development of the general economy, development of commercial space markets, development of space budgets, merging of space activities, stability of public funded space programs, trade barriers, public opinion, success of space activities, technological progress, sensitivity concerning environment and resources.
3. Market segments Based on the now -xed scenario the derivation of market data is done by segments. The segmentation is done by the following three criteria: • Target orbits (GEO, LEO Satellites, LEO heavy P/L). The segmentation according to target orbits allows the derivation of mission speci-c launcher design requirements (e.g. reboost capability). • Type of payload and/or utilization (Satellites, Space Station, Moon, Space Manufacturing, etc.). Launcher requirements concerning P=L masses, dimensions, interfaces, etc. can be derived from the segmentation according to the type of payload. • Market structure (commercial, public funded). The development of the market structure indicates the availability of private capital, speci-c customer needs, etc. To make the results comparable, todays average speci-c launch prices have been used as a correlation between the payload transportation demand and the market value (15; 000 USD=kg for LEO and 50; 000 USD=kg for GEO delivery).
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Fig. 1. Market segments and market demand (Russian market not included).
For the assessment of the total market demand, the derivation of average market -gures is more reasonable and reliable rather than the projection of the development of the annual -gures. The results of this assessment are shown in Fig. 1 comparing estimated average annual market demands for future launch vehicles according to the market segments, and sub-divided into commercial and government markets. The intention was to establish a global market projection with a single exception, the Russian market segment. Due to the former big number of launches, the rapid decrease during the last years and the problem of conversion into western economy, i.e. currency, a reasonable approach could not be -gured out. The projected future launcher market is dominated by the segment “Satellite GEO commercial” which mainly includes communication satellites for the geosynchronous orbit. A further group of signi-cant segments is given by “Satellite military GEO”, “Science”, “Satellite LEO and MEO commercial” and “LEO Station”. The other market segments do not show big enough volumina to justify the commercial development of a future launch system. Therefore the de-nition of reference missions which is important for the performance requirement and by this, for the sizing of the launch
vehicle, is based on the following dominant market segments: • • • •
Satellites GEO/MEO commercial. Satellites LEO commercial (constellations). Satellites GEO military. Space Station assembly and resupply.
4. Market capture model The di9erent target orbits require speci-c launcher performance and con-gurations. Mainly a change in upper or kick stages may be required including reignition and coast phase capability to meet, the customers’ need. Due to the end users requirements, those stages are part of the launch vehicle and a key success factor for the market capture and the improvement of the launcher’s economy. Besides the performance, the launch price is the most dominant key for market capture, at least for the commercial market segment. As the price is in3uenced by the other economic and -nancial parameters and vice versa, the launch price cannot be -xed but has to be further treated as a variable parameter. Obviously, an essential part of the market will be regulated, i.e. funded by governmental institutions
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and dedicated to domestic customers. Therefore, this market share cannot only be captured via commercial advantages (performance, cost, availability, etc.), but there is the need to have partners. Such kind of cooperation can either be done by industry or via governmental institutions. Splitted by the identi-ed market segments the following assumptions were made concerning the market capture rate: The commercial GEO satellite market is expected to be deregulated to a high extent, however, a strong competition from established launchers has to be taken into consideration. Due to the speci-c economic needs of the customers concerning this market segment, the following success factors are relevant for the competing launcher systems: • • • • •
established customer relations, proven availability, proven reliability, launch price, launch preparation procedure (timeframe).
The established launchers are expected to have a bene-t concerning these success factors. Similar to the GEO market, a deregulated commercial LEO satellite market is expected as well as a strong competition by established launchers. However, the future FLS is assumed to have bene-ts concerning the 3exibility with respect to service alternative orbits and to allow early access to the launcher and a quick launch preparation. The military GEO communication market is expected to remain regulated. However, due to the established cooperation concerning the development, production and operation of the FLS, the access to the regulated markets of the involved partner groups can be presumed. This gives a tactical bene-t towards the established competitors. Provided the fact that the military budgets of the participating countries represent the major global military activities, the FLS may cover more than 50% of the worldwide military GEO communications transportation market. On civil and military LEO government markets—in addition to the already mentioned success factors—the FLS can rely on bene-ts such as 3exibility concerning target orbits, easy and early access to the launcher and quick launch preparation times.
