Why would they lower their prices when they have no price competition?
Yes, they're banking or reinvesting the profits, and they'll continue to
do so until someone else comes along to force their prices down. But
they are making money on reusability.
On 4/5/20 8:01 AM, William Claybaugh wrote:
George:
Actual prices vary but are not consistently below the $50 m “internet” price for a reused F9 launch.
No inflation in these prices is to be expected: inflation is running near zero throughout the economy.
What we can observe is that if refurbishment cost are zero, than the benefit of depreciating a stage over, say, five uses instead of one should be adding about 28m per flight to free cash flow. ($35m cost of stage depreciated at $7 m per launch instead of at $35 m per launch).
Since it is unlikely recovery and refurbishment cost nothing (the drone ship has operating costs and depreciation; once landed the vehicles require moving back to the processing facility where something must occur to make them certifiably ready for the next launch); and since there is no data on what those costs might be, we can at best conclude that reuse may be generating free cash flow but if so, that benefit is being retained by the company rather than passed on to customers as still lower prices.
Bill
On Sun, Apr 5, 2020 at 2:35 AM George Herbert <george.herbert@xxxxxxxxx <mailto:george.herbert@xxxxxxxxx>> wrote:
The cost seems to be lower though for commercial buyers and reused
boosters, compared with annual inflation baselines.
-George
Sent from my iPhone
On Apr 4, 2020, at 9:35 PM, William Claybaugh
<wclaybaugh2@xxxxxxxxx <mailto:wclaybaugh2@xxxxxxxxx>> wrote:
George:
But facts matter: the price decrease came from pulling the cost
out of expendable rockets.
The subsequent conversion of those then very low priced ELV’s
into somewhat higher priced RLV’s (in price per unit mass to
orbit) does not reveal any new information about RLV’s; nor can
it serve as an existence proof that those RLV’s are lower cost
than the lowest cost ELV’s. Indeed, the data slightly support the
conclusion that the ELV version of F9 was cheaper.
Bill
On Sat, Apr 4, 2020 at 6:37 PM George Herbert
<george.herbert@xxxxxxxxx <mailto:george.herbert@xxxxxxxxx>> wrote:
There’s a certain amount of pointlessness to the theoretical
argument; SpaceX semi-reusable Falcon 9 and Heavy are far
cheaper to buy than any competition, and have been for some
time.
Whether more fully reusable, bigger, methane vs RP-1 next
step works or not there today are only companies and agencies
and countries who understand the current Market and who don’t.
IMHO
Boemart seem unclear. ULA gets it but is hampered by
parents. NASA is in parts aware and in parts unclear. ESA
and Arianespace are politically blinded. China is aware but
continuing national programs of record while it experiments
with innovation and gave up on foreign commercial launches.
Russia... hard to tell. But politically hampered.
-George
Sent from my iPhone
On Apr 4, 2020, at 2:08 PM, William Claybaugh
<wclaybaugh2@xxxxxxxxx <mailto:wclaybaugh2@xxxxxxxxx>> wrote:
Henry:
When RLV’s will be more economic than ELV’s remains unclear
to me and many others. I doubt I have ever suggested that
they would never be lower cost.
Our dispute has always been about when, not if.
Bill
On Sat, Apr 4, 2020 at 3:03 PM Henry Vanderbilt
<hvanderbilt@xxxxxxxxxxxxxx
<mailto:hvanderbilt@xxxxxxxxxxxxxx>> wrote:
Bill,
And you've never disputed the matter with me or anyone
else here since? Okay...
best
Henry
On 4/4/2020 11:46 AM, William Claybaugh wrote:
Henry:
You really need to revisit your assumptions about me.
Griffin and I proved that in 1994.
Bill
On Sat, Apr 4, 2020 at 12:44 PM Henry Vanderbilt
<hvanderbilt@xxxxxxxxxxxxxx
<mailto:hvanderbilt@xxxxxxxxxxxxxx>> wrote:
Ah! We agree that reuse is a benefit!
This is progress...
best
Henry
On 4/4/2020 11:21 AM, William Claybaugh wrote:
Henry:
Have it your way if you wish.
I am certain that Elon will tell you that the
first benefit of reuse is in spreading
depreciation; and, that spreading amortization is
a very second order effect.
Bill
On Sat, Apr 4, 2020 at 12:10 PM Henry Vanderbilt
<hvanderbilt@xxxxxxxxxxxxxx
<mailto:hvanderbilt@xxxxxxxxxxxxxx>> wrote:
Bill,
Terminological quibbling aside, what I'm
talking about is something alien to the
cost-plus trad space industry: Commercial
businesses ferociously controlling their
costs, both upfront and ongoing.
Up-front costs are like poison, while ongoing
operating costs are merely like heroin. Both
are worth considerable effort and ingenuity to
minimize. And SpaceX, in successfully going
for reusability, has avoided both a big
initial chunk of poison and a fair-sized
heroin habit, both implicit in the trad
cost-plus approach to eventually flying circa
sixty booster cores a year.
