Community > Forum > Perception, Barriers & Regulation of Privatized Space Travel > Accumulation of a financial base in detail

Accumulation of a financial base in detail

Posted by: Ekkehard Augustin - Thu Jul 21, 2005 11:31 am
Post new topic Reply to topic
 [ 66 posts ] 
Go to page Previous  1, 2, 3, 4, 5  Next
Accumulation of a financial base in detail 
Author Message
Moderator
Moderator
avatar
Joined: Thu Jun 03, 2004 11:23 am
Posts: 3745
Location: Hamburg, Germany
Post    Posted on: Sat Feb 04, 2006 6:43 pm
Hello, Andy Hill,

I understand you well - there was a time when I was tired myself of numbers but that changed when I started to apply the 3000 astronauts-case.

The tables are there simply for information and as base of issues. Additionaly they are meant to breath life into equations and functions (which are simply the equivalents to the formulars used in the Technology section).

So they aren't meant to explain something - except one aspect I cannot but agree: There are two posters at this board who I can rid of only by equations, functions and tabels about the values inserted and results got by them. I could imagine that there were no tables if those both would behave as positive as you, spacecowboy and many others :) .

I am going to place the next tabel as appndices since I have breathed life into the 300 astronauts-case already.



Dipl.-Volkswirt (bdvb) Augustin (Political Economist)


Back to top
Profile
Moderator
Moderator
avatar
Joined: Thu Jun 03, 2004 11:23 am
Posts: 3745
Location: Hamburg, Germany
Post    Posted on: Sun Feb 05, 2006 10:45 am
I should add some remarks:

1. I consider it to be required to do a summary as a by-step after completing the current step or after applying the case Virgin Galactic doesn't depreciate the vehicles within 5 years. The summary will concentrate on text but not on numbers or tables although numbers can't be avoided totally. Most of the text will consist of issues I made - and most of them are discussable.

2. From the beginning I was interested in their variable costs and the theoretically possible profits.

3. This all is meant to provide fundamentals like those applied by engineeers and engineer-students in the Technology section where not only formulars but concrete values also are applied. Another comparison can be done to rpspeck's threads which he is keeping short - this is in favor of the posters and discussion

4. The fundamental base I am working on can make all discussions here more interesting and generate more creativity.

5. I would have done all the calculations nonetheless and simply share them publicly here.



Dipl.-Volkswirt (bdvb) Augustin (Political Economist)


Back to top
Profile
Moderator
Moderator
avatar
Joined: Thu Jun 03, 2004 11:23 am
Posts: 3745
Location: Hamburg, Germany
Post    Posted on: Sat Feb 11, 2006 5:10 pm
I am going to post a by-step-summary in the next post after this one because I will look into the case(s) where the vehicles aren't completely depreciated at the break-even-point. So the next post is the best opportunity for a summary.

Regarding the profits I got for the case that the price the customers after the Pioneers may have to pay if they are increased and that I am doubting on - these profits can be taken as indicating a price drop after breaking even. And the price can drop down to $ 20,000 without reducing the profits much.

Tables are all past my signature in the Appendix - sorry, Andy Hill, but I really consider them to be required especially because of Peter. But I suppose that they will not be required any longer when applying the next model(s) - I can refer to these via link.

I will prepare the equation and formular for these calculations here for listing it past my signature too.



Since the previous post I calculated the five cases not considered yet. It turned out that for the second case - increasing that price only the Pioneers have to pay - has no valid reuslts based on the $ 150 mio-investment into the vehicles! All prices I got are significantly higher than $ 200,000 which is the only price published by Virgin Galactic officially - so each price calculated my way has to be considered to be invalid. This is a remarkable result since it might have two different meanings:

1. Virgin Galactic internally really do think of flying more than 3,000 atronauts in five years.
2. Virgin Galactic doesn't apply the $ 150,000,000 fully yet.

Additionally the result could be an argument against the infratstructure-etc.-investment of $ 100 mio.

Regarding the formerly applied $ 100 mio for the vehicles the reuslts are around the Pioneer-price of $ 100,000 if the variable costs are between $ 1,000 and $ 10,000 per flight (not per passenger). At varibale costs of $ 20,000 per flight the Pioeer-price is at nearly $ 122,000 already and if the licence costs are included it is at $ 146,000 then.



The third case was that the prices are kept at $ 200,000 for the Founders, $ 100,000 for the Pioneers and $ 20,000 for all customers else.

If a shift from the customers else to the Pioneers is considered and only the depreciation of the $ 150,000,000 for the vehicles are taken into account then between 694 and 1298 of the "customers else" would have to be shifted to the Pioneers. The shift of 1298 would change the relation between the Pioneers and the customers else so that there are more Pioneers than customers else c- I am not sure if Virgin Galctic might consider that to be reasonable. Regarding the other cases the shifts increase. If the vehicles, the licence costs, the investments into infrastructure etc., the labour costs and the 10% safety-margin are applied all then invalid results are got for variable costs of $ 120,000 to $ 130,000 and more. There then is a negative number of customers else - there would be required more than 3,000 astronauts to break even. If only the vehicles, the vehicles plus licence or vehicle plus licence and infratsructure are considered then at variable costs 0f $ 100,000 to $ 130,000 the accumulation of the
capital required for a CXV within one decade is endangered at the lower boundary of the flight rates why it seems to be possible to achieve it at the upper boundary. I got even losses AFTER the break-even-point for the higher boundary of the variable costs. These are due to the circumstance that the higher revenues from Founders and Pioneers will not be repeated after breaking even. The first case this occurs is where the depreciations of the vehicles and the infrastructure plus the licence costs are included. After that the complete upper value step by step result in losses at the lower boundary of the flight rate - but not totally at the upper boundary. But this all would be connected to a shift of most of the customers else to the Pioneers which also is very unlikely in my eyes.
A shift from the Pioneers to the Founders has valid results for the formerly applied investment of $ 100,000,000 into the vehicles only - this again might mean that either the 3,000-astronauts-case or the $ 150,000,000-case isn't really applied by Virgin Galactic. Between one and 138 Pioneers would have to be shifted to the Founders - this can lead to the situation that there are more Founders than Pioneers and again I am not sure if Virgin Galactic would do that.



Fourth the best case of 400 Pioneers has to be applied to look for required increases of the price the customers else would have to pay. The impact isn't that large. What'Äs remarkable perhaps is that the prices drop below $ 20,000 if only the formerly applied $ 100 mio are used and the variable costs areN't higher than $ 10,000 while that price is around $ 20,000 if the licence costs are included and the variable costs are between $ 5,000 and $ 20,000.



The consideration of an increase of the Pioneer-price in the best case of 400 Pioneers - fifth case - a third time leads to invalid results for $ 150 mio!



And at least the shift of customers from one group to another has to be considered.

Regarding the shift of customers else to Pioneers there is no change. The reason is that the sum of the customers else and Pinoneers remains unchanged since 2,600 customers else plus 300 Pioneers is 2,900 as well the sum of 2500 customers else and 400 Pioneers.

The shift of Pioneers to Founders leads to valid results for the formerly applied $ 100 mio only - but not for all of them. Without the licence costs the number of Founders would drop. I think that of the officially published 500 contractors 100 will have a contract to pay $ 200,000 already - this can't be changed that easyly anymore. If the licence costs are included then the results for variable costs equal to and below $ 5,000 are invalid - for the same reason. But fo variable costs between $ 10,000 and $ 20,000 between 14 and 58 Pioneers are shifted to the Founders.



This leaves questions and I will find it interesting to do the summary I think and to look into the cases where the investments are not totally depreciated at the break-even-point.



