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X-Treme Ports June 18, 2006

Posted by Thomas Olson in Uncategorized.
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I usually think of an “extreme sport” as anything that will kill you if either you or your equipment (or both) screw up at a really inopportune moment. Ergo, I consider white water rafting, skydiving, ultralight aircraft, rock climbing, and scuba diving in that genre – the low-end of it, at least. I used to rock climb in my younger days (when there was less of me to have to pull up the rock), and still enjoy to this day an occasional coral reef dive down to 80 feet or so. If you get good training, develop some skills, know your limits, and maintain your equipment, the risks inherent in these activities can be well managed.

Millions of people throughout the world indulge in these hobbies every year, with low rates of injury or loss of life. They come back to do it again, year after year. One reason, in addition to the adrenaline rush, is the managed risk. Another is that these sports are relatively economical to engage in, all things considered, well within reach of the middle classes of most industrialized nations.

But then we go up the “risk spectrum”. There are other extreme activities that are often far more expensive to do, come with far greater risks, and are generally engaged in only a few times in one’s life, perhaps only once. One example of this is high-end mountaineering. One may train climbing smaller peaks in Colorado and Alaska for many years at great expense, before ultimately committing a significant portion of one’s income/savings on a one-time shot at Everest. These people will spend tens of thousands to achieve this goal, at the real risk of nasty death, or falling and simply being left for dead by one’s companions.

Other expensive “extremes” would include things like riding a supersonic jet fighter into the stratosphere, high altitude balloon rides, Formula One race driving, or taking a submersible over a mile under the ocean. These activities cost a lot of money, and most people who do them generally only get to do them once, perhaps more if they’re wealthier. As such, the available pool of customers for such experiences is only a small fraction of that for scuba or kayaking.

So when I see governments and private consortiums working hand in glove to commit hundreds of millions of dollars, all over the world, to build commercial “spaceports” in support of space tourism, I get a bit confused. At the current ticket prices being discussed, it is clear to me that “early adopter” space tourists fall in the high-end of the risk spectrum, and have only the fiscal resources for a once-in-a-lifetime shot at it. There will be no repeat business. The supply of customers at that level are far from infinite, and a quick look at the numbers indicates there may not be high enough a flight rate to justify the construction of a single spaceport at this fragile stage of the game, let alone fourtwo in the US, and one each in Dubai and Singapore. As near as I can estimate, the initial combined price tags for these facilities will be US$ 705 million, the funding being provided by a combination of governments and a “consortium of investors”. Thus far, the actual cash commitments are in the low tens of $ millions, mostly from governments – the “consortium” dollars have been few, to date, although much more is promised by year’s end.

Commercial airports today – a well established mature industry – are usually run under a “port authority” model. Not quite private, not quite government, they’re an independent chartered authority which can levy ticket taxes, take out bond issues, and get federal and state funding for key infrastructure development or repair via their respective Departments of Transportation. They also charge landing and gate fees to individual airlines. They stay ahead of the game fiscally because of high volume.

For any spaceport to be economically viable, it’s going to need lots of competing spacelines with significant flight rates and passenger throughput that pay the taxes and fees. In the airline business, the high flight rates are a result of lots of repeat business, as commercial air travel is on the same cost and safety level as low-end extreme sports. I would posit that, due to the risk factors and the high price tag, space tourism is more akin to climbing Everest. Ergo, potential future spaceports are going to have to find a different operational model in order to stay afloat. Let’s look at some numbers…

The 2004 Futron study is generally one that the alt.space community likes to hang its hat on, so I’m content to go with that.

Right off the bat, however, we have a problem, because the study predicted commercial flights commencing in 2006. Oops…OK, things happen – so we’ll just move that hockey stick back a couple of years. Ah, but then again, I don’t want to fall into the same trap as many alt.spacers do (I was even guilty of it once, myself!), so I’ll just say “Year 1”, or “Year 15” as opposed to “2006” or “2021”.

