The revival of the suborbital market
by Sam Dinkin
|Million-dollar prices are likely to be ephemeral in the suborbital up-and-back market.|
Blue Origin has already successfully revealed the price of a seat on a pioneering flight will be high. If successful, this will not be the first civilian suborbital flight to reach outer space (according to the US definition, an altitude of about 80.5 kilometers). That honor went to Michael Melvill in 2004 in the Scaled Composites SpaceShipOne (see “SpaceShipOne makes history — barely”, The Space Review, Just 24, 2004). Had they carried a paying participant who won an auction instead of lead ballast, the last 17 years of space travel might have changed.
Blue Origin’s astronauts will enter an elite club. Only 569 people have gone to space since the beginning of the Space Age.
The auction price for the first seat may be higher or lower than the price for the second and subsequent seats. The first flight is a compound good of being one of the first non-pilot participants on a suborbital flight, being a pioneer to risk danger to open space to commerce, and being one of the first thousand people to space. After one flight, the next batch of participants will not be first. If the flight is successful, a tiny portion of the risk will have been retired. After a few hundred successful flights in a row, one hopes that the risk will have fallen to that of other proven space launch systems. Before several hundred flights of New Shepard, the list of the first thousand humans in space will likely be full.
Nevertheless, an auction is an excellent means of price discovery. One of the most successful information markets using a periodic auction is the auction for Treasury Inflation-Protected Securities. When these inflation-indexed bond price is compared to the price of non-indexed bonds, a clear market signal on the expected inflation rate is revealed.
Million-dollar prices are likely to be ephemeral in the suborbital up-and-back market. Virgin Galactic is perennially very close to its first flight for paying participants. If the price the market will bear is revealed to be more than $1 million per person (and the risk tolerance is revealed to be high too), that might encourage Virgin Galactic to devote more resources to reach the market. With a couple more entrants, the price will likely be competed down so supply meets demand at close to the same margins as for Tesla sedans.
If SpaceX is successful in developing the Starship, it could be used for suborbital jumps to space without its Super Heavy booster. There might be more competition from a near-orbital trajectory, such as the one planned for SpaceX’s first near-orbital test of Starship and Super Heavy. While Starship has a planned payload target of 100 tons to orbit atop Super Heavy, that might be seven or eight crewed Dragon spacecraft with up to seven people for most of an orbit instead (a variant on something Buzz Aldrin told me about.) A price of $1–2 million per person might generate $50–100 million per flight in revenue. If the Dragons are sufficiently reusable and the launches sufficiently inexpensive, those flights could continue even if the price drops to $50,000 per person, which would still cover a projected aspirational price per launch of Starship at $2 million per flight. A dedicated passenger Starship such as the Mars-colonist version could carry 100 people. That could cost-effectively fly off the risk of using Starship with or without Super Heavy to serve the point-to-point suborbital market (see “How safe is safe enough for point-to-point suborbital?”, The Space Review, April 22, 2019), which might be bigger than the orbital market (see “Could suborbital point-to-point really be worth $20 billion a year in 2030?”, The Space Review, March 25, 2019).
|Sooner or later thereafter, for millions of people, the sky may no longer be the limit.|
At the same time, some of the customers for suborbital flights might prefer to take Axiom SpaceX flights to the International Space Station for $10–20 million per person, or SpaceX flights to orbit like the Inspiration4 flight (see “The new era of private human orbital spaceflight”, The Space Review, March 8, 2021). Perhaps a flight around the Moon will also become as common as trips to the International Space Station are currently, if the dearMoon flight is successful. A civilian flight around the Moon will likely be priced in the range of hundreds of millions per flight after the initial flight, given multiple Starship tanker flights to fuel a Starship in orbit to reach the Moon. There are about 2,700 billionaires, up from 1,000 in 2010, so there may be enough demand there.
Maybe the ancient Futron market study can be dusted off given that there are many more billionaires and millionaires than 20 years ago. In 2009 there were about eight to nine million millionaires in the world (see “Individuals pick up the space development torch”, The Space Review, June 21, 2010). Now 52 million is the current estimate. That makes Futron’s estimate 16,000 annual demand for suborbital flights at a $50,000 price point in 2021 perhaps conservative—it would be 1 in 3,250 millionaires taking a flight each year. And ten years from now there might be more than 100 million millionaires. Serving that market might take three flights a week for a passenger Starship that seats 100. Three flights a day might be sufficient to fly off enough risk to prove space flights are about as safe per trip as a motorcycle in about ten years.
Blue Origin may end up ushering in the space age for private participants in suborbital flight quite soon with the attractive prices (from a supplier’s point of view) it has generated in its auction. Sooner or later thereafter, for millions of people, the sky may no longer be the limit.
Note: we are using a new commenting system, which may require you to create a new account.