Table 1 Market capture rates
Market segment
Capture rate (%)
Satellite GEO comm. Satellite LEO comm. Satellite GEO mil.com Satellite LEO budget LEO budget mil. Satellite MEO navigation Satellite GEO budget civ. Science LEO Station LEO space manufacturing
40 70 60 70 70 40 40 40 100 70
Civil government activities with respect to MEO Navigation, GEO and science are expected to be rather equally distributed worldwide. For this reason a higher in3uence of market barriers due to the regulated government activities is assumed. This results in a competitive disadvantage of the FLS with regard to other launcher systems. The established Space Station will mainly be serviced by the Space Shuttle and Russian Vehicles as well as Ariane 5. For the FLS, an addressable market of one 3ight per year is assumed to be realistic due to the involvement of strategic partners. Concerning future space activities like Space Manufacturing the FLS has to compete with other established launchers such as NSTS Space Shuttle. However, regarding the bene-ts concerning 3exibility and price, the FLS is assumed to achieve a higher market share than 50%. Table 1 summarizes the capture rates which are assumed for the single market segments during the reference year. The market model allows the variation of the capture rates on annual basis throughout the FLS life cycle. For the analysis reported here constant capture rates are assumed. 5. Pro tability When discussing a commercial approach for a future launch system, pro-tability is the essential element to be analyzed. A major criterion for evaluation of the pro-tability is given by the calculation of the Internal Rate of Return (IRR). It allows the comparison between
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two alternative investment opportunities while taking into consideration the factor of time and the investor interest rates throughout the products life cycle. This method provides, the e9ective interest rate of an investment (the internal interest rate), which is compared with the minimum rate of return required by the corporation. This comparison allows the initial partners as well as future investors to judge the advantages and risks of an engagement in FLSs. It shall support a‘yes’ or ‘no’ decision and a comparison of alternative investments. An indicator for the economical risk and the feasibility of the analyzed launchers in relation to the projected overall market demand is given by the break even point (BEP). Both criteria (IRR and BEP) are used as indicators within the sensitivity analysis to analyze the in3uence of di9erent cost -gures, market demand -gures and interest rates. They are based on the overall pro-t/cost structure as given by the economic setup, in which the FLS will be developed, produced and operated. 6. FLS-$eet life cycle assumptions The minimization of -xed costs requires a limited size of the operating 3eet. In this paper a 3eet of three FLSs is considered as an own economic unit (concerning both development, production and operation abolition of the vehicles). The overall life cycle of this unit is de-ned to be 25 years starting in 2001. For the development a timeframe of 7 years is estimated including test and quali-cation. The start of the operational phase is planned for 2006 with -rst 3ights of the proto3ight model. 7. Account logic Sales revenue is directly derived from the captured annual market. Cost -gures are divided into variable (direct) and -xed (indirect) costs. While variable costs are directly linked to the production output, -xed costs are to a great extent independent from the launch rate. Each 3ight is de-ned as a production unit and therefore direct costs are assigned to each 3ight. Table 2 lists the considered pro-t/cost items.
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Table 2 Pro-t/cost items
REVENUE Sales revenue COST Direct cost Trasportation Consumables Operations (on ground, mission) Launch site user fee Recurring operations Indirect cost Programmatics Technical support Facility cost Facility maintenance/upgrading Interest cost
8. Pro t & Loss Statement The Pro-t & Loss Statement provides an annual summary of all relevant income and cost factors. The annual data (number of launches, costs, etc.) prepare the baseline for the derivation of the Internal Rate of Return and the Break Even Analysis. Starting point for the Pro-t & Loss Statement is the description of market as given by the analysis of the pro-t/cost structure. These market data and cost -gures are combined to a “reference year” which represents the -rst year of operation. From this year onwards an annual increase or a decrease of the respective values is de-ned. The pro-tability of a future launcher depends on the size of the captured market share. In order to re3ect this in the Pro-t & Loss Statement, capture rates are de-ned, based on the assessment of the competitiveness of the future launch system. For all market segments and classes of payload masses speci-c capture rates are estimated. Capture rates and total market demands result in the captured market demands for the FLS which completes the market data of the reference year. In total, the following factors characterizing the market for the FLS are identi-ed: • • • •
number of payloads, average annual capture rate, quantum upload mass, launch price.
