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Space The Almighty Buck Businesses Government United States

Ariane Chief Seems Frustrated With SpaceX For Driving Down Launch Costs (arstechnica.com) 165

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.

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Ariane Chief Seems Frustrated With SpaceX For Driving Down Launch Costs

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  • by 93 Escort Wagon ( 326346 ) on Thursday May 24, 2018 @03:17AM (#56663886)

    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?

    • by Anonymous Coward

      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

      • by Rei ( 128717 ) on Thursday May 24, 2018 @04:49AM (#56664150) Homepage

        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.

        • by Rei ( 128717 ) on Thursday May 24, 2018 @05:05AM (#56664184) Homepage

          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.

        • by dunkelfalke ( 91624 ) on Thursday May 24, 2018 @08:06AM (#56664680)

          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.

        • 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.

          The lesson that came to my mind when I read TFA, was "develop a product to canabalize your own market, because if you don't, somebody else will."

        • > Thinking of capital barriers to entry as your uncrossable moat is a dangerous attitude.

          Cable TV companies, for instance.

          > 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.

          So be a smaller company, that gets more done cheaper. Or put some of that excess staff on R&D, and see what else can be done. New methods of propulsion, more reliable, longer lasting, and self-maintaining life support systems. Put th

      • 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

        Trouble, or lack of incentive?

    • by K. S. Kyosuke ( 729550 ) on Thursday May 24, 2018 @05:46AM (#56664310)
      For the record, Ariane 5 is literally subsidized to fly [twitter.com].
    • 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.

      • 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.

        • by jythie ( 914043 )
          Is that actually hypocritical though? They do not seem to be complaining that a subsidy exists, but that the current structure is making it difficult for them to compete within their structure. It is perfectly valid to go 'hey, their government is helping them more than our government is helping us and it is hurting how well we service our domestic markets'.
          • But as someone else said, this may be sour grapes. SpaceX built cheap, reliable, reusable rockets. They put quite a bit of time and money into those three aspects. It's paying off now. Ariane's huge disadvantage at this point is that they sunk everything into single-use rockets, and it's (probably) too late now to catch up.

            • There were European proposals for reusable rockets, but the ESA member states refused to fund them. One of those proposals in the FLPP was to have a LOX/Methane reusable flyback first stage with an expendable upper stage. Sounds familiar?

        • the point is the Ariane program is hugely subsidized, so complaining about any SpaceX subsidy is hypocritical.
          No, that is not the point.
          The point is (at he claims so) that Space X sells launches in the US for 100M to government and for 50M to european customers. And that has a name, it is called dumping.

          Obviously the European Space Agency is subsidized: it is a fucking government organization. But it is supposed to write a black zero at the end of the fiscal year. Which it can't if it gets put out of busine

          • by tlhIngan ( 30335 ) <slashdot@@@worf...net> on Thursday May 24, 2018 @12:38PM (#56666526)

            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).

            • Of course they can't compete with the cost.
              But the article claims that Space X is selling below cost and makes it even harder (no idea if that is true).

              Anyway, there is no one on the planet who can compete with Space X launch costs at the moment.

          • SpaceX doesn't charge the same, because the service is the same. For Government launches (DoD, NASA, NRO etc) there is considerable additional requirements, paperwork and oversight that need to be met. These incur additional costs above and beyond commercial launches
      • This is why we have corn byproducts in our gasoline to say nothing of our food.

        When industry starts looking for places to stuff output from subsidized agriculture, perhaps it's time to cut back on the subsidies eh?

    • 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?

      The City of Romulus, which runs Detroit Metro airport, built a new, giant parking structure and extended lot as part of a modernization and new terminal.

      The surrounding private lots still charged less, enough so peoe put up with the inconvenience of a mile+ extra bus ride.

      So the city added a 30% "Government is grossly inefficient" tax on those lots that it, itself, of course didn't have to pay.

      I'm sure France would try to do the same to SpaceX if it could. This is not the thing to do if we are ever to get

      • ESA is not France. It is European.
        The CEO happens to be a French, and the launch site is technically in France, French Guiana (South America).
        So, no: France can't just raise a tax. And Europe neither. Imagine the outcry if Europe would put a "sales tax" on a launch made by an american company on american soil, just because the customer is a European? WTO would jump us ... but well with current "dumping practice" the WTO probably jumps Space X, who knows ;D

    • by prefec2 ( 875483 )

      ESA gets a lot of state money, but it is the European Space Agency so the NASA lookalike, but with a much smaller budget. There is some support for the development of the Ariane rockets from and through ESA and European states. However, SpaceX does a vast number of launches for the USA military and state, while the EU does not subsidize the flights by paying higher prices for their launches. For example, for the Galileo (GPS) satellites, the EU use Soyuz rockets from Russia starting from the Korou. So indee

      • by Aereus ( 1042228 )

        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.

        • I would recommend going to the WTO and let them clarify who is subsidizing whom with how much. Anyway, both sides will subsidize their space access as an strategic asset. Especially with Trump in the White House the EU will not stop supporting ESA and Arianespace.

    • by GuB-42 ( 2483988 )

      Ariane is also heavily subsidized. However, they are complaining that SpaceX is subsidized by a government with a larger budget, which allows them to do economies of scale, which, in turn makes them more competitive for their non-subsidized commercial market. In particular, that their market is too small to make reusable rockets worthwhile, because NASA isn't there to guarantee them a significant amount of launches.

      Still sounds like whining to me. Especially since I doubt that European governments will allo

  • by AHuxley ( 892839 ) on Thursday May 24, 2018 @03:44AM (#56663956) Journal
    All that quality Ada space code needs support.
  • Excuses (Score:5, Insightful)

    by Anonymous Coward on Thursday May 24, 2018 @03:58AM (#56663988)

    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.