The Futron study projects that in Year 1, there will be 356 suborbital space tourists at an average ticket price of $100k, for a gross revenue of $36 million. They claim that the flight curve will grow such that, by Year 15, there will be 15,712 passengers at an average ticket price of $50k, for a total industry gross revenue of $786 million. That sounds great, except that everybody needs to get paid, and on the surface, there doesn’t seem to be enough revenue to go around.

If you build a $225 million spaceport, there are going to be significant operational costs, including traffic control, security, and especially the cost of insurance, which will be quite high the first decade or so of operation. These costs will run into the millions, annually, and will only be partially passed on to the spacelines and their passengers with standard fee and ticket tax structures, at first. There will also be special facilities needed for the spaceflight participants themselves, as they will be subject to last minute preflight medical checks per FAA regs – this is not a “show your boarding pass and take your seat” affair. Those facilities and the high-end technical staff also cost money to maintain. There will have to be emergency services made available in the event of a launch failure/abort, as well as more elaborate flight safety systems, due to the potentially exotic nature of the fuels used. $36 million in gross revenue, spread across four spaceports, won’t begin to cut it – ergo, we’re looking at subsidies or sustainable private capital losses for “consortia” the first few years.

According to an MIT study, airline ticket taxes were an average of 16.1% in 2004. So that $100k ride now costs $116,100. At $9 million in gross revenue per spaceport, that’s only $1.45 million in tax for the port. Landing fees have traditionally been assessed as a function of Gross Take-Of Weight (GTOW), and gate fees are charged based on the passenger carrying capacity of the airplane. For sub-orbital space tourism, the spacecraft will be at or less than the weight of a small business jet, and will probably not seat more than six passengers and two crew. So there will not be a lot of operational revenue for the spaceport there, under traditional models.

Out of the gross revenues, spacelines also have to meet their own expenses and pay the costs of their own capitalizations. But if port fees and ticket taxes become prohibitive, due to the spaceport’s unique maintenance requirements, it could slow potential tourist traffic, thus hurting revenues.

$36 million in ticket revenues means, at $100k per ticket, only 15 flights the first year, carrying an average of six passengers each, by a single local spaceline operating out of each spaceport. That averages only one flight every 3.5 weeks. Revenues aren’t projected to double until Year 4. They double again in Year 6, but then we’re still only talking $40 million per year per spaceport, and $6.44 million in ticket tax collection. Now we’re up to one flight per day per spaceport – still, hardly the stuff caviar dreams are made of, if you are the SpacePort Authority of Dubai. That’s also a significant time for private consortia or port authority bondholders to hang on for a return.

So lets push ahead to Year 15, where there are 15,712 projected passengers generating $786 million in gross revenue at a ticket price of $50k. That still only generates $31.6 million in ticket tax revenue per spaceport, and a flight rate of 18 every ten days at each port. Being forced to wait 15 years for even those numbers, it hardly seems to justify a $225 million investment in a spaceport for its own sake. This is why the current spaceport plans being offered have more of a theme park quality to them, offering a “complete space experience”, including parabolic flights, training facilities, full-scale pay-to-play simulators, hotels, etc. (Perhaps they’ll add casinos!) The revenues from these sideline operations could actually provide some sort of payback to investors.

I am accepting, for the sake of argument, the projected Futron flight rates from whole cloth, although there is little hard evidence in support of this. Also, those passenger levels assumed the tourist would be in their seat the entire time. The numbers were far more generous if the tourists were allowed to leave their seats during the flight to have a more complete experience of microgravity. Even so, they only project around 25,000 paying passengers at Year 15, as again, straight up and down sub-orbital tourism, at even $50k a pop, is going to be a one-time shot for high-rollers. Plus, the jury is still out regarding safety issues over the notion of allowing the passengers to float around the cabin.

