The space industry, like the nuclear industry, has received some hundreds of $ billions of government investment in the Western world, but to date this investment has not yielded a commercial return. Space investment has produced some returns, directly in the form of telecommunications and remote sensing capabilities, and indirectly in the form of technological spin-offs, national prestige and scientific knowledge, but the social impacts remain limited and indirect to date.

However, research on the use of solar energy and mineral raw materials in space shows that the space industry has a still untapped potential for major industrial growth. In order for the space industry to fulfil this potential, it must provide a commercial return, when it will attract commercial capital investment.

Ever since the pioneering space engineers, Tsiolkovsky, Goddard, Oberth, the most important goal of space engineering has been the development of fully reusable launch vehicles. The reason for this is simple: the single over-riding constraint on the commercial development of the space industry is the very high cost of launch into Earth orbit. At some $10,000 per kilogram, or $10 million per ton, for unpiloted spacecraft, and roughly ten times this for vehicles carrying people, there is little commercial interest in their use.

The very high cost of space-flight is also largely due to a single cause, namely that all launch vehicles to date have been wholly or partly expendable. That is, the vehicle, or major parts of it, are discarded after being used once only. Even the reusable American and Soviet space shuttles use partly expendable launchers, If wide-bodied jet airliners were scrapped after a single flight, passenger flights would cost $1 million each, and air travel would not be a commercial business.

The first fully reusable launch vehicle will reduce the cost of launch by 90% immediately, and by more as operating and manufacturing experience accumulate. For example, the " Sanger" launch vehicle being developed in Germany (1) will have a cost per launch some 10% of that of the mainly French "Hermes", despite a much larger payload (see Appendix). Thus each flight will cost just a few percent of the cost of existing vehicles: hundreds of dollars per kilogram instead of ten thousand. The second generation of such vehicles will reduce launch costs even further to less than one percent of present costs.

It need hardly be pointed out that the owner and operator of even the first such vehicle will, in commercial terms, have a devastating competitive advantage over those using expendable vehicles. It is rare for a company to obtain such a large cost advantage over its competitors, but when it occurs the results are dramatic: With the introduction of its PCW 8256 word processor in 1985 at a price of £399, Amstrad Plc undercut its competitors by approximately 90%. In doing so Amstrad effectively created a new market, and in 1986 alone sales revenues grew from $238 m to $532 m, and profits from $35 m to $132 m.

The reduction of launch costs by between 90% and 99% requires not only the development of fully reusable launch vehicles capable of achieving such low operating costs, but also an increase in launch traffic. In order both to spread the capital investment, and to achieve the economies of scale and learning necessary to minimise costs, an increase in traffic of some 10 to 100 times is required. Very substantial scale and learning economies are routinely achieved in other industries such as the motor and aircraft industries, based on hundreds of thousands of repetitions of unit operations, but they have not been achieved in the space industry to date, due to its very limited scale: In the West some twenty spacecraft are typically launched per year.

Although ultimate reductions in launch costs will be achieved only through the use of fully-reusable vehicles, a major increase in traffic would also enable expendable launch vehicles' costs to fall substantially. Hence, for example, if demand for certain orbital services grew very large, as discussed below, it might be that the orbital facilities involved would be launched most economically with expendable vehicles, opening up an attractive market for them, at least for some years. (The Soviet Union, which launched some one hundred spacecraft per year, achieved major economies of scale with decades-long production of the "workhorse" SL4 expendable launch vehicle.) Such a pattern of development would eventually be limited by environmental as well as economic considerations.

With full reusability and high launch rates, the reliability of launch vehicles will also increase very substantially. As a result, the additional cost of carrying passengers rather than inanimate payloads will fall, since a large part of the cost of crew transport on expendable vehicles is due to the attempt to obtain high reliability.

In order to achieve such a large growth in the launch market, it is necessary for the demand for launches to be "price-elastic", that is, demand must rise more than proportionately as the price is reduced.

Hitherto most launches have been government-financed. The only strictly commercial market for launches has been for applications satellites, primarily for telecommunications, more recently for broadcasting, and prospectively for remote sensing. Launches of vehicles carrying crew, which have been much more expensive, have never been commercially justified, but have been politically popular - for purposes of national prestige, defence and scientific research. This paper contends that with the development of fully reusable launch vehicles this pattern will change radically. Furthermore, by reducing the importance of government funding for the space industry, some of its damaging economic effects, described in (2), will be avoided.

