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The assumption is that borrowed capital is paid off in 10 years. This means that the average annual interest payment would be about $110 million, or about 5% on the capital. (It's more complex that that, but this gives you the general idea.) I think that's quite reasonable.

You're ignoring the incremental operating costs, stated to be $3 million. Otherwise, we're in agreement so far.

Hang on. You've got 10,000 lbs of payload to play with, including accomodation for the crew (one pilot) and a really crowded passenger compartment of three people (which really I think is over-opemistic) People require more care than cargo, and are more expensive to 'replace' than cargo, so the insurance cost, among other things, goes up.

Ten passengers? Come on! That's not a serious possibility. And we've already got a rather good loan, See above.

NOTE-- I started this thread with a quote from someone else about this cost. I did not invent the problem.

(This was my response to a similar question -- actually about SSTO -- on another forum a few days ago. Here I have turned the litigation/compensation risk into insurance premium; it's the only sane way to quantitise it. But since then I now believe that 1% --used below-- is far  too low. I'm told it could be as high as 5%, or even insurers would refuse the risk. That would have a truly devastating effect on the whole project if true.)
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You talk of an orbiting ship that can take about 10,000 pounds payload up, and do it for probably 3 times fuel costs or about $3 million a flight, or $300 a pound to orbit.

Two points.

First:
If it takes $2 billion (you say) to develop an SSTO and $0.5 billion to build three units, with finance costs of , say, $1.1 billion, the full commercial cost of each vehicle if no more were built would be $1.2 billion.

Assuming mean time between failure (vehicle write-off) is a generous 500 trips and the direct incremental flight cost is as you say $3 million, the total cost per trip would be $3 million plus $(1,200/500) or $5.4 million/trip. However, don’t forget insurance on vehicle and cargo. Assume 10,000 lbs cargo is valued at $10,000/lb and a replacement vehicle costs $150 million and the insurance premium is 1%, then the insurance premium cost per trip is going to be some $2.5 million. So let’s say we end up at $8 million/trip or $800/lb ($1,800/kg) of payload. But then you want to make a reasonable but modest profit/risk premium; so the selling price becomes $1,000/lb ($2,200/kg) That’s not so cheap after all.

Second:
Assuming the vehicle is unmanned, it can deliver 10,000lb (4,500kg) to LEO. What use is that? Almost all the business today for commercial launchers is destined for GEO, not LEO—and the typical delivered payload to GEO is about 20,000lb (9,000kg) However, to boost the SSTO’s 10,000lb LEO payload to to GEO will use up half its mass in the form of a transfer vehicle, so the actual payload deliverable to GEO would be more like 5,000lbs (2,200Kg)—which is well-nigh useless. In any case, there are less than 100 commercial space ‘missions’ per year these days. The SSTO is ruled out of GEO delivery missions as we see, which does not leave much. I suspect it would be lucky to garner five or ten delivery trips to LEO/year. With 500 trips/vehicle, three vehicles, and 10 trips/year, the fleet will still be flying in 150 years time. Or to put it another way, one vehicle is enough, but then all development cost ends up  on its head and cost/trip rises to something like $1,250/lb ($3,600/kg).

Now suppose the SSTO is manned. It would seem to me that the best it will be able to manage with 10,000 lbs available for payload, and considering that flight duration could hardly be less than two or three days, would be one crew (pilot) and two, perhaps three passengers. Assuming people are worth more (especially if there is litigation) per lb than inanimate cargo, insurance cost will rise. There are other costs associated with carrying people, but for the moment let’s say one passenger (if there are three) costs the equivalent of 4,000lb cargo at $1,000/lb, or $4,000,000. Add a modest profit/risk premium and we are looking at a ticket price of $5 million.

Now of course there are people who will pay that much for such a trip. But assuming a fleet of three vehicles and one such trip per week, can you be certain of finding 150 paying passengers per year, every year for 30 years, at that price? That’s 4,500 billionaires, remember.

Sorry, but I don’t think this business plan will fly.

I wish it would.
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I believe you may well be right, although flights will be pretty infrequent, I'd guess. This is perhaps the space equivalent of barnstorming by otherwise redundant pilots in redundant WWI aircraft in the 1920s.

The costs involved and the risk exposure are or can be made to be very much less than orbital flight.

Orbital space tourism really is a whole different ball game--very many times more expensive and far, far riskier.

The only other use I can think of for sub-orbital hops is astronaut training in zero gee.

As for ultra-fast parcel delivery (or indeed people delivery) I think that apart from any other issues here, your vehicle is going to be difficult for a future Star Wars defence system to differentiate from an incoming ICBM.

Well I think you're on the right tracks, but that's not far enough out, as Puerto Rico operates under the disadvantage (for this business) of being US territory. I'd say we need somewhere well beyond the reach of normal legal systems and preferrably at or near to the equator.

How does The People's Republic of the Congo (or whatever it calls itself this week) sound to you? Sumatra? (not bad; it's in Indonesia, straddles the equator, but is just a short hop from very civilised and modern and English-speaking Singapore. Or maybe you could buy the Pacific island of Nauru, almost bang on the equator but hundreds of miles from its nearest neighbour...

The thing is to remember that the company itself must not be formed or have any legal connection with the US or anywhere else that's likely to support a US-originated claim for damages, such as the EU, Australia, etc.

No, I think it will compare much more closely with ocean cruising. I think that's the way the courts will see it.

Run their business in Russia, where different rules apply, that's what.

