BANTAM BOOSTERS:
THE KEY TO SMALL RLVs?

Last year, in AIAA-96-2773, this author proposed arguments for the economic and technical benefits of smaller reusable launch vehicles (RLVs) enabled by our assist-stage concepts. In that paper, the author pointed out the potential business advantages of our Space Van concept with a 4 tonne payload relative to a much larger SSTO with a 20 tonne payload. This year, we extend these arguments to a still smaller RLV -- our Bantam Van concept with a 400 kg payload.

As noted last year, pre-operational investment is the dominant economic consideration for fully reusable launch systems. Assuming a business-investment environment, Third Millennium Aerospace has found that traffic levels must build to more than a few hundred flights per year before recurring operational costs begin to become as important as return on investment. Our studies suggest that this finding is largely independent of vehicle size.

As a result of these findings, we do not believe that purely single-stage-to-orbit concepts are viable at this time from the business point of view. SSTOs are technically feasible with current technology if they are large enough, e.g. 800 metric tons gross liftoff mass. Unfortunately this size vehicle is necessarily expensive, considering that rather expensive technology is also required. The author believes that the current market for expendable launch vehicles (ELVs) is basically irrelevant to the new market that is appropriate to RLVs. This compounds the investment problem, since this new market is not likely to develop until an RLV is operational. This results in an extended time to build revenue and therefore makes a large investment impractical to recover without heavy subsidies.

However, if one or more smaller RLVs first develop the space transportation market appropriate to RLVs, then it is likely that -- eventually -- SSTOs will also make sense from the business point of view. Smaller RLVs can build this new market and simultaneously earn appropriate returns on investment (ROI) -- even when the time required to build the market is considered.

Third Millennium has long advocated assist stage concepts as one of the most promising ways to minimize pre-operational investment. This minimizes the size and complexity of the expensive portion of the system: the orbiter stage. The assist stage is basically a reusable booster that is optimized more for total system cost -- rather than for system size and booster performance. As such, this type of reusable booster can be relatively low cost. Moreover, system performance is relatively insensitive to assist-stage performance -- which tends to stage at medium supersonic speeds and low dynamic pressures. Accordingly, the assist stage is generally designed for efficient operations and for maximum relief of loads and other requirements on the orbiter stage.

RLV size can have a dramatic effect on near-term business potential. At a 26 percent ROI and traffic levels equal to about 100 tonnes per year to LEO -- i.e. about 20 percent of current total tonnage to LEO -- our analysis shows that the price per flight for each of five flights per year with an SSTO is about 130 times recurring costs. However, this same 100 tonnes per year carried on the Bantam Van results in 250 flights per year -- with a resulting price per flight that is less than three times recurring costs.

As in last year's paper, we will review basic return-on-investment concepts and outline the assumptions used in our analysis. This analysis will involve three assumed RLVs: an SSTO with a 20-tonne payload, our assisted-SSTO Space Van with a 4-tonne payload, and our assisted-SSTO Bantam Van with a 400 kg payload.

In this analysis, the author considers three levels of return on investment (ROI). A 10 percent ROI is more typical of relatively low-risk equity investments, while a 26 percent ROI is more typical of a venture-capital investment in a low inflation period. Potential venture-capital ROI may be much higher -- for example, 40 percent compounded per year -- for new, risky projects in order to make up for a significant chance of complete failure by at least some of the projects being funded. For example, an investor funding two risky projects at a 40 percent ROI would realize only about 11 percent per year over three years if only one of the projects is successful.

Since the Bantam Van is fundamental to our economic analysis, the next section gives a brief description of this minimum size RLV.

The Bantam Van uses a [scaled-up derivative of our X Van candidate for the X PRIZE as a reusable booster / note: items in brackets are revised as of 28 August 1997].  This booster should be able to boost our fully reusable orbiter to about mach 4 at 45 km.  The fully resuable orbiter is minimal size with a  mass of only 9 tonnes. This orbiter is designed around a single RL10A-4-1.