Dipl.-Volkswirt (bdvb) Augustin (Political Economist)

Virgin Galactic break-even-analysis and -acceleration

break-even-points, profits



Appendix

Increase of prices

Code:
fixed     var.costs   new least       profits
costs                 price           428.57 flts         500 flts

           - 300 Pioneers - increase of Pioneer-price -
               - $ 100 mio only for the vehicles -

veh.      fr. 1,000   fr. 94,761.90   fr.283,857,142.90   fr.331,166,666.70
          to 10,000   to 107,619.05   to 318,571,428.60   to 371,666,666.70
             20,000      121,904.76      357,142,857.10      416,666,666.70
veh,lic   fr. 1,000   fr.118,650.79   fr.354,090,476.20   fr.413,344,444,50
          to 20,000   to 145,793.65   to 427,376,190.50   to 498,844,444.50


(continuation)
                      profits
                      3000 flts

veh.      fr. 1,000   fr.1,987,000,000.00
          to 10,000   to 2,230,000,000.00
             20,000      2,500,000,000.00
veh,lic   fr. 1,000   fr.2,487,233,334.00
          to 20,000   to 3,000,233,334.00

           - 400 Pioneers - increase of the price of the customers else -
                           - $ 150 mio for the vehicles -

veh.      fr. 1,000   fr. 36,171.43   fr.108,085,714.30   fr.126,100,000.00   
          to130,000   to  58,285.71   to 119,142,857.10   to 139,000,000.00   
veh+lic   fr. 1,000   fr. 39,038.90   fr.115,252,381.00   fr.134,700,000.00   
          to130,000   to  61,152.38   to 126,309,523.80   to 147,600,000.00   
veh+lic   fr. 1,000   fr. 53,038.90   fr.150,252,381.00   fr.176,700,000.00   
+infra    to130,000   to  75,152.38   to 161,309,523.80   to 189,600,000.00   
veh+lic   fr. 1,000   fr. 71,269.50   fr.195,830,881.00   fr.231,394,200.00   
+inf,lab  to130,000   to  93,383.78   to 206,888,023.80   to 244,294,200.00   
veh+lic   fr. 1,000   fr. 80,779.30   fr.219,605,397.60   fr.259,923,620.00   
+inf,lab  to130,000   to 102,893.59   to 230,662,540.50   to 272,823,620.00   
+10%



(continuation)
                      profits
                      3000 flts

veh.      fr. 1,000   fr.  756,600,000.00
          to130,000   to   834,000,000.00
veh+lic   fr. 1,000   fr.  815,366,666.70
          to130,000   to   892,766,666.70
veh+lic   fr. 1,000   fr.1,102,366,667.00
+infra    to130,000   to 1,179,766,667.00
veh+lic   fr. 1,000   fr.1,476,110,367.00
+inf,lab  to130,000   to 1,553,510,367.00
veh+lic   fr. 1,000   fr.1,671,061,403.00
+inf,lab  to130,000   to 1,748,461,403.00
+10%

           - 400 Pioneers - increase of Pioneer-price -
               - $ 100 mio only for the vehicles -

veh.      fr. 1,000   fr. 76,071.43   fr.227,785,714.30   fr.265,750,000.00
          to 10,000   to  85,714.29   to 252,857,142.90   to 295,000,000.00
             20,000       96,428.57      280,714,285.70      327,500,000.00
veh,lic       1,000       93,988.90      280,102,381.00      327,025,000.00
          fr. 5,000   fr. 98,273.81   fr.291,245,238.10   fr.340,025,000.00
          to 20,000   to 114,345.24   to 333,030,952.40   to 388,775,000.00



(continuation)
                      profits
                      3000 flts

veh.      fr. 1,000   fr.1,594,500,000.00
          to 10,000   to 1,770,000,000.00
             20,000      1,965,000,000.00
veh,lic       1,000      1,969,316,667.00
          fr. 5,000   fr.2,047,316,667.00
          to 20,000   to 2,339,816,667.00




Shift of customers

Code:
fixed     var.costs   incrse     profits
costs                 to-grp     428.57 flts         500 flts

           - Shift of customers else to 300 or 400 Pioneers -
                  - $ 100 mio only for the vehicles -

veh.      fr. 5,000   fr.   +2   fr. 57,857,142.86   fr.67,500,000.00
          to 10,000   to   +29   to  55,714,285.71   to 65,000,000.00
             20,000        +83       51,428,571.43      60,000,000.00
veh,lic       1,000        +70       58,138,095.24      68,066,666.67
          fr. 5,000   fr.  +92   fr. 56,423,809.52   fr.66,066,666.67
          to 20,000   to  +172   to  49,995,238.09   to 58,566,666.67



(continuation)
                      profits
                      3000 flts.

veh.      fr. 5,000   fr. 405,000,000.00
          to 10,000   to  390,000,000.00
             20,000       360,000,000.00
veh,lic       1,000       415,566,666.70
          fr. 5,000   fr. 403,566,666.70
          to 20,000   to  358,566,666.70


           - Shift of customers else to 300 or 400 Pioneers -
                     - $ 150 mio for the vehicles -

veh.      fr. 1,000   fr. +606   fr. 59,571,428.57   fr. 69,500,000.00
          to130,000   to +1297   to   4,285,714.29   to   5,000,000.00
veh+lic   fr. 1,000   fr. +695   fr. 58,138,095.24   fr. 68,066,666.67
          to130,000   to +1387   to   2,852,380.95   to   3,566,666.67
veh+lic   fr. 1,000   fr.+1133   fr. 51,138,095.24   fr. 61,066,666.67
+infra    to130,000   to +1824   to - 4,147,619.05   to - 3,433,333.33
veh+lic   fr. 1,000   fr.+1703   fr. 42,022,395.24   fr. 51,950,966.67
+inf,lab  to130,000   to +2394   to -13,263,319.05   to -12,549,033.33
veh+lic   fr. 1,000   fr.+2000   fr. 37,267,491.90   fr. 47,196,063.33
+inf,lab  to130,000   to +2691   to -18,018,222.38   to -17,303,936.67
+10%



(continuation)

veh.      fr. 1,000   fr. 407,000,000.00
          to130,000   to   20,000,000.00
veh+lic   fr. 1,000   fr. 405,566,666,70
          to130,000   to   18,566,666.67
veh+lic   fr. 1,000   fr. 398,566,666.70
+infra    to130,000   to   11,566,666.67
veh+lic   fr. 1,000   fr. 389,450,966.70
+inf,lab  to130,000   to    2,450,966.67
veh+lic   fr. 1,000   fr. 384,696,063.30
+inf,lab  to130,000   to -  2,303,936.67
+10%



           - Shift of Pioneers to Founders - 300 Pioneers -
                 - $ 100 mio only for the vehicles -

veh.      fr. 5,000   fr.   +2   fr. 57,857,142.86   fr.67,500,000.00    fr. 405,000,000.00
          to 10,000   to   +23   to  55,714,285.71   to 65,000,000.00    to  390,000,000.00
             20,000        +66       51,428,571.43      60,000,000.00        360,000,000.00
veh,lic   fr. 1,000   fr.  +56   fr. 58,138,095.24   fr.68,066,666.67    fr. 415,566,666.70
          to 10,000   to   +95   to  54,280,952.38   to 63,566,666.67    to  388,566,666.70
             20,000   to  +138       49,995,238.09      58,566,666.67        358,566,666.70


(continuation)
                      profits
                      3000 flts.

veh.      fr. 5,000   fr. 405,000,000.00
          to 10,000   to  390,000,000.00
             20,000       360,000,000.00
veh,lic   fr. 1,000   fr. 415,566,666.70
          to 10,000   to  388,566,666.70
             20,000       358,566,666.70




           - Shift of Pioneers to Founders - 300 Pioneers -
                 - $ 100 mio only for the vehicles -

veh,lic   fr.10,000   fr.  +15   fr. 54,280,952.38   fr.63,566,666.67    fr. 388,566,666.70
          to 20,000   to   +58   to  49,995,238.09   to 58,566,666.67    to  358,566,666.70



(continuation)
                      profits
                      3000 flts.

veh,lic   fr.10,000   fr. 388,566,666.70
          to 20,000   to  358,566,666.70


End of Appendix


Back to top
Profile
Moderator
Moderator
avatar
Joined: Thu Jun 03, 2004 11:23 am
Posts: 3745
Location: Hamburg, Germany
Post    Posted on: Sat Feb 18, 2006 1:16 pm
Summary - choose the chapter of your interest

Contents

I. Important - Meaning of the Numbers
II. Nature of the Results
III. Profits
IV. Variable Costs
V. Methods used
VI. Tools and Formulars
VII. Sources of public available numbers
VIII. Turn-around-Time and number of flights
IX. Fixed Costs
X. Revenues
XI. Not included
XII. New prices
XIII. Modified customer groups
XIV. Probability of sufficient accumulation
XV. Virgin Galactic's Strategy
XVI. Possible additional startegies and tactics
XVII. Definitions
XIX. Missing informations
XX. Remarks regarding the future
XXI. Market competition
XXII. Mentioned by others
XXIII. Outlook regarding this thread





I. Important - Meaning of the Numbers

The numbers calculated in this thread up to now - profits and variable costs, new prices and new numbers of customers - are simply results of formulars and Excel-spreadsheets into which numbers made public are inserted. These numbers are made public by Virgin Galactic (mostly).

So all the numbers are simply implied by what is made public - they are logical derivations. They only make explicit what is implied - they are the meaning of what's made public and thus describe a potential and a potentiality. They are NO look into the future, they are NO forcast, they are NO prdection etc.

At least some of the calculated numbers - profits, variable costs, new prices, new numbers of customers - change when at least one of the published numbers is updated by a new article, a new statement of Virgin Galactic and the like.