Maybe that's the answer. Maybe the US is about the last place to run a space tourism business from.

Anyway, what happens to the business in general after the first fatal passenger-carrying crash? Remember the Hindenburg and what it did for the future of airships?

Not guilty, honest.

You mentioned Lockerbie. A very good example.

The airline that flew that 747 was PanAm. Where is PanAm today? Gone. Why? The litigation. It was faced with having to fork out something like $1 billion which is did not have. As a result it became history.

The threat of litigation and/or insurance is a very serious barrier which must be taken very seriously indeed. I reckened earlier on a different site that it can almost double the cost of each flight.

But it does work this way.  Libya is forking out $6 million for every passenger. This is serious money, you know. If every passenger in your tourist ship is a billionaire, you can bet the farm that the litigation lawyers are the very best and can earn their huge fees. The flight operator will have to fork out truly vast sums-- and to insure against that will cost a fortune too.

The trouble is, no-one will know for sure if it's profitable until after someone goes for it.

Running the numbers as best one can, it does not look close to a convincing business plan, and in any case it's putting the cart before the horse: it's a classic example of the 'build it and they will come' fallacy, or the triumph of hope over realism.

That would be your entire income for 50 to 250 years you say you would pay. How do you propose surviving in the meantime?

If wishes were horses...

Space tourism is not the wonderful cure-all we keep telling each other. It'll happen one day as a spin-off of other space business; it will never be the main business that drives space forward.

Let's get real. That's all I'm saying.

After posting this to the SpaceshipOne tread, I thought it might deserve a thread of its own.

http://www.msnbc.msn.com/id/5327529/]Here  is a very interesting news article on MSNBC that is well worth reading all the way through.

The case against space tourism as the killer app for private space needs to be put more often: this extract from that article makes a good opener...

QUOTE/
...TGV's Bahn wonders if the focus on space joyrides is a case of putting the cart before the horse, to use an analogy from an earlier transportation era.

"They shouldn't be screwing around with space tourism," Bahn said of his colleagues. "Space tourism makes a great sound bite. It's a horrendous business model. They should be talking to the military or they should be talking about hauling the mail. If you look at the history of aviation, it is the history of military reconnaissance and airmail."

For Bahn, "hauling the mail" is a metaphor for low-risk applications that may not yet have become obvious — not necessarily a killer app, but "an app which generates a steady, predictable cash flow while you're fixing up your technology."

Bahn sees the issue of liability and insurance as a huge impediment to space tourism. Even if a multimillionaire ponies up tens of thousands of dollars for a half-hour suborbital flight to see the curvature of Earth and experience weightlessness, "that's a $20 million cargo you've got in the back seat," he said.

"If your insurance costs on the payload are on the order of what you'll be charging, your business model has a big problem," Bahn said.
/END QUOTE

So space tourism is no 'killer app'. Apart from the question of liability insurance, normally overlooked, killing it dead, it's all based on the 'build it and they will come' fallacy. No person or institution with money to invest or lend for a profit will give any sort of business plan with gigantic and fatal flaws like these a moment's consideration.

Yeh? I'd believe this when I see it.

Really?

Here's selected highlights of what http://www.technewsworld.com/story/3462 … hWorldNews actually reports Rutan -- and Allen -- saying following the recent successful flight of SpaceshipOne:

QUOTE: "We're heading into orbit sooner than you think," predicted Burt Rutan, the renowned aviation pioneer Allen recruited to plan, build and launch SpaceShipOne. "The next 25 years will be a wild ride."

I'd take that to mean he's 25 years away from achieving orbit, not 5 to 8 as you recall.

QUOTE: Some of Rutan's competitors (including his brother Dick, who works down the street for the competing company XCOR Aerospace) think the approach taken by Rutan isn't necessarily the best for reaching suborbital space and won't work for achieving orbit.

I'm pretty certain his brother is right; SpaceshipOne is a dead end approach so far as getting to orbit is concerned.

QUOTE: Rutan acknowledged yesterday that the SpaceShipOne project is focused only on reaching suborbital space for now, but added that they are learning "lessons that will help us on an orbital vehicle." The rocket ship he and his team at Scaled Composites built appears capable of reaching more than 200 miles into space, but today's flight was just to get pilot Michael Mevill to reach the 62.5-mile mark that most agree is the end of our atmosphere and the beginning of space.

QUOTE: Allen said the primary goal of this project is to show that this can be done, in order to stimulate further advances that will eventually make space tourism a reality.

Fine, but  I doubt there's a orbital vehicle on their drawing board (as you put it) yet.

QUOTE: "Clearly, there is an enormous pent-up hunger to fly in space and not just dream about it," Rutan said. He predicted that this is the kind of public groundswell that can make suborbital space tourism routine and affordable within the next 15 years.

IOW, even he thinks sub-orbital space tourism could be 15 years away. The 6-passenger vehicle with bigger windows is a figment of some reporter's fetid imagination, I'd say. I doubt it's on any drawing board anywhere.

(Like I said before, I'm just trying to inject some realism into this discussion.)

Well, the difference between reusable and refurbishable is, in the end, one of degree.

Refurbishable like the SSMEs is, is so expensive it's not worth doing. Same for the SRBs. If (as I suspect) the shipyard-built and very rugged first stage of Sea Dragon can survive launch and recovery with very little damage, that might well be considered reusable. (But this is a side issue.)

Y'know, what matters is not reusability, refurbishability or not, but cost.  All other considerations are secondary.

You mean, just like Lego? (....after all!)