What could be a revenue machine, however, in 15-20 year’s time, is directed point-to-point suborbital travel, be it package delivery or high-end business travelers. But presumably another zero is going to have to be dropped from the price to make such passenger travel popular enough to demand high flight rates in and out of busy spaceports. Private investor consortia in such facilities are going to have to wait a long time for their returns, unless the theme park model becomes sufficiently successful to drive profits on its own, in which case they stick the host governments with the tab for the annual operations shortfall. But those governments may pony up, just to enjoy the “prestige value” of having a spaceport.

In the meantime, spacecraft capable of sustaining even these minimal flight rates, regularly and in safety, have yet to be demonstrated. This whole thing, to me, is akin to the Wright Brothers at Kitty Hawk, saying at the end of the day, “OK, we’ve had four successful flights. Now, lets go build O’Hare!”

PT Barnum is smiling.

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Comments»

1. oldspacecadet - June 19, 2006

Who is looking out for the taxpayers of New Mexico? The Governor has aspirations in D.C. and is willing to travel there on the backs of his citizens. The local legislators, apparently morons, should be introduced to the Oklahoma legislators and ask them how well their subsidy has paid off.

2. TomsRants - June 19, 2006

In the case of Singapore and Dubai, it may well be the case that their respective governments know the score and are nevertheless willing to subsidize their spaceports in perpetuity, just to be able to claim that particular “jewel in the crown”. If so, they should be fully honest about it with both taxpayers and private investors. That presently isn’t clear.

3. Oilboy in Neverland - June 19, 2006

heh, your also forgetting about the one ITT Systems Division controls with Spaceport Systems International in California.

http://www.ittsystems.com/products/spaceport.html

http://www.calspace.com/

So thats 5 total, 3 in the US alone, plus Sealaunch’s ops, and yes… none of them are doing squat right now

4. Professor L - June 19, 2006

Tom, you are grossly unfair to P.T. You do not give him fair due here. Stop maligning this great entrepreneur. At least, P.T. did deliver and helped people realize their expectations. Please do not sell him short in future rants.

5. Shubber Ali - June 19, 2006

Sometime in the early 1900’s, P. T. Barnum, the owner of the Barnum & Bailey circus and originator of the phrase “There’s a sucker born every minute” offered $10,000 in cash to any person who could thoroughly dupe, or sucker, him.

Barnum was always looking for interesting new acts or novel creatures to exhibit, and one day he received a letter from a fellow in Maine who claimed to possess a cherry-colored cat and asked if Barnum was interested in such a thing for his circus. Barnum contacted the man and said yes, if the cat were truly cherry-colored, he’d gladly put it on display.

Well, a few days later a crate marked “live animal” arrived for him. When Barnum opened it, he found a somewhat frightened but otherwise perfectly ordinary-looking black housecat inside, along with a note, which read:

Maine cherries are black.

6. TomsRants - June 19, 2006

According to my Google search, the jury is still out on whether the author of the following quote was PT Barnum or HL Mencken:

“Nobody every went broke underestimating the intelligence of the American people”.

I originally assumed Barnum had said this when I mentioned him in the post, for it was that quote I was most thinking of.

7. Bill White - June 20, 2006

You have left out of your analysis a significant revenue stream – tourists visiting the facility to watch the flights. I suspect the actual business model for these spaceports is the football or baseball stadium, not the ticketed passengers.

The “drag race” to 100 km idea – – 6 or 8 or 12 suborbital jalopies racing to space – – can be imaged on giant TVs with cameras on chase planes and high altitude balloons. This might attract crowds if it were packaged NASCAR fashion. I submit that crowds of spectators are the intended users of these new spaceports. This might very well remain a Kool Aid induced fantasy, but its a different fantasy than the one than your essay addressed.

8. oldspacecadet - June 20, 2006

Interesting idea, but —
If the audience gets to watch on TV, they can do so from home (or their local bar) without having to travel to a “spaceport.” In order to handle lots of in-person viewers, the “spaceport” must provide plenty of hotel rooms, decent eateries, etc. Unless these resources can attract conventions, meetings, etc., what do they do for revenues between launches? Compare locations for successful air racing to Truth or Consequences, NM.

