Author Topic: Reusability effect on costs  (Read 178436 times)

Offline oldAtlas_Eguy

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Re: Reusability effect on costs
« Reply #680 on: 10/14/2017 08:59 AM »
Some speculation based in real numbers.

The nominal profit margin for launch in the US has been about 20% for many years.

If SpaceX has been operating with this margin in their pricing then for a F9 that is ~$12M. So the reduction of price by $12M even though costs drop more than the $12M on average for the multiple launch of a single booster, allows for SpaceX to break even if on the first launch of a new booster that booster failed to be recovered. No loss but no profit. If the actual cost reduction on a reuse flight vs a new one is $20M then the profit from 2 launches with the same booster is $20M. If the booster is used 3 times then SpaceX profit is $40M. If it is used 5 times the profit is $80M ($16M per flight average). If it is used 10 times the profit is $180M ($18M per flight average). But in no case would SpaceX ever loose money. Just have the possibility to make a lot of money if the booster is successful and is recovered on every flight.

With the case of 10 uses the profit per flight average actually increases by $6M even though the Price has been decreased by $12M to a price of $50M per launch. So if only that $6M is considered the payback it would take at 30 flights per year 5.5 years to make $1B. But if the complete profit is considered then it would take less than 2 years to reach $1B or ~$540M per year in profits to be reinvested into the constellation and into BFR. In 5 years that comes to internally raised cash of $2.5B.

This is the kind of realization that reuse will cause on costs and the ultimate item of Prices for Launch.

Offline M.E.T.

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Re: Reusability effect on costs
« Reply #681 on: 10/14/2017 11:03 AM »
Even by keeping their price at $60m per launch, they would effectively be lowering it in real terms, if annual inflation is taken into account. I think that is the course they should follow.

Offline oldAtlas_Eguy

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Re: Reusability effect on costs
« Reply #682 on: 10/14/2017 04:38 PM »
If I were chief economic advisor to Elon, I would counsel him to maximize revenue on the Satellite internet business by keeping launch prices high, to keep out competitors such that SpaceX can offer the fastest and cheapest space based internet on the market. If successful, Mars colony money should be readily available.
Would invite antitrust trouble, if not in the U.S. than certainly in Europe, given what's happened there to U.S. companies like Microsoft, Apple, Google, etc.
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In most of the possible Antitrust application cases against US LV industry providers, National Security interests would squash any FTC actions. These are primarily about mergers into a monopolistic situation and price fixing at artificially higher values by conspiring with other providers. Actually since this already had happened by the creation of ULA and the merger creation of a monopoly was allowed for NS interests, any FTC legal action against US LV providers for such antitrust actions is unlikely to occur.

The only exception would probably be the case of "Dumping". But SpaceX wants to make extra cash to further and fund their Mars campaign so they are very unlikely to ever do this action even though the prices may have the effect, they would not be guilty of dumping because they are making a profit on the Prices given and at a high margin at or higher than industry average.

Offline john smith 19

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Re: Reusability effect on costs
« Reply #683 on: 10/14/2017 05:03 PM »
I would like to see them move the price down a bit to demonstrate to the market that lower prices are coming.  It should increase launch demand at the margins.
what you're talking about is called "price elasticity."

Unfortunately in the launch services business the prices are so unbelievably high (by the standards of every other transportation system) that they'd have to drop by a very large amount to stimulate market growth.

Did cutting launch prices on flight proven stages by 30% increase the number of contracts SX picked up?

AFAIK, no.

The truth is SX Launch Vehicle Mfg has 1 customer, SX Launch Services. Unlike say Boeing they carry all the costs of R&DDTE for all the SX launch vehicles. Sole mfg/sole operator.  So the costs aren't really being spread in the same way (and they never will with this architecture).

According to Musk lower $/lb will have to wait till BFS is flying.

We'll see if that turns out to be the case.
I think after talking so much about reducing cost they should reduce their prices just a little, say below the $ 60 million threshold. No reason to go to $ 40 million or less, even if they could.
Why?

Their headline prices are the lowest in the industry and they know to get any serious growth they'd need to lower them a lot (IE 90%)

However they've said when BFS comes in costs will drop a very great deal (or is it prices?)

Remember when Musk said if they launched 4 FH's a year (fully loaded) they could get to <$1000s/lb?

