Real Delta IV Cost?

According to it's press release, Boeing's recent $835 million
Delta IV write-off covered 24 contracted launches, meaning
(as I understand it) that the company was loosing an average of
$34.8 million on each launch. The original EELV contract for
Delta IV was 19 launches for $1.88 billion, including $500
million for research and development, or an average of $99
million for each launch. Does this mean that an average
Delta IV mission really costs $99 million + $34.8 million =
$133.8 million?

- Ed Kyle

ed kyle wrote:
According to it's press release, Boeing's recent $835 million
Delta IV write-off covered 24 contracted launches, meaning
(as I understand it) that the company was loosing an average of
$34.8 million on each launch. The original EELV contract for
Delta IV was 19 launches for $1.88 billion, including $500
million for research and development, or an average of $99
million for each launch. Does this mean that an average
Delta IV mission really costs $99 million + $34.8 million =
$133.8 million?

You'll never really know the answer, but that certainly sounds
like it's in the ballpark - maybe a little low, but certainly not off by
a factor of more than about 2.

Brett

(ed kyle) wrote in message . com...
According to it's press release, Boeing's recent $835 million
Delta IV write-off covered 24 contracted launches, meaning
(as I understand it) that the company was loosing an average of
$34.8 million on each launch.

I don't think this is quite right.

Boeing uses "program accounting". Instead of recording a big expense
on their balance sheet for R&D and tooling and such, they estimate how
many units they'll sell and record a bit of the up-front expense on
each unit. If they guess right, they'll have paid off the up-front
costs right when they sell their final unit (launch, in this case).

For the Delta IV, Boeing was assuming that they could record a certain
development cost for each launch and thus pay off the R&D;
unfortunately a bunch of those launches now just aren't going to
happen. Launches that actually are going to happen have to pick up
the slack; each of the 24 contracted launches needs to bear an extra
$35M.

Boeing actually got in some minor trouble on the 777 program for the
way they used program accounting. When development was more expensive
than they thought it would be and the early planes cost more than
Boeing thought they would, Boeing just increased the number of 777s
that they planned to sell so they didn't have to report the overruns.

-jake

(Jake McGuire) wrote in message . com...
(ed kyle) wrote in message . com...
According to it's press release, Boeing's recent $835 million
Delta IV write-off covered 24 contracted launches, meaning
(as I understand it) that the company was loosing an average of
$34.8 million on each launch.

I don't think this is quite right.

Boeing uses "program accounting". ...

For the Delta IV, Boeing was assuming that they could record a certain
development cost for each launch and thus pay off the R&D;
unfortunately a bunch of those launches now just aren't going to
happen. Launches that actually are going to happen have to pick up
the slack; each of the 24 contracted launches needs to bear an extra
$35M.


The June issue of Boeing's Delta newsletter (available on Boeing's
web site) provided a hint of what was coming. One article mentioned
the commercial market pressures. It said that the five big GTO
launchers; Delta IV, Zenit 3SL, Atlas V, Proton, and Ariane 5;
provide 70 payload per year capacity for a market that currently
supplies only 15 annual payloads. This overcapacity has driven
launch prices down (a good thing, unless you build expensive rockets).
The article further stated that Delta IV would focus on the
DoD/NASA/NOAA market while SeaLaunch would handle the commercial
market for Boeing Launch Services (BLS). It also said that Boeing
was studying whether Sea Launch might be able to fly some type of
ISS missions for NASA. Finally, the newsletter notes that this
year's BLS schedule actually includes more Zenit 3SL launches (4)
than Delta IV missions (3).

Could this be an example of how Ike was right about the military-
industrial complex? Here we have an innovative, competitive
corporation (several merged ones, actually) that has become so
lethargically dependant on government weening that it can no longer
compete in the world market.

- Ed Kyle

ed kyle wrote:

According to it's press release, Boeing's recent $835 million
Delta IV write-off covered 24 contracted launches, meaning
(as I understand it) that the company was loosing an average of
$34.8 million on each launch. The original EELV contract for
Delta IV was 19 launches for $1.88 billion, including $500
million for research and development, or an average of $99
million for each launch. Does this mean that an average
Delta IV mission really costs $99 million + $34.8 million =
$133.8 million?

First off, your math is off.

$1380 million / 19 launches = $72.6 million / launch
+$835 million / 24 launches = $34.8 million / launch
----------------------------------------------------
$107.4 million / launch

Second, to answer your question, it depends. Boeing spent at least
$1.5 billion of its own money developing Delta IV. How you apportion
that sunk cost over its expected lifetime will determine what you get
for an "average" cost. Clearly, the marginal cost of a Delta IV is
pretty cheap.

Mike

-----
Michael Kent Apple II Forever!!
St. Peters, MO

ed kyle wrote:

Could this be an example of how Ike was right about the military-
industrial complex? Here we have an innovative, competitive
corporation (several merged ones, actually) that has become so
lethargically dependant on government weening that it can no longer
compete in the world market.

Of all the "companies" in the "commercial" launch market, you accuse
Boeing of government weening? Krunichev, RSC Energia, and Arianespace
are all goverment owned, and NASDA is a government agency. Boeing and
Lockheed Martin are the only truly private* companies in the business.

No, this is an expample of government-subsidized competition killing off
a superior product. Boeing spent $1.75 billion of its own money to meet
requirements of the EELV contract that were waived for Lockheed Martin,
and Arianespace got nearly $12 billion in subsidies to build Ariane V.
The companies building Russian and Ukranian rockets frequently don't even
pay their workers, let alone repay the cost of their development.

The fact is that Boeing built the world's only truly commercial large
launch vehicle and is now paying the price of trying to compete against
most of the major world governments.

Mike

* "Private" meaning not government owned. They are obviously publicly
traded.

-----
Michael Kent Apple II Forever!!
St. Peters, MO

(Explorer8939) wrote in message . com...
"It also said that Boeing was studying whether Sea Launch might be
able to fly some type of ISS missions for NASA. "

Huh?

Yeah, that statement is in the Boeing Launch Services
newsletter. NASA bought a Proton launch for its first
ISS (Russian-built) module, so why shouldn't it also
buy a Russian-powered Ukrainian rocket launch? If
Boeing scraps Delta IV , NASA may not have a choice.

- Ed Kyle