[Our affiliated company, PanAero, Inc., has obtained a permit for permanent import of a number of Rybinsk RD-38 airbreathing lift engines that are currently operational on the Yak-38 VTOL fighter that is operational on four Russian carriers. PanAero had earlier planned to use the somewhat more powerful RD-41 engines that have been flown in the Yakovlev Yak-141 supersonic VTOL fighter. However, during a 28 August meeting in Russia, representatives of Rybinsk Motors convinced us that the RD-38 was more mature, more readily available, and adequate for our purposes.  Our revised design for the Bantam booster -- including the fully loaded 9-tonne orbiter -- has a mass of about 50 tonnes.  The revised Bantam booster uses four RD-38 engines in each of four rotating nacelles.  The revised booster is designed for vertical takeoff and landing in the horizontal attitude.  The horizontal attitude simplifies maintenance, access, and mating with the orbiter -- while still allowing operations from a small island or stable ship platform.  After vertical liftoff in horizontal attitude, the booster and with the orbiter attached climbs to about 10 or12 kilometers, followed by acceleration with pressure-fed rockets to the mach 4 staging point at low dynamic pressure. The pressure-fed rocket modules -- as well as the RD-38 engines -- are identical to the modules planned for the X Van.  The Bantam booster has an engine-out capability at all times, including liftoff and airbreathing hover prior to landing.]

Most traffic-model experts will take issue with our assumption that total tonnage can be divided up among many flights, rather than being carried fully assembled on a few flights. In fact, we recognize that it is highly unlikely that we would be able to convince potential customers that they should fly a sufficient number of small payloads on the Bantam Van -- or that they should revise their plans to allow for on-orbit assembly of larger payloads. Rather, we intend to concentrate on vertical integration of launch vehicle operations and potential applications. For example, Third Millennium Telecom is a proposed consortium of selected GEO slot holders and financial interests that are willing to treat rendezvous and on-orbit assembly as an internal piece of business in exchange for far lower costs and far greater telecommunications capability.

Following is a review of the financial model used in last year's paper -- with appropriate modifications for inclusion of our example of a very small RLV, our Bantam Van concept.

Spreadsheet software such as Quattro Pro, Excel, or Lotus 123 enable rather sophisticated analysis of the assumed use of funds during any quarter, as well as varying interest rates, varying development schedules, varying market buildup rates, etc. However, a simplified model is useful for illustrating the importance of the size of the investment with respect to reusable launch vehicle economics. The following simplified model will be used to illustrate the importance of RLV size and investment to reusable launch vehicle economics:

• Development of the reusable launch vehicle occurs during a four-year period prior to the start of ten-year period of revenue operations. ROI is constant during the 14-year period.
• One-fourth of the funds required for development and acquisition of the initial three operational reusable launch vehicles is committed at the beginning of each year of the development period.
• Uncommitted funds are invested elsewhere, and no ROI is expected until funds are committed.
• The market for a new launch vehicle starts out immediately at the assumed traffic level at the beginning of the fifth year, i.e. the first year of revenue operations. (This assumption is less and less valid as traffic levels and/or the size of the RLV increase).
• During the first four years, there is only investment and there is no revenue; for the following ten years, there is no investment and only revenue and recurring costs. Recurring costs decrease with traffic level along a 90 percent learning curve. Higher traffic levels may require additional vehicles; the cost of which is included in recurring costs.

With these simplifying assumptions, one can calculate the equivalent investment and the payment schedule corresponding to the entire fourteen year period for a given ROI. The payment schedule -- together with recurring costs -- determines the price per flight and price per kilogram of payload.

We then apply this method to three different sizes of reusable launch vehicles:

• One launch vehicle is assumed to be an 800 tonne SSTO that costs $6,000,000,000 to develop and has a 20 tonne payload. Recurring costs at 5 flights per year -- corresponding to 100 tonnes per year -- are assumed to be $4,900,000 per flight. We refer to this vehicle as an SSTO.
• The second launch vehicle is based upon our Space Van -- a 350 tonne, fully reusable assisted SSTO with an 86 tonne orbiter. We feel that can make the Space Van operational for about $500,000,000. Payload for the cargo variant is about 4 tonnes. Estimated recurring costs at 25 flights per year -- corresponding to 100 tonnes per year -- are about $1,300,000. We refer to this vehicle as the Space Van.
• The third launch vehicle is based upon our Bantam Van -- also a fully reusable assisted SSTO. However, with a gross mass of [50] tonnes including a 9 tonne orbiter, the Bantam Van orbiter is only about one-tenth the mass of the Space Van orbiter. More importantly, estimated investment is only about $75,000,000, i.e. about one seventh that for the Space Van, or only an 80^th that for the SSTO. Payload for the cargo variant is about 400 kg. Estimated recurring costs at 250 flights per year -- corresponding to 100 tonnes per year -- are about $100,000. We will refer to this vehicle as the Bantam Van.

The equivalent investment (EI) at the start of revenue operations is:

EI = (I/4) [(1 + i)⁴ + (1 + i)³ + (1 + i)² + (1 + i)],           (1)

where I = total investment

and i = assumed interest rate (ROI)

Note:  The numbers after each set of parenthesis are supposed to be exponents; not all browsers handle exponents and superscripts properly.


Applying Equation (1), table 1 indicates the equivalent investment that must be paid from revenue operations.

Table 1. Equivalent Investment (EI).

ROI	EI Factor	EI for $6B Invested (SSTO)	EI for $500M Invested (Space Van)	EI for $75M Invested (Bantam Van)
10 %	1.276	$7.66B	$638	$96M
26 %	1.842	$11.1B	$921M	$138M
40 %	2.486	$14.9B	$1.24B	$186M

The "present value (PV) of an annuity" equation can now be used to calculate the annual payments (PMT) required for various expected interest rates or ROIs:

PV = PMT[1 - (1 + i)^-n] / i           (2)

Note:  -n is supposed to be an exponent; not all browsers handle exponents and superscripts properly. 

Table 2 combines Equation (2) and the results of table 1.

Table 2.  Portion of Annual Revenue Required for ROI.

ROI	SSTO	Space Van	Bantam Van
10 %	$1246M	$104M	$16M
26 %	$3190M	$266M	$40M
40 %	$6180M	$515M	$77M

Tables 3a, 3b, and 3c show the price per flight and the price per kilogram that must be charged for traffic levels of 100 tonnes/yr, 500 tonnes/yr, and 2500 tonnes/yr respectively. These traffic levels correspond to about 20 percent, 100 percent, and 500 percent of current tonnage carried to orbit. These tables are constructed by applying the results of table 2 and adding in the recurring costs for various assumed traffic levels.

Tables 3a, 3b, and 3c assume that recurring costs follow a 90 percent learning curve. These tables assume further that -- at traffic levels of 100 tonnes per year -- recurring costs are $4,900,000 per flight for the SSTO, $1,300,000 per flight for the Space Van and $100,000 per flight for the Bantam Van.. The SSTO flies only five flights/yr at 100 tonnes per year. The Space Van would fly 25 flights/yr for this tonnage, and the Bantam Van would fly 250 flights/yr.

Note: The author believes that the market for reusable launch vehicles is essentially unrelated to the space transportation market currently determined by ELVs. Yet there exists an ELV-traffic-model mind-set that precludes proper consideration of the role of RLVs for space transportation. This mind-set insists that rendezvous and assembly on orbit is impractical -- even though RLVs promise to provide excellent rendezvous and assembly options with frequent, reliable, low-cost access to space. While current tonnage to low-Earth orbit is about 500 tonnes per year, the author believes that this will rapidly increase by a factor of 100, i.e. to 50,000 tonnes per year, when RLVs are allowed to hit their real stride. However, this will not happen until traffic models are determined by free-market principles, and not by obsolete mind-sets. Moreover, this change in thinking and change in market is not likely to happen overnight; this is why the author believes that it is extremely important to start with a small RLV and an integrated application.

Table 3b.
Price per Flight and per Kilogram for 500 Tonnes per Year and Assumed ROIs.