This is how real launch service economics, built around semi reusable TSTO vehicle works.
« Last Edit: 10/14/2017 05:04 PM by john smith 19 »
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 structured booster for BFS. First flight to Mars by end of 2022. Forward looking statements. T&C Apply So, you are going to Mars to start a better life? Picture it in your mind. Now say what it is out loud.

Offline RedLineTrain

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Re: Reusability effect on costs
« Reply #684 on: 10/14/2017 07:28 PM »
Did cutting launch prices on flight proven stages by 30% increase the number of contracts SX picked up?

I don't know that SpaceX cut the prices by 30% on flight proven stages.  In fact, I seriously doubt that is true.

Online AncientU

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Re: Reusability effect on costs
« Reply #685 on: 10/14/2017 10:31 PM »
Did cutting launch prices on flight proven stages by 30% increase the number of contracts SX picked up?

I don't know that SpaceX cut the prices by 30% on flight proven stages.  In fact, I seriously doubt that is true.

They didn't.  The 30% number was tossed around before rebuilding LC-40 became a thing.  Actual cut is of order 10% for now.
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Offline john smith 19

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Re: Reusability effect on costs
« Reply #686 on: 10/15/2017 11:12 AM »
Did cutting launch prices on flight proven stages by 30% increase the number of contracts SX picked up?

I don't know that SpaceX cut the prices by 30% on flight proven stages.  In fact, I seriously doubt that is true.

They didn't.  The 30% number was tossed around before rebuilding LC-40 became a thing.  Actual cut is of order 10% for now.
And now looking to be 0 %.
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 structured booster for BFS. First flight to Mars by end of 2022. Forward looking statements. T&C Apply So, you are going to Mars to start a better life? Picture it in your mind. Now say what it is out loud.

Offline Lar

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Re: Reusability effect on costs
« Reply #687 on: 10/15/2017 02:29 PM »
This is a thread about costs. Not pricing.

Nor is it a thread about national security. Or antitrust. Focus on cost, and not on anything else. Thank you.
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Offline francesco nicoli

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Re: Reusability effect on costs
« Reply #688 on: 10/15/2017 02:37 PM »
quick observation- there is no reason why, with 1 single provider with reusability in a market, the price should go much down. Assuming that the provider is led by profit maximisation and not by charity/ideology, the price will decrease enough for the more competitive provider to eat out all possible contracts, but not an inch more. it COULD decrease further, but it would make no sense for the launch provider. You need at least 2 providers with reusability (and strong anti-cartel oversight!) to ensure that costs reduction are transmitted in structural terms into the pricing. Otherwise, cost reductions only increase profit margins.

market structure of reference:Bertrand-Edgeworth oligopolitstic competition model with constraints on individual firms' capacity of absorbing all market demand.

https://en.wikipedia.org/wiki/Bertrand%E2%80%93Edgeworth_model
« Last Edit: 10/15/2017 02:44 PM by francesco nicoli »

Offline john smith 19

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Re: Reusability effect on costs
« Reply #689 on: 10/15/2017 05:47 PM »
quick observation- there is no reason why, with 1 single provider with reusability in a market, the price should go much down. Assuming that the provider is led by profit maximisation and not by charity/ideology, the price will decrease enough for the more competitive provider to eat out all possible contracts, but not an inch more. it COULD decrease further, but it would make no sense for the launch provider. You need at least 2 providers with reusability (and strong anti-cartel oversight!) to ensure that costs reduction are transmitted in structural terms into the pricing. Otherwise, cost reductions only increase profit margins.

market structure of reference:Bertrand-Edgeworth oligopolitstic competition model with constraints on individual firms' capacity of absorbing all market demand.

https://en.wikipedia.org/wiki/Bertrand%E2%80%93Edgeworth_model
Indeed.  With no effective competition  why should they?

As for the title of this thread, WRT to costs (rather than prices) the next new thing in the near term is likely to be  Fairing recovery (and reuse).

Musk is saying this is a $5M item.  Is there any feel for refurb cost and number of reuses?  I'm guessing 5-10% of original cost  but how many re-uses?  As many as the Block 5 F9, so booster and fairings as reusable package?
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 structured booster for BFS. First flight to Mars by end of 2022. Forward looking statements. T&C Apply So, you are going to Mars to start a better life? Picture it in your mind. Now say what it is out loud.

Offline Space Ghost 1962

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Re: Reusability effect on costs
« Reply #690 on: 10/18/2017 01:44 AM »
It occurs to me that few here understand the differences between providers costs and costing models.