II. Nature of the Results

The variable costs are averaged costs - but not economies of scale. Since Virgin Galactic have said that the final price of $ 20,000 will be due to economies of scale a follow-on conclusion would be required if it were possible. This conclusion would derive higher initial variable costs but less final variable costs compared to the average costs calculated in this thread. But there are no informations made public which would enable this conclusion.

Throughout the thread tables of precise numbers are used. This precision simply is the logical result of using Excel. Excel necessaryly gives precise numbers which are used here to enable direct checks by doing your own Excel-calculations. More important yet - to do so prevents excess of rounding errors. Economically all $-numbers are to be rounded to $ 1,000.



III. Profits

The profits calculated are sufficient to accumulate the capital required to develop and build a private orbital vehicle. This might be the CXV, an orbital SS3 developed by Scaled Composits, Virgin Galactic and/or The Starship Company or even the orbital vehicle SpaceDev has in mind. But since Virgin Galactic is working with Scaled Composites - id est Richard Branson is working with Burt Rutan - it seems unlikely to me that the profits will be available for SpaceDev unless Burt Rutan agrees. And Virgin Galactic/Richard Branson have promised to Rutan that the profits will be reinvested into the evhicles. There is the only chance that this meant reinvestment into private space vehicles which not necessaryly must be vehicles developed by Scaled Composits.

The most proper calculated profits vary from $ 99 mio to $ 284 mio linked to numbers of flight from 500 to 3000. These numbers of flight may be possible per year but don't really need to be per year - this depends on the turn-around-time, the dates when the customers are free to do the flight and on the market.

There are profits above $ 1 bio also but I am not sure how likely they are.

Profits which wouldn't accumulate the required captial for the development and building an orbital vehicle I got only by calculations inconsistent with the methods etc. or by applying combinations or situations which seem very unlikely to me. Additionally I got such profits at for the lower flight numbers when the calculations didn't be sufficiently proper yet.

Virgin Galactic have projected a Worst-Case-Scenario and a Best-Case-Scenario. In the Best-Case-Scenario they are in the profit zone by six to nine months earlier but the effect on the profits seems to be marginal only.

The profits are listed here:

page 1: $ 104,000 to $ 57 mio - inconsistent, improper
page 2 3. post of page or 18. post of thread: $ 7 mio to $ 45 mio - inconsistent, improper
page 3 8. post of page or 38. post of thread: $ 106 mio to $ 229 mio ($ 5 mio to $ 25 mio inconsistent) if worst case is sufficient
$ 99 mio to $ 221 mio ($ 3 mio to $ 23 mio inconsistent) if best case is required
page 3 12. post of page or 42. post of thread: profits for the vehicle-investment of $ 150 mio
$ 160 mio to $ 284 mio if worst case sufficient
$ 153 mio to $ 276 mio if best case required
profits listed in the first and the second table of the Appendix of that post
page 3 13. post of page or 43. post of thread: profits for price increase of cust. else in 3000 cust. case + veh.-inv. $ 100 mio
page 3 14. post of page or 44. post of thread: $ 115 mio to $ 1.746 bio
only table of post - profits for price increase of cust. else in 3000 cust.
case + veh.-inv. $ 150 mio

page 3 8. post of page or 38. post of thread: earlier entries into profit zone
first table of post



IV. Variable Costs

To get the profits it is required to calculate the variable costs first since there are no public informations about them. But to do so also is an answer to the question valid in at least one other post for what a suborbital trip costs.

The variable costs calculated vary between around $ 1,000 to $ 124,000. The reason is that because of the method used the higher the fixed costs are the less the variable costs must be. More about this later.

Three single values are got in the 3000 astronauts-case - variable costs of $ 7,000 in the best case, and under inclusion of licence costs $ 4,666.67 in the worst case and $ 23,333.33 if the best case is required.

The most proper variable costs are to be found here:

page 3 7. post of page or 37. post of thread: $ 22,000 to $ 102,000 at veh.-inv. of $ 100 mio
second table of post
page 3 10. post of page or 40. post of thread: $ 900 to $ 108,000 at veh.-inv. of $ 150 mio
fourth tabel and seventh tabel of Appendix of post

page 2 4. and 5. post of page or 19. and 20. post of thread provide an example of a conclusion from the calculated variable costs to economies of scale - but it is one example of an infinite number of possible conclusions only. So nothing should be based on it.

Further variable costs got in descending order of how completely available date have gone into the calculation are

page 3 6. post of page or 36. post of thread: $ 14,000 to $ 99,000
third table of post
page 3 2. post of page or 32. post of thread: $ 32,000 to $ 124,000 interests included
second table of post
page 3 1. post of page or 31. post of thread: $ 18,000 to $ 121,000
third table of post

Initially the lower boundary of the variable costs was $ 21,000 always - going up to $ 117,000 at page 1 and $ 121,000 at page 2 3. post of page or 18. post of thread.



V. Methods used

The methods used are methods of Enterprise Economics. In principle it's only one methods used in several different ways.

The method is called Break-Even-Point-Analysis. In companies the method is used to look when the company, a part of the company, a product of the company etc. will enter the profit zone. Since this is a transition from loss to profit the method uses a profit of zero. Looking from outside the company it is possible to conclude by using numbers published to the numbers NOT made public if sufficient numbers are made available by the company.

There is a principle the method is combined with here - a private company wants to earn a profit or at least not to suffer a loss. So the company can't be working at costs which are higher than the revenues. The revenues got by mulitplying the number of sales of a product/service with its price. Logically the varaible costs can't be higher than the price. The price is known here - there are several prices and several groups of customers - and so it is easy to get an upper boundary of the variable costs.

In short - the Break-Even-Point-Analysis is incorporated here into a Upper-Boundary-Principle which might be called a method also perhaps.

A lower boundary can't be found yet - it simply needs to be above zero since nothing can be produced or done without costs. So a widening corridor between the upper boundary and zero is the result.



Later the Break-Even-Point-Analysis is used to find out the lower boundaries of new prices and new numbers of customers. How this is done is described at page 3 13. post of page or 43. post of thread.



VI. Tools and Formulars

Excel has been used to do the calculations. This means that the Break-Even-Point-Analysis has been translated into Excel-spreadsheets:

More flexible and improved
Initial version including some numbers

The way the new prices and new numbers of customers are calculated isn't available as spreadsheet here. The Break-Even-Point-Formular currently is the first step of a second-step-method which I am going to transform into a formular. currently it is explained at page 3 12. post of page or 42. post of thread.

The formulars the Excel-spreadsheets are based on can be found and are derived here:

page 1 3. post of page and 3. post of thread: break-even-point
page 2 3. post of page or 18. post of thread past the tables: break-even-point
page 2 12. post of page or 27. post of thread: shift/acceleration of break even by best case - two steps



VII. Sources of public available numbers

The information about the projected scenario including the distinction between worst case and best case is took from "Virgin Galactic Update" ( www.xprizenews.org/index.php?p=993 ). Sam Dinkin is quoting an information here which Virgin Galactic have sent to those registered customers they already had that time. This information is a little more than six months old and there is no direct information available by them which has been published by space.com for example, no interview or the like.

The number of seats per vehicle is got from the article "Richard Branson and Burt Rutan Form Spacecraft Building Company" ( www.space.com/news/050727_branson_rutan.html ) which is of similar age and so can be considered to be age-consistent to the previous listed one nearly sufficiently. The age of this article is of less meaning compared to the age of the first article for at least two reasons. First there are younger articles speaking of the same number of seats. Second the size and design of the vehicle can't be permanently changed since the design-process has to proceed so that the date "late 2008" of beginning of operations can be kept by Virgin Galactic. They have to get ready the design, produce a first vehicle and then do tests and test-flights. Compared to this the projections can be changed hundreds of times until the beginning of operations except the edge-price the Founders have to pay of $ 200,000.

Another information aging much less still or - more precisely - probably not aging at all are the licence costs which have been published in "Scaled.com: Virgin Group Sign Deal with Paul G. Allen’s Mojave Aerospace Licensing the Technology To Develop The World’s First Commercial Space Tourism Operator" ( www.xprizenews.org/index.php?p=523#more-523 ).

To be able to include labour costs the article "Hybrids In The News" ( www.xprizenews.org/index.php?s=Virgin ) provides the number of pilots but doesn't list additional employees which might be needed and hired perhaps. So I used a number increased by one third as implicit safety margin. An information about wages etc. to be paid to the employees was required and I din't want to spend too much time to look for it. So I used a german source about what is paid after eight to twelve years to a Flight Captain by Lufthansa. The information is from the 18th of July 2005 and so is age-consistent with the first article listed. It has neem published by the german newspaper "Süddeutsche Zeitung" in a "Gehaltstest" - I presently don't remeber the english translation of "Gehalt" but it is a kind of income similar but not equal to a wage.

