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SpaceWorks Engineering, Inc. (SEI)www.sei.aero
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Mr. A.C. CharaniaSenior FuturistSpaceWorks Engineering, Inc. (SEI)[email protected]
Dr. John R. OldsCEOSpaceWorks Engineering, Inc. (SEI)[email protected]
Mr. Dominic DePasqualeSystems EngineerSpaceWorks Engineering, Inc. (SEI)[email protected]
SUB-ORBITAL SPACE TOURISM:Predictions of the Future Marketplace Using Agent-Based ModelingIAC-06-E3.4.0157th International Astronautical Congress (IAC)02-06 October 2006, Valencia, Spain
Revision A04 October 2006
Contents
Firm OverviewOverview of Agent-Based Modeling NESC Model OverviewSample NESC Model Simulations
SpaceWorks Engineering, Inc. (SEI)www.sei.aero
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SpaceWorks Engineering, Inc. (SEI)www.sei.aero
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Introduction to SpaceWorks Engineering, Inc. (SEI)
Overview:- Engineering services firm based in Atlanta (small business concern)- Founded in 2000 as a spin-off from the Georgia Institute of Technology- Averaged 130% growth in revenue each year since 2001 - 85% of SEI staff members hold degrees in engineering or science
Core Competencies:- Advanced Concept Synthesis for launch and in-space transportation systems- Financial engineering analysis for next-generation aerospace applications and markets- Technology impact analysis and quantitative technology portfolio optimization
SpaceWorks Engineering, Inc. (SEI)www.sei.aero
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Practice AreasSpace Systems Analysis | What is the System?Conceptual Level Engineering AnalysisConceptual Level Engineering DesignLife Cycle AssessmentCost EngineeringAdvanced / Robust Design Processes
Technology Prioritization | What are the Implications? Technology AnticipationTechnology Benefit AssessmentsTechnology Prioritization
Financial Engineering | Is the Project Viable?Business DesignFuture Venture Due DiligenceReal Options Analysis
Future Market Assessment | What is Next?Scenario PlanningMarket ForecastingMarket Analysis
Policy and Media Consultation | How to Express the Vision?Government InitiativesPolicy ConsultationTelevision, Film, Radio, Internet Presence
From Vision to Concept
Including:- Engineering design and analysis- New concept design- Independent concept assessment- Full, life cycle analysis- Programmatic and technical analysis
Including:- Storyboards- Technical concept illustrations (marker and pastel in B&W and color)- 2-D line engineering drawings with technical layouts and dimensions- 3-D engineering CAD models of concept designs- High-resolution computer graphics imaging (renders) - Concept / architecture summary datasheets and single page handouts / flyers
SpaceWorks Engineering, Inc. (SEI)www.sei.aero
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Including:- 2nd, 3rd, and 4th generation single-stage and two-stage Reusable Launch Vehicle (RLV) designs (rocket, airbreather, combined-cycle)- Human Exploration and Development of Space (HEDS) infrastructures including Space Solar Power (SSP)- Launch assist systems- In-space transfer vehicles and upper stages and orbital maneuvering vehicles- Lunar and Mars transfer vehicles and landers for human exploration missions- In-space transportation nodes and propellant depots- Interstellar missions- In-space and surface human habitats
Concepts and Architectures
Image sources: SpaceWorks Engineering, Inc. (SEI), Space Systems Design Lab (SSDL) / Georgia Institute of Technology
SpaceWorks Engineering, Inc. (SEI)www.sei.aero
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Recent Exploration Experience
Including:- NASA Exploration Systems Mission Directorate (ESMD) Concept Exploration and Refinement (CE&R) Study Subcontractor- NASA Exploration Systems Mission Directorate (ESMD) Economic Development of Space (EDS) Project- NASA MSFC exploration architecture trade studies (launch vehicles, in-space stages, lunar landers)- NASA MSFC Prometheus follow-on study: Nuclear Electric Propulsion (NEP) mission to Pluto/Kuiper Belt- NASA LaRC Lunar Lander Preparatory Study Phases 1 and 2 Concept Design for NASA JSC - Rocketdyne propulsion technology assessment on lunar exploration architectures- Mission Scenario Analysis Tool (MSAT) architecture optimization tool development- Moonraker in-space stage and habitat sizing tool development- In-space trajectory tool development- Lunar exploration economic and life cycle cost analysis