So when we discuss the effects of reusability, costs do not map one-to-one and onto with, say expendable vehicles, or even entirely map in the comparison of partially reusable vehicles of different providers, which may be the closest to evaluate.

To many, cost is cost, but even in the simplest comparison of, say, fasteners, costs are very different when considered in the context of volume and total absorption on a specific bulk scale.

In like kind, reuse with costs depends on a financial model with variable "horizons" for absorption. Most aerospace costing depends too much on total absorption in fixed programs with limited extensions, because you cannot know the applicability of a vehicle's use over which to span with. (Exceptions to this come in commercial aircraft and related vehicles, because service use and incremental costs have a history, including consecutive/derivative vehicles.)

Have noticed that costing in space systems is poorly understood for this reason. Little to no experience with reuse means that economics devolve always to an expendable retrospective view, where even with Shuttle (not the best example of reuse economics due to its limited scope with Taos) its cost structure had selective advantages over equivalent scale/scope vehicles.

The key to space/launch vehicle reuse costing is where agile development in effect moves the goalposts to adapt costing to what it needs to be, to meet achievable goals for a given design (this fights the system engineering view by not preserving a common design methodology/progression). And this is not without risk - as we saw with Falcon's move to chilled propellant, or with proving a land-able booster.  The basic "units" of development costs are considerably different for reuse.

As to the costing models, you usually cycle through various technologies/subsystems and adapt/discard/reselect to suite, where there's a high cost increment for each but a limited run until something "fits". If you have a vertical cost integration, you quickly "own" the ones that "fit".

Offline Lar

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Re: Reusability effect on costs
« Reply #691 on: 10/18/2017 01:59 AM »
Do aerospace companies do ABC (Activity Based Costing) or are they still using fixed/variable with direct/indirect/overhead/burden ?  I'm guessing on what SG just said, maybe not really big ABC users?
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Offline Dante2121

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Re: Reusability effect on costs
« Reply #692 on: 10/21/2017 09:10 PM »
Time is money.  Previously SpaceX offered cheaper rockets (62 million) but you had to wait months if not years to launch.  That negated much of the cost savings vis a vis their competition. 

Now you can launch immediately for 62 million or wait many months and pay more for a competitor's rocket. SpaceX is now winning on two fronts.  Because of this you could legitimately argue that SpaceX should be charging even more than 62 million for this promptness and they still would be reducing costs for their customers due to earlier received revenues from faster satellite launches.


Online AncientU

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Re: Reusability effect on costs
« Reply #693 on: 10/23/2017 01:21 AM »
Time is money.  Previously SpaceX offered cheaper rockets (62 million) but you had to wait months if not years to launch.  That negated much of the cost savings vis a vis their competition. 

Now you can launch immediately for 62 million or wait many months and pay more for a competitor's rocket. SpaceX is now winning on two fronts.  Because of this you could legitimately argue that SpaceX should be charging even more than 62 million for this promptness and they still would be reducing costs for their customers due to earlier received revenues from faster satellite launches.

ULA's Rocket Builder places a definite price advantage on Atlas V for not getting delayed; seems more than reasonable to decrease the Falcon cost by similar amount for moving up in the queue.  Their default value for 'schedule certainty' is $23M, so this is of order the price reduction realized by early adoptors for flight-proven vehicles... plus the 10%-ish price reduction, of course.

SpaceX doesn't need to reduce prices yet as the growing list of customers for reflown boosters demonstrates -- since their costs for reflights have dropped considerably, their margin should be growing nicely.
« Last Edit: 10/23/2017 01:22 AM by AncientU »
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Offline deruch

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Re: Reusability effect on costs
« Reply #694 on: 10/24/2017 04:06 AM »
Time is money.  Previously SpaceX offered cheaper rockets (62 million) but you had to wait months if not years to launch.  That negated much of the cost savings vis a vis their competition. 

Now you can launch immediately for 62 million or wait many months and pay more for a competitor's rocket. SpaceX is now winning on two fronts.  Because of this you could legitimately argue that SpaceX should be charging even more than 62 million for this promptness and they still would be reducing costs for their customers due to earlier received revenues from faster satellite launches.

If you're talking about being able to move up the queue through accepting a pre-flown booster, that advantage is going to soon disappear.  Moving up the launch queue is only an option right now because SpaceX has pre-flown boosters to use that are sitting idle.  Once there is widespread adoption of reused boosters by the satellite industry, your place in the queue will just be your place in the queue.    With both SES's and Iridium's adoption, plus their imminent usage on NASA's CRS launches, that day will very soon be at hand.  Of course, SpaceX being able to reuse boosters is vital to their strategy of raising their launch rate.  So, they'll be able to burn down their backlog much more quickly.  But, very soon there won't be any line jumping because pretty much everyone will accept a reused booster.

