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.

41 thoughts on “SpaceX Operating Margin on Rockets Increasing by Over 10% to 74+%”

  1. Photovoltaics have a high mass to power output. Solar thermal electric have less but most of the mass is in the radiator. The greater the difference in temperature between the hot and cold the of heat engines the greater the efficiency, and power out.

  2. DARPA is working with REL on the SABRE now as well. That engine has more potential since the Boeing and Lockheed, along with what is known about the Chinese designs all are currently impractical due to the weight of the materials required. The SABRE is the only engine design that currently has a solution to the weight problem with its precooler.

  3. I’ve done design work on the “scoop mining” concept, but I will be the first to admit it is not ready for prime time yet. Obtaining fuel from asteroids or the lunar poles is much farther along, since NASA and others have been doing low-level technical work for many years.

    We have lots of asteroid samples here on Earth (they’re called meteorites), and two probes are visiting mining candidates right now, and will bring back pristine samples. Nobody has flown an atmospheric scoop of any size that I know of yet.

  4. Are there any up-to-date solar-thermal-drive designs floating around.
    A google search “solar thermal space ship design” revealed nothing useful.
    I’m expecting it to look like solar sail designs.

  5. Isn’t that the reason for the atmospheric scoop idea? There IS enough gas to be useful, you just need to be close enough to a planet to grab it.

  6. 100 meter satellite antennas have already been deployed in GEO. At 1 AU a metallized film that size supplies 9 MW of reflected light. The largest space solar arrays flown so far are on the Space Station. Replacing the actual station cells with modern triple-band ones yields 375 kW.

    The thing about large solar arrays is you have to have cabling to carry the current, which complicates the design. A reflector can be a “dumb structure”. It doesn’t need much in the way of active devices across its surface. You may want some adjustable tension cables to keep the right shape.

  7. What’s your stance on hybrid tugs, which would have a small high-thrust system for certain maneuvers that require it, and a primary high Isp system for the rest of the way? Would that make any sense?

  8. But the other launch providers (ULA, the Chinese government etc.) DO have pockets the equal or greater than Bezos.

    It isn’t money that’s the restricting factor.

  9. If solar electric has limited power levels then wouldn’t solar thermal have the same limitation?
    Or is the idea that you can easily pack in a couple of hectares of lightweight folded metalized film mirror for the thermal concentration, but you can’t pack anywhere like that for PV cells?

  10. > I think for this idea to work we need to know how much hydrogen is floating around in space

    Within the heliosphere (about 100 AU from the Sun), we have the solar wind. The mass flow rate is not high enough to be useful. You get better mass return by mining Near Earth Asteroids. Some of those are 20% rocket fuel ingredients (water and carbon compounds).

  11. > Nuclear rockets also a potential disruptor.

    If you mean nuclear-thermal rockets, their time has passed. Solar-thermal gets the same performance, but without all the nuclear hysteria and reactor mass. Nuclear-electric gets 5 times lower propellant burn. Solar-electric already exists and is flying, but has limited power levels. A nuclear reactor for electric power source can pump up the juice, and therefore thrust levels.

  12. You don’t necessarily have to carry wings and wheels. I ran a “Jet-Assisted Take-Off” study when I worked at Boeing. This involved mounting off-the-shelf jet fighter engines vertically in a ring around a conventional rocket core.

    You launched on jet engines with full afterburner, until you reached Mach 1.6 at 15 km altitude, after which the rocket lights up and continues from there. The “booster ring” arcs over ballistically, and once it gets low enough, relights the jets, and lands vertically. It needs some control surfaces and landing legs, but not a whole wheeled landing gear. Fuel consumption is surprisingly small for the jets, about 500 kg/engine.

    With different engines, you can probably go higher and faster, but by the terms of the study we were using off-the-shelf engines (P&W F100’s) to minimize R&D cost.

  13. The next big leverage is using off-planet resources. In the long run, 98-99% of stuff used in space can be made in space. The other 1-2% are either rare elements not easily mined up there, or hard-to-make items like computer chips, where it is easier to just ship them from Earth.

    Near Earth Asteroids, like the two being visited right now by Japan and the US, are high in water and carbon compounds (up to 20% mass). Since asteroid mining has a mass return ratio of 200:1 to high Earth orbit, you can bring back 40 times your starting mass in net fuel. From high orbit you can deliver it to LEO by slow aerobraking (multiple drag passes). With an ample supply of fuel, deliveries upwards becomes much cheaper.

    Chemical rockets are only 13% efficient in turning fuel energy into payload orbital energy in LEO. There is no significant way to improve this. You need to move away from chemical rockets to other technologies. There are many options (air-breathing engines to ~Mach 6, electromagnetic or gas accelerators, rotovators, etc.)

