Blue Origin Will Be VTOL

Spy Handler writes "The Blue Origin spacecraft, being built by Amazon.com billionaire Jeff Bezos' new venture, will have VTOL (vertical take-off and landing) capability, according to the company's FAA permit applications. It will be a cone-shaped vehicle about 50 feet tall and 22 feet in diameter at the base, and carry 3 or more passengers to an altitude of 325,000 feet"

Comments

Impressive turn-around time, too...

[stoborrobots]

They're claiming that the commercial launch around 2010 will be able to make 52 lauches a year, meaning that they expect to be able to turn around one of these babies in a week from landing...

That will require some interesting reliability stats on the exposed surfaces...

Re:Impressive turn-around time, too...

[hey!]

I would also add that there isn't a snowball's chance in hell that there's be enough demand for 52 launches a year in the long term, though they could possibly sustain it for maybe a few months to a year after launch.

This is one of those assumptions that you put in your business plan spreadsheet, that makes the difference between success and failure but which nobody can say for sure.

Elementary economics tells us you can't possibly say something like "there won't be enough demand for 52 launches per year in the long term." What you have to say is "the market will demand less than 52 launches per year at a certain price." Price the launch low enough, and you'll be able to sell a thousand or even a million launches; the question is, can you make a profit.

Creating a popular web site and creating a aerospace company are on the surface very different things. But one thing that is in common is that there is an adoption curve. You almost never have enough people want your service at the outset to sustain it. What you need is enough people to want your service to keep the ball rolling, to bring in enough cash that venture dollars don't feel too lonely as they're waiting to be shoveled into the furnace.

The key to everything is pricing and its relationship to volume. IN a mature business, you want to charge to maximize profit, but in a startup you aren't expecting to see profit. It's more complex because your pricing has to do more things than deliver a profit. It has to deliver enough volume so that you can begin to achieve economies of scale and learn how to operate the business efficiently; it also has to show that your business plan's ales projections and cost projections are realistic. Pricing and volume has to validate your assertions about your ability to manage the technology, as well as your assertions about how the market will respond to price.

In a venture like this, you'd charge more at the outset, because you really can't deliver more. So supposing after initial test, you think you can launch four times a year for the first year, because you're shaking down your system and learning how to scale the system safely and efficiently. So, you charge so much that the number of rides you sell is exactly four, neither more nor less. You still burn lots of money and don't get much back. Next year, you can launch eight times, which is twice as often. You drop your prices, hopefully less that 50%; let's say 66%. Presuming that your marginal costs stay the same or drop, it means you lose more money.

In time, repeat this process enough, and (God willing) your marginal costs start to drop, and you start to approach the area where you are making profit on each transaction instead of losing money. However, if your model was wrong, you may end up get no closer to that point: if you don't achieve economies of scale with increased volume, or if demand does not fall with price rising.

Every business plan depends on predicting the future, and making leaps of faith about certain assumptions. Most of the time, some assumption was wrong; if it's right, and you're talking about something like this where you can't create a business overnight, then you can expect to enjoy larger than normal profits if you are right. Higher rewards nearly always entail higher risks (although the converse is not true).