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<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 3.2//EN"> <HTML> <HEAD> <META HTTP-EQUIV="Content-Type" CONTENT="text/html;CHARSET=iso-8859-1"> <META NAME="Description" CONTENT="Sumarizes current status of commercial sail. Investigates free flying kites as primary motive power for ships. Specific pros and cons of crewed, lighter-than-air KiteTugs are investigated. Costs and paybacks are investigated."> <META NAME="KeyWords" CONTENT="sail, hapa, kite, sailboat, commercial sail, airship, transport sail, helium, sail assist, kitetug"> <META NAME="GENERATOR" Content="Symantec Visual Page Mac 1.1.1"> <TITLE>Operating Costs 15ksf</TITLE> </HEAD> <BODY TEXT="#000000" BGCOLOR="#FFFFFF" LINK="#0000FF" VLINK="#551A8B" ALINK="#0000FF"> <P><FONT SIZE="4"><I><B>On KiteTugs</B></I><B><SUP>©<I> </I></SUP></B></FONT><I>copyright 1996, </I><A HREF="mailto:[email protected]"><I>Dave Culp Speedsailing</I></A></P> <P><A HREF="cost_30k.html">Previous Chapter | </A><A HREF="happen.html">Next Chapter | </A><A HREF="KiteTugs.html">Table of Contents</A></P> <P> <H2>Costs and Cash Flows of Smaller 15,000 sq. ft. KiteTug<SUP>©</SUP></H2> <P>This kite is likely to be on the smaller size for manned commercial flight. Taking the nacelle, plus the weight of the canopy, a structure this size will just contain sufficient volume of helium to achieve positive buoyancy. <IMG SRC="kitetug6a.gif" WIDTH="320" HEIGHT="233" ALIGN="LEFT" BORDER="0" VSPACE="5">Less efficient kite shapes may be envisioned at smaller sizes (thicker airfoils, or lower aspect ratios), to gain sufficient volume, but here we're optimizing aerodynamic shape to gain as wide a performance envelope as possible.</P> <P>For the 15,000 sq. ft. kite, all of the sailing assumptions are the same. We'll assume that a KiteTug this size is capable of economically towing ships from about 8,000 tons, up to 25,000 tons. Kite power/displacement ratios for these vessel sizes suggest that, at 10,000 tons, the KiteTug/ship combination might split "pure" sailing and "sail assist" in the 2/3:1/3 ratio envisioned earlier. At 25,000 tons, the ratios will perhaps be reversed, only 1/3 of the time will the vessel sail "pure." However, the larger vessel's much higher fuel consumption, and thus potential fuel savings, will result in higher average tow rates chargeable, and the KiteTug will again favor large vessels over small. Below, we will assume a vessel of 10,000 tons, burning approximately 12 long tons of diesel oil, at $320/lt. per day. A 25,000 ton ship might burn twice that.</P> <P>Thus, we have 100 days/year in which the KiteTug replaces 90% of 12lt of diesel fuel burned per day. At 80% of 90% of $320/lt, this would lead to average fees charged of: $2,850/day, or $285,000 on an annual basis. In addition, the tug will have 50 days in which it can only charge an average of 1/2 normal fuel costs, so will add another $79,000 annual income. This gives a total annual income stream of $364,000.