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Space Future has been on something of a hiatus of late. With the concept of Space Tourism steadily increasing in acceptance, and the advances of commercial space, much of our purpose could be said to be achieved. But this industry is still nascent, and there's much to do. this space.
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P H Diamandis & P Collins, June 1999, "Creation of an Accredited Passenger Regulatory Category for Space Tourism Services", Presented at 1st STA Conference on Space Tourism, June 1999.
Also downloadable from of an accredited passenger regulatory category for space tourism services.shtml

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Creation of an Accredited Passenger Regulatory Category for Space Tourism Services
Dr. Peter H Diamandis

Dr. Patrick Collins


The concept of space tourism has been under discussion since the 1950's. In the mid-1950's, the Hayden Planetarium offered to take reservations for people interested in flying to the planets: over 250,000 wrote in to reserve their place. In the late 1960's, following the release of the Stanley Kubrick / Arthur C. Clarke movie "2001: A Space Odyssey", PanAm accepted 90,000 reservations for people wishing to fly to the moon. From this and from more recent market research, it is clear that the idea of space tourism is very popular with the general public.

In 1998 NASA published the report "General Public Space Travel and Tourism" (1) which endorses the feasibility of space tourism, and foresees it growing into a larger commercial space activity than all space activities today. Also in 1998 the American Institute of Astronautics and Aeronautics ( AIAA) published the report "International Cooperation in Space" of which pages 25-30 were devoted to the subject of public space travel, and concluded: "In view of its great potential, public space travel should be viewed as the next large, new area of commercial space activity" (2). Today, at least two companies are accepting advance reservations to fly passengers on sub-orbital flights to space and thereby to earn their "astronaut wings".

The main obstacle facing space tourism services has been, and remains, that the vehicles required to fly passengers to and from space on a regular, safe and low-cost basis do not yet exist. Today, those wishing to fly to space as a passenger have only two vehicles to choose from, the U.S. Space Shuttle or the Russian Soyuz, of which only the Soyuz is available for commercial hire.

For many years it has been recognized that the technology required for sub-orbital space travel is not a barrier; much greater difficulties lie in the raising of capital investment and the development of a suitable regulatory structure. The X PRIZE Competition has been created to foster a mechanism which has historically made capital available, namely sponsorship of competitors in a race (similar to the America's Cup yacht races and Grand Prix motor races). The X PRIZE Foundation is in the final stages of raising the funds to offer a $10 million prize for the first team to fly repeatedly to an altitude of 100 km, and 14 teams have registered to compete. However, a number of regulatory matters remain to be resolved before this activity can lead on to commercial passenger space travel services. This paper focuses on the issue of creating an appropriate regulatory structure to allow X PRIZE derived vehicles to carry passenger traffic.

Aviation Background

Today new passenger-carrying aircraft must undergo an elaborate "certification" process before they are allowed to carry fare-paying passengers or cargo. In the USA the Federal Aviation Authority (FAA) has created up various categories of certification depending upon the aircraft's gross weight and its intended usage (cargo, scheduled passenger traffic, general aviation, etc). Certification typically involves performing more than 1000 test-flights in order to collect extensive operating statistics; the average cost of certifying a small business jet aircraft can run in excess of $100 million, or up to 10 times the cost of developing the initial prototype vehicle. The time taken for such certification commonly exceeds three years. If such large investments of time and money are to be required of the nascent space tourism industry, great difficulties would be caused that would seriously hinder the creation of any viable start-up space travel companies.

The stated goal of the FAA is to achieve 100% safety record. This is a difficult and demanding objective and is the result of many decades of evolution of progressively safer and safer airline systems. Should this goal also be applied even to the earliest space tourism vehicles, the cost of certifying a human-rated space launch vehicle would become prohibitive - assuming that a certification process would ever be developed at all!

However, it is being increasingly widely recognized that only the development of passenger space travel services offers the possibility of demand for travel to and from orbit growing sufficiently large to enable the cost of launch to be reduced far below present-day launch-costs. These are still based on expendable missile technology, and are much too high for most space activities to be commercially profitable.

The question therefore arises: "How should the U.S. government facilitate the creation of a space tourism industry that does not need to meet the extremely strict standards that the FAA requires of mature aviation services?" Is it possible to devise a legal construct which could allow for would-be space tourists to accept some risk themselves? After all, if the aviation industry had been held to a safety requirement as demanding as today's during its formative years from 1910 - 1940, today's rich tapestry of aircraft designs and capabilities could never have developed. A promising answer to this question may be found by looking at another part of the U.S. government.