9. Bill White - June 20, 2006

First a question – how can I delete my double post?

Second. Why attend NASCAR or the Indy 500? Often you cannot see anything anyway, except on giant TVs. Also, think air show like Oshkosh WI. before the flights, spectators can roam the tarmac (with security) and chat with the pilots and ground crews and sang autographs.

Move to an “infield” or stadium seating for the flights.

Hob-nob afterwards.

The author did write this after all:

>> This is why the current spaceport plans being offered have more of a theme park quality to them, offering a “complete space experience”, including parabolic flights, training facilities, full-scale pay-to-play simulators, hotels, etc. (Perhaps they’ll add casinos!) The revenues from these sideline operations could actually provide some sort of payback to investors. < < I am suggesting the revenue from this type of stuff has potential to greatly exceed fares paid for passenger tickets.

10. Bill White - June 20, 2006

Sorry, more thoughts.

New Mexico can use a spaceport as a calling card for week long vacations for tourists. The drag race to space fills one day a week (and maybe the night before) but on the other days, the guests do other things in and around New Mexico. Golf? Casinos? Parabolic flights? Whatever.

11. TomsRants - June 20, 2006

There will probably be some spectator traffic in the early going that would be quite significant, but unless you had other reasons to bring them back, you probably won’t see much repeat business after the novelty wears off. But at a flight rate of 1 each 3.5 weeks at 4 different spaceports, how do you sustain it? I think the same principles apply.

12. Michael Mealling - June 23, 2006

Two small comments: the mountain climbing analogy has a small error. Yes, for extreme climbing you generally only climb Mt. Everest once. But that doesn’t mean you never climb another mountain or never climbed one prior either. While you might not end up with much repeat business for a single vehicle, you will end up with repeat business across the industry as passengers opt for vastly different experiences…

You also seem to be assuming very inelastic market. Its valid to make that assumption but that’s all it is. We’ll have to see if its true or not.

13. Shubber Ali - June 23, 2006

Two small comments: the mountain climbing analogy has a small error. Yes, for extreme climbing you generally only climb Mt. Everest once. But that doesn’t mean you never climb another mountain or never climbed one prior either.

Actually, your criticism is incorrect. Tom’s original post said this:

One may train climbing smaller peaks in Colorado and Alaska for many years at great expense, before ultimately committing a significant portion of one’s income/savings on a one-time shot at Everest. These people will spend tens of thousands to achieve this goal, at the real risk of nasty death, or falling and simply being left for dead by one’s companions.

No one is claiming that climbers of Everest ONLY climb that mountain. The more important point is that VERY FEW people who have gone through the expense of climbing Everest once will return to do it again. The analogy with suborbital tourism is solid. A passenger would likely continue to fly on airplanes for decades after a one-time suborbital flight (just like climbing smaller mountains) but I find it hard to believe that very many would choose to go up again on another suborbital tourist flight to space.

While you might not end up with much repeat business for a single vehicle, you will end up with repeat business across the industry as passengers opt for vastly different experiences…

How do the experiences vastly differ? What are the selling points of suborbital tourism? From what i’ve seen, it boils down to:

(a) seeing space
(b) weightlessness
(c) seeing more of the Earth than you can from an airplane
(d) bragging rights to friends

You also seem to be assuming very inelastic market. Its valid to make that assumption but that’s all it is. We’ll have to see if its true or not.

The reason we tend to assume an inelastic market is the evidence from other extreme sports indicates that this, too, will have low repeat business, and with the price tag there aren’t that many people who will do it. Further, the market for orbital tourism shows that it, too, is highly inelastic. Remind me again how many people have gone to ISS since Tito went half a decade ago?

