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?

[Rei]

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.

Re:Isn't Arianespace government-subsidized?

[K. S. Kyosuke]

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

Excuses

[Anonymous Coward]

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.

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.

Zut Alors!

[Freshly Exhumed]

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

Moot point

[Solandri]

"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.

Re:Moot point

[spth]

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).