RLV Size		SSTO	Space Van	Bantam Van
No. of Flights/Yr		25	125	1250
Recurring Cost/Flt		$3.840.000	$1,020,000	$80,000
10 percent ROI	Total Price/Flight	$53,700,000	$1,850,000	$92,000
	Total Price/Kg	$2685	$463	$232
26 percent ROI	Total Price/Flight	$131,000,000	$3,148,000	$112,000
	Total Price/Kg	$6550	$787	$280
40 percent ROI	Total Price/Flight	$251,00,000	$5,140,000	$142,000
	Total Price/Kg	$12,550	$1285	$354

Table 3c.
Price per Flight and per Kilogram for 2500 Tonnes per Year and Assumed ROIs.

RLV Size		SSTO	Space Van	Bantam Van
No. of Flights/Yr		125	625	6250
Recurring Cost/Flt		$3,000,000	$800,000	$60,000
10 percent ROI	Total Price/Flight	$13,000,000	$966,000	$62,600
	Total Price/Kg	$650	$242	$156
26 percent ROI	Total Price/Flight	$28,500,000	$1,226,000	$66,400
	Total Price/Kg	$1426	$307	$166
40 percent ROI	Total Price/Flight	$52,500,000	$1,624,000	$72,300
	Total Price/Kg	$2622	$406	$181

Tables 3a, 3b, and 3c suggest that the assist-stage concept may be a powerful mechanism for alleviating the "investment barrier problem" common to reusable launch vehicles. Even under conditions most favorable to the SSTO -- low interest and tonnage levels five times current levels -- table 3c suggests that the Bantam Van may have a factor of four advantage with respect to dollars per kilogram of payload. However, once the market grows to tens of thousands of tonnes per year, the SSTO will probably enjoy a cost per kilogram advantage, as well as being more appropriate for some payloads. Until that happens, however, the Bantam Van should have a very large cost advantage over the SSTO. At low traffic levels and medium ROI, table 3a shows that this cost advantage may be as much as 50 to 1 in terms of dollars per kilogram of payload.

The operational appeal of an SSTO is undeniable. However, the market must build very rapidly in order to justify the large investment required for an SSTO -- or, for that matter, for a reusable two-stage vehicle with a large payload,

In gross terms, the current worldwide launch vehicle market might be characterized as follows:

• 500 tonnes to LEO per year
• Typical prices of $14,000 per kg of payload
• 100 to 200 flights per year
• $7,000,000,000 per year total dollar volume
  
  

With reference to table 3b, the SSTO become attractive -- relative to ELVs -- when it captures the total current ELV market of 500 metric tons per year. However, even at a very modest 10 percent return on investment, ROI still represents about 93 percent of the price that must be charged per flight. At a more realistic 26 percent ROI, capture of the current total traffic level of 500 tons per year would only reduce cost per kilogram by a factor of two, compared to current prices. At this point, ROI represents 97 percent of the price that must be charged per flight.

By comparison, for a ROI of 10 percent, the Space Van promises to reduce cost per kilogram of payload to about one-tenth current prices with capture of only one-fifth the current market in terms of tonnage: i.e. at 100 tons per year. For 26 percent ROI, prices are reduced to about one-fifth of current prices at 100 tons per year, and to nearly one-twentieth at 500 tons per year.

The Bantam Van promises to be even more effective at relatively low traffic levels and high interest rates. Cost per kg of payload is an estimated 1/14th of current costs at 100 tonnes per year and a 40 percent per year ROI. At higher traffic levels and low interest rates, ROI becomes a minor consideration for the Bantam Van.

At traffic levels of 2500 tonnes per year, the SSTO becomes quite attractive. However, the assisted SSTO concepts are still significantly more attractive on a dollars per kg basis.

Ironically, the assist-stage concept may be one of the best ways to build the market for an eventual SSTO. The Bantam Van, in particular, promises to be profitable at low traffic levels and moderate to high interest rates. By being able to operate effectively as an RLV at low traffic levels, this type of RLV can build a market for RLVs that can eventually support larger and larger RLVs. The key to good RLV economics is to prevent ROI requirements from overwhelming recurring costs. Assist-stage concepts are also less sensitive to requirements for advanced technology -- another reason for starting small.