    • by Zorpheus ( 857617 ) on Thursday May 24, 2018 @04:34AM (#56664098)
      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.
      • So they seem to put reliability over everything, from the beginning. Musk seems to have a better way.
        But maybe I am just too biased against this attitude as a researcher.
    • Re:Excuses (Score:5, Interesting)

      by Rei ( 128717 ) on Thursday May 24, 2018 @05:26AM (#56664254) Homepage

      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.

      • Re: (Score:2, Insightful)

        by Anonymous Coward

        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.

      • You're my favorite Slashdotter. And I'll be in Reykjavik May 27, May 28 and June 7... may I buy you lunch?

        (Sorry to spam a bunch of your posts, but I wanted to be sure you saw my invite.) Reply to GPSpilot1@NOsPam.gmail.com.

        And you're right... it's ridiculous that we can't type a thorn here.

      • by GPS Pilot ( 3683 )

        we have no SpaceX or Blue Origin in the wings, and an environment that I don't think would ever create one.

        What do you think about Skylon? SABRE will be tested here in Colorado very soon...

        Whatever ULA bids, SpaceX will undercut them - even though that undercutting is still a windfall for SpaceX. What alternative does the US government have?

        Why would the US government even want an alternative to that terrific situation? : )

    • You missed the point.
      Space X sells flights to the US government for 100M and the exact same flight for an European customer for 50M. So obviously Adriane/ESA can not compete with that, and that is not a question of costs or price, but: dumping

      The correct answer here is to be innovative yourself in different ways
      Yes, but they can't do that if Space X bankrupts them. If you had read further: the market at the moment is to small that ESA can invest into reusable vehicles. Because then the workers at ESA would

  • Zut Alors! (Score:5, Funny)

    by Freshly Exhumed ( 105597 ) on Thursday May 24, 2018 @04:16AM (#56664054) Homepage

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

  • story that is in most economics 101 textbooks - if the market is of the right size and unregulated, a huge government subsidy can help a company take the lead and stay there. Boeing dominated the aerospace market in the 60s and the 70s because of what would now be considered under WTO rules illegal subsidies, and killed off most other aerospace companies. That was the case until Airbus was created and sponsored by three European governments -- and the monopoly market of Boeing became the Boeing-Airbus duopo

  • by upuv ( 1201447 ) on Thursday May 24, 2018 @04:31AM (#56664090) Journal

    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.

    • by Rei ( 128717 )

      They just happen to have written a screw the feds contract that brings more money in.

      I'm totally going to have to steal this wording at some point ;)

    • by sjbe ( 173966 ) on Thursday May 24, 2018 @09:48AM (#56665154)

      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.

  • boo hoo (Score:5, Insightful)

    by MachineShedFred ( 621896 ) on Thursday May 24, 2018 @04:36AM (#56664106) Journal

    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.

    • by Anonymous Coward

      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.

      Well spoken. Of course, you will say the same when China, India or any of the other emerging players in this game come and undercut your industry, yes?

    • I knew you would pop up eventually. Thank you for your subsidized goods and cheap labor. When I shop, I look for the Made in China label, then I know I am supporting communists, cheap labor, and subsidized services.
  • Moot point (Score:5, Informative)

    by Solandri ( 704621 ) on Thursday May 24, 2018 @04:38AM (#56664112)

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

    Falcon 9 FT [wikipedia.org] payload to LEO: 22,800 kg
    Ariane 64 [wikipedia.org] payload to LEO: 20,000 kg
    A64 launch cost [wikipedia.org]: 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 (Score:5, Informative)

      by spth ( 5126797 ) on Thursday May 24, 2018 @05:11AM (#56664198)
      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).
      • by Rei ( 128717 )

        They're talking about FH, not F9.

        • You're my favorite Slashdotter. And I'll be in Reykjavik May 27, May 28 and June 7.... may I buy you lunch?

          (Sorry to spam a bunch of your posts, but I wanted to be sure you saw my invitation.) Reply to GPSpilot1@NOsPam.gmail.com.

          And you're right... it's ridiculous that we can't type a thorn here.

      • I believe that generally speaking launch costs are constant for any particular rocket, regardless of target orbit. Basically you have the cost of the rocket, the cost of ground support and other logistics, and way down at the bottom at somewhere around 5% you have the cost of the fuel - the only the only part that changes significantly based on target orbit.

        Once there's competition in the heavily reusable rocket market, so that the rocket is no longer the overwhelming fraction of the cost, and those saving

        • It depends heavily on the design. In the case of Falcon 9 there is only 1 variant. In some ways this is part of the genius of the SpaceX model. The Falcon 9 was built larger than most payloads, so there is a mass margin they can play with on every flight (say to test out various recovery approaches), paid for by someone else (the primary payload owner). Most other rockets have variants for different levels of performance, Ariane 5 has ECA and ES, Atlas V has something like 22 different variants, and the cus
    • BFR will arrive about the same time as Ariane's F9 competitor. Current estimates are roughly 150,000 kg for $7M for BFR.

      Ariane will be limited to European Intelligence services launches exclusively (unless there's a mandate by their governments that non-secret missions keep Ariane alive as a jobs program). It should just be absorbed into the military.

      Even then nobody else will be able to cost-justify non-BFR launches.

      • By then, Blue Origin might have evolved New Glenn into a fully-reusable system that can compete with BFR for smaller payloads. Of course, they have to actually reach orbit first.

  • ....what technical advances has Ariane brought to the space-launch process, again?

  • Well I guess he's just a crybaby, it's their own fault, the ariane has been around for ages and seemingly haven't really improved over the years to cut cost. It's more like they could ask almost anything because there wasn't really any competition, but now there is, and now they have to get their act together..

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