Author Topic: The Reaction Engines Skylon Master Thread (2)  (Read 598413 times)

Offline lkm

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Re: The Reaction Engines Skylon Master Thread (2)
« Reply #320 on: 02/14/2013 02:03 pm »
I've just read the skylon paper "a two stage to commercial market approach to reusable launch vehicle development" and I think who wants to argue about their business model needs to read it too because it changes things greatly.
Not that agreement will suddenly breakout or anything.

Offline john smith 19

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Re: The Reaction Engines Skylon Master Thread (2)
« Reply #321 on: 02/15/2013 07:08 am »
I've just read the skylon paper "a two stage to commercial market approach to reusable launch vehicle development" and I think who wants to argue about their business model needs to read it too because it changes things greatly.
Not that agreement will suddenly breakout or anything.
Can you give a brief synopsis of it?
BFS. The worlds first Methane fueled FFORSC engined CFRP structured A380 sized aerospaceplane tail sitter capable of flying in Earth and Mars atmospheres. BFR. The worlds biggest Methane fueled FFORSC engined CFRP stainless steel structured booster for BFS. First flight to Mars by end of 2022. Forward looking statements. T&C apply. Believe no one. Run your own numbers. So, you are going to Mars to start a better life? Picture it in your mind. Now say what it is out loud.

Offline Turbomotive

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Re: The Reaction Engines Skylon Master Thread (2)
« Reply #322 on: 02/15/2013 11:33 am »
I've just read the skylon paper "a two stage to commercial market approach to reusable launch vehicle development" and I think who wants to argue about their business model needs to read it too because it changes things greatly.
Not that agreement will suddenly breakout or anything.
Would love to read, if there's a handy URL or download..
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Offline lkm

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Re: The Reaction Engines Skylon Master Thread (2)
« Reply #323 on: 02/15/2013 01:24 pm »
Unfortunately I only have a paper copy though it's available for a fee here:

http://arc.aiaa.org/doi/pdf/10.2514/6.2011-2296

So I'll try to summarize as best I can.
"A Two Stage To Commercial Market Approach To Reusable Launch Vehicle Development" is a paper by Sam Hutchison of Skylon Enterprise Limited which is a subsidiary of REL focused on the financial/political side of the endeavour.

The paper is an analysis of the difficulty faced by generic RLV spaceplane development in attracting institutional investment and the proposals of a strategy to correct that.
The challenge is broken down into two problems, how to get to point A, where a RLV of reasonable development time, cost and launch cost (10 years, $15 billion, $500/kg) can be introduce to market and from there how to get to point B, where there is a unsubsidized, profitable and robustly growing wholesale launch market.

For the purposes of investment problem B is the focus of the paper because without a solution to that there is no finance for problem A.
The issues surrounding Problem B are summarized thus:
       a)the small size of the current market and its balkanization could lead to:
       b)low vehicle demand as only a few vehicles could service the entire market and cause the vehicle purchase price to rise to cover development cost reducing purchases
       c)High Insurance costs due to the lack of a launch record could force operating costs to be higher
       d)Lack of regulatory framework for RLV operation creates an uncertain environment for investment.

The solution posited is termed a Two Stage TO Commercial Market (TSTCM) approach. It is an attempt to structure a business model that addresses some of these issues.
The goal is to minimize the commercial RLV unit purchase price and operation cost by launching to market in two phases.

In the initial production run units would be sold to a limited number of experienced institutional non-commercial customers in an operational verification stage over which the entire development cost is amortized.
These customers should be trusted and familiar to institutional investors and able to place pre-orders at the completion of certain agreed milestones. At that point financing can move from seed and risk capital to institutional investment allowing early investors to leave.
These customers should be experienced space users to minimize accident risks from non-technical failures and willing to cooperate with data sharing and the regulatory reform needed to enable a robust commercial market.
Customers also need to agree not to use them for aggressive acts that would endanger their commercial status.

The primary attraction for these institutional customers is concluded to be their responsiveness and reliability with low cost as an added benefit. They have a strategic capability of aircraft like operations.


The overall shape of a development program that satisfies this model has four phases of funding with technical risk reducing as funding increases along with clear exit points for the different classes of investor:

          A-Seed
          B-VC
          C-Private Equity
          D-Institutional Capital

Such a program also has a cost not in excess of $15 billion and accurate costing prior to the institutional investment.

 This paper was published in April 2011 and it seems like REL have just entered phase 3, the private equity phase, of their development plan. I've read nothing else regarding the possibility of TSTCM and it would seem to me that their testing program should do a lot for the insurance costs and regulation reform but if TSTCM is the way they intend to go it changes the arguments here over market models and such to one over who makes it onto the list of experienced institutional customers and will they have the money and interest to become one.
 
« Last Edit: 02/15/2013 01:25 pm by lkm »

Offline Turbomotive

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Re: The Reaction Engines Skylon Master Thread (2)
« Reply #324 on: 02/15/2013 02:51 pm »
Unfortunately I only have a paper copy though it's available for a fee here:

http://arc.aiaa.org/doi/pdf/10.2514/6.2011-2296

Fascinating - thank you so much for your time and effort on behalf of the community.

