Boom (YC W16) signs $2B letter of intent with Virgin, $5B total
techcrunch.com
techcrunch.com
Instead, with this tiered announcement: Three days ago, nobody knew about Boom. Within the last two days, they have lots of new press, and and thus lots of skepticism. Today, they 'announce' an effective endorsement with Virgin. Brilliant.
On the other hand, if this becomes a successful company, it is inevitable one of their planes will go boom in a negative way one day, and that day will see quite a few bad jokes. Will that permanently damage the brand? That, I think, is anybody's guess, and may not be caused by the name. 'MH' didn't have any connotation positive or negative a few years ago, but I expect it will be a few years before anybody considers using that airline abbreviation again.
I dunno, it could turn against them if they have reliability issues. "BOOM is the sound their planes make when exploding on takeoff", etc.
[1] https://en.wikipedia.org/wiki/Space_Shuttle_Challenger_disas...
Then I read more comments here and now I think of crashing and death :-(.
Rarely will all the points, both of fact and law, be in your favor. Openly
acknowledge the ones that are against you. In fact, if you're the appellant,
run forth to meet the obvious ones. [1]
Granting an option means Boom has given something to Virgin, not the other way around.
> a Virgin Group spokeswoman confirmed their plans to The Guardian: “We can confirm that The Spaceship Company will provide engineering, design and manufacturing services, flight tests and operations and that we have an option on the first 10 airframes. It is still early days and just the start of what you’ll hear about our shared ambitions and efforts.”
EDIT: Let's hope that we hear Virgin is making a big investment in Boom soon, that will be a stronger indicator. If Virgin really had substantive interest in the planes, and Boom was actually experiencing demand, Virgin would have had to PAY MONEY for an option.
The bit about the Spaceship Company seems to be systems-integration, not hiring out the full engineering department. If you've ever sold enterprise software, usually a deal with a big company includes a commitment on the part of the customer to provide engineering & testing resources to integrate the new product. For something huge like an SST, they need to ensure it meets Virgin's safety specifications, they need to make sure it can interface with Virgin's maintenance department, they may need to alter the design to meet noise requirements from airports Virgin operates from, and all other sorts of little engineering tasks. These all require engineering resources from the customer, not just the seller.
...unless the deal is an LOI on something so far in the future than it's (effectively) meaningless, coupled with an agreement to pay the LOI-signer for real-world engineering services, today. Then the money is flowing the other way, as the OP said.
The finances aren't actually clear from this announcement, but the TechCrunch headline (and some of the reaction here) is certainly credulous. A LOI for an unbuilt airplane is essentially just validation that airline companies would like to have an cost-effective supersonic airplane, if it's possible to create one. I think most reasonable observers know that's true -- they just disagree on whether it's possible.
Before the late 1970s, this is how most businesses were created: big-talking entrepreneur promises something awesome to customers, signs them up, uses that promise to get money from financiers, uses that money to recruit the specialized talent that will actually build the product. Software threw a monkey-wrench into that, because having more people is actually a disadvantage when building v1 of a software product. But in many industries, the only way you can make progress is by lining up a number of commitments from people, all of whom bring something different to the table, and then hoping you can work out all the details later.
That said, I don't agree with your second paragraph. Investors didn't suddenly lose (or gain) the ability to evaluate technical risk in the late 1970s. There have probably always been big-dream pitches as long as there have been investors, but most businesses started small, and grew. If anything, the throw-money-indiscriminately-at-a-dreamer style of investment probably became more popular since the rise of Silicon Valley, not less.
In this particular domain, all of the big players started tiny, grew off of government largesse, or both. The risk is entirely on the execution and feasibility side of the equation. And a statement from an airline that they'd like an affordable, practical supersonic jet is of nearly zero information. I, too, would like a goose that lays golden eggs.
