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P Collins, 1989, "European launch vehicle development: a commercial approach", European Business Journal, Vol.1 No.2. February 1989.
Also downloadable from launch vehicle development a commercial approach.shtml

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European launch vehicle development: a commercial approach

The space industry is approaching a major turning-point. Within twenty years, and possibly within ten, space transportation will finally 'come of age' with the development and operation of fully reusable launch vehicles. These will reduce the cost of access to space by 90% initially, and eventually by 99%. As a result of the timing of system development cycles, Europe is in a position to take the lead in this evolution, with important economic and political benefits. However, if current plans are followed, Europe will miss this opportunity, and it will be exploited by other countries. In order to avoid this, greater weight must be given to commercial considerations in Europe's space planning.

The goal: reusable launch vehicles

The main constraint which has prevented private industry from taking a significant role in financing space development is the immense cost of putting payloads into orbit. The great majority of launches have been made with expendable vehicles which fly only once, with typical costs of some $10,000 per kg of payload delivered to low Earth orbit. Although the US space shuttle is partly reusable, its launch cost is no lower - largely because its design was strongly influenced by political factors. Because of these high costs, governments have been the main providers of funds for space research, motivated by the needs of defence, political prestige and scientific research. More recently, increasing emphasis has been given to the need to commercialize space activities, but the achievement of this goal is not straightforward, due to the differences between government and commercial objectives, as discussed in Chorley (1988) [3].

Fully reusable launch vehicles will have much lower operating costs than expendable vehicles because they do not have expendable components, and operating costs (fuel and maintenance) will be a few percent of current costs - giving the developers of the first fully reusable launch vehicle a major economic advantage. The development of subsequent reusable vehicles will be commercially less attractive since they will have to compete with the first as it matures along its learning curve. It is a classic case where 'being second' will be very expensive because of the rapid reduction in prices imposed by the market leader, as it is, for instance, in the production of new generations of semiconductor memory chips. This raises the interesting and important question of who will be the first to develop such a vehicle and thereby gain a strategic economic advantage, as well as political prestige.

Who will be first?

Fortuitously, both the US and the USSR have recently developed partially reusable 'shuttle' vehicles, and are not currently planning their near-term replacement. Furthermore, because of political and military considerations, neither of these vehicles is optimized for commercial use. This opens a major opportunity for Europe, which has more or less caught up with the US in expendable launch vehicle technology, and is now planning the next enhancement of its launch capabilities, currently based on the commercially successful Ariane family of expendable vehicles.

Japan is also planning a new generation of launch vehicles. Although Europe's expertise in the space industry, as in aerospace generally, is still significantly greater than that of Japan, this situation will not continue for long. Japan has the explicit objective of catching up with both Europe and the US in aerospace technology, and annual turnover of the Japanese aircraft industry is expected to grow from $7,000 million today to some $28,000 million by the year 2000 (Donne, 1988) [4].

In addition, without fanfare, Japan has recently overtaken Europe in rocket technology: the restartable LE-5 liquid hydrogen engine is more powertul and versatile than Europe's HM7 which propels the Ariane third stage; while the LE-7 is more powerful, technologically more advanced and ahead of the HM60 (planned for Ariane 5) in its development programme. Without going into details, Japan shows every intention of taking a commanding position in the launch industry as soon as possible. Their goal is a fully reusable, piloted vehicle, and the government has stated that 'earning revenue in the commercial market is a key objective' for their space industry (Davis, 1988) [5].

This poses a serious challenge for Europe. It would be unprecedented for 'Japan Inc.' to enter a new industrial area with obsolescent technology; while the state of the Japanese economy, combining a large balance of payments surplus with a high rate of domestic saving, provides the right background for sustained public investment in an ambitious space programme.

Europe's critical decision

The decision to be made in Europe on a new launch system also has long-term implications because of its very high cost of several billion dollars, and the long development time of approximately a decade. In the current political climate, and owing to the unavoidable difficulty of achieving international agreement, such a commitment to a particular launch vehicle pre-empts the development of other vehicles for at least a decade. In view of this, and of other countries' plans, the cost to Europe of extricating ourselves from the wrong decision is extremely high.

Consequently European industry as a whole has an interest in seeing that the funds which they provide as taxpayers are used most effectively in this field. Although those outside the space industry cannot expect to participate in the detailed decision-making, nevertheless they must be concerned to see that the strategic decisions are sound. ln the present context there are perhaps four broad issues which can be identified as sufficiently critical that European business leaders should have a view:

  1. whether the vehicle is to be fully reusable;
  2. whether the vehicle is to be piloted or not;
  3. how much time and money should be spent developing new technology; and
  4. approximately what payload the vehicle should carry into orbit.