Although the demand for launches of applications satellites will increase as the price charged for launches falls, it is not clear that it will rise very much. Typical space industry projections of launch demand foresee a growth rate of 5% - 7% per year, more or less independent of price (3). No-one has forecast a very rapid growth of launch demand for automated satellites.

The demand for passenger launch, by contrast, is likely to be much more price-elastic than the demand for satellite launches. To date the evidence for this is largely anecdotal, although the small amount of market research that has been performed supports this view. If true, this has major implications for the planning of launch vehicles, as discussed below.

The market for passenger launches can usefully be considered as comprising three broad phases. In each successive phase the main customer will be different, the price of passenger launch will be approximately 90% lower, and the number of passenger launches will be 100 times higher.

It is proposed that the first phase will start with utilisation of the US/international space station. The use of crew at this stage will be different from that in the past since they will be required for purposes of science and engineering research far more than for political prestige or defence. Work in the space station will be much more productive if there are vehicles capable of economically rotating crew as frequently as every week, than if it is constrained to have only one crew change per three months, as is currently envisaged. Such a high rate of rotation would be economically attractive at a price of even several $ million per passenger, by comparison with the enormous cost of launching crew on the US space shuttle or the European Hermes, at approximately ten times this.

Flights of a fully reusable vehicle at some $10 million per flight would permit regular weekly flights of several passengeis for the same cost as annual flights of the space shuttle, or quarterly flights of Hermes, at a total cost of some $500 million per year. Thus government space agencies, which are tentatively budgeting $1000 million per year for transport to and from the space station, would not have to increase this budget in order to permit much more frequent visits of a fully reusable vehicle, carrying several hundred crew and passengers per year instead of ten to twenty.

The second phase will grow out of the first phase as the cost per passenger falls with experience and economies of scale. In round figures, as costs fall significantly below $1 million per passenger, a growing number of companies will find it profitable to finance commercial activities in space. Initially these will include high-technology companies such as those already involved in micro-gravity research, for both R&D and manufacturing in fields including advanced materials, bio-technology, and solidstate physics.

Such a price level for passenger transport will also make such projects as that of the private US company ETCO to refurbish and utilise space shuttle external tanks in orbit financially attractive, given their expected price of some $500 per day per person (4). Japanese researchers have estimated that in this phase the demand for launches could exceed one hundred passengeis per day from the Pacific Rim alone within twenty years (5).

Also in this phase the range of companies involved in financing passenger launches will grow to include companies from the media and entertainments industries, of which the potential for expenditure in orbit is substantial. Involvement to date by these companies in the space industry has been restricted to the use of telecommunications satellites for transmission and broadcasting of programming material - concerts, sports events, films and television programmes. Once the launch of personnel into orbit is relatively low-cost, safe and routine it is likely that they will make extensive use of the unique possibilities of zero gravity to record programming material in orbit.

In this connection it is notable that the USSR has already started to offer passenger flights to their orbiting space station MIR on a more-or-less commercial basis at a price of $10 million. As well as the traditional demand to send scientists into orbit from government-funded scientific research organisations, it is striking that there is substantial interest from television companies, with Tokyo Broadcasting Company winning the race to send the world's first broadcaster, and the first fare-paying passenger, into space in late 1990 (6).

With a price of passenger launch and orbital accommodation ajound $100, 000 per passenger, many profitable uses could be made of space facilities by entertainment companies, that would have popular appeal. In view of the scale and growth rate of the entertainments industry, commercial revenues in this phase could exceed $1,000 million per year.

The third phase will become increasingly significant as the cost of a flight to orbit falls below $100,000 per passenger, when the demand from individuals for recreational space travel is expected to grow rapidly. This claim is based primarily on thc wide range of unique activities that would be possible in an orbital tourist facility, arid secondly on the commercially vigorous nature of the tourism industry. Several unique attractions of a short orbital visit are described briefly:

Observation of the Earth: astronauts arid cosmonauts all report that the view of Earth from low orbit is utterly spectacular, and endlessly interesting.

Astronomical observation: the view of astronomical objects from orbit is much better than that from the ground when looking through the atmosphere.

Observation of zero gravity phenomena: there are many fascinating micro-gravity physical phenomena to observe, such as the behaviour of liquids and air bubbles, still and rotating.

Zero gravity gymnastics: many novel gymnastics and sports activities would be possible in an orbiting gymnasium.

Zero gravity flying: human bird-flight would be possible in large zero- or partial-gravity chambers, using fabric wings attached to the arms.

