Assessment of Commercial Suborbital Market

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Assessment of Commercial

Suborbital
Market

Presentation to FAA Commercial Space
Transportation Advisory Committee (COMSTAC)


Carissa Christensen

October 9,
2012

Agenda


Overview (What is an SRV?)


Forecast Approach


Demand by Market


Integrated Demand Forecast


www.taurigroup.com

1

Overview


Suborbital reusable vehicles
(SRVs) are creating a new
spaceflight industry


This project forecasts demand for
SRVs


Informs government and industry
decision makers


Analyzes market dynamics


Identifies actionable drivers of
growth


Project jointly funded by FAA and
Space Florida and conducted by
The Tauri Group



2

What is a Suborbital Reusable Vehicle
(SRV)?


Vehicle typically crosses
the threshold of space
(~100km/ ~62 mi)


Reusable


1 to 5 minutes of
microgravity


Currently planned vehicles


Up to ~700 kg of cargo


Some carry people


Current ticket prices
$95k to $200k


Between 1 and 6
passengers


May launch very small
satellites

Armadillo Aerospace:

STIG and Hyperion

Blue Origin:

New Shepard

XCOR: Lynx

Masten Space
Systems: Xaero

and Xogdor

Virgin Galactic:

SpaceShipTwo

UP Aerospace:

SpaceLoft

XL


www.taurigroup.com
3


SRV Capabilities and Prices

Company

SRV

Seats*

Locker

Equivalents
(estimated)

Cargo

(kg)

Price

Announced
Operational
Date

UP

Aerospace

SpaceLoft

XL

--


0.5

36

$350k per launch

2006

(actual)

Armadillo

Aerospace

STIG A

STIG B

Hyperion

--

--

2

1

2

12

10**

50**

200**

Not announced

Not announced

$102k per seat

2012

2013

2014

XCOR
Aerospace

Lynx Mark I

Lynx Mark II

Lynx

Mark III

1

1

1

3

3

28

120

120

770

$95k per seat

$95k per seat

$95k per seat; $500k

for small sat launch

2013

2013

2017

Virgin Galactic

SpaceShipTwo

6

36

600

$200k per seat

2013

Masten

Space
Systems


Xaero

Xogdor

--

4

25

Not announced

2012

2013

Blue

Origin

New
Shepard

3+

5

120**

Not announced

Not

announced

* Passengers only; several vehicles are piloted

**Net of payload infrastructure


www.taurigroup.com
4

Forecast Approach

Demand
Forecast

SRV

Supply

Market
Dynamics


Analysis of plans for
SRVs


Interviews with vehicle developers


Independent of SRV provider
proprietary data


120 interviews with users and experts


Survey of 226 wealthy individuals


Detailed research of markets



Scenario
-
based forecast
focused on quantifying

predictable demand


Identify uncertainties

Research, Interviews, Survey


www.taurigroup.com
5

Purpose of the Forecast


The primary purpose of this forecast is to provide a comprehensive
analysis of what is known about the SRV
industry


Who the players are


Current activities and plans


Trends, market dynamics, and areas of uncertainty


P
rovides
a broader focus on market dynamics, rather than a point
estimate of the
future


In a new
market or industry,
many
unpredictable and sometimes
unknown factors will shape outcomes


We have focused on:


A
ggregating
, analyzing, and resolving information about future
demand


Identifying
uncertainties and areas where increased awareness of SRVs
could affect the
future


www.taurigroup.com
6

Demand by Market

7

SRV Markets


www.taurigroup.com

8

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Scenario Definitions


Baseline Scenario
:

SRVs operate in a
predictable
political and
economic environment that is relatively similar to today’s.
Existing
trends generate demand


Growth Scenario
: New dynamics emerge from marketing,
branding, and research successes


Commercial human spaceflight has a transformative effect on consumer
behavior, and more consumers purchase SRV flights


SRV research results attract significant new government, international,
and commercial interest


Constrained Scenario
: Dramatic reductions in spending compared
to today, due, for example, to worsened global economy


All scenarios:


Prices remain at current levels


Perception of safe operations


Year 1 = start of regular SRV operations



www.taurigroup.com
9




Commercial Human
Spaceflight


Forecast predicts 8,000

individuals
interested, willing, and able to pay for a
suborbital flight


95% high net worth ($5M+), 5% space
enthusiasts (lower net worth)


About 40% (3,600) will fly over the next
10 years


Growth scenario projects over 24,000
individuals


Based on survey results reflecting strong
interest and realistic ability and
willingness to pay