"Clear skies for Virgin spaceliner" ( news.bbc.co.uk/2/hi/science/nature/4365612.stm ) was the reason to look into the best case since up to then the worst case has been considered only. Since Virgin Galactic consider themselves to able to survive in the worst case the variable costs calculated for the worst case should be considered to be valid in the best case too. Then the article must be considered to mean a shift which has been analyzed for this reason.

I allways remembered an information about the total investment exceeding the vehicles by millions and late but finally found it in Shatner aims for real ‘Star Trek’" ( www.spacefellowship.com/News/?p=614#more-614 ). The number is from late 2004 and so already could be considered to be aged the time I made use of it. But first I have been using a total investment higher than that number already and second it is not to be expected that the number reported by that article will be reudced - this would be unusual simply. The number then has been updated by the article "New Mexico Spaceport: Getting Down To Business" ( www.space.com/news/060102_nm_spaceport.html ).

From "Space Tourism: Next Steps Taking Shape" ( www.space.com/news/050426_tourism.html ) is the number of 3,000 astronauts used in the second way of usage of the Break-Even-Point-Analysis. It also includes other numbers of astronauts used in an early comment. The number 3,000 is age-consistent to all the article used because Virgin Galactic still continues to use that number officially. The number can be doubted as result of the calculations done in this thread.



VIII. Turn-around-Time and number of flights

I didn't quote and list articles about the turn-around-time of SpaceShipOne and the information that Rutan and Branson are working to reduce it. But I assume to be well-known that the first XPRIZE-flight was at 29th of Septemebr 2004 and the second at 4th of October 2004. So one turn-around took not more than five days really. Ass far as I remember Scaled Composites have investigated SSO a little bit druing that time and so might hevae been able to do the second flight even earlier - but this is speculation only. To include all possible future reductions of turn-around-time I assumed a minimum of one hour to be possible. This is done only as one of the boundaries of another corridor - the other boundary being five days. Because Virgin Galactic and Burt Rutan have said to break even within alimited amount of time - five years - these data both together combined with the number of vehicles - five - are an information about the number of flights between the beginning of operations and break-even-date. This also is an information about the possible number of flights per year. page 1 4. post of page and 4. post of thread include tabels about the turn-around-time - the first table of the post is followed by a time-table of flights. From the first tabel the range of number of flights used during the thread is took - that range doesn't include the last row of the table.



IX. Fixed costs

The fixed costs used are ranging from $ 100 mio and $ 351 mio. The upper portion of the range includes an explicit saftey margin of 10% and interests at a rate of 6% partially - both of which are not related to sources listed above.

For details look here:

page 2 15. post of page or 30. post of thread: investmenet to be depreciated - without the later update.
page 1 4. post of page and 4. post of thread: employees/labour costs

page 3 1. post of page or 31. post of thread first table: fixed costs of all kinds used here
page 3 6. post of page or 36. post of thread first table: fixed costs of all kinds used here
page 3 10. post of page or 40. post of thread: fixed costs of all kinds used here
first table, second table and fifth tabel of Appendix of post
page 3 4. post of page or 34. post of thread: fixed costs of all kinds used here



X. Revenues

The total revenues vary with number of flights. Only the revenues got from the Founders and the Pioneers are given as prices and numbers of customers from one of the sources listed above. These given revenues are $ 50 mio and $ 60 mio.

Later on not only the revenues from the customers else are calculated but all revenues. This done when new preices or new numbers of customers are calculated because there were results not allowing for the numbers got from the one source.

Details have been listed here:

page 3 1. post of page or 31. post of thread second table
page 3 2. post of page or 32. post of thread first table
page 3 6. post of page or 36. post of thread second table
page 3 7. post of page or 37. post of thread first table
page 3 10. post of page or 40. post of thread third table and sixth table of Appendix of post



XI. Not included

The calculations don't take into account taxes on profits, revenues or capital and the like.

Also it has not been tried to use economies of scale.



XII. New prices

It turned out that if Virgin Galactic thinks to break even within five years by flying 3,000 astronauts even at an investment of $ 150 mio they must increase the prices for 5the customers else to $ 39,000 to $ 103,000. Details are listed at page 3 13. post of page or 43. post of thread only table of post as well as in the post previous to this summary. The alternative to increase the price the Pioneers pay and leaving the price of the customers else at $ 20,000 doesn't work - there are no valid results.

If the 3,000 astronauts are flown at investment costs of $ 100 mio then the prices caould be kept if the variable costs are ranging from $ 1,000 to $ 10,000.



XIII. Modified customer groups

Since at least one price has been made public officially by Virgin Galactic and three different prices have been listed to registered customers according to Sam Dinkin they may be forced to keep those prices and only could modify the number of customers per group.

3,000 astronaust at an investment of $ 150 mio would mean a shift of 694 to 1298 customers to the Pioneers

Regarding a shift from the Pioneers to the Founders I said in the previous post that I got invalid results only. The reason was that I got negative numbers of Pioneers. But this can be interpreted differently - it menas that it is insufficient to shift the Pioneers to the Founders and that additionaly customers else have to be shifted to the Pioneers. Using that interpretation all cases are valid since even in the case with highest fixed and the highest varaible costs there are customers else left.

At an investment of $ 100 mio only a shift of one to 138 Pioneers to the Founders would be sufficient.



XIV. Probability of sufficient accumulation

The numbers given or referred to under Profits indicate that there is a reasonable probability that sufficient capital can be allocated to privately develop a prvate orbital space vehicle like the CXV, SpaceDev's orbital vehicle or even an orbital SS3.

There was an early issue by Burt Rutan use at page 1 4. post of page and 4. post of thread past the fifth table of post and the five remarks.

But what has been calculated that time wasn't sufficient and the 3,000 astronauts-case required to leave away some costs. The probability is better established in between and can be improved further which will be done.



XV. Virgin Galactic's Strategy

The projections Sam Dinkin has reported are a special price policy called market discrimination which in Germany at least isn't allowed in general because it doesn't reflect differences in product or service. If market discrimination reflects such differences then it's called market differentiation and is allowed really.

Perhaps the flights offered will differ between the three groups or the interior of the vehicles and the service aboard will differ - which might be required. For example before the flights of the Founders there will be no experiences regarding the reactions of their bodies and healths to the flight. Also it is not experienced before these flights if the training is proper. To get all these experiences and to learn by them how to improve training and interior means costs which will disappear then. But these costs are fixed costs and sunk costs. To handle bad reactions of body and health may cause variable costs which will disappear also when the problems are handled. In so far there may be a product differentiation as a result of required further development - and it would involve economies of scale.

The flights of the Pioneers will test the changes and more but now minor changes may be required - justifying another differentiation and causing new economies of scale.

In so far a service differentiation may be behind the market discrimination meaning that it really is a market differentiation as it is allowed in Germany.



XVI. Possible additional strategies and tactics

There some ways how they can simplify their economical life and assist their goal by. they are strategical or tactical mostly.