Image sources: NASA
SpaceWorks Engineering, Inc. (SEI)www.sei.aero
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SpaceWorks Engineering, Inc. (SEI)www.sei.aero
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Sample Economic Analyses
Human Exploration Cost Estimates Scenarios of Reusable Launch Vehicle (RLV) Price Sensitivity
500
1,500
2,500
3,500
4,500
25% 50% 75%Turn-Around-Time Reduction
Pric
e Pe
r Pou
nd P
aylo
ad [$
/lb]
20
40
60
80
100
120
140
Flig
ht R
ate
[Flig
hts
Per
Yea
r]
Price Per Flight [$/lb]
Flight Rate [Flights/Year]
500
1,500
2,500
3,500
4,500
25% 50% 75%Turn-Around-Time Reduction
Pric
e Pe
r Pou
nd P
aylo
ad [$
/lb]
20
40
60
80
100
120
140
Flig
ht R
ate
[Flig
hts
Per
Yea
r]
Price Per Flight [$/lb]
Flight Rate [Flights/Year]
1,0002,0003,0004,0005,0006,0007,0008,0009,000
10,000
25% 50% 75%Turn-Around-Time Reduction
Pric
e Pe
r Pou
nd P
aylo
ad [$
/lb]
20
25
30
35
40
Flig
ht R
ate
[Flig
hts
Per
Yea
r]
Price Per Flight [$/lb]
Flight Rate [Flights/Year]
1,0002,0003,0004,0005,0006,0007,0008,0009,000
10,000
25% 50% 75%Turn-Around-Time Reduction
Pric
e Pe
r Pou
nd P
aylo
ad [$
/lb]
20
25
30
35
40
Flig
ht R
ate
[Flig
hts
Per
Yea
r]
Price Per Flight [$/lb]
Flight Rate [Flights/Year]
Oper
atio
ns C
ost R
educ
tion
DDT&E AND TFU COST REDUCTION25% 75%
25%
75%
Components of LCC (FY06)
Other (Robotic/ISS/Shuttle)
CEV/CM
CLV
LSAM
CaLV-HLLV
EDS + CEV/SM
Technology Maturation Surface Systems
Facilities, Operations, and Flight Tests
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Year
$M
$111.3 B (2006-2018) $53.4 B (2019-2025)$164.7 B
NASA FY06 Exploration-Related Budget
See: http://www.sei.aero/library/technical.html for more information and technical papers on above analyses
Space Tourism Economic Modeling International Space Station (ISS) Support Market
-100M
-50M
0M
50M
100M
0 2 4 6 8 10 12
Disc
ount
ed C
umul
ative
Ca
sh F
low
(US
$)
Project Year
Effect of Competition
Higher-End Operator
In Competition with Higher-End
Lower-End Operator
Effect of Market Entry Date
0 2 4 6 8 10 12Project Year
-40M-20M
0M20M40M60M80M
-60M-80M 2 Year Market Delay
4 Year Market Delay
Higher-End Operator
Lower-End Operator
5 Commercial Competitors + min. 2 CEV/Yr + Russian Competition
SpaceWorks Engineering, Inc. (SEI)www.sei.aero
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SEI’s Background Related to Economics of Emerging Commercial Space Transportation
Sample Economic Analysis Tools:- NESC (Nodal Economic Space Commerce Model, agent-based space market simulation financial tool) - CABAM (Cost and Business Analysis Model, general space transportation)
- LMNoP (Launch Markets for Normal People, tourism model)
Recent Projects:-Economic Development of Space (EDS)sponsored by NASA Langley Research Center-Simulating Emerging Space (SES) Industries with Agent-Based Modeling sponsored by NASA Marshall Space Flight Center
Recent Papers (www.sei.aero):-Charania, A., Kanamori, H., "Extensions of NASA's Exploration Architecture: Performance Capabilities and Market Economics of a Lunar Propellant Production Facility," ISTS-2006-k-13, 25th International Symposium on Space Technology and Science (ISTS), Kanazawa City, Ishikawa Prefecture, Japan, June 4-11, 2006.-Charania, A., DePasquale, J., "Agent-Based Modeling of the Space Tourism Market," ISDC 2006-355, 25th International Space Development Conference, Los Angeles, California, May 4-7, 2006.-Charania, A., Bradford, J. E., Olds, J. R., "Economic Development of Space: Examination and Simulation," IAC-05-E3.3.08, 56th International Astronautical Congress, Fukuoka, Japan, October 17-21, 2005.-Charania, A., DePasquale, D., "Simulating the Dynamic Marketplace: An Introduction to the Nodal Economic Space Commerce (NESC) Model," AIAA-2005-6617, Space 2005, Long Beach, California, August 30 - September 1, 2005.