They want to charge $5,000 for a round trip between NYC and London. That's at least 5x the cost of getting a normal economy trip, if you buy early. Certainly, there are people who would pay that much to save time (~$600 per hour saved), but is the market big enough for many planes, running 24 hours a day? Most people aren't willing to pay a couple hundred extra dollars for first class, let alone a few thousand.
The LoI means investors don't have to trust their market judgements. An airline is going to buy the planes and bear the risks regarding how much customers will pay. The remaining questions are technical. I'm sure the technical side is the vast majority of the risk, but it seems like a nice simplification for them.
You're dramatically overstating the power of a letter of intent.
It's fairly routine for purchase options to fall through in the world of big jet purchases. The Concorde program itself had over a hundred options after announcement, from a bunch of big airlines, but ultimately sold only 14 jets. These are just options, after all.
This announcement is probably most useful in that it gets them some press on demo day, indicates that there's still customer demand (however tentative) and that these guys aren't total chumps, and last but not least, makes a bunch of credulous investors think about the big-B number and see dollar signs blinking in front of their eyes.
I checked some BA flights in April, and the same flights went from down to <$400 for economy, $2500-$3600 for business, and up to $7700 for first.
Some of those flights don't even have economy seats so your choice of fights is actually greater for business (BA flies some 32 seat business-only flights out of London City Airport using the old Concorde BA001 flight code with extra short checkin time, and immigrations pre-screening at Shannon)
$5k doesn't seem given the amount of business and first class seats currently available on NYC <-> London. Consider that they're by no means the only airline doing that stretch either.
Put another way, Boom won't have trouble selling their plane if they manage to build it, and the only point of the LOI is to put Virgin and Boom on the front page of every news outlet tomorrow.
Imagine you were an aeronautical engineer inside, say, Boeing who had discovered a way to control or reduce the sonic boom generated by a supersonic aircraft. You can't get permission from your boss to investigate this further and run actual field trials - the higher-ups have already decided that Boeing is not going to be in the SST business, so why waste money on it? You have a family to feed and only one life to live, so if you jump ship to another job, it better be one where your invention will actually make it to market. By getting LOIs from customers, Boom has something to show to both investors and prospective hires so that the portion of the risk that is outside of their control is mitigated. That matters a lot - as an engineer, one critical thing I look for when joining a company is whether the founders and salespeople are doing their job and ensuring that my work will actually be valuable to customers.
Remember that different people all have different pieces of the puzzle. I'm a random HN reader, I neither know nor care much about aviation. Someone who does know a lot about aeronautical engineering is a rather critical part of Boom's story, however, and may have a much better picture of the technical risks involved, and if such a person exists and believes they have a technical solution, demonstrating that you've solved the market & financing risks is a huge selling point for bringing them on board.
It is true that the LOI serves a marketing purpose, which is why it was created.
I think you're quite right about the LOI mostly being for the publicity, but from the opposite perspective: I don't think the market for a new player offering a product highly specialised towards transatlantic all premium flights is actually that big, and enthusiastic noises made by an airline run by the British equivalent of Elon Musk who made similar noises about resurrecting Concorde doesn't really change that.
(Related prediction: the undisclosed LOI turns out to be from Odyssey Airlines whose proposed business model is perfectly suited to supersonic business class jets, but at present have nothing but a massive binding commitment with Bombardier and some small change from crowdfunders.)
"From their particle measurements, the authors of the Science study calculate that a future possible fleet of 500 supersonic passenger aircraft will increase the surface area of particles in the atmosphere by an amount similar to that following small volcanic eruptions. In mid-latitude regions, such emissions have the possibility of increasing ozone loss above that expected for nitrogen oxide emissions alone. The increase in the number of particles may also affect the ozone-related processes occurring on wintertime polar stratospheric clouds (PSCs) in the polar regions."
-http://www.publicaffairs.noaa.gov/pr95/oct95/noaa95-65.html
That really wasn't a reason for the Concorde's retirement. It was an old plane. It was marginal economically. It had a fatal accident. And then, just as it was returning to service, the travel slump after 9/11 happened.