Zero gravity water sports: a slowly rotating, cylindrical swimming chamber would enable people to swim in low gravity as well as to float in the central air space.

The main recreational possibilities in an orbital hotel are summarised in Table 1, and possible stages in their development are discussed in (7).

In a survey of holiday expenditure patterns in 1985, the American Express Company asked more than one thousand respondents whether they would like a holiday in space, and found that 50% replied affirmatively (8). It is notable that no information was provided about what services might be available. If fully informed about the possibilities, an even higher proportion would seem likely to favour a "holiday" in space. While this figure does not in itself indicate what prices people would be prepared to pay for such a service, it shows that the idea is inherently attractive to many people.

An estimate of the market for space tourism services, based on market research by Society Expeditions Inc, is shown below:

An analogy to future tourism in low Earth orbit can perhaps be drawn with present-day tourism to the Antarctic. There are several companies which provide such services today, the leading company being Society Expeditions of Seattle, which operates luxury tour ships to exotic destinations throughout the world. The number of passenger bookings offered by Society Expeditions for 1-week to 3-week trips to the Antarctic and other destinations is as follows:

Table 3 Number of passengers on Society Expeditions' Antarctic voyages (9)

Prices range from some $9,000 to some $25,000. More detailed information would be needed to assess the overall market for "adventure tourism", but visits to one of the more exotic destinations, the Antarctic, are apparently growing.

From approximately one thousand passengers per year at $100,000 per flight, it has been suggested that demand for low Earth orbit tourist flights could reach one million passengers per year at a price of around $10,000, representing revenues of some $10,000 million per year (8). To put this into perspective, the fuel cost of launch is potentially a few thousand dollars per passenger. In air travel today, fuel represents typically one third of the total cost per flight. Hence mature reusable launch vehicles should be able to attain such a price target (10).

A second reason suggesting that a commercial space tourism industry could be expected to develop rapidly is the large scale, the rapid growth and the competitive vigour of the foreign travel business today. With approximately one million tourists flying abroad every day, and an annual turnover of some $100,000 million, the industry has a growth rate of some 5% per year in real terms (that is it doubles every 15 years). In seeking to generate the large increase in launch traffic that is potentially available from passenger space travel, intense competitive pressure would be exerted on launch costs, bringing about major cost reductions.

Although the popular image of tourism is of a rather "lightweight" business, comprising mainly simple services such as restaurants and beaches, the industry also has a long track-record as a major driver of new technological developments - particularly in transportation, telecommunications and computers:

The rapid and still continuing improvements in commercial aviation have been driven primarily by the requirements of the public as customers. The need for real-time, global booking, ticketing and foreign-exchange systems by airlines has put continual pressure on computer and tellecommunications systems manufacturers to advance the state-of-the-art. Thus it would be no more than a continuation of its past history for tourism to play a key role in knocking another industry into shape, and bringing the technology of space transportation to commercial maturity.

The significance of the phased scenario described above is that it comprises a continuous growth of commercial demand by several orders of magnitude as launch costs fall, summarised in Figure 1. That is, it identifies an expanding series of potentially profitable ways of utilising passenger launch opportunities as costs fall, leading to some 100 flights per day of as many launch vehicles. Military systems, apart, no such scenario has been proposed for commercial demand for non-passenger payloads.

It is the author's contention that only passenger traffic offers the opportunity to achieve rates of growth of commercial launch traffic sufficient to achieve economies of large-scale operation and eventually production. Likewise the investment of thousands of $ millions in the development of fully reusable launch vehicles would be commercially justified only if they were designed for commercial passenger transportation.

The question whether it would be possible for such a development to be financed purely commercially is an interesting one, but it is a separate subject from that of the present paper. It seems probable that fully reusable launch vehicles will be developed in the foreseeable future by government-subsidised organisations in Japan, Europe and the USA, where they will be operated by quasi-commercial organisations. Such a scenario clearly adds additional uncertainty to the feasibility of a commercial project.

The achievement of the level of traffic that is proposed above (representing an annual payload mass to orbit of several hundred times current levels) would provide the major economies of scab which are required to achieve mature cost levels. With the vigorous growth in commercial demand that could be expected for such new and unique services, this level of activity could be achieved in perhaps 25 years. The commercial revenues from passenger space transportation in the year 2015 can therefore be projected at some $10,000 million, representing perhaps a few percent of global air travel expenditures at that time, and they might be divided more-or-less equally between the major geographical zones, East Asia, Europe and North America.