- Runway: If Virgin Galactic own a runway then of course that runway can be used no tonly to launch their five vehciles but for a lot purposes else - normal airplanes, sports, test-flights etc.
- Depreciations: The deprecitaions could go completely into an orbital vehicles if the market growth isn't that high.
- Deposits: They< can be used to pay the vehicles or other equipment since they are to paid back only if the customer doesn't get his flight.
- Motherships: They might be used to launch small expendabe orbital vehicles also (assisted by "Space Tourism: Next Steps Taking Shape" ( www.space.com/news/050426_tourism.html ) and "Jim Muncy’s on the SpaceShow, SS2 info" ( www.xprizenews.org/index.php?p=929 ))
- Customers flown: They could do a market reserach regarding orbital flight with those customers. The reserach would be similar to thos Prof. Collins and his colleages have done.
- Branson's fortune: Branson could use small portions of his fortune to complete small gaps between the capital accumulated by suborbital flights and the requirements of an orbital vehicle
- Orbital customers: They could offer orbital flights and start to take deposits from people registering and contracting to fill up to close financial gaps.
- Co-investors: Virgin Galactic could decide to be content with hhaving the majority of an orbital investment and accept co-investors. Possibly Space Adventures might be interested if it would enable them to offer their orbital trips cheaper and thus to more people.
- New partners: The Spaceship Company might succeed to sell more vehicles than Virgin Galactic's five - making the new company a natural partner for an orbital investment. Mojave Aerospace Venture then may be interested also perhaps.
- Propellant price: There was compatition regarding propulson between two companies. The losing company might be able and willing to deliver at a less price than the winning one. The engines used up to now were single productions but futurely hundreds or thousands will be needed - there is a reasoblae probability that the propellant price will drop significantly.
- Selling packages: Virgin Galactic may achieve cost savings when travel bureaus sell tickets. This would enable Branson's company to sell packages of trips to the bureaus. The savings then could be used to drop the price.
- Interests: Deposist could be used to earn interests as they aren't invested.
- Variable costs: These costs can be covered by deposits not invested yet - partially at least. So they wouldn't have to finance them by their capital or Branson fortune and can use them for covering fixed costs. More at page 2 4. post of page or 19. post of thread
- Contractors before beginning of operations: From the number of contractors they allways know the revneues they will get nearly for sure. It might be that they recognize large future profits even before late 2008. Then they could start work on for manned orbital vehicle before beginning of operations. More at page 2 4. post of page or 19. post of thread
- t/Space: Scaled Composites is part of that cosnortium and thus knows the experiences, innovations and inventions done or going on there or at the partners. So they could licence these innovations etc. and avoid development costs to reduce the reuqired captial funds and costs. Or an orbital SS3 could be considered to be a prototype and t/Space could be a co-investor.
- Labour costs: They can be turned into variable costs if the pilots are willing to be freelancers regarding the suborbital flights or if simply Virgin Atlantic's pilots are "leased" for these flights. If the pilots wouldn't have to do non-pilot work also then less might have tp be paid to htem. Details are to be found at page 3 10. post of page or 40. post of thread.
- Outsourcing: Virgin Galactic can avoid fixed costs by outsourcing - they seem to be doing so by the partnership with New Mexico regarding the spaceport. This wills ave them some costs like runway maintenance and several others.
- Licence costs: The licence costs could be moved over to Virgin Atlantic as owner of Virgin Galactic or the group could be reorganized so that Virgin Galactic isn't the licence-taker of Mojave Aerospace anymore.
- Lifetime: They might have an idea about the lenth of the lifetime of theri vehicles and so perhaps don't depreciate the vehicles totaly until break-even as done in the claculations of this thread.
- Resale: May be that Scaled Composites and Virgin Galactic see the chance to resell the vehicles if the business doesn't got as required. May be that they have an idea about how to use the White Knights for transportions and to turn the SS2s into airplanes. This will require additional investments but make all the vehicles resellable at several markets.



XVII. Definitions

Throught the thread some special terms have been used and this may continue. Those definitions of those terms including at least one correction of an English-error are listed at page 1 14. post of page and 14. post of thread.

To this I should add something here. Variable costs include propellant costs but not only propellant costs. So in all the claculations and numbers the propellant costs will be less then the numbers used. But the propellant costs are a lower boundary of the variable costs.



XIX. Missing informations

The calculations include numbers only which I could get from articles, informations else I found in the internet or even newspapers and journals.

Some informations weren't available to me:

- Rutan's remarks about the turn-around-time of Virgin Galactic's vehicles. This information would help to fix the number of flights or at least to make the range shorter and more narrow a bit.
- the american ty rates and tay system
- production costs of the vehicles
- how the licence revenues are used by Mojave Aerospace Venture
- additional sources of revenues of Virgin Galactic
- the role The Spaceship Company could play beyond the production of the vehicles.
- the $ 20,000-deposits may be valid for all the three price levles but it also could mean 10%-deposits
- the calculations are based on a price drop after 400 Pioneers but what Sam Dinkin has said might mean that the drop will occur when there have been 1,000 Pinoneers if Virgin Galactic can get that number of Pioneers
- there may be customers depositing more than $ 20,000
- the pilots may be freelancers or airplane pilots in service of Virgin Atlantic



XX. Remarks regarding the future

One day Virgin Galactic will have to replace the five vehicles or at least one or the other of them. Of course they wnat to earn profits which also is indicated by their speaking of the profit zone. To earn a profit means tnat not all vehicles are to replaced then - but depreciations are got. Ass a company they will invest the depreciations so that additional profits or amounts of coverage are earned. This means that the depreciations aren't use for a replacement then. But they will ensure that they have back a sufficient portion of that investment when they need to replace one or more of the five vehicles. Since a couple of years will have gone by then technological or technical progress might enable them to get the replacement at a reduced price or to get vehicles which can carry more than seven passengers. May be that they can significantly reduce the price because of the progress. On the other hand the market might have changed so that they don't need the capacity anymore they create now. The reason may bbe that there are private orbital vehicles then.

In the near future only new numbers about costs and investment into vehicles and investment are to expected. It wouldn't make sense to redo all the lot of calculations then. Perhaps I can form key numbers out of the Break-Even-Point-Analysis instead but I didn't try that yet. If new numbers are made public before that then simply have a look at

page 3 1. post of page or 31. post of thread past the third tabel,
page 3 2. post of page or 32. post of thread past the second tabel,
page 3 8. post of page or 38. post of thread second table or
page 3 9. post of page or 39. post of thread

for the factor to do approximations by.



XXI. Market competition

The only official price Virgin Galactic have made public is $ 200,000 - the projections they don't report themselves but are from Sam Dinkin.

But it may be hard for them to keep that high price since they may be faced to competition by Rocketplane beginning in 2007 - and Rocketplane's price is reported to be between $ 100,000 and $ 150,000. People like Richard Branson and companies like his ones take the simple probability into account which is automatically created by such announcements. So they will try to be enabled to reduce their own price to the Pioneer-price of $ 100,000 really. Their projection as reported by Sam Dinkin explicitly takes into account the competition and may include its reflection by the projected price drops. Virgin Galactic's informations and announcements are meant competitional too because their quick price drops tend to make the life harder for Rocketplane and others.

Starchaser is another serious competitor announcing prices of aroung $ 160,000 - below $ 200,000 also.

The competitive impact of Canadian Arrow isn't that easyly to be judged. Their price is higher at $ 250,000 but they announced more , better and longer training which menas that they are going for product competiton instead of for price competition.



XXII. Mentioned by others

spacecowboy has mentioned - page 1 8. post of page and 8. post of thread - that because of the pretty rough wear-and-tear on a rocket-powered vehicle the vehicles will have to be replaced sooner than later. It's possible to look into that a bit but hasn't been done yet. He espaically mentioned that the engines will have to be replaced more often and earlier than the vehicles. These replacements might be included into the varibale costs or the implicit and explicit safety margins. According to what I answered at page 1 9. post of page and 9. post of thread it might be that the engine has to be replaced after each flight. It might be inseparable linked to the propellant and so nearly identical with it. If it is not then it may be jump-fix or be of low costs compared to one complete vehicle.

According to spacecowboy it might be that the vehicle can land at night. Then the number of flights per year may be higher since more flights are possible reaching space at daylight and only doing the landing at night.



XXIII. Outlook regarding this thread

There were several points meaning that it might be interesting to look at how Virgin Galactic might handle the fixed costs differently than done during the calculations of this thread. In particular the 3,000 astronauts-case seems to mean that perhpas only fixed costs of $ 100 mio are considered. Additionaly the lifetime of the vehicle has been in focus a fewe times. There might be a way to find out what lifetime Virgin Galactic are supposing. spacecowboys post is a good reason to do that.

So I will start to do that in the next post - it is simple and the results don't require any tables.





Dipl.-Volkswirt (bdvb) Augustin (Political Economist)

Virgin Galactic break-even-analysis and -acceleration

break-even-points, profits



End of Summary


Last edited by Ekkehard Augustin on Sat Mar 04, 2006 12:24 pm, edited 2 times in total.



Back to top
Profile
Moderator
Moderator
avatar
Joined: Thu Jun 03, 2004 11:23 am
Posts: 3745
Location: Hamburg, Germany
Post    Posted on: Sat Feb 25, 2006 11:05 am
What has been done up to now:

Summary - - choose the chapter of your interest
(previous post)




The results up to this point seem to indicate that the number of astronauts flown within the time to break-even - five years - is based on fixed costs of $ 100 mio althought the total investment according to public informations is $ 150 mio.

This seems to be possible only if not the total depreciations of the investment are got back by the flkights, the market but only a portion. This would mean that the vehicles - five SS2. and two WK2s - still have some value after those five yeras to be sold perhaps.

So the question is which imaginations and ideas Virgin Galactic etc. might have about the depreciations and that remaining value.

In the CXV-thread I already applied the number of landings per vehicle as criterion of depreciation. The number used there was a lifetime of an airplane of 20,000 landings. This has been applied to a Boeing 747 but was got from wikipedia for an IIlyushin. I haven't found further data for ranges of airplane-sizes and so apply the 20,000 landings here too.

If $ 50 mio of the current known number of $ 150 mio to be invetsed really are the two White Knights then one White Knight would be an investment of $ 25 mio. This divided by 20,000 results in a depreciation of one White Knight of $ 1,250. Two Wihite Knights are to be depreciated menas $ 2,500. At 500 flights this would mean depreciations of $ 625,000 - 0.625% of the investment into the five SS2. This allows for using $ 100 mio only in the calculations and the $ 150 mio don't need to be applied. The then remaining $ 625,000 depreciatiuons of the SS2s not included simply would have to be subtracted from the first profits calculaed in other posts. At 3,000 flights the depreciations would be $ 3,750,000 - still 3.75 % of the SS2-investment only which can be subtracted from the first profits calculated in this thread.