Environmental opposition was one factor in the cancellation of the Boeing SST program. Although the bigger one was almost certainly that it didn't make economic sense.
I agree that all those are the primary retirement factors but I did not want to bring them up as they where being discussed elsewhere in the comments.
I'm interested to see that people where complaining about the potential of Concorde stratospheric pollution all the way back in 1972[1]. Maybe it was not so much a reason for retirement but one of the many reasons the concorde received such a poor public reception in the 70s. I think Boom has some serious hurdles ahead of them in this regard. Environmental regulations have done nothing but grow since the 1970s and many countries where outright banning the concorde from their airspace then.
[1]https://upload.wikimedia.org/wikipedia/commons/6/61/ACPTimes...
It's something to watch, but I also wouldn't be particularly concerned until these things actually start to scale.
"imagine leaving New York in the morning, making afternoon meetings in London, and being home to tuck your kids into bed."
That is a terrible thing to enable from an environmental impact standpoint. While air travel can be somewhat more efficient per mile than driving alone in a gas car[1], the distances it enables you to travel are vastly greater. Further upping the convenience factor would no doubt encourage more "binge flying".
Perhaps Boom is more efficient than typical airplanes. Perhaps it's less efficient. Perhaps it could make planes that travel at the same speed but at half the carbon footprint. We wouldn't know from this. It's not part of the story.
Let's change that. Let's make sustainability as important a consideration with airplanes as it is with cars.
[1] http://www.yaleclimateconnections.org/2015/09/evolving-clima...
Yes. Also, regardless of the human pilot, this is intended as a passenger aircraft. That necessitates people on board for it to operate as intended.
Boom can't do this. Unlike SpaceX, they need enough investment money to take them all the way to passenger-safe.
Also passenger safe for a few highly trained and risk aware astronauts is a lower bar than passenger safe for the general public.
The military has used supersonic aircraft on cargo missions in exceptional cases, actually. Their supersonic aircraft tend to be vastly less efficient than even Concorde, though.
To answer that
https://en.wikipedia.org/wiki/Tupolev_Tu-160
and
https://en.wikipedia.org/wiki/Rockwell_B-1_Lancer
The only long range strategic bomber developed after the 50s that wasn't supersonic was the B-2 stealth bomber (not that there have been very many strategic bombers developed after the 50s).
In the case of SpaceX, consider their last launch failure. The general consensus seemed to be "well, rockets are really hard. And it was the strut manufacturer's fault to some extent. They'll do better next time, and they're still changing the world. Anyway, SpaceX rockets are 4x cheaper than any competitor so even with the occasional launch failure it's still the best option!"
Can you imagine the reaction today if e.g. a Boeing plane blew up on launch? In fact, recall all the criticism Boeing received after issues with the 787's batteries...
But again, I certifiably don't really know. Someone could write about energy requirements and wet/dry mass and how thin rocket skins are and aerodynamic forces and easily convince me rockets are harder.
Think how many more cycles a plane goes through a day / month / year / decade. Times that by the number of models of that plane out there.
Building a totally new passenger airplane just seems a hugely complex thing. Getting it to fly is one thing but you need safety, long-term maintenance, fuel efficiency, international regulation and many other factors.
At least from the outside a rocket looks simpler to me.
Don't get me wrong. I would love to see them succeed but it seems really, really, really hard. Much harder than anything any of the current unicorns has achieved.
From a technical POV, I don't think this is anywhere near unicorn territory. In fact, I think they are aiming too low. I'd ideally want a supersonic plane that is quiet enough to fly over land and cheap enough that your average traveler can afford if they want to trade price for speed. Full autonomous capability so that the plane itself can have thousands of flight hours under its belt before a human test pilot gets on-board.
SpaceX has brought reusability to space travel. That's slightly more impressive than a fast airplane.
Err... is trying to bring?
