Ariane Chief Seems Frustrated With SpaceX For Driving Down Launch Costs (arstechnica.com)

schwit1 shares a report from Ars Technica: Like United Launch Alliance, the [France-based] Ariane Group faces pricing pressure from SpaceX, which offers launch prices as low as $62 million for its Falcon 9 rocket. It has specifically developed the Ariane 6 rocket to compete with the Falcon 9 booster. But there are a couple of problems with this. Despite efforts to cut costs, the two variants of the Ariane 6 will still cost at least 25 percent more than SpaceX's present-day prices. Moreover, the Ariane 6 will not fly until 2020 at the earliest, by which time Falcon 9 could offer significantly cheaper prices on used Falcon 9 boosters if it needed to. (The Ariane 6 rocket is entirely expendable). With this background in mind, the chief executive of Ariane Group, Alain Charmeau, gave an interview to the German publication Der Spiegel. The interview was published in German, but a credible translation can be found here. During the interview, Charmeau expressed frustration with SpaceX and attributed its success to subsidized launches for the U.S. government.

When pressed on the price pressure that SpaceX has introduced into the launch market, Charmeau's central argument is that this has only been possible because, "SpaceX is charging the U.S. government 100 million dollar per launch, but launches for European customers are much cheaper." Essentially, he says, launches for the U.S. military and NASA are subsidizing SpaceX's commercial launch business. However, the pay-for-service prices that SpaceX offers to the U.S. Department of Defense for spy satellites and cargo and crew launches for NASA are below those of what other launch companies charge. And while $100 million or more for a military launch is significantly higher than a $62 million commercial launch, government contracts come with extra restrictions, reviews, and requirements that drive up this price.

Comments

Isn't Arianespace government-subsidized?

[93 Escort Wagon]

This really seems like a case of the pot calling the kettle black. Which company is more heavily subsidized by their respective government(s), overall?

Re: Isn't Arianespace government-subsidized?

[Rei]

They've suffered from the same program that NASA itself has, albeit to a lesser extent: they're jobs programmes. Part of their rationale for existing is the number of people they employ, and how their business operations are spread around politically-convenient areas. Same story for both Ariane and UAW. As Charmeau put it:

"Let us say we had ten guaranteed launches per year in Europe and we had a rocket which we can use ten times - we would build exactly one rocket per year. That makes no sense. I can not tell my teams: "Goodbye, see you next year!" "

In any normal business, in a competitive environment, focused on its bottom line, this would mean that you need to downsize 90% of your staff. If you're over capacity, you don't just stay over capacity for the heck out of it, or build hardware that's 1/10th as labour efficient just to justify keeping as many employees on the books as possible. It's an absurdity, but that's been the way the launch industry has operated for the past decades. Improved designs have been bad specifically because they'd streamline the industry.

But they got away with that specifically because there was such a capital barrier to entry in their industry. Lots of small companies had tried and failed. Some because their designs didn't really pan out, but some simply because they just couldn't get enough cash. Established players became dismissive of upstarts as a result - but it was really just a matter of time.

This lesson should be applied to a lot more capital-intensive industries than just rocketry. Thinking of capital barriers to entry as your uncrossable moat is a dangerous attitude.

Re:Isn't Arianespace government-subsidized?

[K. S. Kyosuke]

For the record, Ariane 5 is literally subsidized to fly.

Re: Isn't Arianespace government-subsidized?

[jabuzz]

Thing is Skylon is progressing and should it get to flight then SpaceX would be under the same pressures as Ariane and ULA are now.

A better gamble than Ariane 6 would have been to go full on with Reaction Engines/Skylon. However Brexit has probably screwed that option now. With space in Europe going down the pan over the row about Galileo, where I predict the next step is the UK government will stop UK firms exporting the tech needed to run it to Europe because they are sticking to the rules about none EU countries being able to access it, crippling the system before it even goes live.

Re: Isn't Arianespace government-subsidized?

[dunkelfalke]

Your logic only works if every staff member is capable of doing the job of every other staff member, which is fine for picking strawberries, but not for mechanical engineering and manufacturing. It is not an absurdity, you need at least a certain amount of engineers and other specialists to design complicated systems and also enough workers to build parts and assemble the rockets. If it takes a month to build a rocket, then the same amount of personnel is required for manufacturing for 10 launches per year as for just one launch since the manufacturing would be serial, not parallel.
Apparently you don't know the difference between low and high volume manufacturing and between skilled and unskilled jobs.

Re: Isn't Arianespace government-subsidized?

[cjameshuff]

Falcon 9/Heavy has already achieved most of Skylon's cost reductions without requiring $10 billion to develop, and can improve further if fairing reuse works out. Worse, BFR is expected to achieve around the same recurring cost per flight as Skylon while having the ability to deliver 9 times as much payload, and also being able to use in orbit refueling to deliver the full payload to higher orbits without using an expendable upper stage. And BFR doesn't require any revolutionary new technologies, making it much more likely to actually hit those cost targets, and will be flying much sooner even with delays.

If they can turn Skylon into a staged vehicle, they might be able to compete, but still won't be pressuring SpaceX like they are doing to the competition now.

It's a philosophy problem

[Zorpheus]

I once looked at jobs at the European Space Agency. And it became clear that their working philosophy is to do only things that are completely proven. There seems to be no room to try something new and revolutionary. I bet the philosophy is the same in the whole space industry.

Re: It's a philosophy problem

[Anonymous Coward]

If they're stuck in this position because they focused on reliability, then maybe they can sell reliability?

While what you say makes a kind of sense, the trouble with this approach is that (1) SpaceX's failure rate is no where near 10%, and (2) they will have many more launches than Ariane and thus be finding problems more rapidly and improving more rapidly, thus ending up on a path to improve reliability faster than ariane. They can also examine their equipment post-fight to see which parts are seeing the most wear etc, which Ariane cannot do because they dump theirs into the ocean each time.

Re:Excuses

[Rei]

I'm also embarrassed by him. Ariane is our equivalent of ULA. A dinosaur. And we have no SpaceX or Blue Origin in the wings, and an environment that I don't think would ever create one. Ariane will never adapt. It's structurally incapable of it. And it doesn't help that Europe spends a small fraction as much on space as NASA does. So we can't endlessly make up for inefficiency with pork.

And yes, in general SpaceX puts in bids a lot higher for the government than they do for private companies, but so? They can make their bids whatever they want. The government is choosing them because they're still cheaper than ULA. Whatever ULA bids, SpaceX will undercut them - even though that undercutting is still a windfall for SpaceX. What alternative does the US government have? Maybe there will be a serious drive-down-costs bidding war when (if) Blue Origin ever makes it onto the scene in a serious way. Maybe. I'm not a big Blue Origin optimist - but at least they're not ULA.