If you're talking about general lead time from contract agreement to launch, then SpaceX is still only selling launches for 2 years in the future.  Though they may offer shorter lead times for government launches and/or higher prices.  There's really not much demand for anything else because, except in the event of a customer swapping launchers, no customers are stockpiling satellites to launch when launchers are available.
« Last Edit: 10/24/2017 04:11 AM by deruch »
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Offline raketa

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Re: Reusability effect on costs
« Reply #695 on: 10/24/2017 09:57 PM »
Time is money.  Previously SpaceX offered cheaper rockets (62 million) but you had to wait months if not years to launch.  That negated much of the cost savings vis a vis their competition. 

Now you can launch immediately for 62 million or wait many months and pay more for a competitor's rocket. SpaceX is now winning on two fronts.  Because of this you could legitimately argue that SpaceX should be charging even more than 62 million for this promptness and they still would be reducing costs for their customers due to earlier received revenues from faster satellite launches.

If you're talking about being able to move up the queue through accepting a pre-flown booster, that advantage is going to soon disappear.  Moving up the launch queue is only an option right now because SpaceX has pre-flown boosters to use that are sitting idle.  Once there is widespread adoption of reused boosters by the satellite industry, your place in the queue will just be your place in the queue.    With both SES's and Iridium's adoption, plus their imminent usage on NASA's CRS launches, that day will very soon be at hand.  Of course, SpaceX being able to reuse boosters is vital to their strategy of raising their launch rate.  So, they'll be able to burn down their backlog much more quickly.  But, very soon there won't be any line jumping because pretty much everyone will accept a reused booster.

If you're talking about general lead time from contract agreement to launch, then SpaceX is still only selling launches for 2 years in the future.  Though they may offer shorter lead times for government launches and/or higher prices.  There's really not much demand for anything else because, except in the event of a customer swapping launchers, no customers are stockpiling satellites to launch when launchers are available.
I am guessing  in 2 years, rocket will be not limiting factor, but range availability for Spacex. Rocket will be waiting for Satellite. They will no queue.

Offline swervin

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Re: Reusability effect on costs
« Reply #696 on: 10/27/2017 10:00 PM »
Quite a billion posts to filter through, so apologies if already asked/answered:

Any ideas when the first time attempt at a 3-time flown booster will occur?

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Offline ClayJar

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Re: Reusability effect on costs
« Reply #697 on: 10/27/2017 10:59 PM »
Quite a billion posts to filter through, so apologies if already asked/answered:

Any ideas when the first time attempt at a 3-time flown booster will occur?

Asked many times and guessed at many times over.  ;D  The general consensus seems to be, approximately, that with Block 5 coming soon and a good stable of landed boosters, there's likely no reason for SpaceX to fly any of their pre-Block 5 boosters a third time.  Obviously, being outside the know, we can't say whether or not they could or couldn't fly a booster a third time (or, to put it with more finesse, how much additional refurbishment and testing may be required to do so).  It just seems logical to assume they wouldn't as long as there isn't a pressing need (and "because we can" doesn't rise to that level... at least not at this point... regardless of how cool it'd be to see).

Online Robotbeat

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Re: Reusability effect on costs
« Reply #698 on: 10/28/2017 01:58 AM »
I suspect SpaceX is warehousing the pre-5 landed boosters as a way to get a jump on stockpiling F9 cores as a risk-reduction measure so they can switch the line to BFR as early as possible.

So even if they never fly them post-5: It's an insurance policy. They can still refly those recovered cores (or part them out) in case BFR has teething problems and is delayed after they shut down the F9 booster line.
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Offline Coastal Ron

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Re: Reusability effect on costs
« Reply #699 on: 10/28/2017 02:04 AM »
So even if they never fly them post-5: It's an insurance policy. They can still refly those recovered cores (or part them out) in case BFR has teething problems and is delayed after they shut down the F9 booster line.

Ugh. That would seem to be a rather ugly option, since by the time the BFR comes online they will be, what, no younger than 5 years old?

I'd have to think that building a few extra Block 5 would make better sense, but then we're still left with the mystery of what they will do with the leftover Block 3&4.
If we don't continuously lower the cost to access space, how are we ever going to afford to expand humanity out into space?

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