Forecast sensitive to several
assumptions that would change
projection


Corporate sales, contests and
promotions, and in
-
space training
demand totals 56

seats over 10 years
(baseline), 74

(growth)

10

Commercial Human Spaceflight

Human spaceflight experiences for
tourism or training

How We Estimated Demand
for Individuals


Survey of 226 US individuals with greater than $5M in investable assets


Because survey results on hypothetical spending overstate willingness to purchase, used
multiple questions to validate interest and likelihood of purchase


Based on survey, only 4% of high net worth individuals have ever spent $100K per person on
leisure trip or experience


Interest in suborbital flight


Extremely or very interested in taking a suborbital trip


Likely to purchase a suborbital trip (alone or in addition to other spaceflight options)


Willingness to pay $100K or more for a suborbital trip


Ranked a suborbital trip highly compared to other options


Performed cross checks on total population determining likelihood of purchase


How much imagine spending (per person) on a once in a lifetime trip ($100K threshold)


Most ever actually spent (per person) on a past trip ($50K threshold in baseline)


Predicted demand based on survey results applied to global population with $5M+
net worth (~3,000,000)


Additional 5% to account for demand from individuals with lower net worth


Estimated likelihood of flying in any given year based on 25 years per individual


Growth scenario relaxed past spending requirement, constrained scenario increased
requirement



www.taurigroup.com

11

Current Reservations for
SRVs


Four
SRVs

capable of carrying humans in
development


Announced prices range from $95K to
$200K


925 reservations to date for SRV flights


Celebrity passengers include Stephen
Hawking, Ashton
Kutcher


At least 1 family has purchased an entire flight
for $1M


For Virgin Galactic, 35
-
40% of passengers
from US, 15% UK, 15% Asia
-
Pacific


Unclear exactly how number of ticket
holders relates to future trends


Tickets have been purchased before any
flights, with limited advertising; future
purchases may be higher


Some tickets are refundable, some are
deposits; possibility to change mind


Our survey data says about 7% care about
flying early (we asked if they would pay to
be in the first 1,000 people to fly)


Baseline = 600


Growth = 1,700


If all reservation holders fly, and ticket
purchases occur in future at the same level,
demand will fall between baseline and
growth scenarios


Until passengers fly, future behavior cannot
be predicted with certainty


Positive reports of flight experiences may
increase sales


Negative or unexpected flight experiences
could slow sales or trigger requests for
refunds



www.taurigroup.com

12

SRV reservations

to date

Company

System

Planned start

Reservations

Armadillo

Hyperion

2014

200

Blue Origin

New Shepard

TBD

No

info

Virgin Galactic

SpaceShipTwo

2013

550

XCOR

Lynx
Mark
II

2013

175

Total reservations

925

Market Response to a Change
in Price


If prices decrease, demand
increases significantly among high
net worth individuals


Additional demand (not reflected in
curve shown) would result among
individuals with lower net worth


An increase in price would reduce
demand, but comparatively little

13

Commercial
Human Spaceflight
Demand

(For
individuals with
≥ $5M net worth. Source
: 2012 Tauri Group
Space Travel
Survey of HNWIs)

Uncertainties


Forecast assumes passengers fly once only and that only 40% of interested
passengers today will fly within the next 10 years


Relaxing any of these assumptions increases demand significantly


For example, if 80% of interested passengers fly in the next 10 years, forecast doubles


Forecast assesses attitudes and behavior related to an experience that does not yet
exist. Flight experience and other factors (awareness, marketing, perceptions of
safety, media coverage, and so on) once operations start will shape attitudes and
behavior


Estimating demand among individuals with less than $5M in investible assets who will
purchase flights using a disproportionate amount of personal assets (“space
enthusiasts”)


Estimated at 5% of high net worth demand


Some
providers
suggest this is a low percentage compared to ticket holders


No public data available on ticket purchase demographics to
date


If passengers with a net worth of $1M rather than $5M are commonplace, the addressable
market increases dramatically


Other submarkets


In
-
space training


Orbital providers and NASA have not indicated interest in using
SRVs

for astronaut training


Suborbital operators expect that to change once the vehicles are operating and have a proven track record


Excalibur
Almaz

signed an agreement with XCOR for training, but unclear the extent and timing for such
training




www.taurigroup.com

14

98%

0.3%

1%

1%

Demand Projection

Submarkets

Corporate Baseline

Individuals Baseline

Contests and
Promotions Baseline


www.taurigroup.com

15

Training Baseline




Basic and Applied Research

16

Basic and Applied Research

Basic and applied research in a
number of disciplines, leveraging
the unique properties of and
access to the space environment
and microgravity