I read "experienced institutional customers" as the likes of ESA (primarily), NASA, JAXA and NATO-member militaries (if non-aggressively).

I see logic in an approach to clear regulatory and insurance hurdles to Skylon's unimpeded full commerciality. I also agree though, that they are asking for many angels among both investors and customers. What if well-heeled but "inexperienced" investors or customers showed interest, would they then be rebuffed, even in the case that the "experienced institution" orders were insufficient to amortize development costs? Also, if all of this comes to pass, it's clear the unsubsidized commercial service won't be in existence until many years after 2022.





 

 





"Men might as well project a voyage to the Moon as attempt to employ steam navigation against the stormy North Atlantic Ocean." - Dionysius Lardner, 1838

Offline lkm

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Re: The Reaction Engines Skylon Master Thread (2)
« Reply #325 on: 02/15/2013 03:23 pm »
I think  it depends on how many units they  need to produce to cover the development costs and refine the production and operations processes  so that  the second commercial production run can begin.
That could be as few as six or so over only a couple of years depending on how the  development cost turned out .
But I  imagine that  pre-orders would be available to  all potential customers from from the beginning of phase 4, it's just that commercial customers would have a later production slot and a cheaper unit  price.

Offline Oli

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Re: The Reaction Engines Skylon Master Thread (2)
« Reply #326 on: 02/15/2013 04:04 pm »
Quote
the small size of the current market and its balkanization could lead to:

Completely agree with their assessment and its nice to see that the folks at REL don't have illusions when it comes to financing a $15bn RLV in the current market environment.

They need an institutional investor backing this, unfortunately, and in all likelihood that would be ESA. The question is, how do they get there? Nov. 2014 is when the future of european launchers will be determined, until then REL rather have something to show for. Its not completely hopeless IMO, Ariane 6 doesn't exactly generate excitement and if the eurocrisis will be overcome there may be new self-confidence.
 

Offline Turbomotive

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Re: The Reaction Engines Skylon Master Thread (2)
« Reply #327 on: 02/16/2013 12:29 am »
Yes - all this means a lot is riding on the whole-hearted embrace of ESA, an intergovernmental body financed by its member states' contributions, moving the agenda back to the realm of politics. Besides the spacecraft themselves, there's also the spaceport (presumably at Kourou) and a whole bunch of other expensive infrastructure required. Meanwhile, the Eurozone is in recession again, and may still be so by 2014.

"Men might as well project a voyage to the Moon as attempt to employ steam navigation against the stormy North Atlantic Ocean." - Dionysius Lardner, 1838

Offline lkm

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Re: The Reaction Engines Skylon Master Thread (2)
« Reply #328 on: 02/16/2013 09:34 am »
To be clear, an institutional investor is a bank or other large financial lender.
ESA, under a possible TSTCM scheme, maybe could be one of several institutional customers who would pre-order a unit around 2016 or later and pay for and  receive it 2022 or so. As I understand things. 

However TSTCM is just a possible business model strategy to jump start the market and secure investor confidence in a return, if when it comes to pre-orders there is no weakness in demand, regulation has been satisfactorily reformed and the comprehensive flight test program has brought down insurance costs then TSTCM would largely no longer be needed.

Offline FinalFrontier

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Offline john smith 19

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Re: The Reaction Engines Skylon Master Thread (2)
« Reply #330 on: 02/16/2013 12:32 pm »
Unfortunately I only have a paper copy though it's available for a fee here:

http://arc.aiaa.org/doi/pdf/10.2514/6.2011-2296
Thank you for that summary.

Quote
the small size of the current market and its balkanization could lead to:

They need an institutional investor backing this, unfortunately, and in all likelihood that would be ESA.

ESA would be an institutional customer not an investor.


To be clear, an institutional investor is a bank or other large financial lender.
I think the relevant EU institution here would be the European Investment Bank, but I'm not sure.
Quote
ESA, under a possible TSTCM scheme, maybe could be one of several institutional customers who would pre-order a unit around 2016 or later and pay for and  receive it 2022 or so. As I understand things. 

However TSTCM is just a possible business model strategy to jump start the market and secure investor confidence in a return, if when it comes to pre-orders there is no weakness in demand, regulation has been satisfactorily reformed and the comprehensive flight test program has brought down insurance costs then TSTCM would largely no longer be needed.
As the development proceeds the risks go down. The trouble is to retire the biggest risks you need to has spent the biggest chunk of cash. But that's the nature of high risk/investment/reward projects.

I'd add Intelsat and/or Inmarsat to the list of potential institutional customers.
BFS. The worlds first Methane fueled FFORSC engined CFRP structured A380 sized aerospaceplane tail sitter capable of flying in Earth and Mars atmospheres. BFR. The worlds biggest Methane fueled FFORSC engined CFRP stainless steel structured booster for BFS. First flight to Mars by end of 2022. Forward looking statements. T&C apply. Believe no one. Run your own numbers. So, you are going to Mars to start a better life? Picture it in your mind. Now say what it is out loud.