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These factors are the baseline for the calculation of the annual achievable market demand, which represents the annual income within the Pro-t & Loss Statement. On the cost side, both indirect and direct costs need to be assessed for each year. While indirect costs can be considered as constant in a -rst approach, the direct costs are linked to the number of launches and by this vary from year to year. Therefore, it is necessary to derive the annual launch rate. So far only the annual upload mass and number of satellites are investigated. Based on these data, the annual launch rate is calculated considering the loading factor, the average payload propulsion system structure mass and the additional DV requirement for suborbital launch. 9. Business development The business development for the FLS-3eet is laid down indicating business opportunities as well as alternatives for the capitalization of the commercial development and operation of the FLS. A major point of interest of the business development process is the documentation of the pro-tability of the FLS. As indicator of the pro-tability the internal return rate (IRR) is selected. The calculation of the IRR considers both time factor and interest rate of all cash related activities. All expected receipts and disbursements are discounted throughout the lifetime of the FLS-3eet to the reference day (today or day of -rst acquisition payment). The di9erence between all discounted receipts and disbursements is de-ned as the capitalized value. The calculation of the IRR is performed by comparing two capitalized values of the FLS that are based on alternative interest rates. A further point of interest concerning the business development is to guarantee the liquidity of the business unit throughout the complete life cycle. Therefore, an analysis of liquid resources or Cash Flow is incorporated into the Pro-t & Loss Statement. The liquidity analysis also considers the return of borrowed capital as well as the inpayment of proprietary capital. Concerning the funding of the FLS-3eet, two approaches are considered in this paper. Both have in common that the manufacturing and the operation of the FLS are covered by one economic entity. The di9erence is to be seen in the funding approach.
While the -rst approach foresees a complete internal funding by producers, the second approach considers a complete private funding by producers and customers. As a result for the second approach, a higher market capture can be assumed; however, lower launch prices have to be considered as compensation for the customer’s involvement in the development and production phase. The provision of borrowed capital is a major issue concerning the economic feasibility of a commercial FLS. For this reason the opportunities for the acquisition of funds play an important role within the business development. This leads to the selection of the stock corporation as form for the business unit. As a result the involvement of additional partners and the increase of own capital resources via equity -nancing is supported which increases the independence from the capital market. 10. Launcher concept In this paper the quanti-cation of cost -gures is based on parametric cost modeling, development and production schedules. Therefore the derivation of cost -gures requires the description of a baseline launcher concept. As reference the HTHL HOPPER concept (horizontal take-o9 and landing) is selected in this paper. This concept combines the merits of single stage reusable launch vehicles with those resulting from velocity staging. A small fraction of the total velocity demand is shifted from the launch vehicle to the cargo to improve the performance and to alleviate the technological challenge. The HOPPER launches horizontally using a railguided sled requiring a lower installed thrust compared to a vertical-launch version. After ascending to the exosphere for safe deployment of the cargo, the HTHL HOPPER immediately reenters and glides to a distant landing site for horizontal landing. This landing site will be 180◦ to the East of the launch site allowing a two-site operation of the vehicle. This “Antipode— Pop-Up” is then maintained and prepared for its next mission that brings it back to the initial launch site. Launch vehicle and cargo have to be considered as a cooperative entity. The cargo will be heavier and longer, needs extra propellants, higher thrust and rapid
