SpaceX Operating Margin on Rockets Increasing by Over 10% to 74+%

Most people probably did not notice that there was a large improvement in SpaceX’s profit margin with their latest rocket launch.

Elon Musk said they will be able to reuse the two halves of the fairings. The fairings are the nosecone of the rocket. The nosecone splits in two to expose the rocket payload after the rocket has cleared the atmosphere.

The two halves are fairly light but they cost about $6 million. SpaceX charges about $62 million per launch but they are making more than a 30% operating profit. SpaceX has waterproofed the fairings and has parachutes on them so that they are not damaged when they land in the ocean.

The profit margin on any future launch using reused fairings will increase the profit on that mission by 10%.

SpaceX successfully reused the specific Falcon 9 block 5 first stage used in the launch for the third time. It was successfully landed. The first stage represents about 70% of the cost of the rocket. SpaceX is showing they can reuse first stages for four times or more. I believe that SpaceX will be able to hit the ten reuse goal. They meant ten reuses before major maintenance and continuing reuses up to hundreds of times.

There are costs for recovering the first stage, inspecting it and minor maintenance before reusing it. Refueling is also needed every time.

Assuming SpaceX priced the $62 million Falcon 9 with a 30% profit margin without assuming successful reusability, then the starting cost for a non-reusable Falcon 9 is $43.4 million

The cost of the first stage is 70% of $43.4 million or $30.4 million. Another $6 million cost is the fairings. The “70% of the rocket cost is the first stage” and “$6 million for the fairings” were both statements Elon Musk has made. I will assume the fairings will have the same reuse levels as the first stage. My gut feeling is that undamaged fairings should be simpler to reuse now damage can be prevented.

$36.4 million out of $43.4 million is now reusable. 83.9% of the costs are being reused. It leaves $7 million as the assumed cost of the second stage.

SpaceX is showing they can split the first stage and fairing costs across 4 to ten launches. If it is consistently four launches then the cost is $16.1 million per launch plus recovery, maintenance and inspection including the second stage. If it is consistently ten launches then the cost is $10.6 million per launch plus recovery, maintenance and inspection including the second stage. $7 million per launch for the second stage.

Before with an assumed three launches and no fairing use the cost of $30.4 million split over three plus $13 million for the fairing and second stage. So $23.1 million of costs for three reuse launches.

The screaming of “Noooo!!!” you heard when SpaceX had another successful launch and recovered the fairings was from executives at ULA (United Launch Alliance) and Ariane. Russia’s Space Agency already left the building when they gave up on commercial launch a while back.

SpaceX will be able to make $46 million per launch when they consistently reuse four times and they will make $51 million per launch when they are consistently reusing ten times. The SpaceX operating margin will be 74+%

The cost calculation is not including indirect expenses such as research and development or selling, general and administrative expense (SGA). SpaceX has massive research and development costs.

Brian Wang Invited to USC Class on Space Design

Brian Wang of Nextbigfuture has been invited go and share his insights with the ASTE527 Graduate Space Concepts Studio Finals at the University of Southern California (USC), Dec 11th. I will be joining via webex.


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