From the commercial viewpoint, as important as the level of turnover twenty-five years from now will be its growth rate. If it followed the compound growth rate of some 10-15% per year in post-war air travel, it could lead to a world market of some 10 million passengers per year in 2035. The accompanying commercial activity during that period, due to the perception of the further major opportunities for profitable growth, would be similar to the rapid ordering of civil airliners for delivery in the 1990s that resulted from the boom in air travel in the 1980s, or to the rapid growth of railways during the nineteenth century.

There will also be major impacts on other parts of the space industry of the reduction in launch costs towards $100 per kilogramme. As an example, the construction of satellite solar power stations would become commercially viable at such launch costs. The construction and operation of orbiting solar energy collectors with areas of many square kilometres, to be used to transmit gigawatts of electric power to Earth as microwaves (11), is the only commercial space project proposed to date that has the potential to generate similar revenues to the scenario for passenger transport described above. Every gigawatt of SPS capacity, constructed at a cost of some $4,000 million, would generate approximately $500 million of annual revenues.

However, the SPS project would be viable only once launch costs have fallen by some 99% below today's costs. If this were to happen as proposed, the demand for energy in 2015 from an increasingly industrialised world, given the serious constraints that are likely to limit both nuclear and fossil fuel use, would drive commercial investment to exploit such opportunities, with consequent rapid progress in space industrialisation.

The combined effect of these developments would amount to very significant growth in the space industry. Thus, without even considering the potential of new industries that may develop from industrial research performed in orbit (which would itself be greatly stimulated by such a fall in costs), these two commercial applications of space technology could each be expected to generate space industry revenues of the order of $10,000 million per year within some 25 years. If both areas of business were also growing at 10-20% per year, they would additionally be absorbing investment on a similar scale.

Based on the development and operation of fully re-usable passenger launch vehicles, it is therefore possible to project a commercially self-supporting space industry with a turnover approaching $50,000 million per year in 2015. Divided between the main economic blocs, this would represent less than 1% of total economic output at that time, but several times this percentage of manufacturing. The significance of such a development would be much greater than these numbers suggest, however, as can be seen by considering it in the wider economic context.

Of the economic changes taking place in the world, one of the most important for humanity is the continuation of the well-established pattern of global economic development whereby developing countries industrialise by progressing from simpler manufacturing industries to more complex. Typically starting with textiles and light engineering, their manufacturing industries progress through mining, steel making, ship-building and motor vehicle manufacture, to chemicals, electronics and aircraft production, finally reaching high technology industries such as medical equipment, biotechnology and spacecraft.

An essential step in this process is the ability to trade with more advanced nations, importing goods that they cannot produce themselves, and exporting goods at lower prices than those produced in the advanced nations. This exchange depends in turn on the more advanced countries continually developing new and more advanced products to balance the developing countries' progressive takeover of more basic industries.

In the past two decades this adjustment process was disrupted by a combination of factors. With continuing technological progress, particularly in electronics and computers, manufacturing innovation accelerated, requiring greator investment in R&D to maintain a given level of employment. Thc industrialization of several developing countries also accelerated. At the same time, economic growth in the advanced nations slowed down, in large part due to serious instability in the price of oil, and rapid inflation during the 1970s, followed by recession in the early 1980s.

These changes disrupted the patterns of international trade and industrial activity, and reduced the attraction of longer-term R&D at the very time when global changes required an increase. This mismatch was exacerbated by the acceleration in borrowing by many governments which, by providing large quantities of apparently risk-free securities, reduced the availability of investment funds for projects with normal commercial risks.

In addition to these problems, governments in the advanced countries have made large investments during the post-war period in R&D which has not earned a commercial return, including some hundreds of $ billions spent on the nuclear industry and on the space industry. Furthermore, some 50% of total R&D in the advanced countries has typically been spent on military projects. It is a commonplace observation that the two OECD countries with relatively small military budgets, Japan and Germany, are the most successful industrial economies.

The combination of all these influences has inevitably had a depressing effect on economic and technological progress. Due to the insufficient R&D, both fundamental and applied, to create new employment, there has been growing political pressure to protect the older, less competitive industries in the richer countries against the manufactured goods of the developing countries.

In this context, the development of a substantial commercial space industry would create a dynamic new focus for industrial growth arid investment in the advanced countries. It would thereby reduce the pressure for protectionism, and stimulate international trade. It would have the additional benefit of utilising commercially many of the most advanced technologies which have been developed for military or other (hitherto) noncommercial use.