</P> <H3>Likely annual fixed costs of operation, for the 15,000 sq. ft. kite:</H3> <P> <TABLE BORDER="0" CELLPADDING="0" CELLSPACING="5" WIDTH="90%"> <TR VALIGN="TOP"> <TD>Maintenance, helium and repairs (this is considerably higher than projected maintenance costs of other modern sail assist rigs, on a per sq. ft. basis):</TD> <TD WIDTH="20%" ALIGN="RIGHT" VALIGN="TOP"> <P ALIGN="RIGHT">$50,000 </TD> </TR> <TR VALIGN="TOP"> <TD>Fuel for aux. power, maneuvering, and free flying. Average 100 gals/day x 250 days @ sea. (This would be zero if solar powered):</TD> <TD WIDTH="20%" ALIGN="RIGHT" VALIGN="TOP"> <P ALIGN="RIGHT">$25,000 </TD> </TR> <TR> <TD>Crew salaries (two crew at $45k and $35k)</TD> <TD WIDTH="20%" ALIGN="RIGHT" VALIGN="TOP"> <P ALIGN="RIGHT">$80,000 </TD> </TR> <TR> <TD>Total annual operating costs:</TD> <TD WIDTH="20%" ALIGN="RIGHT" VALIGN="TOP"> <P ALIGN="RIGHT">$155,000 </TD> </TR> </TABLE> </P> <P>Again, we'll look at profitably two ways; gross profit model with the KiteTug leased, and simple payback period, with the KiteTug purchased for all cash.</P> <H4>Gross Profit Approach</H4> <P>We assume that the KiteTug is 100% leased, again for seven years.</P> <P> <TABLE BORDER="0" CELLPADDING="0" CELLSPACING="5" WIDTH="90%"> <TR VALIGN="TOP"> <TD>We assume the interest to be 9%/year, with a salvage value of 30% after 7 years. This will result in annual lease payments of:</TD> <TD WIDTH="20%" ALIGN="RIGHT" VALIGN="TOP"> <P ALIGN="RIGHT">$244,000 </TD> </TR> <TR VALIGN="TOP"> <TD>Grand total cost of operation:</TD> <TD WIDTH="20%" ALIGN="RIGHT" VALIGN="TOP"> <P ALIGN="RIGHT">$399,000 </TD> </TR> <TR> <TD>Grand total income stream:</TD> <TD WIDTH="20%" ALIGN="RIGHT" VALIGN="TOP"> <P ALIGN="RIGHT">$364,000 </TD> </TR> <TR> <TD>This results in a loss, given current assumptions, of:</TD> <TD WIDTH="20%" ALIGN="RIGHT" VALIGN="TOP"> <P ALIGN="RIGHT"><$35,000> </TD> </TR> </TABLE> <H4>Simple Payback Approach</H4> <P> <TABLE BORDER="0" CELLPADDING="0" CELLSPACING="5" WIDTH="90%"> <TR VALIGN="TOP"> <TD>Gross operating costs:</TD> <TD WIDTH="20%" ALIGN="RIGHT" VALIGN="TOP"> <P ALIGN="RIGHT">$155,000 </TD> </TR> <TR VALIGN="TOP"> <TD>Gross income stream:</TD> <TD WIDTH="20%" ALIGN="RIGHT" VALIGN="TOP"> <P ALIGN="RIGHT">$364,000 </TD> </TR> <TR> <TD>Gross profit:</TD> <TD WIDTH="20%" ALIGN="RIGHT" VALIGN="TOP"> <P ALIGN="RIGHT">$209,000 </TD> </TR> </TABLE> </P> <P>$1.5 million, divided by $209,000 gives a payback of 7.18 years. Still, probably unacceptable.</P> <H3><U>Options for Increasing Profitability</U></H3> <H3><B>Option 1:</B> The prototype is built in Asia,</H3> <P>and then production KiteTugs are built there also. This presumes a capital cost for the prototype of $1.0 million, and $0.8 million for production KiteTugs.</P> <P> <TABLE BORDER="0" CELLPADDING="0" CELLSPACING="5" WIDTH="90%"> <TR VALIGN="TOP"> <TD>This brings the gross profit on the prototype, under the gross profit approach to:</TD> <TD WIDTH="20%" ALIGN="RIGHT" VALIGN="TOP"> <P ALIGN="RIGHT">$25,000 </TD> </TR> <TR VALIGN="TOP"> <TD>And the gross profit for the production model to:</TD> <TD WIDTH="20%" ALIGN="RIGHT" VALIGN="TOP"> <P ALIGN="RIGHT">$49,000 </TD> </TR> </TABLE> </P> <P>Under the simple payback model, paybacks are:</P> <P>Asian prototype: 4.67 years <BR> Asian production model: 3.74 years</P> <H3><B>Option 2:</B> Factor in income from salvage towing.