In the CXV-thread the 20,000 landings were doubted because of the CXV slung under the Boeing 747 and so I calculated a least number of landings which were between 10 and 23 flights. But here a least number is already given by Virgin Galactic and Burt Rutan - 3,000 astronauts to be flown within five years has beeen said to be the goal. These mean 428 to 429 flights - and landings. To use this number would mean complete depreciation of the WKK2s in the five yeasr until break-even which isn't the purpose here. Looking from these minimum numbers requires to involve the fact that they want to make profits as many years as possible after breaking even - let's assume five to ten years at least.

Another aspect of the WK2s is that they have been increased accoring to an article Soyuz linked to in a thread in another section of this board - I will add the link later. According to that article they increase the White Knight for orbital operations. It seems a bit as if the increase of the investment from $ 135 mio to $ 150 mio has to do with that. Then $ 15 mio don't have nothing to do with the suborbtial flights and their depreciations could be left away from the calculations - 3ß% of the $ 50 mio for the WK2s.

The same consideraitions - except for the orbital business - could be applied to the SS2s. But this I want to avoid here and prefer something different: If the permanent fixed costs are siubtracted from the $ 100 mio - including the low depreciations of the WK2s - then the remainder are the depreciations of the SS2s. The investment of $ 100 mkio into the SS2s then could be divided by that remainder and is the minimum lifetime of the SS2s by which the number of flights (=landings) could be multiplied . But this method would mean that there never would be profits since from all profuits high depreciations would have to be subtracted.

So the real lifetime of the SS2s will be higher than the minimum calculated the way described above - and ths might mean that they apply depreciations of less than $ 100 mio within five years or that the WK2s are depreciated by a higher rate than the possible one.

I avoid further calculations here since something else has to be done regarding the profits, I want to think about this a bit and I have to do a call now.



Dipl.-Volkswirt (bdvb) Augustin (Political Economist)

Virgin Galactic break-even-analysis and -acceleration

break-even-points, profits

EDIT:

Thze article Soyuz linked to is Virgin space base plan allows for bigger ships in future

The issue I am using here is
Quote:
Plans for future, possibly orbital, spaceships has led Virgin Galactic to increase the size of the SS2’s carrier aircraft, White Knight 2 (WK2), which had been described as having the wingspan of a Boeing 737, but will now be the size of a 757. Both the SS2 and WK2 are being developed for Virgin Galactic by Scaled Composites, which built the suborbital SpaceShipOne


I have to add something to the what I said in this post. Of course depreciations not included into the fixed costs applied in the five years before break-even have to be subtracted from the profits - but by portions only which are determined by the number of flights.

More important however each reduction of the fixed costs applied for the five years before break-even will cause a reduction of the variable costs resulting from the break-even-point-analysis.


Back to top
Profile
Moderator
Moderator
avatar
Joined: Thu Jun 03, 2004 11:23 am
Posts: 3745
Location: Hamburg, Germany
Post    Posted on: Sat Mar 04, 2006 12:36 pm
What has been done up to now:

Summary - - choose the chapter of your interest
(pre-previous post)

prolomged depreciation previous post

Correction

In the previous post I said that areduction of the fixed costs would mean a reduction of the variable costs calculated here also - there I confused writing with thinking further. If the fixed costs are reduced then the new prices got for the 3000 astronauts-case drop but if Virgin Galactic's projections are used and the fixed costs are reduced then the variable costs got by the calculations of this thread will be increased! This would have impacts on the profits which would be positive as long as the total variable costs don't equal the difference by which the fixed costs are reduced.



Revising the profits

It is important and essential to remark that maximum variable costs are applied to all numbers of flights in the following tables:

page 1: 4. post of page and 4. post of thread: $ 104,000 to $ 57 mio - inconsistent, improper
page 2 3. post of page or 18. post of thread: $ 7 mio to $ 45 mio - inconsistent, improper

This use of the maximum variable costs seems to be confusing, improper and inconsitent to me. The following needs to be clarified:

1. To do so meant that really 3000 flights within five years were required to break even but it is assumed that the number of flights might fall to 500 flights but not be increased to more then 3000 flights. More is considered to be not possible here - but it is not clear why the number of flights should fall down to 500. Explanations could be found but what does the number 500 really mean? 500 flights within one year or within another five years? 500 flights within one year would mean 2500 flights within five years - but this still would mean a drop by 500 flights compared to the time to break-even.
2. The use of the maximum variable costs is the most pessimistic case. Why being that pessimistic? The only reasonable reason here would be to avoid overestimated profits - but this doesn't explain anything.
3. What if the number of 500 flights is understood or meant to be a repetition of the minimum number of 500 flights until break even? Then the use of the maximum variable costs would be inconsistent.

As can be seen it's confusing, improper or inconsistent to do as has been done - some principles are required urgently. In the fourth post of the first page I explicitly used the profits as profits per year - but what about it under the aspect that the number of flights used has been done within five years? How does this fit into each other? The only explanation is that I considered the flights being anyhow distributed and spread over the five years until break even while because of the turn-around-time that number of flights might be done within one year also. If it would be like that in reality then the two initial prices may be the cause as well as the fact that the five years before break-even are an initial phase required to get Virgin Galactic's employees the experiences and learning effects to enable them to easyly turn around the vehicles as fast as possible. This is valid for the third post of the second page also.



Checking the following tables it turned out that they aren't commented confusingly but are left uncommented:

page 3 8. post of page or 38. post of thread: $ 106 mio to $ 229 mio ($ 5 mio to $ 25 mio inconsistent) if worst case is sufficient
$ 99 mio to $ 221 mio ($ 3 mio to $ 23 mio inconsistent) if best case is required
page 3 12. post of page or 42. post of thread: profits for the vehicle-investment of $ 150 mio
$ 160 mio to $ 284 mio if worst case sufficient
$ 153 mio to $ 276 mio if best case required
profits listed in the first and the second table of the Appendix of that post
page 3 13. post of page or 43. post of thread: profits for price increase of cust. else in 3000 cust. case + veh.-inv. $ 100 mio
page 3 14. post of page or 44. post of thread: $ 115 mio to $ 1.746 bio
only table of post - profits for price increase of cust. else in 3000 cust.
case + veh.-inv. $ 150 mio

page 3 8. post of page or 38. post of thread: earlier entries into profit zone
first table of post

To apply the variable costs got for a particular number of flights only for calculating the profit for this particular number of flights keeps the comparability of the phase before breaking even to the phase after breaking even - regeardless of how longe the phase after breaking even is considered to be. Everybody is free to assume that phase to be one year long, five years long or have any other length - it is urgently required only to assume the same number of years or the same duration for each of the numbers of flights in one and the same table.

In so far the number of years I linked to the profit were my personal choice only.

THe profits are consistent, proper and clear if at least one of the following priciples is applied:

1. The variable costs got for a particular number of flights is only applied for calculating the profit for this particular number of flights - regeardless of how long the phase after breaking even is considered to be. Everybody is free to assume that phase to be one year long, five years long or to have any other duration + the same number of years or the same duration of that phase is assumed for each of the numbers of flights in one and the same table.
2. The flights are considered to be anyhow distributed and spread over the five years until break even while because of the turn-around-time that number of flights might be done within one year also. In reality then the two initial prices may be the cause as well as the fact that the five years before break-even are an initial phase required to get Virgin Galactic's employees the experiences and learning effects to enable them to easyly turn around the vehicles as fast as possible.

These two principles not only keep the tables of profits consistent, proper and clear but also provide everyone's freedom to choose any period of time during which the profits are got and the number of flights is done.



Dipl.-Volkswirt (bdvb) Augustin (Political Economist)

Virgin Galactic break-even-analysis and -acceleration

break-even-points, profits


Back to top
Profile
Moderator
Moderator
avatar
Joined: Thu Jun 03, 2004 11:23 am
Posts: 3745
Location: Hamburg, Germany
Post    Posted on: Sat Mar 11, 2006 11:28 am
What has been done up to now:

Summary - - choose the chapter of your interest
(third-previous post)

prolomged depreciation (pre-previous post)
Revising the profits (previous post)

In between I calculated one case where the price didn't drop but was kept at $ 200,000. I got variable costs close to the $ 1 mio-mark. I didn't continue because of the plower prices I already mentioned in the summary and because of Whitehorn speaking about price drops and economies of scale.

Some of the numbers used in this thread up to now might be used as milestones to watch the state of accumulation of the capital required for a CXV, a SpaceDev-concepted orbital vehicle or a SS3.