Forecast predicts SRVs will attract research
spending by non
-
space agencies, non
-
profits,
universities, NASA, international
governments, and commercial firms


SRVs can support a wide range of
experiments, offering unique capability in four
areas


Atmospheric research: access to poorly
understood regions of the atmosphere


Suborbital astronomy: high quality IR and UV
observations outside the atmosphere


Longitudinal human research: studies of
diverse/large populations on frequent flights


Microgravity: unique combination of attributes
(duration, human tending, lower cost)


Examples: combustion, crystallization
experiments of particles in a charged plasma,
interfacial fluid dynamics


Energized researcher community but limited US
government funding


In order for research to be proposed, funded,
and undertaken, researchers must invent an
experiment that fits the SRV design niche;
takes time


Mostly government

commercial firms will
experiment to find an application and engage
researchers

Demand Projection

48%

9%

19%

25%


-



2
0



4
0



6
0



8
0



1
0
0



1
2
0



1
4
0



1
6
0



1
8
0



2
0
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2

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6

Y
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7

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Y
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Submarkets

Human Research Baseline

Astronomy Baseline

Atmospheric
Research Baseline

Microgravity Baseline


www.taurigroup.com

17




Aerospace Technology Test and
Demonstration

18

Aerospace engineering to
advance technology maturity or
achieve space demonstration,
qualification, or certification

Aerospace Technology Test and
Demonstration


SRVs can support most test environments


Best fit


TRL 5,
6,
7 (test in a relevant environment)


Human
interfaces, mechanical systems, fluid systems,
atmospheric sensors, avionics, and imaging systems


Cost competitive compared to orbital options


Typically higher cost than terrestrial facilities


Advantage: access to space environment


Some terrestrial alternatives may be costlier; for
experiment set up


Customers
are developers of exploration systems
(vehicles, habitats, robotics)


NASA and ISS partners likely to be main customers


NASA conducts test and demo on ISS and sounding
rockets


About 25%
of test, demo experiments from ISS, shuttle,
sounding rockets are applicable to
SRVs


NASA’s Flight Opportunity program has fully covered this
demand


Growth shows a three fold increase in tech demo as
NASA tests ISS payloads on SRVs first


Baseline predicts almost no commercial or
DoD

demand


15% of the growth scenario is
DoD

and commercial
demand for tech demo


Community not clear on how/whether SRV
-
flown = space
qualified


Awareness
:
coordinate with NASA, other agencies to
certify the suborbital flight environment for TRL
advancement

Demand Projection


-



5



1
0



1
5



2
0



2
5



3
0


Y
e
a
r

1

Y
e
a
r

2

Y
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a
r

3

Y
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a
r

4

Y
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a
r

5

Y
e
a
r

6

Y
e
a
r

7

Y
e
a
r

8

Y
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r

9

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www.taurigroup.com

19




Satellite Deployment

Satellite Deployment

20


SRVs will be price and capability
-
competitive to launch very small
satellites (under 15 kg)


About 100 of these satellites annually in
the next decade; civil, military,
commercial, and education users


SRV market share affected by
government


DoD

plan to develop/use its own
vehicles


NASA is working to launch satellites on
missions of opportunity


SRVs capture about 15% of market in
baseline, over 30% in growth scenario


Additional upside if government
increases use of
SRVs

over alternatives


Uncertainties


Government use


Timeframe for SRV capability


2017 announced for Lynx Mark III


No dates for other providers


Awareness:
DoD

and NASA was not
fully aware of SRV provider capabilities


Very small satellites launched to
orbit from
SRVs


Demand Projection

30%

26%

34%

10%


-



5



1
0



1
5



2
0



2
5



3
0



3
5



4
0



4
5


Y
e
a
r

1

Y
e
a
r

2

Y
e
a
r

3

Y
e
a
r

4

Y
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a
r

5

Y
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a
r

6

Y
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a
r

7

Y
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a
r

8

Y
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9

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S
c
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o

Submarkets

Military

Other

Civil

University


www.taurigroup.com

21




Education


Forecast predicts 600 (baseline) to 1,400
(growth scenario)
K

12
schools


Launch, return of student
-
built small
payloads aligns with STEM goals


High interest from educators if aware of
SRVs

(few are)


Max budget about $5K; consistent with
estimated SRV prices for cube
-
sized
payload


Similar to successful STEM build projects


FIRST Robotics


Team America Rocketry Challenge


Educator flights likely; up to about 15
seats a year by the end of the forecast


Current efforts by not
-
for
-
profits


Historical grant funding for teachers on
parabolic flights indicates interest


University SRV payloads will augment or
replace existing student launches at 120
(baseline) to over 200 (growth)
universities


