SpaceX F9 : SES-10 with reuse of CRS-8 Booster SN/1021 : 2017-03-30 : DISCUSSION

[Jet Black]

I'm perplexed by the disconnect between the facts that SES was able to negotiate a discount for being the first customer on a "flight-proven" stage, but the insurance companies didn't charge a higher premium. Something is being mispriced.

SES know full well that the flight will not be as expensive to carry out as a new rocket.

[bstrong]

I'm perplexed by the disconnect between the facts that SES was able to negotiate a discount for being the first customer on a "flight-proven" stage, but the insurance companies didn't charge a higher premium. Something is being mispriced.

Or, the insurance underwriters don't think there's a substantial difference in risk between the new and flown booster.

Yes, the pricing implies that the underwriters don't see a difference in risk, but SpaceX and SES do.

[starhawk92]

The performance is already "reduced" compared to what the F9 could do fully expendable.  The additional reduction to give the booster a better chance to land is quite a bit smaller.  And we don't really know what the estimated performance of the F9 was when these contracts were negotiated.

SpaceX shouldn't have to negotiate performance reductions to fly on a "flight-proven" vehicle.  It should provide the same performance as a new core.

The performance reduction would be for recovery margins, and have nothing to do with whether a core is new or flown.

Never, ever would I expect SpaceX to press for recovery at the expense of performance for their customer.  They have never asked that before and it would be bad business to start that trend.

The performance reduction would be for recovery margins, and have nothing to do with whether a core is new or flown.

Edit: fixed quoting because I'd be a horrible subeditor

[bstrong]

I'm perplexed by the disconnect between the facts that SES was able to negotiate a discount for being the first customer on a "flight-proven" stage, but the insurance companies didn't charge a higher premium. Something is being mispriced.

SES know full well that the flight will not be as expensive to carry out as a new rocket.

My interpretation of the info we have is that all customers who purchase "flight-proven" rockets will get a discount (probably ~30%), and that SES got an additional discount on top of that for being the first one. My point is that that discount implies SES and SpaceX both think the first flight will be riskier, but the insurance underwriters seem to disagree.

[abaddon]

Luxembourg-based SES says it is going to be the first commercial satellite operator to launch a spacecraft on a "second-hand" rocket.

Nope, that would be SBS-3 on STS-5 (everyone seems to forget the Shuttle! )

How about "...for less than $500 million..."

[envy887]

Luxembourg-based SES says it is going to be the first commercial satellite operator to launch a spacecraft on a "second-hand" rocket.

Nope, that would be SBS-3 on STS-5 (everyone seems to forget the Shuttle! )

How about "...for less than $500 million..."

I wonder if Hughes got a 30% discount from that rate for SBS-3 being the first payload on a re-flown orbiter.

[envy887]

Yes, the pricing implies that the underwriters don't see a difference in risk, but SpaceX and SES do.

As I recall, SES wanted a 50% discount. They are doing this to help their bottom line, not just because they think it's cool. Does anyone know if SpaceX's "free reflight for launch failures" policy applies to this launch?

[abaddon]

Never, ever would I expect SpaceX to press for recovery at the expense of performance for their customer.  They have never asked that before and it would be bad business to start that trend.

I am sure that they don't reduce a contracted orbital performance after the contract has been signed.  However, we know SpaceX is absolutely reserving performance for recovery that could otherwise be used (if the customer is willing) to achieve a better orbit, so I'm not sure what you are trying to say here.

[kenny008]

I'm perplexed by the disconnect between the facts that SES was able to negotiate a discount for being the first customer on a "flight-proven" stage, but the insurance companies didn't charge a higher premium. Something is being mispriced.

SES know full well that the flight will not be as expensive to carry out as a new rocket.

My interpretation of the info we have is that all customers who purchase "flight-proven" rockets will get a discount (probably ~30%), and that SES got an additional discount on top of that for being the first one. My point is that that discount implies SES and SpaceX both think the first flight will be riskier, but the insurance underwriters seem to disagree.

I think what it might be showing is the difference between calculated risk (insurance underwriters) and perceived risk (satellite operators and their shareholders).  Even if the data shows the actual risk is comparable, you still have to convince humans that using a flown stage is a good idea.  Once they have flown x number of stages, people will be more comfortable with the idea, and SpaceX won't have to offer additional discounts any longer.

[Melanchthon]

I'm perplexed by the disconnect between the facts that SES was able to negotiate a discount for being the first customer on a "flight-proven" stage, but the insurance companies didn't charge a higher premium. Something is being mispriced.

Or, the insurance underwriters don't think there's a substantial difference in risk between the new and flown booster.

Yes, the pricing implies that the underwriters don't see a difference in risk, but SpaceX and SES do.

That might be part of it, but I bet it's a small one.