I propose to use the following numbers:

Customers 100, 400, 500, 1000, 3000, 3500, 7000, 10500, 14000, 17500, 21000
Flights 15, 58, 72, 143, 429, 500, 1000, 1500, 2000, 2500, 3000
Deposits 2 mio, 8 mio, 10 mio, 20 mio, 60 mio, 70 mio, 140 mio, 210 mio, 280 mio, 350 mio, 420 mio

There was an article used in this thread reporting a number of contractor of 100 - so the first customer-milestone listed is already achieved. There was another article used also in this thread reporting an amount of deposits got of $ 10 mio - so the third deposits-milestone is achieved already too.



Now there is the news Soyuz posted in another thread of this board saying that the WK2 has been increased, Virgin Galactic might use QuickReach for umanned orbital launches and there is the chance that the increased WK2 could launch the CXV perhaps (CXV-thread). And there is the news at Airlaunch LLC that there were several successful QuickReach-tests in 2005 and that it may be ready this fall (if I understand the news correct). This might be a sufficient reason to have a look at the reaccumulation of the CXV.

Reaccumulation is nothing else than getting back the total investment into something from the market. In other words when the CXV is completely depreciated it can't be used anymore and it should have accumulated sufficient capital to build a new CXV.

In the Collins-thread I used a price policy similar to what Sam Dinkin reported about Virgin Galactic's projections and got the result that the price for a ticket for a flight of the CXV might go down to $ 1.7 mio to $ 3 mio (?) if the initial price is between $ 15 mio and $ 19 mio. But I didn't consider the question if this would be sufficient for the required reaccumulation.

In the calculations in the CXV-thread as well as in the Collins-thread I applied a lifetime of the CXV of 21 flights. Since the investment into the CXV is $ 400 mio there has to be an average depreciation of $ 400 mio/21 = 19,047,619.05 per flight which would be 4,761,904.76 per passenger if four passengers would be flown per flight or 3,809,523,89 per passenger at five passengers per flight. So the lower prices I got in the Collins-thread require higher prices at the beginning - as I applied in the Collins-thread.

The problem with this is that the price per ticket would have be increased after the last flight of the lifetime of the CXV to enable the new CXV to reaccumulate itself and allow for the low prices calculated also. I suppose that the market wouldn't accept that which means that the least price would have to be between $ 3.81 mio and $ 4.77 mio - plus the coverage of the variable costs of $ 10 mio per flight for the booster. These variable costs I covered by the initial high price also.

To allow for the prices got the number of flights per lifetime has to be larger. At four persons per flight the variable costs per passenger are $ 10mio/4 = $ 2.5 mio while at five persons they would be $ 2 mio. Let's assume that the depreciation per passenger shouldn't be more than $ 100,000 - the depreciation per flight would be $ 400,000 in the case of four passengers and $ 500,000 in the case of five passengers. This would mean that a lifetime of $ 400 mio/$ 400,000 = 1000 fligths is required if four passengers per flight are flown and 800 flights at five passengers. This number of flights would be similar and even less than those used for the suborbital SS2 in this thread.

Now the number of flights per lifetime used in the CXV-thread is oriented by the least number of flights to amortize the budget at flight costs of $ 20 mio and so may be far below the actual or real number of flights possible during the lifetime of the CXV.

In the Collins-thread I also applied the possibility that the $ 10 mio-booster is reusable and got a least price of $ 25,000 if I remember correct. For this price the same problems are valid as above. At 21 flights per lifetime depreciations of ($ 400 mio + $ 10 mio)/21 = 19,523,809.52 per flight and so 4,880,952.38 at four persons or 3,904,761.90 at five persons. Varaible costs are & 76,202 per flight only as whonos calculated in the CXV-thread and so are less at $ 19,050.50 per passenger at four passengers only and $ 15,240.40 at five persons. To $ 25,000 $ 6,000 are left in the four.person-case and $ 10,000 are left in the five-person-case - meaning the requirement of 68,334 flights or 41,000 flights.

These astronomical number can be reduced by market differentiation but not the way applied for Virgin Galactic's projections reported by Sam Dinkin. Another way is croos-financing by profits got in the suborbital business.

A CXV capable of carrying significantly more passengers than five will allow for cheap tickets

But there is another solution perhaps - in the Lunar Soyiz-thread I apply the financial properties of the CXV to replace the expendable Soyuz by a reusable vehicle. If the CXV with a capacity of four to five passengers could and would be used for such flights then these lunar flights could push the CXV into the profit zone and allow for cheap prices into orbit. This would mean corss-financing and to use one and the same vehicle within two different market segments - the one segment being orbital tourism and the other segment being lunar tourism.



The results in the Collins-thread are close to the short-ron lower boundary of the price and would be reasonable if there would be no further demand for flights by the CXV when the lifetime of the CXV currently in use is over or if these prices still contribute to the amounts of coverage for fixed costs and/or common costs or Total Costs of Ownership).





Dipl.-Volkswirt (bdvb) Augustin (Political Economist)

Virgin Galactic break-even-analysis and -acceleration

break-even-points, profits


Back to top
Profile
Moderator
Moderator
avatar
Joined: Thu Jun 03, 2004 11:23 am
Posts: 3745
Location: Hamburg, Germany
Post    Posted on: Sat Mar 18, 2006 2:43 pm
What has been done up to now:

Summary - - choose the chapter of your interest
(fourth-previous post)

prolomged depreciation (third-previous post)
Revising the profits (pre-previous post)
Re-Accumulation of the CXV (previous post)

The numbers known up to now can be used to look at the chances to get accumulation by unmanned orbital operations.

The Falcon-competition of DARPA which Air Launch is participaing in by their QuickReach-project will result in a booster having launch costs of less than $ 5 mio for launching a payload of 1,000 pounds. This more than 450 kg and less than 570 kg. A Falcon 1 launch costs $ 6.7 mio and can launch up to 570 kg. The first payload going to be launched by a Falcon 1 weighs less than 100 kg if I remember correct - so that payloadd could be launched using QucikReach alternatively if the booster would be available already. As I calculated in the CXV-thread the costs of the first stage being an airplane can be less than $ 100,000 at a flight rate expected because of the suborbital launches. So the payload going to be launched via the Falcon 1 could be launched using QuickReach an Virgin Galactic's increased WK2 at significantly less than $ 6 mio. This means that the launch via WK2/QuickReach would be significantly cheaper than via the Falcon 1.

Next the QuickReach required to launch the CXV can be considered. It would be able to launch a payload weighing 3,600 kg. This can be compared to the Falcon 5 capable to launch payloads weighing up to 4,200 kg. A CXV-flight costs $ 20 mio but the depreciation of the CXV has to be subtracted from these. A Falcon 5 launch costs $ 18 mio - so if the sum of the CXV-QuickReach and the depreciation of the airplane together is significantly less than $ 18 mio then the CXV-QuickReach is significantly cheaper than a Falcon 5.

So for payloads not heavier than 450 kg or for payloads not heavier than 3600 kg the WK2-QuickReach-combination is cheaper than the according Falcons and may get Virgin Galactic additional significant revenues and profits. If the airplane is depreciated at $ 50,000 per flght and the price of the launch would be at $ 5.7 mio the profit per launch would be $ 650,000 - $ 65 mio at 100 launches.

It would be interesting how heavy the payloads are launches are already scheduled for at SpaceX.



Dipl.,-Volkswirt (bdvb) Augustin (Political Economist)

Virgin Galactic break-even-analysis and -acceleration

break-even-points, profits


Back to top
Profile
Moderator
Moderator
avatar
Joined: Thu Jun 03, 2004 11:23 am
Posts: 3745
Location: Hamburg, Germany
Post    Posted on: Sat Mar 25, 2006 2:56 pm
What has been done up to now:

Summary - - choose the chapter of your interest
(fifth-previous post)
prolonged depreciation (fourth-previous post)
Revising the profits (third-previous post)
Re-Accumulation of the CXV (pre-previous post)



Since I seem to have forgotten to mention it - the Military or in particular the US Air Force might be a potential customer of Virgin Galactic or The Spaceship Company already: QuickReach is a booster DARPA and the Air Force are interested in. So a WK2 capable of launching QuickReach plus payload might be interesting for them.

They could use the WK2 by ordering service from Virgin Galactic at $ 5 mio or less per launch or by buying a WK2 from The Spaceship Company at $ 25 mio which would break even to buying service from Virgin Galactic after five launches.

Both of these possibilities would contribute to the accumulation of capital for a CXV, an orbital SpaceDev-vehicle, a SS3 or any private orbital space vehicle else.