A rocket is not worth 10s of millions in raw materials, so it is the process of creating it that makes it worth tens of millions. So the 10s of millions of dollar question is: how much cheaper is the process of re-using a rocket vs the process of building a new one? It seems impossible to ever fully recoup the other 97.7%, but how much can they?
SpaceX is still very far from their goal, but it's worth describing that "full and rapid" reusability was not how the Shuttle worked. A reusable SpaceX rocket would be able to launch, deliver payload to orbit, land, refuel itself and load the next payload all in less than 1 hour and with a cost of ~$300k. They are very far from that of course, but it's a fantastical goal.
Remember the second / final stage get's to orbit so return needs a heat shield or an obscene amount of fuel. The shuttle demonstrated the issues with reusing heat shields very well.
PS: IMO, Space X is all about execution not technology. Landing a first stage rocket vs using taking a dip in the ocean is probably a good trade-off. But, most of there gains are about being lean and making incremental improvements.
ED: It's the classic doing X, trying to do X, or hope to someday do X.
The only reason this idea is even being entertained right now is because oil prices are so low. As soon as the oil producers are finished crushing this round of alternative energy companies oil prices will go back up and Boom won't sound so good.
Sure, that was the only ever Concorde crash, but then they really didn't fly very much compared with conventional aircraft. There are individual commercial aircraft that logged around as many flight cycles as the entire Concorde programme without incident.
But afaik the main culprit in the crash was a piece of titanium that fell off from another airplane and was left on the runway. This metal-piece cut into the tyre and caused an explosion.
You can think of lots of reasons why, but it mainly boils down to this: VCs are hired to make bets within an asset class (startups) and not outside that asset class. Institutional investors (upstream of VCs) have other managers to do commodities etc.
Also, at least in theory, the market price of oil takes all info into account. If the VCs could really predict the price of oil in 3-5 years, they should probably be trading that alpha instead of investing in VC.
That doesn't mean that the investment isn't expected to be hurt (or wiped out completely) should the price of oil rise, it just means that a competent investor would have looked at that possibility and decided that the investment was still worthwhile.
The comment I was responding to IMO assumed flippancy on the part of investors and implied that they would be surprised by an increase in oil. That's absurd.
For flight testing a scale model, they could use a F-5E Tiger [0] ($1-5m each, de-milled) to test the wing and nose aerodynamics, keeping as much systems as possible from the original jet. NASA have done similar modifications before [1]
I expect this will be more of a project management challenge than a technical challenge.
[0] https://en.wikipedia.org/wiki/Northrop_F-5
[1] https://en.wikipedia.org/wiki/Shaped_Sonic_Boom_Demonstratio...
[1] http://www.concordesst.com/faq.html [2] http://inflation.stephenmorley.org/
Margins on aircraft are never 50%. For 787 its like 10-15%.
[1] http://www.seattletimes.com/business/boeing-aerospace/will-7...
Aircraft have high design costs (figure for the '87 is above), but the actual manufacturing costs should be ... somewhat reasonable. I have a hard time imagining Boeing would be selling the aircraft if they weren't recovering their marginal costs.
http://www.seattletimes.com/business/boeing-aerospace/report...
The "never make a profit" line is probably a tax-deferral strategy which is reflected by their stock price increasing ~100% in the past 5 years. Not exactly the performance you'd expect of a floundering company.
If the founding fathers were born in the 80's, they might have gone for restricting the establishment of brands not religions. (Which are also brands of a kind, really.)
The 787 was designed for 44,000 takeoff/landings [1], with mere minutes turn around time, while carrying 400+ people in comfort. Add to that target 99% dispatch availability (i.e. does not break down). To do that, you've got to think hard about every single nut and bolt and how that bolt will break in 30 years, and how hard it will be to detect the broken bolt, and how cheaply the bolt can be replaced (easy wrench access, need to pull out seats?). Extrapolate that to the millions of parts in the airframe.
Add to that Billions for production tooling for mass production. Remember, 495 Boeing 737 were build last year[2]. That's one finished plane every 16 hours.