You don't need a difference in risk to get a difference in price. A difference in *cost* can be enough. As Jet Black noted upthread, "SES know full well that the flight will not be as expensive to carry out as a new rocket"--that's the mechanism that's pushing prices towards mirroring costs.

Simply put, lower costs -> lower prices.

[enzo]

In the event of mission failure does the insurance payout include a portion for the launch provider? If so a lack of that component could explain the lower premium in this case.

[AncientU]

I'm perplexed by the disconnect between the facts that SES was able to negotiate a discount for being the first customer on a "flight-proven" stage, but the insurance companies didn't charge a higher premium. Something is being mispriced.

SES know full well that the flight will not be as expensive to carry out as a new rocket.

My interpretation of the info we have is that all customers who purchase "flight-proven" rockets will get a discount (probably ~30%), and that SES got an additional discount on top of that for being the first one. My point is that that discount implies SES and SpaceX both think the first flight will be riskier, but the insurance underwriters seem to disagree.

I think what it might be showing is the difference between calculated risk (insurance underwriters) and perceived risk (satellite operators and their shareholders).  Even if the data shows the actual risk is comparable, you still have to convince humans that using a flown stage is a good idea.  Once they have flown x number of stages, people will be more comfortable with the idea, and SpaceX won't have to offer additional discounts any longer.

There's always the unknown unknowns, until x* have flown.  Yes, there could be increased risk (certainly perceived risk), but only marginal because of the re-qualification testing of the 'life leader' 0024 and other tests directly on this booster.

* x being a small number in the 2-5 range, based on new launchers being certifiable after 3 successful launches.

[mme]

I'm perplexed by the disconnect between the facts that SES was able to negotiate a discount for being the first customer on a "flight-proven" stage, but the insurance companies didn't charge a higher premium. Something is being mispriced.

Or, the insurance underwriters don't think there's a substantial difference in risk between the new and flown booster.

Yes, the pricing implies that the underwriters don't see a difference in risk, but SpaceX and SES do.

I think it implies that SES is a business that has faith in SpaceX and wants to reduce it's bottom line. SpaceX is eager to fly a "flight-proven" booster to continue self-funding reusability R&D.  Negotiations ensued.

[gongora]

Does anyone know if SpaceX's "free reflight for launch failures" policy applies to this launch?

SpaceX doesn't have any "free reflight for launch failures" policy.  They negotiated a provision in one contract (Iridium) because they were launching a constellation with multiple flights (and SpaceX was still a very unproven company when they signed that contract).

[gongora]

I'm perplexed by the disconnect between the facts that SES was able to negotiate a discount for being the first customer on a "flight-proven" stage, but the insurance companies didn't charge a higher premium. Something is being mispriced.

Or, the insurance underwriters don't think there's a substantial difference in risk between the new and flown booster.

Yes, the pricing implies that the underwriters don't see a difference in risk, but SpaceX and SES do.

Tweet from Peter B. de Selding

SES decision to pioneer reuse of Falcon 9 first stage comes at a favorable time in space insurance market; rates low, coverage plentiful.

[Robotbeat]

If I were an insurer, I'd just be glad they weren't planning on flying it on Proton.

[wannamoonbase]

I'm perplexed by the disconnect between the facts that SES was able to negotiate a discount for being the first customer on a "flight-proven" stage, but the insurance companies didn't charge a higher premium. Something is being mispriced.

Or, the insurance underwriters don't think there's a substantial difference in risk between the new and flown booster.

Yes, the pricing implies that the underwriters don't see a difference in risk, but SpaceX and SES do.

I suggest that SES sees a change in risk.  SpaceX may not see any risk change, but they do want some revenue on the flight and not a dummy payload to prove reuse.

[IntoTheVoid]

I'm perplexed by the disconnect between the facts that SES was able to negotiate a discount for being the first customer on a "flight-proven" stage, but the insurance companies didn't charge a higher premium. Something is being mispriced.

Or, the insurance underwriters don't think there's a substantial difference in risk between the new and flown booster.

Yes, the pricing implies that the underwriters don't see a difference in risk, but SpaceX and SES do.

No, there is no difference in risk perception required between SpaceX, SES and insurance. The pricing difference merely reflects the perceived risk of the rest of the launch market, which reduces the market for the first reflown F9 such that SES can demand a lower price. Market dynamics more than risk.

[baldusi]

There's probably the fact that they can actually launch in October this way, waiting would probably mean 2017. If they have a revenue expectancy of 5M/month or so it might very well make a difference if insurance is low enough.

[bstrong]

Tweet from Peter B. de Selding

SES decision to pioneer reuse of Falcon 9 first stage comes at a favorable time in space insurance market; rates low, coverage plentiful.

Thanks, that was the answer I was looking for!