As Lord Chorley emphasized, making decisions on space industry investment is very difficult because of the high levels of uncertainty, and he concluded that 'what is needed is openness, debate and a plurality of view' ( Chorley, 1988) [3]. Being largely government funded, the space industry is not traditionally driven by market considerations. The following discussion is a contribution to this debate, intended to emphasize the commercial point of view.

Development costs and reusability

Central to the decision about which vehicle to develop are of course the expected operating and development costs of different proposals. It is a common assumption that operating costs and development costs are inversely related: that is, lower operating costs can be achieved only by incurring higher development costs. In certain respects this is true, for instance where lower operating costs are achieved through the development of new technology, such as high-performance engines. However, it is not widely appreciated that reusability also introduces two major factors that reduce development costs as well as operating costs.

The first of these arises from the inherent impossibility of achieving very high levels of safety and reliability with expendable systems, since by definition they are used only once. This leads to the need for very costly engineering in many areas in order to attempt to achieve high reliability with expendable systems. By contrast, reusable vehicles such as cars, ships and aircraft build up lifetimes of operating statistics, permitting reliability levels many times higher than those of expendable systems to be achieved as a matter of course.

The second major advantage results from the fact that flight testing of a fully reusable vehicle can be done progressively as with an aeroplane, starting with subsonic flights and working through supersonic, hypersonic and sub-orbital flight regimes before attempting orbital flight. The incremental cost of each flight in such a test programme is little more than the cost of fuel and maintenance. Taking into account the overhead of the salaries of the engineering staff, several dozen test flights could be perrormed for the cost of single launch by an expendable vehicle such as Ariane 5 costing some $140 million per flight.

These advantages of reusability, discussed in detail in Collins and Ashford (1988) [6], Ashford and Collins (1989) [1, 2], are unfamiliar to space industry start with experience of expendable launch vehicles but not of aircraft development programmes. They are nevertheless potentially very significant in the present context.

Piloted launch vehicles

The issue of launching crews into orbit is an area in which government objectives have in the past been particularly different from commercial objectives, and the decision about the specification for the next European launch vehicle is made more complex by this question. To date, most spacecraft have been unpiloted because piloted vehicles have been much mote expensive because of the additional costs of life support systems and of attempting to achieve adequate reliability levels using expendable vehicles. Despite this, while governments remain the major provider of funds, they are interested in the real, if unquantifiable, popular prestige that the development and operation of a piloted launch vehicle undoubtedly earns the nations involved.

In addition to this, for certain tasks human crews provide capabilities unavailable with automatic satellites. In the next twenty years, orbital activities centring on the use of the US/international space station will create a substantial demand for crew transport to and from orbit. Owing to the limitations of the space shuttle, a small personnel-carrying launch vehicle would have a variety of valuable roles such as space station crew rotation, servicing spacecrart in orbit, and rescuing astronauts.

As described above, reusability greatly increases a vehicles reliability, and therefore greatly reduces the additional cost of including crews in the payload. Furthermore, the technology of crew accommodation is more than 25 years old, and does not need costly development. Thus, for the first time. in addition to the political objective, there is a commercial case for developing a piloted vehicle-provided that it is fully reusable.

European launch vehicle proposals

The development of the Ariane launch vehicle familv was paid for collectively by national governments through the European Space Agency (ESA), and the vehicle was subsequently transferred to the Arianespace company to operate commercially. A similar pattern appears likely for the next generation of launch vehicles.

Currently the main European proposal for a reusable, piloted launch vehicle is the German two-stage, horizontal take-off ' Sanger' (see Figure 1). This involves the development of two new engines, and requires a decade of development work together with a multi-billion dollar budget. A reusable, single-stage, horizontal take-off launch vehicle, ' Hotol' (see Figure 2) has been proposed in the UK, but it is unpiloted. This would involve the development of a new engine plus advanced new materials, and would require a similar budget and rimescale.

Figure 1: Sanger
Figure 2: Hotol

Both Sanger and Hotol would have a payload of some 7 tonnes, which is much more advanced than is required to serve the near-term market opportunity: a payload of less than one tonne is adequate to carry a small number of passengers. It is notable in this context that Japanese plans for a spaceplane currently centre on a vehicle with a payload of just four passengers (Kandebo, 1988) [7].

Partly in order to achieve piloted space flight sooner than either of these vehicles, the members of ESA aereed in November 1987 to finance three years' development work on 'Hermes', a piloted, reusable spaceplane to be launched on the expendable Ariane 5 booster (see Figure 3). Research is planned to continue through 1990, followed by a final decision on its development.