Dipl.-Volkswirt (bdvb) Augustin (Political Economist)

Break-Even-Point-Analysis Virgin Galactic

variable costs etc., profits


Back to top
Profile
Moderator
Moderator
avatar
Joined: Thu Jun 03, 2004 11:23 am
Posts: 3745
Location: Hamburg, Germany
Post    Posted on: Fri Mar 31, 2006 12:47 pm
Articles like "The X-37 Spaceplane to Fly At Mojave Spaceport" ( www.space.com/missionlaunches/060331_x37_update.html ) also show a source of accumulation since Scaled Composites will take a price for their service - a service Virgin Galactic might offer later when they have thier WK2. Scaled Composites then could concentrate on development and tell NASA, DARPA etc. to hire Virgin Galactic for such services.

This way NASA, DARPA, Air Force etc. might get familiar with launches by WK/WK2.



Dipl.-Volkswirt (bdvb) Augustin (Political Economist)


Back to top
Profile
Moderator
Moderator
avatar
Joined: Thu Jun 03, 2004 11:23 am
Posts: 3745
Location: Hamburg, Germany
Post    Posted on: Mon Apr 03, 2006 1:04 pm
There are news about regarding the amount of deposits and the number of contractors.

The article "Virgin Galactic Customers Parting with Their Cash" ( www.space.com/spacenews/businessmonday_060403.html ) says that
Quote:
Virgin Galactic has collected $13 million in cash from some 157 people who have signed contracts ...
and that
Quote:
... Some have deposited the full $200,000 in a Virgin Galactic account to reserve their places. Others have made a $20,000 deposit. ...
.

So the already used numbers of 400 and 500 contractors in total were wrong because some customers have paid the full price and there are 157 contractors only up to now.

More interesting the article also says that
Quote:
The Virgin Galactic business plan calls for 50,000 passengers to be flown in the company’s first 10 years of operations. With that revenue stream, the company is assured of an average 25 percent annual return on invested capital, Whitehorn said.
.

Using $ 150 mio as invested capital means a return of $ 37.5 mio per year applying the number of 25% - if the invested capital isn't higher.

This is worth to go on with the study. But the 25 % schould mean also, that they think to have back their investment after four years. Then they would get depreciation-free returns of $ 245 mio in six years.

And there is another interesting information -
Quote:
Virgin Galactic is also in preliminary talks with NASA and with the European Space Agency on business relations that could include having prospective astronauts from those agencies act as SpaceShipTwo pilots to hone their skills.
.

This seems to point to the possibility that they perhaps don't employ pilots themselves but lease them from others - a point I already listed as a possibility.

But that's not the only point - they might do service for NASA and ESA since the article says that the astronauts are incuded but not the only subject of the business relations.



Dipl.-Volkswirt (bdvb) Augustin (Political Economist)

EDIT: To be quoted also:
Quote:
Virgin Atlantic, Branson’s commercial airline, announced March 29 that the company’s 700 pilots are being invited to apply for positions as Virgin Galactic pilots.

Another side business will be carrying spectators in a separate aircraft to witness SpaceShipTwo in action for lower fees.


The first part of the quote is also on my list of possibilities - but the second one is an idea which didn't come to my mind. I find it a very reasonable source of revenues and thus accumulation.


Back to top
Profile
Moderator
Moderator
avatar
Joined: Thu Jun 03, 2004 11:23 am
Posts: 3745
Location: Hamburg, Germany
Post    Posted on: Thu Apr 06, 2006 6:38 am
To make use of the numbers a bit - nothing conceptional:

50,000 customers to be flown within 10 years mean 5,000 customers per year. At 7 seats per flight these mean 714 to 715 flights per year and so the rows for 500 and for 1000 flights of my tables are the right ones for comparisons.

Next 715 flights per year mean 163 per vehicle per year - that's a turn-around-time of 2 to 2.5 days.

The numbers seem to mean that they don't keep speaking about 3,000 astronauts within five years since these averaged number mean 25,000 astronauts within five years. If they would keep that former number then 47,000 customers would have to be flown within the second five years of the ten-year-period. So 9,400 customers would have to be flown per year - 1342 to 1343 flights. Then the row for 1,500 flights would have to be included into the comparison.

1343 flights per year would mean 269 flights per vehicle per year and a turn-around-time of 1.3 to 1.5 days.

Now all these are business-plan-numbers and the article is giving averaged numbers. They will have taken into account peaks above the average - so the trun-around-time will be shorter than the numbers calculated here.



The return on investment reported is by between $ 50 mio and $ 70 mio less than the profits I calculated - so the reported return on investment can be used to improve the numbers I got. I am thinking about the best way to do that. Perhaps Virgin Galactic's involvement into the New Mexico spaceport project should be included somehow. Then the return on investment of 25% would be higher than the $ 37.5 mio calculated - and the total costs would be closer to what I used to get the tables.



Dipl.-Volkswirt (bdvb) Augustin (Political Economist)



Dipl.-Volkswirt (bdvb) Augustin (Political Economist)


Back to top
Profile
Moderator
Moderator
avatar
Joined: Thu Jun 03, 2004 11:23 am
Posts: 3745
Location: Hamburg, Germany
Post    Posted on: Tue Apr 11, 2006 7:20 am
To do some more calculations for comparisons with the tables - average profits of $ 45 mio per year at an average number of flights per year of 714 would mean $ 63,025.21 profit per flight. At a revenue of $ 1,4 mio per flight this would mean total costs per flight of $ 1,336,974.79 - this would be a bit more than or around the variable costs I calculated for the case that the price is kept at $ 200,000 until break-even-point or beyond that. At a revenue per flight of $ 700,000 the total costs per flight would be $ 636,974.79 and at a revenue of $ 140,000 per flight the total costs per flight would be $ 76,974.79.

I will do a detailed comparison to the tables - the details being simply fixed costs and variable costs.

The higher costs to be assumed because of the informations - compared to my tables - might mean that the projections Sam Dinkin informed about aren't applied like I did it or that investments into the underground mission control at the New Mexico spaceport are included or both of these or that the runway is a larger investment or that the labour costs are increased some way.



Dipl.-Volkswirt (bdvb) Augustin (Political Economist)


Back to top
Profile
Moderator
Moderator
avatar
Joined: Thu Jun 03, 2004 11:23 am
Posts: 3745
Location: Hamburg, Germany
Post    Posted on: Wed Apr 19, 2006 12:46 pm
My thoughts about the comparison(s) in between made me decide to use the recent new informations for enhancing or completing the approach I used to get the tables.

The particular point is that the informations contain the first concrete ideas about the future Virgin Galactic have in mind.

Another essential point is that the informations allow to include investments Virgin Galactic haven't made public yet - no numbers at least. The number about the New Mexico spaceport is the total investment but not Virgin Galactic's part alone. The inclusion can be done via the percentage the ROI is given by.



Dipl.-Volkswirt (bdvb) Augustin (Political Economist)


Back to top
Profile
Moderator
Moderator
avatar
Joined: Thu Jun 03, 2004 11:23 am
Posts: 3745
Location: Hamburg, Germany
Post    Posted on: Sun Jul 16, 2006 3:50 pm
To apply the most recent news from Virgin Galctic I now ignore my earlier comparisons etc. and have a new look on it.

Virgin Galactic said that they will have an Retrun on Investment of 25% per year in average over ten years beginning at start of operations. But there can’t be a Retrun on Investment before they have achieved the break-even-point. Because of this the ROI should be calculated per year, then multiplied by 10 and divided by 5 again – because they said that they will break even after 5 years..

The investment according to the informations available is $ 150 mio. 25% of that are $ 37.5 mio – so in ten years they get $ 375 mio which would require $ 25 mio additional only to invest into the CXV. $ 375 mio divided by 5 is giving $ 75 mio.

Obviously now I get a resuklt that isn’t that far off the profits I calculated – the difference is $ 25 mio to $ 35 mio. You might say that a third or more is a large gap but the point is that their real investment is above $ 150 mio. At least they are investing into the New Mexico Spaceport and build a subterranean mission control there and a runway for the White Knight 2. The additional investment required to get the profits I calculated is $ 100 mio to $ 140 mio – the total investment into the spacecport New Mexico is more than $ 200 mio.

At this point now I will incorporate the calculation done as an equation into the methods applied earlier.

By the way - the article „The New Age of Space Advocacy: Enter the Professionals“ ( www.space.com/adastra/adastra_advocacy_prof_060525.html ) says: [quote]Virgin has also added Customer Relationship Management (CRM) to its brand by creating a discrete group of customers called the “Virgin Galactic Founders.â€


Back to top
Profile
Display posts from previous:  Sort by  
Post new topic Reply to topic  [ 66 posts ] 
 

Who is online 

Users browsing this forum: No registered users and 7 guests


cron
© 2014 The International Space Fellowship, developed by Gabitasoft Interactive. All Rights Reserved.  Privacy Policy | Terms of Use