Life Cycle Costs for Fleet of Tourist Spaceships

At the time of writing, Burt Rutan and Sir Richard Branson had teamed up to form The Spaceship Company, which will develop and manufacture commercial spacecraft (Space Ship Two, or SS2), launch aircraft (White Knight Two, or WK2), and support equipment. Branson’s “space line,” Virgin Galactic, will handle the operations for space tourist flights. Their hope is to eventually reduce by half the proposed initial ticket price of $190,000.

No information has been released about development and operating costs for the space line and equipment, so the figures used in this case are guesses. Refer to Example 2 for hypothetical life cycle costs for the space line and spaceship fleet, but assume the following changes to the numbers:

• Five spaceships, seven passengers per spaceship

• Development and manufacturing cost, $120 million

• Flight operations cost: $0.5 million per flight

• Ticket price: $190,000 for passengers on the first 100 flights, then $150,000 for passengers on the next 100, and $100,000 for passengers on flights thereafter

QUESTIONS

1. Assuming all other numbers from Example 2 are the same, what is the “bottom line” profit of the venture for 5 years of operation?

2. If the profit goal is $70 million:

(a) What is the maximum development & production cost for the fleet?

(b) What is the maximum per-flight operational cost? (Note: assume $120 million development/production cost.)

3. Brainstorm. What are some ways the development cost might be reduced? What are some possible design decisions for the spacecraft and mother ship that would reduce the per flight operational cost? Next, research articles and news releases about SS2 and WK2 to see what the developers, Scaled Composites and The Spaceship Company, have been doing to contain costs.