Unfortunately, because of the very high cost of the expendable Ariane booster, the Hermes - Ariane 5 vehicle would cost some $140 million per flight, compared with only $15 million for Sanger, with a much larger payload (Koelle and Kuczera. 1989) [8]. Among other consequences, Hermes would be used only very infrequently. Current plans are for no more than two flights pet year by each of two vehicles. This would not achieve the benefits of a fully reusable vehicle, namely lower costs resulting in the growth of commercial space activities.

Another consequence of Hermes' high operating costs is that it would not be possible to 'commercialize' it like Ariane, becaus~ there would not be a significant commercial market for piloted launches at this price level. By contrast, a fully reusable vehicle with operating costs only a few percent of this could be successfully commercialized.

Figure 3: Ariane 5 booster
Demand for piloted flights

There is a large pent-up demand for access to orbit, but market research to date is no more than anecdotal. lt is essential that the level of market preference for the lower cost per flight of a fully reusable launch vehicle by comparison with expendable vehicles should be estimated objectively. However, it is possible to make a number of observations: ESA is provisionally budgeting for four flights of Hermes per year at a cost of some ECU 500 million. If flights of a reusable vehicle cost even ECU 5 million, the same budget would cover one hundred flights per year or two flights per week. ln practice. as the vehicle operations matured, the cost per flight would fall towards ECU 1 million, permitting several times more flights. Thus, in addition to the main task of providing crew transport for the space station, ESA could make an unprecedented range of services available, at no extra cost to the taxpayer:

  1. It could offer regular subsidized flight opportunities for European researchers. Currently European micro-gravity research, co-ordinated through the European Low Gravity Research Association (ELGRA1, and satellite astronomy, based on long university traditions, are world competitive, but the prospects are poor due to the very high cost and poor availability of orbital flights.

  2. It could offer a scheduled commercial launch service for micro-gravity research organizations. This is the primary requirement of INTOSPACE (an international company based in the Federal Republic of Germany. dedicated to micro-gravity research and exploitation) and other organizations.

  3. It could offer collaborative flights to scientific and industrial researchers from other countries in return tot access to the data generated.

  4. There would also be the possibility of offering commercial passenger flights. Glavkosmos of the Soviet Union is currently the only organization offering commercial passenger flights to orbit. Even at $10 million there is interest from potential customers such as television companies (McKie, 1988) [9]. It is likely that at prices less than $1 million per passenger such uses would grow substantially. In a recent paper, two leading Japanese space researchers projected a market of up to 100 passenger flights per day to orbit within twenty years (Yamanaka and Nagatomo. 1986) [10].

It is perhaps worth emphasizing that the above activities would represent an extraordinary growth of access to space: at present, most European researchers are involved with no more than a single flight every tew years.

A commercial alternative to Hermes

Like defence research, development work in the space industry has traditionally been 'performance driven' rather than market driven' as it is in other industries. As a result, space industry costs are very high: only in the space industry, for instance, can the prospect of spending $140 million to send two people on a two day mission, as with Hermes, even be contemplated. Government financing has created a depth of aerospace expertise in Europe, but it must izive way to a more commercial approach if the industry is to become commercially self-supporting.

In the present context, developing Hermes would not obtain the benefits that will accrue to the developers of the first fully reusable vehicle: it would waste the lead in commercial launch operations that Europe has established with Ariane; and it would ignore the international technological competition. Consequently there are serious doubts within Europe. and particularly in the UK, about the wisdom of expending a large proportion of governments space budgets on the development of a vehicle 'which xvill not be economical to use. From the above discussion it would seem clear that if commercial considerations were given more weight the following choices would be made:

  1. The vehicle would be fully reusable, because the operating costs would be very' much lower and utilization much higher, leading to rapid maturation of the system, and far greater value for European space users.

  2. The vehicle would be piloted. Although there are political pressures for this, there is also a highly significant new market for crew transportation, which can be addressed only with a fully reusable vehicle.

  3. It would be designed to have minimum development time and cost, by using existing technology to the maximum extent possible, rather than developing technology that is not strictly necessary. A commercial design for a space station, for example, would be much closer to a copy of 'Skylab', flown 15 years ago, than to the new US/international space station, planned to cost some $30 000 million~

  4. It would have only a small payload-less than one tonne-since carrying even four passengers would be adequate to perform the tasks mentioned above that uniquely require human presence.

It is clear that none of the three European projects mentioned above satisfies these requirements. There is, however, a more commercial alternative that would meet these requirements without the need for new engines, as required for Sanger and Horol, and hence at a much lower development cost. This is to revive the approach used in the 1960s in several European studies of 'aerospace transporters - fully reusable, winged launch vehicles more or less similar to Sanger, though with smaller payloads. The main advantage of such an approach is that, because it is less technically demanding, it is possible to design such a vehicle using technology developed since the l960s in a range of European projects: Concorde, Ariane, Spacelab and Hermes to date, as described in Collins and Ashford (1988) [5], Ashford and Collins (1989) [1, 2].