There is another regulatory body which also has the job of protecting unsuspecting members of the general public from being deceived by people with specialized professional knowledge. This organization is the Securities Exchange Commission (SEC), which is intended to prevent unwitting members of the public from being taken in by companies operating various fundraising scams. As such the SEC requires companies making an Initial Public Offering (IPO) of shares to undergo a high degree of rigor in their disclosures and processes. The resulting cost to a company of making an IPO is very high.

The SEC however does not want to stifle young companies trying to raise money from private sources. Consequently, in order to broaden the range of fund-raising options, the SEC has created a category of fundraising called "Regulation D" under which companies can raise funds from "Accredited Investors" with less burdensome conditions than apply to IPOs. The definition of the SEC's Private Offering Exemption, Regulation D and of Accredited Investors are provided below:

SEC Regulations Section 4-2 (3):

Private Offering Exemption Section 4-2 of the Securities Act exempts from registration "...transactions by an issuer not involving any public offering." To qualify for this exemption, the purchasers of the securities must:

  • Have enough knowledge and experience in finance and business matters to evaluate the risks and merits of the investment (the "sophisticated investor"), or be able to bear the investment's economic risk;

  • Have access to the type of information normally provided in a prospectus; and

  • Agree not to resell or distribute the securities to the public.

In addition, the issuers may not use any form of public solicitation or general advertising in connection with the offering.

Regulation D (Rule 505) (4):

Rule 505 provides an exemption for offers and sales of securities totaling up to $5 million in any 12-month period. Under this exemption, issuers may sell to an unlimited number of "accredited investors" and up to 35 other persons (who do not need to satisfy the sophistication or wealth standards associated with other exemptions). Purchasers must buy for investment only, and not for resale. The issued securities are "restricted"; that is, issuers must inform investors that they may not sell them for at least a year without registering the transaction. Issuers may not use general solicitation or advertising to sell the securities.

An "Accredited Investor" is:

  • A bank, insurance company, registered investment company, business development company, or small business investment company;

  • An employee benefit plan (within the meaning of the Employee Retirement Income Security Act) if a bank, insurance company, or registered investment adviser makes the investment decisions, or if the plan has total assets in excess of $5 million;

  • A charitable organization, corporation or partnership with assets exceeding $5 million;

  • A director, executive officer, or general partner of the company selling the securities;

  • A business in which all the equity owners are accredited investors;

  • A natural person with a net worth of at least $1 million;

  • A natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year; or

  • A trust with assets of at least $5 million, not formed to acquire the securities offered, and whose purchases are directed by a sophisticated person.

These conditions serve the purpose of permitting people with well above average knowledge and/or resources to invest in the shares of companies which are at a (typically early) stage of development at which they are not able to make an IPO and sell shares to the general public, due to having an insufficiently long operating history, facing a high level of risk, and/or for other reasons. Accredited Investors are people who are considered capable of judging for themselves whether to invest in shares that have high risk (and offer potentially high returns). This exemption serves the very valuable economic purpose of broadening the pool of investment available to innovative new companies - which contribute greatly to overall economic growth.

"Accredited Passenger" Proposal

Based upon the precedent of the SEC regulation described above, it is proposed that a parallel set of regulations be crafted by the Federal Aviation Administration to allow for a "Private Carriage Exemption" for travel aboard privately owned and operated spaceships - namely the creation of an "Accredited Passenger" category of person who will be exempted from certain FAA regulations that apply to scheduled aviation services. The underlying objective is the same - to allow well-qualified people to choose to undertake certain risks that are greater than those involved in flying on a scheduled airline flight, in return for a rare and exciting experience which the person values. In doing so they will be helping to establish a new industry that is expected to grow into the largest activity in space.

Using the SEC language as a guide, following is a draft of the proposed FAA guidelines:

FAA DRAFT Guidelines:

Private Carriage Exemption for Spaceship Travel. These guidelines exempt a category of private carriage aboard non-FAA certified spaceships from certain FAA regulations concerning carriage of passengers. To qualify for this exemption, the purchaser of the spaceship carriage service must be an "Accredited Passenger" as defined below. An accredited passenger must:

  • Have enough knowledge and experience in aviation and space-related matters to evaluate the risks and merits of the vehicle and spaceship operator, or be willing to acquire and demonstrate this knowledge through appropriate training;

  • Be familiar with the operations, safety and emergency procedures of the specific vehicle;

  • Have access to all relevant test information and flight safety records of the vehicle, engines, and major systems so as to be able to judge the safety of the vehicle on his/her own; and,

  • Agree not to resell or distribute the tickets to any other person or persons.