Sample Clients and Partners:
NESC ModelSub-orbital Public Space Flight Market
NESC ModelCommercial Support of the
International Space Station (ISS)
SpaceWorks Engineering, Inc. (SEI)www.sei.aero
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Trying to Model the World (or even a small piece of it)
Source: Stephen Eubank, “Social Networks and Epidemics,” Basic and Applied Simulation Sciences, Los Alamos National Laboratory
The world is complex
Complex group interactions
Simple individual/agent behaviors
Conditions change -> agent behaviors change
Microsoft Excel – strains to model complexity
SpaceWorks Engineering, Inc. (SEI)www.sei.aero
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Nodal Economic Space Commerce (NESC) Model
The Nodal Economic Space Commerce (NESC) model is a dynamic, agent-based space market simulation and financial engineering tool
Agent-Based Modeling (ABM): allows heterogeneous agents with varied and dynamic behavior
- Qualities: emergent phenomena, natural description of system, flexible- Simulation can represent plants and animals in ecosystems, vehicles in traffic, people in crowds, or
autonomous characters in animation and games
Modeling space capitalism in NESC- Between competitors, includes current and future competitors (expendable and reusable)- Entrance of new competitors within existing and new markets - Explore variations in customer preferences- Current markets: sub-orbital space tourism and ISS support- Use available data (Futron, etc.) on demand and estimate supply
Companies compete for customers with the goal of maximizing revenues
- Each company autonomously decides its pricing strategy given its unique capacity, costs, and vehicle characteristics
- Model outputs financial health of each company- Model differences in products/services
Based Upon “REcursive Porous Agent Simulation Toolkit”RePast Sources: http://www.duncanrobertson.com/research/simulation.htm, http://sourceforge.net/projects/repast/, http://complexityworkshop.com/cw/tutorial/RePast/index.html
SpaceWorks Engineering, Inc. (SEI)www.sei.aero
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Users of Agent-Based Modeling (ABM)
P&G to understand the impact of alternative shipment and payment terms on retail in stock positions and company inventory
Macy’s to generate new store layout options for maximizing customer satisfaction and spending
Hewlett Packard to understand the effect on organizational performance by a change in hiring practices
NASDAQ to understand what happen when the “tick size” changes from 1/8 of a dollar to 1/100 of a dollar
U.S. Department of Defense to conduct war games predicting battlefield outcomes in a networked information environment
Pricewaterhouse Coopers to predict CD sales in the Japanese pop (J-Pop) market using 75,000 agents (correlation coefficients of actual and predicted sales between 0.8 and 0.9)
Electronic Arts (EA) and their “The SIMS” game
Sources: “Agent-based Modeling: A valuable new weapon for Chief Marketing Officers in the fight of their lives,” EMM Group, Inc., 2004, http://www.red3d.com/cwr/ibm.html
SpaceWorks Engineering, Inc. (SEI)www.sei.aero
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NESC Dynamics: Space Tourism
Company A
Has unique:Costs
Vehicle CharacteristicsDiscount rate
Desires to maximize:Profits = Sales - Cost
3
Limited information sharing:• Price from prior year• Vehicle characteristics
Company BSame logic as Company
A but with different product
Company CSame logic as Company
A but with different product
Company adjusts pricing strategy:• Stay at current• Higher• Lower• Match competitor
4
4
4
1Price offering per year Customers purchase
21
2
orSpace Tourism Market
P
QQ*
P*
Potential Market Multipliers
Use Aggregate Market Curve Model Individual Customers
SpaceWorks Engineering, Inc. (SEI)www.sei.aero
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One at a Time: A Sub-Orbital Space Tourism Customer “Agent”
Used to make purchase choices
Willingness to Pay (Wealth Surveys)Interest
Behaviors
Dependent on company offering
Reliability (linear)Appeal (linear)
Windows (LMNoP- Georgia Tech model)Seat Belt Freedom (Futron Study)
Company Interest Factors
Changes with time
Pioneer or Imitator
Diffusion Interest Factors
Constant with time
Base interest in suborbital
Base Interest Factors
Who is the Customer?