The argument for starting with an SSTO appears to be that if the government subsidizes the development of the vehicle, investment can be ignored, and the vehicle can then be marketed at launch prices corresponding to recurring costs. There are two problems with this approach. First, by ignoring business-oriented management discipline, this approach is not likely to result in truly low costs. This approach did not work with the Space Shuttle; and it probably won't work with the X-33 and the follow-on VentureStar. The second problem is that a heavy handed approach by government undermines the fragile attempts by various entrepreneurs to use private funds to develop smaller RLVs that make business sense without subsidy.

Current tonnage levels -- and current number of flights -- are very poor market criteria for reusable launch vehicles. Total dollar volume level is probably much more meaningful. Profit prospects become more favorable for all sizes of RLVs, if we measure the current market in terms of dollars, rather than tonnes or numbers of flights.

Note that the Bantam Van promises to be quite attractive at only 100 tonnes per year, even with venture-capital ROIs. Note further that -- at an ROI of 26 percent per year -- the Bantam Van can carry 100 tonnes per year for revenue amounting to only $65,000,000 per year. This is less than 1 percent of the current market measured in dollars. Thus, the Bantam Van could be attractive if only small payloads are considered. However, the manned variant of the Bantam Van is capable of carrying a pilot and passenger to a low equatorial orbit. This should greatly ease rendezvous and assembly operations for very large payloads and, for example, electrolysis of water for orbital transfer propellants.

Figures 1 through 4 present comparisons of how much cargo could be carried by: a) current expendable launch vehicles; b) an SSTO; c) the Space Van, and d) the Bantam Van -- for annual expenditures of $100 million, $500 million, $2.5 billion, and $10 billion on each vehicle for space transportation. The prices for the RLVs compare ROIs of 10, 26, and 40 percent; the prices for current expendable launch vehicles assume investment is a sunk cost or that any additional investment is already factored into the price. Operational costs for ELVs also assume a decrease along a 90 percent learning curve.

Figure 1 indicates that the Bantam Van can carry quite large tonnages for $100,000,000 per year, compared to ELVs. Since both the SSTO and the Space Van require more than $100,000,000 per year of business for even a 10 percent ROI, neither of these vehicles are appropriate if business revenue is only $100,000,000 per year of business.

Figure 1 indicates that the investment in an RLV should not exceed that estimated for the Bantam Van, if the initial market for the RLV is only about one or two percent the current market -- as measured in dollars.

Figure 1 also suggests several other important observations.

First, reusable launch vehicles are likely to make current tonnage levels completely irrelevant as a market indicator. Third Millennium has maintained for nearly three decades that the availability of low cost, frequent, and reliable space transportation by means of one or more fully reusable launch vehicles will completely change the nature of what we do in space. The next section on the nature of payloads in the reusable era will treat this in more detail.

Second, a smaller reusable launch vehicle appears to be an appropriate way to transition the launch vehicle market place from a market measured in hundreds of tons per year of cargo to one measured in tens of thousands of tons or more per year of cargo. The Bantam Van promises to carry current tonnages for a few percent of current expenditures. This should build the market for much larger tonnages with the Bantam Van, and possibly, larger RLVs.

Figure 2 indicates the author believes will happen when revenue for a specific, well-designed RLV increases to $500 million per year.

If revenue for a specific vehicle increases to perhaps $500 million per year, then medium size RLVs like the Space Van start to make business sense. However, this level of revenue is still insufficient to justify investment in a large RLV -- as an SSTO must necessarily be -- even for unrealistically low ROIs of 10 percent per year.

As the revenue level increase to $2.5 billion per year for a specific launch vehicle, then an SSTO should begin to make business sense -- if a 10 percent ROI is acceptable. Figure 3 shows that the SSTO can carry large tonnages at this ROI and revenue level. Note, however, that the smaller RLVs can still carry significantly more tonnage, even under these assumptions.

With an annual revenue of $10 billion per year for a specific launch vehicle, a large RLV such an SSTO begins to come into its own. Once the market for RLVs is established, then an expenditure of $10 billion per year on a specific vehicle is not unrealistic. This level is not much higher than current expenditures for all launch vehicles. Low cost access to space should encourage a tradeoff between payload costs and transportation costs. Heavier, but much lower cost payloads should make sense -- along with more dependency on redundancy than excessively expensive reliability.

