RLV Markets V: Additional Thoughts on Passengers–Divisibility and Elasticity

[Note: While digging through unfinished blog post drafts, I found this one from April 2009. I think this was originally supposed to be the third in the series, but is now the fifth. While the series doesn’t exactly flow, and some of the examples now seem a bit anachronistic, I thought these two provided some interesting points worth consideration.]

The Impact of Divisibility on Flight Rate
One important technical thing about passengers as customers for RLV flights is that while people are not infinitely divisible1, they don’t have to be moved in large batches either. Sure, down the road if you have thousands or tens of thousands of people flying to space every year, having larger transports is eventually going to make sense2. But with realistic near-term demand, even a two-seater RLV might potentially be big enough to be useful. By flying people in smaller batches, the same nominal demand for manned spaceflight can result in a higher number of flights for a smaller vehicle, which counterintuitively could be cheaper than flying a largeer vehicle less frequently. For instance, several years back when Bigelow and LM unveiled some of their original plans for crew vehicles launched on Atlas V, Bigelow was talking about 12-16 flights per year on an Atlas V with a capsule that could sport 8 people (2 crew, 6 passengers)3. That’s somewhere between 70-100 passengers per year. If the launch vehicle instead had 1 crew and 2 passengers, that would result in 35-50 flights right there, instead of the 12-16 for a larger capsule (assuming that doing lots of berthings doesn’t screw up the microgravity for others). If the more frequent visits doesn’t hurt the microgravity too much, 35-50 flights on a tiny RLV may very well be much cheaper than flying 12-16 flights on a large ELV, or even on a partially reusable Falcon 9/Dragon V2 combo. Also more frequent crew flights would mean more opportunities for on-demand cargo deliveries. The place where larger reusable passenger transports shine (relative to small RLVs) is when there is enough demand for them to fly 50+ times per year.

Space Tourism Demand Elasticity
One other point about passengers as an RLV market is that there’s a lot of potential for elasticity of demand. While the old Futron study is now very dated4, there are some common sense reasons to believe that demand for personal spaceflight will rapidly increase if prices can come down. The single biggest factor is the distribution of wealth in the US and the world (note the number of households at each total net asset level is plotted on a logarithmic scale!)5:

Global Household Wealth Distribution (data from t/Space CE&R presentation)

Global Household Wealth Distribution (data from t/Space CE&R presentation)

The total number of households in the world with greater than $20M in assets according to this several years old data is about 100,000. The total number of households with more than $1M in assets is 7.3 million. Using the rule of thumb that Futron did (that most households won’t spend more than 10% of their value on a space trip), that means that dropping down from the ~$15-20M ticket range to a $1M ticket range would increase the number of eligible households from ~6,000 to nearly 1 million–that’s over two orders of magnitude increase! Basically, assuming that the super wealthy aren’t any more naturally inclined to spend money on space travel than the “just wealthy”, suggests that there’s a lot of potential for demand elasticity for personal orbital spaceflight as the price goes down. This is why I think prices have to come down over an order of magnitude from what even SpaceX is currently proposing before you’re going to pass the elastic point of the demand curve.

The market for flying people into space (and eventually to other destinations) is possibly going to be one of the largest early RLV market segments. Before you can really have any sort of sustained industry in LEO or on the Moon, or anywhere else for that matter, people need to be able to reach there on a regular basis. Existing transportation systems don’t provide an environment very conducive for experimenting with space-based entrepreneurial ventures. However, a transportation system that can safely, reliably, and on a regular and frequent basis transport people to orbit and back is a transportation system that is then on a level that it can enable experimentation with different space venture ideas.

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Jonathan Goff

Jonathan Goff

President/CEO at Altius Space Machines
Jonathan Goff is a space technologist, inventor, and serial space entrepreneur who created the Selenian Boondocks blog. Jon was a co-founder of Masten Space Systems, and is the founder and CEO of Altius Space Machines, a space robotics startup in Broomfield, CO. His family includes his wife, Tiffany, and five boys: Jarom (deceased), Jonathan, James, Peter, and Andrew. Jon has a BS in Manufacturing Engineering (1999) and an MS in Mechanical Engineering (2007) from Brigham Young University, and served an LDS proselytizing mission in Olongapo, Philippines from 2000-2002.
  1. People tend to be somewhat picky that you transport them in integer quantities
  2. Building a 50-100 person Super Dragon or Mars Colonial Transport as some suggest seems about as wise to me as trying to build a 737 in the early 1930s
  3. Note: it’s interesting how far things have changed since I started this blog post 6 years ago…
  4. It was only a decade old when I started this blog post!
  5. This data is also a decade old, there are a much larger number of millionaires now then then, partially because inflation means a million dollars isn’t quite what it was worth a decade ago, and also due to increasing wealth in the upper parts of the upper and upper-middle classes.
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11 Responses to RLV Markets V: Additional Thoughts on Passengers–Divisibility and Elasticity

  1. Your unfinished blog posts are better than most of our polished blog posts. You’re making us look bad Jon, please keep it up 🙂

  2. Jonathan Goff Jonathan Goff says:

    Thanks Trent!

