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

Posted by BeauHD on from the cheaper-by-the-dozen dept.

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.

33 of 165 comments (clear)

  1. Isn't Arianespace government-subsidized? by 93+Escort+Wagon · · Score: 5, Interesting

    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?

    --
    #DeleteChrome
    1. Re: Isn't Arianespace government-subsidized? by Anonymous Coward · · Score: 2, Insightful

      Actually it would be such a case if this was about ULA who was being paid multiple times what spaceX was for the same thing. Ariane and the traditional companies like Boeing had a sweet sweet deal all these years, that's why they have trouble competing

    2. Re: Isn't Arianespace government-subsidized? by Rei · · Score: 5, Interesting

      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.

      --
      Give a boy a gun and you arm him for a day. Teach him how to make a gun, and the whole metaphor breaks down.
    3. Re: Isn't Arianespace government-subsidized? by Rei · · Score: 5, Informative

      SpaceX's success is a mix of factors. Part of it is that they did take a good design approach - combining both reusability and disposability and mass production into a single rocket line. Many identical (or near identical engines per rocket), and many rockets produced, means a very large number of engines, meaning you get good at making them, cheaply. Very similar upper and lower stages, and again a large number of rockets, means - again - you get good at making them cheaply, and can quickly go through development iterations. Any accidents in the development process, while painful, only take out a single disposable launch vehicle and its payload (accidents are much more painful for obligate-reusable rockets). Eventually you get a good, cheap-to-manufacture rocket with a lot of flight hours. If you can then have that same rocket then become reusable... the game is changed.

      Most new "game changer" designs have called for just one of the above philosophies. OTRAG, for example, was based around the idea that mass production of identical stages as cheaply as possible. It was to have terrible performance (and certainly no reusability), but be so cheap to make that it would overcome this. Skylon, on the other end was to go high-tech and be so affordably reusable that you could use it like an airplane. OTRAG, for its part, would have been inherently limited in its ability to lower launch costs (if at all) due to the veritable skyscraper of stacked stages you have to build, which are trashed each time. Skylon would have gotten almost no mass production benefits, a much slower learning curve, and any accident would have taken out a launch vehicle that is not cheaply replaceable. SpaceX's choice of the middle ground rather than going hard toward either philosophical extreme really seems to have been the wise choice.

      That of course doesn't mean that SpaceX's approach is the only one that could have worked. For example, I kind of like the idea of launching rockets as floating spar platforms. It means you have to build them capable of withstanding saltwater exposure (more restrictive alloy and design selection) and deal with engine-water interactions at launch. But it means you have no diameter restrictions due to overland transport (make it as big as you want!), nor any pads to damage if something goes wrong - just tow, fill, and go. As an example. But what matters is, SpaceX's approach turned out to be a good one. And this combined with the "we can't fire people" environment that its competition operated in, once SpaceX had crossed that capital moat, the writing was on the wall.

      --
      Give a boy a gun and you arm him for a day. Teach him how to make a gun, and the whole metaphor breaks down.
    4. Re:Isn't Arianespace government-subsidized? by K.+S.+Kyosuke · · Score: 5, Interesting

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

      --
      Ezekiel 23:20
    5. Re: Isn't Arianespace government-subsidized? by jabuzz · · Score: 3, Interesting

      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.

    6. Re:Isn't Arianespace government-subsidized? by msauve · · Score: 4, Funny

      He's French. He should know you can't make good whine with sour grapes.

      --
      "National Security is the chief cause of national insecurity." - Celine's First Law
    7. Re: Isn't Arianespace government-subsidized? by dunkelfalke · · Score: 3, Interesting

      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.

      --
      "It's such a fine line between stupid and clever" -- David St. Hubbins, Spinal Tap
    8. Re: Isn't Arianespace government-subsidized? by cjameshuff · · Score: 4, Interesting

      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.

    9. Re:Isn't Arianespace government-subsidized? by jellomizer · · Score: 2

      Being that governments are the high user of Space Crafts, subsidizing really isn't benefiting them. Because they are paying them out of tax payer money to save on a launch out of tax payers money?

      You also make it sound like government subsidies are a bad thing. One of the highest markets for subsidies is the Agriculture industry which helps to make sure American Food supply is there, and supporting farmers for bad seasons. So they will be able to operate the next season.

      --
      If something is so important that you feel the need to post it on the internet... It probably isn't that important.
    10. Re:Isn't Arianespace government-subsidized? by 93+Escort+Wagon · · Score: 2

      You also make it sound like government subsidies are a bad thing.