Note that the smaller RLVs are still very cost effective even when expenditures rise to a very high level. However, as medium and larger RLVs become comparable on a cost per kg basis, then more attention to desired payload size is likely to be appropriate. In particular, the Bantam Van is marginal for manned access. Although the manned variant of the Bantam Van can carry a pilot and passenger to a low Equatorial orbit, it can probably carry only a pilot (or a passenger on an autopiloted flight) to the International Space Station.

Low-cost, frequent, reliable access to space should change the nature of launch-vehicle payloads. One of the main changes should be payload managers' attitude toward rendezvous. Rendezvous should become far more practical. With practical assembly on orbit, 4-ton payloads -- and even 400-kg payloads -- should be adequate, initially at least. Far lower transportation costs for small payloads should result in less dependence on much more costly transport of payloads in large packages, e.g. 20 tons or larger.

With respect to very large payloads, rendezvous and some on-orbit assembly is necessary even for the largest of launch vehicles. With greatly increased practicality, assembly on orbit should become far more attractive. The main concern will likely be with total cost. If an assembled payload is far lower cost, there should not be any great concern with how it was delivered. The fact that an Assisted SSTO may have to make many flights for a particular customer makes the economics of reusability that much better.

With respect to large payloads now carried on a single launch, there may -- or may not -- be valid arguments for paying perhaps twenty times as much for launch costs for delivery of the payload in one piece. To the extent that this argument is valid, such payloads could be carried on current expendable launch vehicles. Third Millennium expects that the real growth in the tonnage market will be for low-cost transport and assembly of very large payloads that cannot be carried on single flights of current or projected launch vehicles.

With respect to small payloads, small launch vehicles with dedicated payloads are preferable -- especially for replacement of satellites in varied orbits. If such payloads can be launched at much lower costs using a small, reusable launch vehicle, so much the better.

Payloads should also become much less expensive. Payload designers seem to believe that they are still launching on Vanguard at $1,000,000 per pound of payload (1958 dollars). Even with current launch vehicles, launch costs have become two orders of magnitude or more less expensive. In the reusable launch vehicle era, there will be even less justification for high payload costs. If reliability is the reason, the same reliability can be achieved at far lower cost by allowing the payload to be heavier with redundant equipment. Similarly, there will be little justification for using exotic materials to reduce the weight of a satellite, when launch costs are only a few hundred dollars a pound.

For deep-space and GEO missions, most of the payload is propellant -- which tends to be much cheaper than even the lowest cost projections for transportation.

Third Millennium has often proclaimed a basic paradox of space transportation economics: When launch costs are high, the predominant cost is likely to be for spacecraft. However, when launch costs become very low, the predominant cost is likely to be for space transportation.

• The economics of reusable launch vehicles is very different from that of expendable launch vehicles. Projections based upon the data base for expendable launch vehicles are probably not valid for reusable launch vehicles.
  
• Large reusable launch vehicles -- such as the SSTO and reusable two-stage vehicles with large payloads -- are probably incapable of achieving a proper return on investment until the launch market is greatly expanded by a smaller reusable launch vehicle with much lower pre-operational investment costs.
  
• Even medium size vehicles like Third Millennium's Space Van may be too large to earn a suitable return on investment in the initial market for RLV services. Accordingly, a very small RLV such as Third Millennium"s Bantam Van may make more business sense in spite of its very small payload of 400 kg.
  
• The nature of the launch market and payloads themselves is likely to change radically with the introduction of appropriately designed reusable launch vehicles.
  
• Assist stage concepts appear to be capable of greatly reducing pre-operational investment costs -- thereby serving as an appropriate transition tool for greatly expanding the market for launch vehicle services.
  
• Subsidies to uneconomic RLVs can inhibit the development of truly low-cost space transportation.

Copyright © 1997 by Third Millennium® Aerospace, Inc.

Published as AIAA 97-3124 by the American Institute of Aeronautics and Astronautics, Inc. with permission.