Given we once again seem to be talking past
each other - it's good to be back! - perhaps
best we simply continue to disagree about this
being a significant part of why SpaceX is
cleaning the trad industry's clock.
cheers
Henry
On 3/24/2020 8:19 AM, William Claybaugh wrote:
Henry:
Terms matter: what you are talking about is
depreciation, not production savings.
I’m will to be educated but I would be
shocked if making 1/5 as many vehicles
resulted in a production system 1/5 the
previous size: that is simply not how
production works.
There are high fixed costs in any production
line as well as minimum costs.
Bill
On Tue, Mar 24, 2020 at 8:49 AM Henry
Vanderbilt <hvanderbilt@xxxxxxxxxxxxxx
<mailto:hvanderbilt@xxxxxxxxxxxxxx>> wrote:
Bill,
The long-term production difference in
question, by definition, is a factor of
five times. Not 2:1 either way around a
base of 12/year.
SpaceX knew this going in. Being
sensible people /not/ locked into the
established way of doing things, they
likely would have set up a production
establishment for sixty expended cores a
year very differently than they did the
plant for ~12 5X reused cores. Twelve a
year, as you say, is pretty much craft
production - modest production tooling
and a lot of very skilled hand labor, low
plant investment but relatively high
ongoing personnel cost. 60X a year is
still not exactly Willow Run, but
sensible people planning that would very
likely invest considerably more in plant
and tooling so as to not require5X the
skilled personnel plus 2nd and 3rd shift
differentials, working in
~2X the modest 12/year plant (assuming it
was originally run one-shift).
Yes, I oversimplified by saying "1/5th
the size of production establishment".
Thought I'd allowed for that sufficiently
with "(to a first approximation)", oh
well. And yes, "size" was not quite the
mot juste; "cost" might have been closer
to what I was driving at.
My basic point: SpaceX gambled on 5X
reusability to greatly reduce their
up-front investment in, and ongoing cost
of, F9 booster production. And they seem
to have won. By a quick count, 92 F9
booster core flights so far, and already
over half of those (51) have been used
boosters. The used proportion will only
rise from here. And they did this on the
up-front investment for a dozen a year.
In other words, one of the reasons
they're so far ahead of the game now is
they gambled and won bigtime on a
major-capital saving shortcut at the
start. I hope that's clearer.
Henry
On 3/23/2020 2:00 PM, William Claybaugh
wrote:
Henry:
It isn’t clear to me that there is all
that much difference between making 12
per year and making 6 or 24.
One saves the material costs and the
marginal labor cost but the
infrastructure doesn’t (or at least
shouldn’t) change much over that range
of production.
That said, if you optimize your system
for four units per year you will find
making 24 more costly than a line
optimized for twenty-four.
But rates of a few dozen per year—or a
few hundred—all fall into “craft
production” and are not going to show
economically significant variation on
production costs. The benefit of even a
few reuses is in the depreciation of the
hardware cost over multiple launches.
Bill
On Mon, Mar 23, 2020 at 2:24 PM Henry
Vanderbilt <hvanderbilt@xxxxxxxxxxxxxx
<mailto:hvanderbilt@xxxxxxxxxxxxxx>> wrote:
Another way of looking at this that
I think is relevant: 5-reuse
boosters allows SpaceX to support a
given flight rate with (to a first
approximation) 1/5th the size of
production establishment they'd need
for fully expendable operations.
Henry
On 3/23/2020 8:12 AM, William
Claybaugh wrote:
Robert:
There is too little data to make
any assertion about stage longevity
at this point.
However, ignoring propellant and
launch operations costs, five
flights per booster would indicate
a cost per booster at 20% of the
manufactured cost, not including
refurbishment between flights. The
former is around $30-35 million, so
$6-7 Million per flight, again, not
including refurbishment. If an
overhaul costs more than about $6
million, it would make more sense
to simply build a new five launch
lifetime stage.
We may note that compared to a $50
million price, these depreciated
stage cost estimates suggest either
a good deal of profit or that other
costs (launch operations,
refurbishment) are high.
Bill
On Mon, Mar 23, 2020 at 8:51 AM
Robert Steinke
<robert.steinke@xxxxxxxxx
<mailto:robert.steinke@xxxxxxxxx>>
wrote:
From hobbyspace.com
<http://hobbyspace.com> about
the latest Falcon 9 launch:
" A first stage engine shut
down prematurely (just before
staging) but had no effect on
the mission as the other 8
engines made up the difference.
The booster also failed to make
a successful landing on a sea
platform. This was the fifth
flight of this booster."
That was after a previous
launch attempt aborted due to
slightly high power.
Wonderful demonstration of
engine-out fault tolerance, but
it does look like the rocket is
showing some wear and tear
after 5 flights. What does
this do to their economics if
stages need an overhaul/have an
increased chance of loss of
vehicle after only 5 flights?