14. TomsRants - June 24, 2006

For much the same reasons that Shubber mentions, any “repeat business” market will indeed be only driven by those fortunate and wealthy few who will opt for “different experiences”, as Mike suggests…but I see it as a group of ever more costly vertically-integrated experiences. As Paul Contursi and I presented at the 2003 ISDC, it boils-up to this:

Parabolic flight: $3000
Flight to stratosphere in Mig-25: $12,000
Sub-orbital up-and-down tourist flight: $100,000 – $200,000
Cosmonaut training: $250,000
Orbital tourist adventure to ISS or elsewhere: Priceless

Once you’ve done one, you’ll move up to the next one in succession, depending on your budget. But most will settle for a one time shot. That is a very inelastic market, in my view.

I say “priceless” at the end with tongue firmly planted in cheek, as there have been only a handful of those willing to shell out the $20 mill or so to ride a Soyuz, and no future private commercial orbital tourism plans have been unveiled that meet all the various sniff tests, and can also reduce ticket prices.

15. Chris Mann - June 25, 2006

Remind me again how many people have gone to ISS since Tito went half a decade ago?

Tourists can only go up during an ISS changeover when there isnt a third cosmonaut scheduled.

Tito went up on TM-32 on April 28 2001, Shuttleworth on TM-34. Then the economy crashed. Next up was Olsen on TMA-7. TMA-8 is booked for science. TMA-9 and TMA-10 both already have tourists paid, and TMA-11 and TMA-12 will be taking Korean and Malaysian astronauts (nationalist tourists).

16. Ray - June 25, 2006

Maybe the business model for the spaceports, at least in the early years, isn’t the traditional airport, since it is difficult to get flight rates up, or to make enough money with low flight rates. Maybe it’s more like a shopping center, with suborbital space tourism as the anchor tenant. The idea would be for this anchor tenant to bring in enough business and interest to make the whole effort worthwhile. That is why the parabolic flights, simulators, and so on may be important. The idea would be that the early space tourism will draw the crowds to these “little stores” in the “mall”. By the time the novelty goes down, there could be enough flights, and the side businesses could be well-enough established, to justify continuing the business.

One idea for these spaceports is to not just support space flights. The parabolic flights are part of this, but there could be a lot more. What if a company can develop a suborbital ride that goes to (picking a number out of the air) 75 km, rather than over 100 km, and get the ticket price down with the relaxed physical requirements? These less-intense and less-expensive flights could be like the less-extreme sports. They could get more interest in the whole process, since more people could affort these flights, and more repeat business would be possible. If you are rich, and there are 4 spaceports (who says all 4 have to survive, though?), you could take 1 big ride, and 3 little rides to see the different views above the different spaceports. There is a big gap in price below the 100+ km flight ticket price that could be filled in.

This idea wouldn’t have to be limited to lower high-altitude flights, parabolic flights, and jets. Maybe some people would be interested in a tourist ride to observe a suborbital ride from a chase plane? I read in Space News that Virgin Galactic plans to offer this. This could be more business for the spaceport, and for the suborbital space ride vendor. What about a ride on something like a commercial version of the Lunar Lander Challenge contenders? What about a ride on something like the Rocket Racing League planes? What about a ride on something like the White Knight? What about a traditional air tour ride to show the spaceport and surrounding area from the air? There are all sorts of possible space-related rides that could cost quite a bit less than the space tourism rides, and bring in business to the spaceport, FAA allowing. In addition to giving more business to the spaceport, these rides could give more business and experience to the hardware vendors and operators. My guess is that the whole space tourism and spaceport business depends on getting a diverse and successful set of less-ambitious businesses going as a foundation.

From the state’s point of view, the spaceports can pay off even if not directly successful. For example, I went to New Mexico for a week at a space event a few years ago. My wife and I went again for a week this year, partly from interest in various space activities there, and partly for regular ground tourism interests. They complement each other. We will probably go again for similar reasons. That’s good business for the regular airports, hotels, shops, car rentals, restaurants, and so on in the state. They know it – the tourism brochures had rockets on the cover page. How much such business will the X-Prize Cup bring, and would it be there without the spaceport? Will the spaceport itself bring more such business to the state?