The first stage would take off horizontally powered by four Anglo-French Olympus turbo-jet engines as used in Concorde up to a speed of mach 2, and then by two modified SEP Viking 4 rockets from the Ariane first stage to mach 4. It would require only a conventional light alloy structure and simple aerodynamic design.

The upper stage would be a Hermes-like, bluntwinged vehicle powered by six HM7 engines from the Ariane third stage. If it was 'buried' in the rear of the booster in order to protect it from aerodynamic loading, it could be optimized for gliding return, when it would have lower wing loading and consequently lower thermal stresses than Hermes.

For the reasons given above (and expanded on in Ashford and Collins (1989) [1, 2]), both stages of such a fully reusable vehicle with a crew of two and a payload of four passengers, could probably be developed in Europe at lower cost than Hermes. From a commercial point of view, such a vehicle would be more attractive than the alternatives of Hermes, Sanger or Hotol, and ought to be fully researched before Europe decides to commit several billion dollars to Hermes. In view of its stated intention to make the space industry more commercially minded, the UK government should perhaps take the lead in funding a feasibility study on this approach.


The decision to design a piloted vehicle for launch on the Ariane 5 booster was made in the belief that, at some $5,000 million, this would be less expensive than the development of a fully reusable vehicle. Such a view takes inadequate account of the effects of full reusabiliry in reducing development costs described above If these are taken into account, a small, fully reusable vehicle could be less costly than Hermes.

In order to evaluate this case, a feasibility study of the proposed vehicle is required which, in addition to detailed technical analysis, should also give due weight to commercial factors not normally addressed in space industry studies. Hence it should include a detailed market survey of the probable demand in the 1990s and 2000s for orbital flights by a small, passenger-carrying vehicle. This should include explicit estimates of the price-elasticity of demand from different user groups: that is, how much the vehicles would be used by different users at different price levels.

Such a detailed study must also investigate design approaches for achieving minimum development cost rhroueh maximum use of off-the-shelf hardware. This is different from the traditional approach in Europe. which fosters the European space industry. However, this aim must be tempered by the need to be commercially competitive, and hence to make cost reduction a major priority. In performing a commercial, 'market-driven' feasibility study, there is also a strong case for participation by the civil aircraft part of the aerospace industry who have decades of experience or reusable vehicle development, testing and operation.

In summary, the proposed vehicle offers a solution to the current European dilemma: it would provide a near-term, piloted space flight capability which, being fully reusable, would have low operating costs and would give Europe an unquestionable lead in space transportation. The development of the partially expendable Hermes would leave Europe vulnerable to a devastating competitive blow when Japan develops a fully reusable launch vehicle near the end of the century. Commercial considerations must be brought to bear if Europe is not to fumble its unique opportunity to take the lead in developing the first fully reusable launch vehicle, and to reap the economic and political benefits that xvill result. This opportunity will exist for only a few years, and will nor recur.

  1. D M Ashford and P Q Collins, l989, " The Prospects for European Aerospace Transporters, Part 1", Journal of the Royal Aeronautical Society, Vol.93. No 921
  2. D M Ashford and P Q Collins, 1989, " The Prospects for European Aerospace Transporters, Part 2", Journal of the Royal Aeronauocal Society, Vol. 93, No 922
  3. Chorley, 1988, " Economics of space and the role of government", Space Policy Vol. 4, No. 3
  4. M Donne, 5 October 1988, "Japan's air industry faces rapid growth", Financial Times
  5. N W Davis, 1988, "Japan takes charge", Aerospace Amenca, Vol. 26, No. 3
  6. P Q Collins and D M Ashford, 1988, " An alternative to Hermes: A solution for the European space industry", Space Policy, Vol. 4, No. 4
  7. S W Kandebo, 1988, " Japanese outline spaceplane program at international forum", Aviation Week & Space Technology, Vol. 129. No. 15
  8. D Koelle and H Kuczera, 1989, " Sanger II. an advanced launcher system for Europe", Acta Astronaunca. Vol. 19, No. 1
  9. R McKie, 27 November 1988, "Hitch-hiker's ride to the galaxy", Observer
  10. T Yamanaka and M Nagatomo, 1986, " Spaceports and new industrialized areas in the Pacific Basin", Space Policy. Vol. 2. No.4
P Collins, 1989, "European launch vehicle development: a commercial approach", European Business Journal, Vol.1 No.2. February 1989.
Also downloadable from launch vehicle development a commercial approach.shtml

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