The 1986 report of the US National Commission on Space described "A frequent desire expressed by the public - to personally participate in the future of the space program" (12), a sentiment which echoes the findings of the American Express Company described above. This contrasts sharply with the plans of government space agencies which involve launching very small numbers of astronauts on expendable vehicles at enormous public expense. Such activities have very limited popular appeal. As a result of this pattern of activity, it is even proposed that the exploration of space will be performed exclusively by machines (13), a vision of equally little public interest.

This, however, is not inevitable, but is due primarily to the fact that no organisation has to date had both the objective and the means to develop a fully re-usable passenger launch vehicle. The proposed scenario, in which the development of vehicles designed to satisfy the popular demand for orbital space flight leads to a radical reduction in the cost of space activities, resolves this problem:

It will tap a new source of revenue for the space industry - commercial payments from the public as customers, rather than politically controlled taxpayers' funds. By making space activities much cheaper, and returning humans to their centre, it will also create renewed public interest in government space research programs, resolving the main political problems of government space agencies. It will also contribute substantially towards one of the stated objectives of government space policy, namely to create a self-supporting commercial space industry, which will be in control of its own destiny, rather than continuing to be a pollitical "football", some of the ill-effects of which are described in (2).

Another important cultural effect of such a development may be the re-motivation of young people to study scientific and technical subjects at school, by creating enthusiasm for science and engineering. It is well known that student enrolments in the physical sciences rose steeply in the USA during the years of the Apollo project and fell sharply afterwards. Wide popular support for science and technology is needed to redress the drift away from careers in these fields in some countries.

During the next few decades, the ever-growing human population will face a number of serious challenges which will require major scientific effort to overcome, both in the form of more highly qualified personnel, but also in greater general scientific understanding in the public at large. Actual participation in space activities is likely to have a uniquely powerful influence in achieving this.

The expansion of the commercial space industry will also provide an alternative outlet for many of the technological skills used to date in the weapons industry. It may therefore also help to reduce the economic pressure on governments to encourage exports of military equipment which currently aggravate regional conflicts around the world.

There is a potentially very large demand for passenger space transportation services, arising successively from governments, from a range of businesses including the entertainments industry, and from individuals. Satisfying this demand would appear to offer the prospect of reaching sufficiently high traffic levels to achieve major economies of scale, reducing launch costs to some 1% of present levels. This has major implications for current plans in several countries for the development of fully reusable launch vehicles which are necessary to provide commercial passenger launch services.

Because of this, the development of fully re-usable launch vehicles represents a fundamental strategic technology - like machine-tools, computers and high-definition television. Once identified, large-scale, long-term investment in such technologies is justified due to the very long-term commercial returns that can be anticipated. In this case, optimisation of launch vehicle design for passenger market requirements will lead to very different and commercially much more profitable results than would continuation with emphasis on military and satellite launch requirements. The question of which country will produce the first fully re-usable passenger launch vehicle is a very interesting and historically significant question, and is to be discussed elsewhere.

Briefly, the problem of reaching orbit is the high speed that must be reached - equivalent to about Mach 26. To achieve this, very large quantities of fuel must be carried in the vehicle, which must therefore be as light as possible. The lightest container per unit of volume is a sphere, and the simplest type of fully reusable vehicle is a "blob-shaped", single-stage, vertical take-off, vertical landing ( VTOVL) craft propelled by rockets - such as the " Phoenix" designed by Pacific American Launch Systems in the USA (14), or the " Beta" designed by MBB in Germany (15).

An alternative approach is to use wings in order to gain thc advantage of aerodynamic lift in the lower atmosphere. However, wings are heavier than spherical tanks for the amount of fuel they carry, and it is therefore much easier to produce a two-stage horizontal take-off, horizontal landing ( HTOHL) vehicle, in which only a small part of the total vehicle reaches orbit. The development cost of such a vehicle would be several times that of the former. Examples of such vehicles are the MBB proposal " Sanger" (1), and the smaller and technically less demanding (and therefore commercially more attractive) "Spacecab" (16, 17), and various Japanese designs (18).

More advanced single-stage-to-orbit winged vehicles such as the US National Aerospace Plane (NASP) and the unpiloted UK " Hotol" (2) will become feasible at some stage in the future) but they require major advances in materials technology, and are not necessary to achieve the economic advantages of full reusability. Less advanced vehicles such as the European Hermes proposal are not fully reusable, and would be rendered obsolete by the first fully reusable vehicle (19).

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