[1] http://aviationweek.com/commercial-aviation/boeing-begins-an...
[2] https://en.wikipedia.org/wiki/Boeing_737#Total_production
I also wonder if a business jet would be a better market for this type of thing. Netjets would buy a few, I bet.
JT8D [0] is based on the J52 engine that powered the A-4 Skyhawk, and a related design is the RM8 [1] that powered the M2.0+ SAAB Viggen.[2]
[0] https://en.wikipedia.org/wiki/Pratt_%26_Whitney_JT8D
This kind of thinking is useful as a first pass check, but one should not carry it too far. I would hope that by now the company has considered why no one has done it, and concluded that the obstacles are not insurmountable, and the prize in the end is worth it. Like so many other innovative companies, e.g. Tesla.
Also... "Somebody who would be already doing it" would have had to pass exactly the same hurdle.
I'm not sure this is something to cheer, just because it's new and shiny (and because it appeals to tech types who fancy they'll finally get to afford a ride on one of these contraptions, some day).
I think many companies depending on situation will consider this worth it for the quick flight. It certainly doesn't strike me as something that people are excited about just because it's "new and shiny." It adds actual utility to get key players to certain locations on short notice.
In any case, despite it holding fewer passengers than a Boeing 787 or something, I would bet that drastically decreasing flight time goes a long way toward bringing the carbon impact more in line with a typical flight of the same length.
I was referring to CO2 impact, not price.
Happy to be shown wrong, this is complete conjecture.
But there may be other factors to consider: type of fuel that gets burned (and how it is burned); how long it stays in the upper atmosphere (possibly at higher altitudes), etc.
And you also said, "I'm not sure this is something to cheer, just because it's new and shiny." So I was addressing that part of your comment in stating that people are excited about it for more than vanity reasons.
And you talked about CO2 impact as well, to which I replied, "In any case, despite it holding fewer passengers than a Boeing 787 or something, I would bet that drastically decreasing flight time goes a long way toward bringing the carbon impact more in line with a typical flight of the same length." Carbon is one of the components of CO2 and phrases like "carbon impact" typically encompass things like CO2 generation.
So, to answer your question directly: Yes, I did understand your question. I addressed your question in my original comment, and addressed your side comments where you did implicitly mention price.
With a moniker like "kafkaesq" you must be really smart, so maybe you skipped over that part of my original comment. Or maybe it's just easier to be condescending than address the substance of a comment in your reply.
That said I didn't mean to be condescending, and apologize for it ending up that way.
As to what you were originally saying: I'm not sure your argument will "fly", as it were -- for the simple reason what most strongly predicts the carbon impact of a means of transport is not transit time but, generally, the amount of energy expended to get from A to B (not the transit time). And even though the flight may be shorter, something tells me the energy expenditure has to be much higher for supersonic than for subsonic flight -- in part precisely it needs to get to a much higher speed (i.e. get there with "decreased flight time") and attain a higher altitude before coming down again.
If you think about Boom as part of an ecosystem, they will eventually need a large number of companies to buy seats on their planes. As with Concorde, only a minority of seats will be saleable to individual consumers. Now Boom, they're here, getting name recognition at hundreds of SV companies, some of which will have offices in London, Singapore (where Concorde also briefly flew), etc.
>YC has been awesome and supportive in so many ways, far beyond money. 5 stars, would do again!! :-)
YC have a lot of knowledge, connections and name recognition
$200M per delivery seems a little tight to design and build 25 planes from scratch (the latest version 787 is ~$300M for comparison) but I'm sure they have smart people working on it.
1) didn't have the manufacturing means themselves;
2) couldn't control the quality enough via contract measures.
That significantly drove up the cost of the 787 project. Someone really needs to do a good write-up on these two projects as today's version of the Mythical Man Month and similar texts.
Edited: Revised the numbers to better reflect the article.