      No, I talked about subsidies because Charmeau complained that SpaceX was able to offer lower prices to European customers than Arianespace because the cost of SpaceX’s US government launches are supposedly subsidizing part of the cost for those other launches. In this context, it’s irrelevant whether you consider subsidies good or bad... the point is the Ariane program is hugely subsidized, so complaining about any SpaceX subsidy is hypocritical.

      --
      #DeleteChrome
    11. Re:Isn't Arianespace government-subsidized? by tlhIngan · · Score: 4, Insightful

      And that has a name, it is called dumping.

      It's only dumping if SpaceX is offering launches below the cost of the launch. If SpaceX is breaking even or worse, making a profit at $50M, it's not dumping.

      SpaceX charges $62M for a commercial launch. The only reason they charge $100M for a government launch is because a government launch comes with a whole pile of conditions that SpaceX feels costs them an extra $38M to fulfill.

      Presumably, at $50M, they're still making money, perhaps attracting a lot of commercial interests. It's more of an "introductory rate" to EU customers. The problem is Ariane can't compete - they don't have a rocket capable of such cheap costs, and the one in development costs 25% more. Even at $62M for "regular rate" it's still too cheap. (Even the governmental rate is cheaper than ULA and others).

    12. Re:Isn't Arianespace government-subsidized? by Aereus · · Score: 2

      To me it reads that they both got subsidies, its just SpaceX spent theirs more wisely. Nothing was stopping Ariane from designing a more efficient rocket before now. They only started doing it after SpaceX started eating their lunch. That is their fault.

    13. Re: Isn't Arianespace government-subsidized? by Bruce+Perens · · Score: 4, Informative

      The last time I had an ARPA contract, we had to hire a part-time accountant just for that one contract. We had 6-7 developers total. There really is a vastly increased compliance and accounting responsibility when you have a government contract vs. a commercial one. This is in part because so many people have ripped off the government that they have to check everything.

      --
      Bruce Perens.
    14. Re: Isn't Arianespace government-subsidized? by Shotgun · · Score: 2

      Go to http://www.aircraftspruce.com/
      Look at the various choices for aircraft batteries. Be clear that all of these are various sizes of lead plates inside a plastic container and bathed in sulfuric acid.
      Look at the prices for "certified" or STC'd batteries, vs the "experimental" batteries.

      That is the cost of your government paperwork.

      (and it is approximately 2x)

      --
      Aah, change is good. -- Rafiki
      Yeah, but it ain't easy. -- Simba
  2. Think of the Ada by AHuxley · · Score: 4, Funny

    All that quality Ada space code needs support.

    --
    Domestic spying is now "Benign Information Gathering"
  3. Excuses by Anonymous Coward · · Score: 5, Insightful

    I'm from Europe and I'm thoroughly embarrassed by this guy. Yes, SpaceX is subsidized by the US government, but his company is subsidized by European governments. And his claim that it's only the subsidies that drive the costs down is ludicrous. Sure, subsidies help with development costs, but it's not like SpaceX doesn't make a profit off of commercial launches.

    I do agree that a monopoly by SpaceX would be bad (which btw. even Musk agrees with), but the cure for that is to be innovative yourself, not to cry about others.

    The main difference I see here is that SpaceX is an actual company that can make decisions based on what the best for the company is, while Ariane is the typical state-originating pseudo-company where politics plays a way too direct influence.

    SpaceX provided actual innovation in a field that was stagnant for a long time. The correct answer here is to be innovative yourself in different ways, not to whine about it. And who knows, maybe a different company will out-innovate SpaceX in the next couple of years. But from the looks of it that company isn't going to be Ariane.

    1. Re:Excuses by Rei · · Score: 5, Interesting

      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.

      --
      Give a boy a gun and you arm him for a day. Teach him how to make a gun, and the whole metaphor breaks down.
    2. Re:Excuses by Anonymous Coward · · Score: 2, Insightful

      Don't worry. If those yankees dare to endanger our superior European industry we will fine them and break them up and do all the other things we Europeans do.

  4. Zut Alors! by Freshly+Exhumed · · Score: 5, Funny

    Our beezness plan eez faileeng par ce-que les maudits americains! We must faaaaart in zehr zheneral deerection!

    --
    I deny that I have not avoided attaining the opposite of that which I do not want.
    1. Re:Zut Alors! by K.+S.+Kyosuke · · Score: 4, Funny

      We must faaaaart in zehr zheneral deerection!

      Indeed, they are designing a methane engine now.

      --
      Ezekiel 23:20
    2. Re:Zut Alors! by SCVonSteroids · · Score: 3, Funny

      "Ok take a nap.... Zen fire zee missilez!!"

      --
      I tend to rant.
  5. Subsidised industry == Industrial polictics by upuv · · Score: 4, Insightful

    One of the most significant differentiators is that when governments control the funing paths of industry they also control decision making in the industry.