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activation. The launch vehicle is not able to escape into a stable orbit. For GEO, MEO. Space Station, lunar and planetary escape missions, a separate expendable upper stage will be developed. It is based on ARIANE 5 EPS a pressure fed GTO stage using storable propellants. The Pop-Up concept mission pro-le requires about 10 N thrust for every kilogram upper stage mass (loaded including payload). The total take-o9 mass of the HTHL HOPPER will be 650 Mg allowing 19; 500 kg to be delivered into a 250 km circular LEO due East or 5600 kg into a polar orbit. The net GEO payload is estimated to be 3000 kg or 5500 kg GTO requiring a separate upper stage. The HTHL HOPPER uses three high pressure main engines with cryogenic propellants (LH2/LOX). The total thrust acceleration at take-o9 will be 0:9g. The structural design of the vehicle is based on non-integral loadsharing tanks, CFRP cold protected structures and a lightweight aeroshell. Three CFRP LH2 tanks, internally insulated and two Al-Li LOX tanks with external insulation contain 563 Mg propellants. The thermal protection system consists C/SiC hardcover on the windward side, 3exible external insulation (FEI) leeward, C/SiC hot structures on nose and front give, wing and -n leading edges, wing 3aps and rudders, and the body 3ap. Internal insulation blankets are placed under nose and leading edges. 11. Launcher performance The operations-cycle of the HTHL HOPPER begins with the payload integration. In case of a GTO mission, the payload is mounted to the completely -lled and tested upper stage. Both are transferred into the I 4:7 m × 12 m cargohold of the HTHL HOPPER. Cargo and upper stage are processed horizontally and moved through the opening aft of the vehicle using a railsystem. After sealing the cargo bay doors, the Pop-Up, being mounted to the launch skid, leaves its processing shelter on rails. At the launch area automated -nal checkout and fueling of the Pop-Up vehicle is performed. Take-o9 acceleration is done by the vehicle’s three main engines with the HOPPER attached to a railguided launch skid until take-o9 velocity is reached. After being released, the wings provide suQcient
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aerodynamic lift for a safe take-o9. Using a railguided skid for take-o9 instead of a vehicle-own, undercarriage reduces the weight of the take-o9/landing gear by a factor of 6 and allows safe storing. The HTHL HOPPER reaches an altitude of about 120 km at main engine cut-o9 and gains another 20 km until the payload is released and the expendable GTO-upper-stage or the payload’s LEO-injection motor is ignited. Reentry of the Pop-Up occurs directly after the cargo deployment. The vehicle’s gliding characteristics and 3ight path carries it halfway around the Earth. When, for example, being launched from Kourou, French Guyana, the HTHL HOPPERs downrange landing site can be on Australia’s western coast. This landing site is being used as the second launch site for the vehicle. Therefore, a complete duplication of the ground infrastructure is necessary with exception of maintenance facilities for major vehicle overhaul. The vehicle lands horizontally on a commercial runway using its on-board landing gear. At the second launch site the vehicle is serviced and prepared for the next launch, that brings it back to the primary launch site. This two-site operation allows the launch system to 3y into all inclinations and avoids the operation of multiple downrange landing sites and ferrying back the launch vehicles to the launch site. It is assumed that all technologies necessary for the development of this vehicle are available and proven and that the existing experience in launch system design and operation is suQcient to directly enter in the development only considering economic reasons for the scheduling. 12. Risk coverage A commercial approach has also to take into account a -nancial margin to cover any kind of risk which in the end will in3uence the cost and schedule. Having in mind the general demand for keeping cost low, the goal has to be to avoid risk as far as possible. Cooperation gives the potential to reduce the risk by • reduction of the overall cost (e.g. development, production, operation) by using the existing global potential in terms of advanced technologies, operations experiences, infrastructure like launch
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Fig. 2. Sensitivities in relation to development costs.
and landing sites (e.g. Kourou, Edwards AFB) sharing of investments (tailored to company a9ordables), • adding of industrial capabilities. Therefore, it is assumed that via adequate cooperations the already above-mentioned technology and experience basis is assured and there is no need for a signi-cant -nancial margin for risk coverage. 13. Sensitivity analysis—discussion of critical factors The derivation of strategies for the commercial development and operation of an FLS requires the knowledge of the major in3uencing factors on the pro-tability (IRR) and the commercial risk (BEP, break even time). The following driving factors are identi-ed: development costs, operations costs, capture rates, launch price, interest rates. In order to analyze their e9ects on IRR and Break Even -gures, a variation of the values of these factors is executed around their reference value.