Offline Oli

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Re: The Reaction Engines Skylon Master Thread (2)
« Reply #331 on: 02/17/2013 10:47 am »
Quote from: john smith 19
ESA would be an institutional customer not an investor.

Who would pay for development with pre-orders above production cost.
Isn't that how many defence contracts work?

Quote from: lkm
ESA, under a possible TSTCM scheme, maybe could be one of several institutional customers who would pre-order a unit around 2016 or later and pay for and  receive it 2022 or so. As I understand things. 

Institutional customers want independent access to space. Maybe REL should think about letting institutions contributing to the project manufacture skylon on their own.

Offline john smith 19

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Re: The Reaction Engines Skylon Master Thread (2)
« Reply #332 on: 02/18/2013 11:57 am »
Quote from: john smith 19
ESA would be an institutional customer not an investor.

Who would pay for development with pre-orders above production cost.
Isn't that how many defence contracts work?
REL is not planning to be a defense contractor.

You might also like to look up the difference between absorption and marginal pricing.
Quote
Quote from: lkm
ESA, under a possible TSTCM scheme, maybe could be one of several institutional customers who would pre-order a unit around 2016 or later and pay for and  receive it 2022 or so. As I understand things. 

Institutional customers want independent access to space. Maybe REL should think about letting institutions contributing to the project manufacture skylon on their own.
Institutional customers want a capability in the same way that early adopters of the 707 provided key input to Boeing about what features they needed to make it a success. They would not be expected to mfg it.
BFS. The worlds first Methane fueled FFORSC engined CFRP structured A380 sized aerospaceplane tail sitter capable of flying in Earth and Mars atmospheres. BFR. The worlds biggest Methane fueled FFORSC engined CFRP stainless steel structured booster for BFS. First flight to Mars by end of 2022. Forward looking statements. T&C apply. Believe no one. Run your own numbers. So, you are going to Mars to start a better life? Picture it in your mind. Now say what it is out loud.

Offline lkm

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Re: The Reaction Engines Skylon Master Thread (2)
« Reply #333 on: 03/05/2013 02:19 pm »
I thought this was amusing:

http://epetitions.direct.gov.uk/petitions/43303

and

http://epetitions.direct.gov.uk/petitions/33402


It seems to me that everyone on this thread can agree with at least one of these.

also this:
http://www.citywire.co.uk/money/john-dodd-5-money-makers-for-my-investors/a661675?ref=citywire-money-videos-list

not funny, but slightly interesting from a where's the money going to come from perspective.

Offline simonbp

Re: The Reaction Engines Skylon Master Thread (2)
« Reply #334 on: 03/05/2013 02:56 pm »
It's worth mentioning that the pro-Skylon petition has 126 signatures, while the anti-Skylon one has literally only been signed by the guy who posted it.

Also a general warning that the third link has auto-play video/audio if that sort of thing annoys you.

Offline Turbomotive

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Re: The Reaction Engines Skylon Master Thread (2)
« Reply #335 on: 03/05/2013 05:55 pm »
Dennis Tito and the Cirque de Soleil guy better give their money back...
Still, some City guy wants to get in early, good luck to him.

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Offline R7

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Re: The Reaction Engines Skylon Master Thread (2)
« Reply #336 on: 03/05/2013 07:29 pm »
From the first petition couple posts ago:

Quote
It [REL] recently extracted £350m from the government for research.

Is this even correct? Googling seems to say that it was $350M and from private investors. Hefty chunk of money anyway.
AD∑ASTRA∑ASTRORVM∑GRATIA

Offline BobCarver

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Re: The Reaction Engines Skylon Master Thread (2)
« Reply #337 on: 03/05/2013 07:59 pm »
The guy who posted the anti-Skylon petition is simply making things up. If you follow the link to the page where he claims two ESA retirees claim Skylon is "impossible," you'll find just an image stolen from REL's website with the same assertion as a caption with no real verified claim at all. In other words, this loonie is simply faking it.

Offline john smith 19

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Re: The Reaction Engines Skylon Master Thread (2)
« Reply #338 on: 03/05/2013 08:22 pm »
From the first petition couple posts ago:

Quote
It [REL] recently extracted £350m from the government for research.

Is this even correct? Googling seems to say that it was $350M and from private investors. Hefty chunk of money anyway.

No. REL have stated they wanted to raise this amount but it's unclear if they have raised it and they certainly have not raised it from the British government (there would have been much more of an announcement from the government side if nothing else).

AFAIK one of the links he references is a pay site and the other does not seem to work (unless my security is too tight to let it run  :) )

Any one heard of this guy?
BFS. The worlds first Methane fueled FFORSC engined CFRP structured A380 sized aerospaceplane tail sitter capable of flying in Earth and Mars atmospheres. BFR. The worlds biggest Methane fueled FFORSC engined CFRP stainless steel structured booster for BFS. First flight to Mars by end of 2022. Forward looking statements. T&C apply. Believe no one. Run your own numbers. So, you are going to Mars to start a better life? Picture it in your mind. Now say what it is out loud.

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