Does the customer want
to buy?
Who does the customer want to buy from?
SpaceWorks Engineering, Inc. (SEI)www.sei.aero
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NESC Company/Customer/Market Agent Interaction
Evaluate pricing optionsRemain at current priceRaise priceLower price
Alter price if desired
Make offer to market
Calculate financial metrics
Examine profit
Estimate price for desired ROI
Make offer to market
Initial Price
Subsequent Price
Pass company offers to customers
Match customer demand to supply
Return number sold
MARKET AGENTS
Evaluate company offers
Rank companies in preferred order
Decide to buy or not
CUSTOMER AGENTS
COMPANY AGENTS
SpaceWorks Engineering, Inc. (SEI)www.sei.aero
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Quality and Quantity of Space Tourists
Since sub-orbital space tourism is a new industry, little data is available from actual sales and company revenues
Data on customer characteristics and behaviors must be determined from market surveys, inferred from other industries, or deduced using intelligent assumptions
One such source is the Space Tourism Market Study conducted by Futron Corporation in cooperation with Zogby International
- The market study involved telephone interviews of 450 people with household income of at least US$250,000 annually or net worth greater than US $1 million to examine the size, growth potential, and customer characteristics of the suborbital and orbital tourism markets
The number of customers for the NESC sub-orbital model simulation is estimated to be around 53,000 for calendar year 2006. This is the number of customers who are interested in purchasing a sub-orbital experience and able to do so (financially and physically). It is derived by the following parameters:
- Number of Millionaires in World- Take proportion who have requisite net worth (assume willing to spend 1.5% of net worth)- Apply percent interested in participating (somewhat, very, and definitely likely) from Futron survey- Reduce for fitness requirements (split between those over and under age of 65)
SpaceWorks Engineering, Inc. (SEI)www.sei.aero
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High Net Worth Individuals (HNWI) Population by Region, 2003 – 2005 (In Millions)
Source: Merrill Lynch and Capgemini, Source: http://www.us.capgemini.com/worldwealthreport06)* 2004 numbers have been refined and minimally restated, as every year more accurate and recent data or sourcesof information are gathered.Note: All chart numbers are rounded.Source: Capgemini Lorenz curve analysis, 2006
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Potential Customers at Various Prices (Source: Futron Space Tourism Market Study)
Cumulative % of Potential
Customers Willing to Pay at the
Indicated Price or Lower
0%
10%
20%
30%
40%
50%
60%
$0 $50 $100 $150 $200 $250 $300Price Per Consumer ($K)
$0 $50 $100 $150 $200 $250 $300Price Per Consumer ($K)
Experience: Sub-Orbital Space Tourism
The percentage of potential customers willing to pay for a suborbital tourism experience levels out at higher price points
The additional potential customers gained by decreasing price from $200 thousand to $150 thousand is small (a four percent increase) by comparison to the additional customers gained by decreasing price from $100 thousand to $50 thousand (a twelve percent increase)
This suggests that the market for suborbital space tourism is relatively inelastic at high prices, but elastic at low prices
Futron Suborbital Demand (extrapolated)
0200400600800
1,0001,2001,4001,6001,8002,000
$0 M $200 M $400 M $600 M $800 M $1,000 MTicket Price (US$ K)
2006
2008
2010
Annual Passenger Rate
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NESC: Sub-Orbital Space Tourism Model Visual Interface - Inputs
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Top Level Assumptions
Company input information based upon available public data- Since incomplete information for these companies, results are to be taken as
representative of industry as a whole and not specific to any one company
Sub-orbital space tourism companies make decisions based upon impact on financial bottom line and not other “human”desires
- Examined from the perspective of other capital investment projects and not as a hobby or altruistic venture
Several case studies are presented here as examples of the capabilities of the NESC sub-orbital space tourism model:
- Case A: One firm- Case B: Two firms (same start times)- Case C: Three firms (same start times)
SpaceWorks Engineering, Inc. (SEI)www.sei.aero
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Overview of Firm Inputs
202020Maximum Flights Per Vehicle Per Year
0.250.250.25Debt-to-Equity Ratio
435Perceived Vehicle Appeal (Qualitative 1-5)
$1.0 M / Flight$0.2 M / Flight$0.5 M / FlightVariable Operating Cost Per Flight ($M FY2006)
$25 M / Year$8 M / Year$20 M / YearFixed Operating Cost Per Year ($M FY2006)
626Passenger Capacity
10.91Window Quality (Shared=0.25, Small=0.9, Large=1, Ceiling=1.25)
151715Risk Premium
334Perceived Reliability (Qualitative 1-5)
1.4811.48Vehicle Freedom (Belts=1, No Belts=1.48)
$10 M$9 M$10 MVehicle Production Cost ($M FY2006)
$20 M$10 M$50 MDevelopment Cost ($M FY2006)
535Number of Vehicles in Fleet
Firm 3Firm 2Firm 1Item
Customers: 53,000 potential sub-orbital space flight consumers over a 15 year project period with 1) the financial means to pay, 2) physical condition to fly, and 3) the interest in suborbital flight have been categorized into over 20,000 “agent types” based on personal characteristics such as: pioneer vs. imitator, influence of perceived vehicle reliability, willingness to pay at various ticket prices, influence of cabin freedom (e.g. seat belt requirements), influence of perceived vehicle uniqueness/intrinsic appeal, etc.Providers: A user-defined number of sub-orbital passenger vehicle developer/operators can be included in any simulation: Each provider has a realistic business model including development and production costs, operating costs, vehicle capacity, perceived reliability, etc. Each ‘CEO agent’ can adjust its market price for a ticket from year to year in an effort to improve profitability. Firms select their initial prices based upon ROI.Growth rate: 6% per yearPrice Ceiling: $500k/passenger maximum amount that can be charged
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Sample Simulation Results: Sub-Orbital Space Tourism Market
Case AOne Firm
Case BTwo firms (same start times)
Case CThree firms (same start times)
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Sub-Orbital Space Tourism Market: Preliminary Observations
Sub-orbital public space flight market can allow two companies to beprofitable over time
- A third competitor, competing with the top-tier operator, struggles to maintain viability- Can the first firms in the marketplace have enough capacity to capture total annual market?- Based upon results shown here and other sensitivity analyses previously performed- Caveat 1: Given current consumer and company modeling assumptions- Caveat 2: Need to re-examine in terms of higher fidelity NESC model (almost complete)
Optimal pricing strategy must take advantage of “pioneer” and “imitator” effects
- Initial prices should start higher (around $300k/ticket in simulations) than some initial “public” rates, companies could then decrease (to close to $150-200k/ticket) to maximize profit
- “Virgin Galactic has, in the near term, been focusing on what it calls the ‘Founders’, its group of the first 100 customers who have paid their full $200,000 ticket price up front. With the Founders group now filled up, Virgin is now promoting two other groups of passengers: Pioneers and Voyagers. The Pioneers will be the next 400 passengers, paying a deposit of between $100,000 and $175,000, while the Voyagers will follow the Pioneers, putting down a deposit of 10 percent of the ticket price, or no more than about $20,000.” (Source: http://www.thespacereview.com/article/717/1, Monday, October 2, 2006)
Future work will include enhancement and additional analysis- Include the effect of failure (cost and downtime) upon market demand and suppliers (Monte Carlo
analysis)- Better pricing determination- Enhance financing model to include injection of venture capital and mezzanine financing, including
stocks/warrants (beyond current debt-to-equity ratio formulation)
NESC capability is ready to be applied by SEI for commercial ventures
SpaceWorks Engineering, Inc. (SEI)www.sei.aero
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www.sei.aero
Business Address:SpaceWorks Engineering, Inc. (SEI)1200 Ashwood ParkwaySuite 506Atlanta, GA 30338 U.S.A.
Phone: 770-379-8000Fax: 770-379-8001
Internet:WWW: www.sei.aeroE-mail: [email protected]