Yes, there's still a ton of technical work to be done. But it's a hell of a lot easier to hire smart people and raise the funding you need to build stuff when you've decisively proven the business case for your product.
Also, not for nothing:
"An advertisement covering two full pages, promoting Concorde, ran in the 29 May 1967 issue of Aviation Week & Space Technology. The advertisement predicted a market for 350 aircraft by 1980 and boasted of Concorde's head start over the United States' SST project.
The consortium secured orders (i.e., non-binding options) for over 100 of the long-range version from the major airlines of the day: Pan Am, BOAC, and Air France were the launch customers, with six Concordes each. Other airlines in the order book included Panair do Brasil, Continental Airlines, Japan Airlines, Lufthansa, American Airlines, United Airlines, Air India, Air Canada, Braniff, Singapore Airlines, Iran Air, Olympic Airways, Qantas, CAAC, Middle East Airlines, and TWA. At the time of the first flight the options list contained 74 options from 16 airlines." [1]
Guess how many they sold? 14. LOIs for unbuilt, undesigned airplanes are meaningless.
It's something of an understatement to say the business case for SSTs remains unproven.
Plus I always wanted to fly on the Concorde but the fleet retired before I got the chance.
>people solving REAL problems
This real problem (as opposed to the cool tech)--unless the price of fuel goes to near-zero--is likely to turn out to be mostly about how to get international lawyers, investment bankers, CEOs, and so forth back and forth between New York and London fast enough to do a short turnaround trip.
There have been plenty of supersonic commercial jet startups-and-shutdowns through the years, to the extent that aviation people shrug when a new one appears ( but are quite happy to take the promotional merchandise that is handed-out at airshows! )
One of the most recent prior to Boom is Aerion:
http://www.aerionsupersonic.com
Prior to that we had HyperMach who were proposing Mach 3.5
https://www.flightglobal.com/news/articles/paris-picture-hyp...
Or fancy a catchier name? Here's Spike
http://www.spikeaerospace.com/
Even the big-boys have dabbled in the arena; Dassault, Gulfstream, Lockheed-Martin, Sukhoi and Tupolev all had projects but none made it to hardware.
Keep watching. Maybe they'll have something in 10-15 years.
Today, realize that most things happen a hell of a lot faster than I expect.
A word of warning though.
Anyone who thinks a LOI violation isn't actionable hasn't met bigco lawyers. I was taught long ago to basically treat LOIs as purchase orders. They are hard to make completely nonbinding. Whether an LOI, a MOU, or a HOA; all such preliminary agreements fall into basically the same category of potential legal time bombs. An imperfectly drafted LOI may be treated as billable by some parties, with all the actionable response this implies if you withdraw from the arrangement.
So someone asking you to sign a LOI or similar preliminary agreement who suggests "Oh it's just a letter of intent" is probably taking you for a chump. Do not sign without very good legal advice, and (unless you are an excellent lawyer) never attempt to write one yourself.
For comparison 3% of 747's (53) have been a total hull loss. But, the Boeing 707's had 17% hull-loss occurrences and 246 major aviation occurrences out of 1,010 built (172) which is arguably a better comparison.
It was just about profitable at the margins, but only after the enormous development costs had been written off entirely. As the fleet aged and safety fears mounted, it became uneconomic to run, and was retired.
It helped give Airbus a technological start, which was probably the only thing that allowed Airbus to become globally competitive.
So politically it wasn't necessarily a failure at all.
It's not easy to assess the true economic return on a megaproject, especially one that lasts for decades. Something that looks like a disaster on the profit and loss account can still provide big benefits.
The US space program is a more obvious example. The direct economic return on bringing a few rocks back and developing giant booster rockets wasn't great. But there were significant spin-off multipliers that provided a significant lift to whole sectors of the economy.
If you try to imagine the state of US computing and aerospace without Apollo, and British and French aerospace without Concorde, it should be clear the money wasn't just thrown away for nothing.
Today: Oh shit