The reference value is given by the data related to the HTHL HOPPER concept. Figs. 2–6 show the behavior of IRR and break even -gures as a result of this parameter variation. Figs. 2 and 3 con-rm the results of previous investigations concerning the importance of cost reductions for the commercialization of space activities. However, the comparison with Figs. 4 and 5 show that a variation of the launch price or of the capture rate has an even higher in3uence on the pro-tability than development and operations costs. Therefore, in order to succeed in the establishment of a commercial launcher, the capture of a market share larger than 50% is to be achieved and pro-table launch prices have to be maintained. On the other hand, the FLS system must be able to allow competitive price policies. However, one result of the sensitivity analysis is that low prices—as market penetration strategy—do not promise a successful approach for the establishment of new commercial launcher systems. Other launcher qualities except prices need to be used for the improvement of the market (e.g. availability, reliability, etc.). This means, the launcher con-guration must allow the service of the most important market segments in order to cover a maximum market share. This aspect led to the selection of the heavy HOPPER concept as reference launcher instead of
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Fig. 3. Sensitivities in relation to operations costs.
Fig. 4. Sensitivities in relation to capture rates.
the small concept in order to service the important GEO-market segments and by this to enable a higher pro-tability. A further nontechnical approach for the improvement of the worldwide market share has to be seen in the establishment of strategic cooperations. International partnership may open additional markets. The highest in3uence on the pro-tability is given by the interest rates on borrowed capital. In other words,
the minimization of the debt–equity ratio is mandatory for the successful commercial development and operation of an FLS. This can be achieved by extending the -nancial basis through incorporation of a broad and strong group of initial partners (development, production and operation). In addition to this, the raising of own funds (which implies the acceptance of a higher own -nancial risk)
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Fig. 5. Sensitivities in relation to achievable launch price.
Fig. 6. Sensitivities in relation to interest rate and debt–equity ratio.
or the equity -nancing via stock exchange are reasonable approaches for the reduction of the debt–equity ratio. 14. Conclusions Based on the following assumptions: • 3eet size of 3 vehicles, • 50% market capture of a 5.8 BUSD/year global market, • todays launch prices,
• no debt capital involved, • technologies and design experience available, • no signi-cant -nancial margin for risk coverage necessary, the commercial development, production and operation of a HOPPER-type launch vehicle can be considered feasible. The investigated launcher achieves an IRR of 14.4% with a break even at 150 launches. According to the market data as provided by the market model the break even will be achieved 5.5 years after the -rst 3ight (market entry).
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The sensitivity analysis con-rmed the importance of development cost and operations costs as well as launch prices on the pro-tability. On the other hand, this analysis proved the in3uence of capture rates and interest rates in dependence of the debt equity ratio. As a result, the low price approach to achieve higher market penetration gets questionable which will not necessarily exclude moderate price reductions. To establish essential cooperations to
Both market model and IRR as well a Break Even models provide reliable -gures and proves to be reasonable tools for the analysis of alternative market situations and launcher concept. The further proceeding foresees the analysis of other launcher concepts and the derivation of optimization strategies concerning -nancing strategy, involvement of partners, price policy and market demand.
• enlarge the capital basis and by this reduce the debt equity ratio and interest costs, • reduce technical and economic risk, and • open new geographic markets and so enlarge the total market capture,
For further reading
seems to be more promising.
[1] J. Lassmann, M. Obersteiner, D. Wolf, M. Sodomann, Assessment of Semi-Reusable Launcher Concepts; IAF-96V.3.03, 47th International Astronautical Congress, Beijing, China, October 7–11, 1996. [2] M. Obersteiner, H. M%uller, Scenarios Future Launchers, Dasa internal Report, December 1996.