    SpaceX is independent and makes their own decisions. They just happen to have written a screw the feds contract that brings more money in.

    NASA is a government run industrial institution. It's priorities are set by politicians. But in order to maintain funding other decisions are made to favor the politicians. For example where are the NASA jobs going to be located? The answer is a political one. Where are parts going to be developed, tested, assembled etc. All political answers.

    The politically driven process is inherently more expensive. Simply because the most efficient and cheapest way to conduct business is usually not the chosen path.

    With the Ariane 6 the proposal on the board is that Ariane plans to buy out the government stake in the company. Thus freeing it to directly compete on a level footing.

    All credit to the government sponsored space programs over the decades. They created the seed tech and the science that is now being capitalized by the private industry.

  6. It's a philosophy problem by Zorpheus · · Score: 3, Interesting

    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.

    1. Re: It's a philosophy problem by Anonymous Coward · · Score: 2, Interesting

      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.

  7. boo hoo by MachineShedFred · · Score: 4, Insightful

    waaaaaahhh!

    Is this guy serious? Because ArianeSpace isn't subsidized out the wazoo by the EU? So because SpaceX got (far less) subsidies and managed to make better rockets with them, you're going to cry about it?

    A simple message for you and your employees (if they aren't on strike right now): Adapt or die. Disruption has come to the launch market, and you can either get your costs down or not win contracts.

    --
    Slashdot still doesnâ(TM)t support Unicode after it was added to the HTML standard in 1997.
  8. Moot point by Solandri · · Score: 5, Informative

    "SpaceX is charging the U.S. government 100 million dollar per launch, but launches for European customers are much cheaper."

    Falcon 9 FT payload to LEO: 22,800 kg
    Ariane 64 payload to LEO: 20,000 kg
    A64 launch cost: 90 million Euro = US$106 million

    Even at $100 million, SpaceX is charging the U.S. government less than Ariane would be.

    1. Re:Moot point by spth · · Score: 5, Informative

      Your quote of 106 M USD is for launching up to 12,000 kg to GTO (2014 quote). To compare launch prices a bit more information is needed. The current Falcon 9 can launch 8,300 kg to GTO (without recovering the boosters) or up to 5,300 kg (recovering the boosters). Falcon 9 launch (with booster recovery) is 62 M USD (2016 quote).

  9. Re:Free Enterprise by Rei · · Score: 2

    Maybe it's just me, but when I picture commercial launch services offered by North Korea, the image that immediately comes to mind is the Druuge starships from Star Control II ;)

    --
    Give a boy a gun and you arm him for a day. Teach him how to make a gun, and the whole metaphor breaks down.
  10. Links for the parent comment by Futurepower(R) · · Score: 3, Informative

    BFR is a privately funded next-generation reusable launch vehicle and spacecraft system developed by SpaceX

    SpaceX Payload Fairing Survives Despite Missing Recovery Net by 'a Few Hundred Meters'

    In-orbit refueling

  11. Re:hahahahah ur funny by Daemonik · · Score: 4, Funny

    The Chinese rockets will be excellent. They'll be using someone else's designs.

  12. Might actually be honest accounting by sjbe · · Score: 4, Insightful

    SpaceX is independent and makes their own decisions. They just happen to have written a screw the feds contract that brings more money in.

    I wouldn't be so sure of that. I run a small manufacturing company and I've build products for government contracts. I also happen to be a certified accountant. The amount of administrative burden for a government job can in some cases easily double the cost. Particularly for military work. While I'm not privy to the inner workings of SpaceX, I could see a military launch easily adding many millions of dollars of administrative costs for legitimate reasons not controlled by SpaceX.

    Now I know that a bunch of your are thinking that this is government inefficiency at work (and sometimes it is) but most of the time it is simply procedures put in place to ensure the government actually gets what they are paying for. These procedures are developed based on previous experiences. Private enterprise routinely tries to screw the government as hard as possible (and they often succeed) and government fights back by making extremely detailed requirements to ensure that doesn't happen or to at least minimize the problem. It's not an easy problem to solve especially when the number of qualified suppliers for a complicated product (like a rocket) are few.

  13. Re:"...and deal with engine-water interactions..." by angel'o'sphere · · Score: 2

    ICBMs are launched from launch tubes. High pressure nitrogen like in an air gun shots the missile out of the water. The missile is inside of a plastic shell. The shell gets dropped with explosives: then the rocket engine fires.

    So no: there is absolutely nothing in common with a rocket that is floating in salt water and has to fire its engines under water to lift off.

    --
    Cost free eBook I read (by iBook/Kobo/Amazon/ObookO/Gutenberg etc.): "The Green Odyssey" by Philip Jose Farmer.