Commerical Launch Services Payment Structure

[Brovane]

In the private sector Commercial launch Industry, how is payment for launch services usually structured?

From what I understand the Buyer pays a certain % upfront when launch services are procured.  When the launch is successful the Launch provider then receives the balance of the payment for services.  Or am I in-correct?

Is there a industry standard as to what that % usually breaks down as?  Is it 60/40 80/20 etc? 

What happens when a launch vehicle fails in regards to payments?  Does the launch provider keep the upfront payment and have to provide another launch at no additional charge? 

[oldAtlas_Eguy]

It is something like this:

1) 10-20% down to reserve.
2) 40% at start of LV manufacture usually 18-24 months prior to scheduled launch date (this is a NET launch date)
3) 20% when payload arrives at launch pad or 2 months prior to launch
4) remaining 20-30% once launch occurs. Here the structure is interesting due to how the success clauses go in that this payment may be required even if there is a launch failure. I believe this last payment for SpaceX is ~20% and is payable only on launch success. Such that SpaceX costs are mostly covered but there is a profit incentive to make the launch successful.

The structure is sometimes unique to a customer and this structure is only a guide. Goverment contracts are very different even for FFP "commercial buys".

[Brovane]

It is something like this:

1) 10-20% down to reserve.
2) 40% at start of LV manufacture usually 18-24 months prior to scheduled launch date (this is a NET launch date)
3) 20% when payload arrives at launch pad or 2 months prior to launch
4) remaining 20-30% once launch occurs. Here the structure is interesting due to how the success clauses go in that this payment may be required even if there is a launch failure. I believe this last payment for SpaceX is ~20% and is payable only on launch success. Such that SpaceX costs are mostly covered but there is a profit incentive to make the launch successful.

The structure is sometimes unique to a customer and this structure is only a guide. Goverment contracts are very different even for FFP "commercial buys".

Thank you for this information - So in the event of failure, for example a Commercial Satellite, is the launch provider on the hook to provide another launch at no additional cost?  Obviously the buyer of the services will need to provide the payload.  However will the buyer need to pay again for the service that the provider failed to deliver during the first launch? 

[oldAtlas_Eguy]

It is something like this:

1) 10-20% down to reserve.
2) 40% at start of LV manufacture usually 18-24 months prior to scheduled launch date (this is a NET launch date)
3) 20% when payload arrives at launch pad or 2 months prior to launch
4) remaining 20-30% once launch occurs. Here the structure is interesting due to how the success clauses go in that this payment may be required even if there is a launch failure. I believe this last payment for SpaceX is ~20% and is payable only on launch success. Such that SpaceX costs are mostly covered but there is a profit incentive to make the launch successful.

The structure is sometimes unique to a customer and this structure is only a guide. Goverment contracts are very different even for FFP "commercial buys".

Thank you for this information - So in the event of failure, for example a Commercial Satellite, is the launch provider on the hook to provide another launch at no additional cost?  Obviously the buyer of the services will need to provide the payload.  However will the buyer need to pay again for the service that the provider failed to deliver during the first launch?

As with any commercial contract the terms and conditions are sometimes very unique to the pairing of participants. You can never say for certainty how all contracts are structured only general terms. Different providers have different usual structures and different customers demand different payment structures and clauses.

[savuporo]

Thank you for this information - So in the event of failure, for example a Commercial Satellite, is the launch provider on the hook to provide another launch at no additional cost? ...

..Different providers have different usual structures and different customers demand different payment structures and clauses.

In case of failures, there is normally a launch insurance package.

For example : http://spacenews.com/iridium-delay-allows-glimpse-of-complex-spacex-launch-insurance-policy/

A nice presentation below : Space insurance market overview
http://www.raaks.ru/docs/doc20150303_008.pdf

Edit: one more, talks about standard space insurance practices a bit
http://iislweb.org/docs/2012_Gaubert.pdf

[Brovane]

In case of failures, there is normally a launch insurance package.

For example : http://spacenews.com/iridium-delay-allows-glimpse-of-complex-spacex-launch-insurance-policy/

A nice presentation below : Space insurance market overview
http://www.raaks.ru/docs/doc20150303_008.pdf

Edit: one more, talks about standard space insurance practices a bit
http://iislweb.org/docs/2012_Gaubert.pdf

Thank you for that information.

The second policy covers the  SpaceX Falcon 9 launches. Iridium needs less insurance than it normally would because it has purchased a relaunch option to be exercised if one of the Falcon 9 rockets fails,

This is interesting because it would seem to indicate that even if a failed launch, the launch provider doesn't have any obligation to provide a re-launch unless it was specifically negotiated ahead of time.

So it seems like the actual buyer of the launch services is kind of left with the short end of the stick.  Which is why they purchase insurance.   

Launch success - Launch provider gets 100% payment.  With probably 80% already paid up-front. 

Launch failure - The buyer of launch services doesn't have to pay the final 20% but they are essentially out the 80% they paid up-front and the payload regardless of success.  Which is why they buy insurance. 

 

[rayleighscatter]

This is interesting because it would seem to indicate that even if a failed launch, the launch provider doesn't have any obligation to provide a re-launch unless it was specifically negotiated ahead of time.

So it seems like the actual buyer of the launch services is kind of left with the short end of the stick.  Which is why they purchase insurance.   

Launch success - Launch provider gets 100% payment.  With probably 80% already paid up-front. 

Launch failure - The buyer of launch services doesn't have to pay the final 20% but they are essentially out the 80% they paid up-front and the payload regardless of success.  Which is why they buy insurance.

While the payload owner is the one hurt the most the launch service provider doesn't come out well either. While they get the lion's share of the payments the final payment not received is all of their profit as well as part of their expenses, so they are out several million out of pocket. But more importantly they wind up with a launch failure on record which both drives down the likelihood of getting a future launch contract, as well as pushing down the rate at which they can charge.