</H3> <P>Under current standards of practice, deep-sea tugboats charge from $100-500/mile run, both out and back to a disabled ship. Thus, a 10,000 ton vessel, stranded 500 miles offshore, might pay $200,000 for a tow to harbor<A HREF="refer.html#12"><FONT SIZE="2"><SUP>26</SUP></FONT></A>. Such a trip under KiteTug would take less than a week, both out and back (24 kts out, 8 kts back = 3.5 days). One single such rescue per year would dramatically change the financial outlook for a KiteTug:</P> <H4>Gross profit approach</H4> <P> <TABLE BORDER="0" CELLPADDING="0" CELLSPACING="5" WIDTH="90%"> <TR VALIGN="TOP"> <TD>Domestic prototype gross profit:</TD> <TD WIDTH="20%" ALIGN="RIGHT" VALIGN="TOP"> <P ALIGN="RIGHT">$170,500 </TD> </TR> <TR VALIGN="TOP"> <TD>Asian prototype gross profit:</TD> <TD WIDTH="20%" ALIGN="RIGHT" VALIGN="TOP"> <P ALIGN="RIGHT">$225,000 </TD> </TR> <TR> <TD>Asian production gross profit:</TD> <TD WIDTH="20%" ALIGN="RIGHT" VALIGN="TOP"> <P ALIGN="RIGHT">$249,000 </TD> </TR> </TABLE> <H4>Simple payback approach:</H4> <P>Domestic prototype 3.62 years <BR> Asian prototype 2.42 years<BR> Asian production 1.93 years</P> <P>Salvage is the single most profitable activity for this size KiteTug. Such work will be sought and prioritized.</P> <H3><B>Option 3:</B> Add 20% to paying days at sea</H3> <P>(Presumes "pure" sailed days, which generate $2,850/day in fees) This may be done by reducing deadhead days, reducing "at harbor" days, reducing "sail assist" days, towing larger ships, or any combination of all four. It only needs to add 20 average days/year to the mix</P> <H4>Gross profit approach:</H4> <P> <TABLE BORDER="0" CELLPADDING="0" CELLSPACING="5" WIDTH="90%"> <TR VALIGN="TOP"> <TD>Domestic prototype gross profit:</TD> <TD WIDTH="20%" ALIGN="RIGHT" VALIGN="TOP"> <P ALIGN="RIGHT">$27,000 </TD> </TR> <TR VALIGN="TOP"> <TD>Asian-built prototype gross profit to:</TD> <TD WIDTH="20%" ALIGN="RIGHT" VALIGN="TOP"> <P ALIGN="RIGHT">$86,500 </TD> </TR> <TR> <TD>Asian-built production KiteTug to:</TD> <TD WIDTH="20%" ALIGN="RIGHT" VALIGN="TOP"> <P ALIGN="RIGHT">$110,500 </TD> </TR> </TABLE> <H4>Simple payback approach:</H4> <P>Domestic Prototype: 5.54 years <BR> Asian prototype: 3.69 years <BR> Asian production: 2.95 years</P> <P>It's clear we're getting somewhere.</P> <H3><B>Option 4:</B> Fuel doubles in cost:</H3> <H4>Gross profit approach:</H4> <P> <TABLE BORDER="0" CELLPADDING="0" CELLSPACING="5" WIDTH="90%"> <TR VALIGN="TOP"> <TD>Domestic Prototype profit:</TD> <TD WIDTH="20%" ALIGN="RIGHT" VALIGN="TOP"> <P ALIGN="RIGHT">$320,000 </TD> </TR> <TR VALIGN="TOP"> <TD>Asian Prototype profit:</TD> <TD WIDTH="20%" ALIGN="RIGHT" VALIGN="TOP"> <P ALIGN="RIGHT">$370,000 </TD> </TR> <TR> <TD>Asian production unit:</TD> <TD WIDTH="20%" ALIGN="RIGHT" VALIGN="TOP"> <P ALIGN="RIGHT">$409,000 </TD> </TR> </TABLE> <H4>Simple payback approach:</H4> <P>Domestic prototype: 2.74 years <BR> Asian prototype 1.82 years <BR> Asian production 1.46 years</P> <P>These numbers are much more acceptable, and await a simple doubling of current fuel oil prices.</P> <P><A HREF="cost_30k.html">Previous Chapter | </A><A HREF="happen.html">Next Chapter |</A><A HREF="KiteTugs.html">Table of Contents</A> </BODY> </HTML>