Awareness:


Easy access for schools


Tie to curricula (Space Florida efforts
under way now)




22

Flights provide opportunities to K
-
12 schools, colleges, and
universities to increase access to
and awareness of space

Education

Demand Projection

Submarkets

K
-
12 Teacher Seats Baseline

K
-
12 Payloads Baseline

University Payloads Baseline


www.taurigroup.com

23

32%

59%

9%




Media and Public Relations


SRVs

likely to attract documentaries,
reality TV, sponsorships/PR campaigns


Consistent with similar space activity in the
past


Baseline predicts 4 to 5 seat/cargo
equivalents per year


Growth scenario reflects SRV buzz, brand
and marketing successes


Larger documentaries, more spending by
reality TV shows, bigger ad campaigns
generate 30+ seat/cargo equivalents in 10
years


While complexity, cost of filming movies
makes demand uncertain, we show about
10 launches for one feature film in growth
scenario


Uncertainties


Media, public interest


changeable, hard
to quantify; could explode, could fade after
a few years


Size of activities


a seat? a flight? a
series?

24

Using space to promote products,
increase brand awareness, or film
space
-
related content

Media and Public Relations

Demand Projection

28%

65%

7%


-



5



1
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1
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2
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3
5


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e
a
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Y
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2

Y
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3

Y
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4

Y
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r

5

Y
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a
r

6

Y
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a
r

7

Y
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r

8

Y
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r

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Submarkets

Ad and PR Baseline

Film and TV Baseline

Novelty Baseline


www.taurigroup.com

25

Summary of Major Uncertainties


Forecast assumptions regarding consumer behavior


Commercial interest by industry


Changeable perceptions and impact on media and PR demand


Research uptake by US agencies that do not traditionally fund space
research


International government programs to use
SRVs


NASA and
DoD

(could be larger users)



www.taurigroup.com

26

Integrated Demand Forecast

27

Demand, by Scenario and Market

Conversion factors: 1 seat/cargo equivalent = 1 seat = 3⅓ lockers

Commercial Human
Spaceflight

Satellite
Deployment

Basic and Applied
Research

Media and Public
Relations

Technology
Demonstration

Education


www.taurigroup.com

28

Scenarios (in seat/cargo equivalents)
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
Total
Baseline Scenario
373


390


405


421


438


451


489


501


517


533


4,518


Growth Scenario
1,096


1,127


1,169


1,223


1,260


1,299


1,394


1,445


1,529


1,592


13,134


Constrained Scenario
213


226


232


229


239


243


241


247


252


255


2,378


Approximate Annual Flight Revenue ($M)

Seat/Cargo Equivalents

10
-
Year

SRV Demand
Forecast

Constrained
: Multiple flights per week, $300M over 10 years

Increased demand from marketing, research
successes, and flight operations

Today’s consumer demand and research budgets

If there is a significant drop from today’s
demand

Game changing unknowns: price reductions, research discoveries,
commercial applications, major sponsorships, others

Additional potential demand

(not estimated)


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Conclusions


Demand for suborbital flight is sustained and appears sufficient to support multiple
providers


Analysis based on measurable, predictable budgets, consumer interest, and trends


Existing demand today, prior to operational human
-
capable vehicles, baselines
hundreds of flights annually, and a new industry generating $600 million over 10
years


Growth scenario (reflecting broader awareness, successful research demonstrations,
and increasing consumer interest expected by providers as regular operations
approach) predicts more than a thousand passengers and thousands of payloads will
seek to fly annually, with multiple daily flights generating $1.6 billion over 10 years


Upside potential associated with
gamechanging

unknowns (not estimated) such as
price reductions, major research discoveries, commercial applications, global brand
value and major sponsorships, and new government use such as
DoD

leverage of
SRVs


Minimal spending scenario, where consumer demand drops to less than half of
today’s levels and global research budgets are dramatically reduced, results in
demand for multiple flights each week








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Thank You and Contact Information

We would like to thank FAA, Office of Commercial Space
Transportation and Space Florida

for sponsoring this study



Contact information:


Carissa Christensen, Managing Partner, carissa.christensen@taurigroup.com


Elaine Gresham,
elaine.gresham@taurigroup.com


Kate
Maliga
,
kate.maliga@taurigroup.com


The Tauri Group

6363 Walker Lane

Alexandria, Virginia 22310

www.taurigroup.com

703
-
683
-
2883



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