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May 04, 2011

SpaceX Defends its 'Cheaper than China' Launchers, Cost Structure

By Doug Mohney, Contributing Editor


Last month, a Chinese government official said SpaceX (News - Alert) -- an American company -- currently had the best launch prices in the world and didn't think Chinese offerings could beat them.   Today, May 4, SpaceX CEO Elon Musk has posted a blog posting entitled "Why the US can beat China: the facts about SpaceX Costs" discussing the facts and reasons why his company is causing heartburn to launch companies around the world.

First reported by Aviation Week last month, Chinese officials wouldn't talk for attribution about SpaceX's pricing, finding the published prices on SpaceX's website "very low" for the services offered and they couldn't match them with the Long March family of vehicles.  It was a story that set tongues throughout the space industry waggling, and one that incumbent/legacy launch companies have been more than happy to spin.

In his blog posting, Musk puts his cards on the table to address the "steady stream of misinformation and doubt expressed about SpaceX’s actual launch costs and prices."

"I recognize that our prices shatter the historical cost models of government-led developments," Musk continues, "But these prices are not arbitrary, premised on capturing a dominant share of the market, or 'teaser' rates meant to lure in an eager market only to be increased later. These prices are based on known costs and a demonstrated track record, and they exemplify the potential of America's commercial space industry."

Musk says SpaceX's vertical integration means the company can know and control the majority of its costs, allowing it to offer and publish a fixed price for a standard Falcon 9 flight at $54 million. "This is why I am so confident that our performance will increase and our prices will decline over time," he states, " as is the case with every other technology."

Total company expenditures for SpaceX through the date of founding in 2002 through the 2010 fiscal year were less than $800 million, which includes all development costs for the Falcon 1 light rocket, Falcon 9 medium rocket, and the Dragon spacecraft, plus the costs of building launch sites at Vandenberg, Cape Canaveral, and Kwajalein, corporate manufacturing facilities to support up to 12 Falcon 9 and Dragon missions per year, and the cost of five flights of Falcon 1, two flights of Falcon 9, and the single up-and-back flight of Dragon.

For most existing launch manufacturers used to government contracts, $800 million barely funds a year of development. Lower development and production/facilities overhead also leads to lower pricing per launch. 

But it's not about running a money losing enterprise. "SpaceX has been profitable every year since 2007, despite dramatic employee growth and major infrastructure and operations investments," states Musk. "We have over 40 flights on manifest representing over $3 billion in revenues."

Musk goes on to say that all of his numbers are "objective facts, confirmed by external auditors" and "Moreover, SpaceX intends to make far more dramatic reductions in price in the long term when full launch vehicle reusability is achieved."

Why would Musk have external auditors floating around? SpaceX has a number of private investors and Musk has said the company might look at an IPO late next year.   Certainly, a SEC (News - Alert) S-1 filing might quash a lot of the FUD (fear, uncertainty, doubt) being spread around by its detractors. Further, the company needs to keep NASA bookkeepers happy.

Finally, the holy grail of "full launch reusability" is one that SpaceX has talked about before. Ultimately, the company would like to find a way to recover and refurbish the first and second stages of the Falcon 9 rocket.


Doug Mohney is a contributing editor for TMCnet and a 20-year veteran of the ICT space. To read more of his articles, please visit columnist page.

Edited by Chris DiMarco



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