Now, when you have a good variety of space-related rides, what do you do on the ground? Simulators were mentioned. What about space tourism related video games? I don’t know how well that would go over with passengers who probably don’t want think about their ride as a video game. All of the ideas that often go into a science or space museum could apply. Setting up a ground tour ride to nearby attractions (space-related or not) might work. Anything like a theme park, casino, restaurant, water park, or other tourist attraction might work. Maybe space-related (or local-interest) guest speakers (astronauts, etc), musicians, movies, etc would help. Have facilities that cater to school or university science field trips. Having a festival or space-art show would help. Put in vending machines, sticker print machines, and so on. Set up a display of old airplanes and rockets. Is there spaceport near a flat area where a rocket-car event could be held?

As everyone knows, it’s easier to make money on ground business than in space.

It may even be worthwhile for a state to sponsor a space prize or space prizes similar to (or in partnership with) one of the NASA Centennial Challenges. Depending on how well the challenge is designed and advertised, this could bring in more news for the state. An event like the X-Prize Cup could be built around the challenge, which would be held at the spaceport.

Another question is will the government be intested in the space tourism rides? Are there any advantages for sending astronauts on the rides for training? What about other agencies? Can they, or anyone else for that matter (companies, universities, etc) use the space tourism vehicles for other uses, like remote sensing or experiments? If so, there is more business.

There are other possible businesses for a spaceport, depending on what it can technically and legally support. One of the space blogs mentioned that SpaceDev is in discussion with the New Mexico spaceport for their orbital craft. Orbital missions would be another source of revenue, if it actually happened. You can also imagine space tourism flights that are more ambitious (and expensive) than the current suborbital proposals, but not quite orbital.

Then there are space flights (whether orbital or suborbital) without passengers – the bread and butter of space flight so far. Will the spaceport support these? Could a spaceport support a “big model rocket” event when no tourism flights are planned?

What about regular airplane service, like you would see in a regional airport?

What about experimental flights, like at Mojave? The spaceport could support this kind of activity. That would involve businesses in the state near the spaceport to develop the experimental flights. This business helps the state economy.

Can any of the capabilities of the spaceport be used for other purposes? For example, can the tracking or communication services be used by (sold to) others?

17. Shubber Ali - June 25, 2006

TMA-11 and TMA-12 will be taking Korean and Malaysian astronauts (nationalist tourists).

Interesting – so you think government-paid flights should count as proving a “tourist” market?

And yet, IIRC, you also said that the only way we can achieve cheap access to space is through private sector involvement and the abolition of state owned enterprises such as NASA.

Sounds mighty convenient (but hypocritical) to bash the government as bad to justify why we don’t have CRATS yet, but then to count them as ‘tourists’ when stating that there *is* a meaningful market for orbital tourism.

18. Bill White - July 1, 2006

An extended reply to this article is here.

19. AmberJane - July 7, 2006

The Everest analogy fails for a very specific reason – when you climb up the mountain, it’s YOU doing it. Space Tourism is just sitting in a vehicle and experiencing something. It’s not a personal achievement in the way that climbing the tallest mountain in the world is. It’s expensive and risky, sure, but it’s also hard work – to do it says something about your character and fitness, not just your wallet.

Jane Bernstein

20. oldspacecadet - July 8, 2006

It is wallet size AND risks for suborbital flights.

Some of those risks can be abated, but the suborbital passenger alt.spacers appear to be in denial about the existence of the human risks. Examples: cardiac arrythmias associated with acceleration in outwardly normal people, decreased arterial oxygen saturation with decreased ambient pressure as a function of age, the need for pressure suits, and “informed” consents that can be broken in court. See my series on human factors in commercial suborbital flight in http://www.thespacereview.com


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