Under this exemption carriers may sell tickets to an unlimited number of "accredited passengers". Purchasers must buy the ticket for themselves, and not for resale.

In order for the spaceship operator to perform the flights as contracted for, the operator must be a "Space Carriage Operator in good standing" as defined below:

  • Have had at least two successful and consecutive flights of their vehicle as defined by guidelines to be individually negotiated between the Operator and the FAA;

  • Fully and completely report all accidents and failures associated with the Operator's vehicle;

  • Have an approved "operations, safety and emergency procedures" course for their specific vehicle; and,

  • Be in compliance with all other relevant local, state and federal regulations.

Such an exemption would be analogous to the SEC Regulation D, and would responsibly enable appropriate people to decide for themselves to fly on a vehicle that is statistically more dangerous than a scheduled airline flight. Such support by these people will facilitate the establishment of a profitable space transportation industry, and thereby enable space activities to contribute to economic growth.

Space Carriage Insurance

The above proposal has parallels with FAA rules concerning flying in privately-owned aircraft. FAA rules concerning private use of privately owned, home-built and even experimental aircraft are much more relaxed than those relating to scheduled aviation in which passengers purchase tickets. A person who has a private pilot's license is permitted to take another person for a flight in their own or a borrowed or hired aircraft, provided that they have a current license to fly that type of aircraft - but they are not allowed to charge for such a flight. However, licensed flying instructors are allowed to charge members of the public for flying-lessons. In such cases, the passenger faces a level of risk that is statistically considerably higher than that involved in scheduled aviation.

Of course, all such "general aviation" flights must be insured; pilots and aircraft must at least be covered by 3rd party insurance. According to long-established standards, insurance companies of course require the pilot to be licensed, the vehicle to have a Certificate of Airworthiness, the airfields used to be in compliance with appropriate regulations, and so on. Even test-flights of newly designed aircraft can be insured, although expert opinions on the vehicle's airworthiness will be required, and insurance premiums naturally reflect the relatively high statistical risks involved.

It is most important to recognise from these examples that aviation activities that are statistically several orders of magnitude more dangerous than scheduled aviation are today handled routinely by the FAA and the insurance world, who permit those who choose to take these risks to do so. Thus it must be possible to develop similarly appropriate regulations relating to new passenger-carrying space vehicles.

A further means of applying the Accredited Passenger concept might involve establishing a Supporters' Club for the space vehicle in question, in which there might be several levels of membership. Achieving the higher level of membership would require demonstrating extensive knowledge of the vehicle and ite operations, and would bring the right to a flight on board the vehicle.


There is no doubt that the legal and regulatory environment has changed drastically between the early 1900's and today. The Wright Brothers and Bill Boeing could never have gotten started if today's FAA regulations were used to govern aviation services 60 to 80 years ago. It is also true that U.S. society at the turn of the twentieth century was far less litigious and more willing to take risks. Few people remember that two of the nine teams which attempted to cross the Atlantic in pursuit of the Orteig Prize (won by Charles Lindbergh) died in their attempt.

Without private companies offering passenger space travel services, the demand for launch services will continue at a very low level, and the cost of space activities will not fall sufficiently to permit commercial development of the resources of space - an enormous loss to the human race.

So the critical question remains, how do U.S. companies wishing to pursue the creation of a space tourism business achieve this goal without having to leave U.S. soil, or having to spend unobtainable amounts of money trying to meet current (or worse, not yet existing) FAA regulations? This paper is one attempt to resolve this central problem by proposing that space carriage operators be permitted to share their risks, responsibly, with a category of sophisticated "Accredited Passengers" who are in a position to judge the risks and benefits for themselves.

  1. D O'Neil (Editor), 1998, "General Public Space Travel and Tourism", NASA/STA Report No. NP-1998-03-11-MSFC.
  2. M Gerard and P Jefferson (Eds), 1998, " International Cooperation in Space: New Government and Industry Relationships", AIAA.
  3. SEC Website
  4. SEC Website
P H Diamandis & P Collins, June 1999, "Creation of an Accredited Passenger Regulatory Category for Space Tourism Services", Presented at 1st STA Conference on Space Tourism, June 1999.
Also downloadable from of an accredited passenger regulatory category for space tourism services.shtml

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