  3. ken anthony says:

    Second Trent’s comment.

    dropping down from the ~$15-20M ticket range to a $1M ticket range would increase the number of eligible households from ~6,000 to nearly 1 million

    Actual sales would then be less than about 1/1000 of that (6-1000.) Assume F9R becomes fully reusable (upper stage stays in orbit and refueled for reuse.) Price of F9/Dragon drops from $140m ($20m/seat) to $21m ($3m/seat.)

    ELV FH (assume 3 tons/seat) could handle 17 seats ($6m/seat.)
    ELV BFR may handle 50 seats ($4m/seat.)

    The bigger LVs may only be used for cargo. Or in the early stages for direct crew (no refueling) flights.

  4. David says:

    I am wondering if for some of this elasticity to occur if the current model of Company X building it’s own rockets and flying them has to end. Boeing does not fly passengers, it sells aircraft. I did some cursory research, and for the most part the early railroads spec’d and bought their locomotives from a manufacturer. Airlines (and rail lines) today are good at what they do – driving prices down. There is also a nice disconnect between the manufacturer and the service provider. The latter can push the boundaries of service (no more free pillows!), and even safety and it does not necessarily impact the manufacturer.

    At some point SpaceX, and others, probably have to be willing to sell vehicles to service providers instead of trying to do it all themselves for the prices to come down – at least if the current transportation systems are useful insights.

    Jonathan, on another topic. Occurred to me that one of the reasons ULA may want to shut down the Delta line is that the proposed Vulcan is more like the Delta in many ways (methane ~ H2) and maybe they need that production line and expertise to build the Vulcan while at the same time continuing to build the Altas V.

  5. Vladislaw says:

    The 0ne million potential customers at a $1 million dollar ticket price … I wonder if that includes buying a ticket on credit or taking out a 10 year personal loan et cetera.

    Might be even higher potential numbers if you can just put it on your company’s credit card.

  6. Jonathan Goff Jonathan Goff says:

    Vladislaw,
    The numbers were based just off of the old Futron study assumptions. I ought to do an update using current numbers of high net worth individuals.

    ~Jon

  7. Jonathan Goff Jonathan Goff says:

    Ken,
    Notice with all of those concepts you’re nowhere near the $1M/seat price point, even with pretty optimistic assumptions (IMO). SpaceX is an awesome company that’s helping people take reusability seriously, and doing many cool things. But I’m not convinced that their approach is the best that’s feasible (or anywhere close), just tons better than their competition and the status quo.

    ~Jon

  8. Peterh says:

    A consideration on divisibility of payload, irreducible per flight minimums. Supposing you need a pilot for your spacecraft, that one pilot can probably handle a larger vehicle as well as a dinky ship with only one passenger. Similar irreducible minimums likely exist for the ground crew.

  9. Jonathan Goff Jonathan Goff says:

    Peterh,
    Possibly true. But while I’m not sure if I agree 100%, John Carmack has suggested that a pilot for a VTVL rocket might be as anachronistic as an elevator operator. People are pretty serious about driverless cars and airplanes, so it isn’t entirely infeasible that you could have a pilotless rocket–rockets are potentially simpler in many ways–the biggest being that you don’t have to operate them in close proximity to other objects, and you don’t have to deal with crazy stupid other drivers…

    But as I said, I’m not fully convinced about pilotless passenger rockets (or pilotless cars or planes for that matter). And if you do have a pilot, you’re right that you do have irreducible minimum issues you need to deal with for RLVs.

    ~Jon

  10. Pingback: Space Tourism Musings | Selenian Boondocks

  11. Robert Clark says:

    But how would that translate into a passengers per year market? This more recent survey asserted that at a $500,000 per ticket price point, the market would be hundreds of thousands of passengers per year, resulting in a $100 billion(!) a year market:

    How the Space Tourism Business Could See Orbital Boom.
    Mike Wall, SPACE.com Senior Writer | April 25, 2011 12:32pm ET
    To date, only seven people — beginning with multimillionaire businessman Dennis Tito in April 2001– have paid to launch into Earth orbit, and they’ve reportedly plunked down between $20 million and $35 million for the experience.
    Those are not the numbers of a thriving industry. But things could change dramatically if prices drop significantly — down to about $500,000 per seat or so. That reduced rate could lure in hundreds of thousands of customers for orbital tourist trips, potentially generating revenues in excess of $100 billion per year, according to the study.

    http://www.space.com/11476-space-tourism-orbit-business-case.html

    However, this survey was sponsored by researchers investigating reusable rockets to orbit. I would like to see a more independent survey done to see if it supports these surprising numbers.
    Note that if these numbers were valid then it would dwarf the current satellite launch market at ca. $6 billion a year.

    Bob Clark

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