    Electric tugs can vastly lower propellant use from LEO to other destinations, so long as your payload is not time or radiation sensitive. Solar-electric tugs can be vastly accelerated when climbing from deep in the Earth’s gravity well by ground-based lasers. You shine the lasers on the solar arrays, and they get a power-up, and at a minimum run 100% of the time instead of 60% due to the Earth’s shadow.

  14. Hi guys here’s my 0.2c worth and a couple of questions.
    Moon then Mars but as an intermediary a proper space dock , rocket goes up delivers goods to space dock ( fuel, food etc)
    Nuclear powered rocket from SD to moonbase(s) which uses hydrogen captured magnetically from space as a fuel and that fuel is stored at the SD in a container contected to the SD but not attached permanently in case of boom boom.
    I think for this idea to work we need to know how much hydrogen is floating around in space and how easy it is to capture. Big scoop attached to the storage vessel so it can capture it directly.
    Feel free to shoot this idea down

  15. Once you’re past the amount of fuel that would fit in the rocket in one load, you’re into bringing fuel up to orbit, and refueling, which then massively expands the number of rocket hours needed to do anything.

    So, yes, the fuel cost is currently a trivial fraction of launch costs, but fuel requirements still drive mission costs for anything beyond LEO.

  16. SpaceX played this one very smartly. Protecting their work is the reason why SpaceX had not filed any patents on their reusability technology, instead choosing to keep things secret.

    This ensures that anyone trying to follow what SpaceX had done with the Falcon 9 will still need to do their own experimentation to work out all the necessary tech that goes into a Falcon 9. Things like developing a kerolox engine with an insane thrust-to-weight ratio with coking mitigation measures and other reusability features, thermal protection systems that do not need to be replaced after every flight, the software to control it all, etc.

    All of that stuff is under wraps at SpaceX, and Musk having had a computer background (Paypal) where security is paramount, probably has some of the best computer system security on the planet.

  17. Wonderful discussion on insurmountable lead. “until somebody comes up with something that is cheaper and more reliable.”

    But what if someone, (or some country) were to be able to grab all that know how and just light the fuse on “their” rockets? No development costs to pay back per launch. Naw, we have international rules on Intellectual Property that virtually every country follows for fairness. Aren’t we in discussions with one that we think may be cheating??

  18. As Combinatirics says, all the space ( Adrianne,Boeing,LM) are designed to use public money by payloads in each launch, SpaceX and BOr. has an incredible margin just by promising 20% discount on that.

    there is no need to compete between them, they can share the market with no risk.

  19. Re-usability is the anvil and BFR will be the hammer. Without pockets like Bezos other launch providers are in serious, serious trouble. As predicted by Musk and executed by SpaceX. Glorious!

  20. I’d argue the laser beaming is almost tenable now, as well as the only viable alternative, considering the resources being pushed into laser weapons, particular solid state fiber lasers and the associated beam directors with combining optics. It’s an all electric option as well on the backend. Unlike hypersonics, laser beam launch is a pure brute force numbers game. Up the laser module count to up your combined power. 10KW is arguably COTS now, so make a full module with beam director, test it, then mass produce the modules and find a large open field to place them. If you can make more powerful lasers, you reduce the module count/field size. There may be issues with getting close to 1MW per beam director though due to practical operational issues (heat lensing, plasma formation, lightning hazards, etc).

    1Kg payload per MW beam power is the rule of thumb, though Dr. Kare did say maybe 3Kg/MW if things work out.

  21. Bezos mentioned favoring cyclers and tugs for in orbit transport. So does the old NASA timelines. On orbit multi stage is also a potential upsetter post bfr. Nuclear rockets also a potential disruptor. Arians and ula response to spacex and bo designs are disappointing at best. Bfr airliner will destroy economics of any competitors tho. The volume and scale will make space seem like a side business.

  22. And a good 2c it was.

    I share your sentiments regarding “Moon, then Mars”. The hype around Mars is large, but once you put pen to paper, the Moon is clearly the underdog with our current tech.

  23. re Hypersonic space planes. Rolls Royce and Boeing are working on this. I think the limitation is payload. You have to carry a jet engine, wings and wheels with every launch.
    And with any new technical innovation there stands the possibility that SpaceX and BO will opt for the same path as well.

  24. F9 profitability and SpaceX profitability are very different animals. As noted:

    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.

    As a private company I wonder how everyone has such specific cost info. But if we strip out allocating F9 investment recovery, and all the fixed costs, and debt servicing and assign a small number of staff hours to its operation I see how you might get to 60%+ profit over 10 reuses. So maybe $1.5-2B a year profit outlook with Block5 + this new fairing recovery (why are they paying a sub $6M for these???). It’s a very nice profit margin, and since they are the clear cost leader on a service with 95%+ reliability they command the commercial market that is not earmarked for “national champions”.

    Too bad we can’t park the upper stage for eventual reuse for space tugs. Think of 3 or 5 of them, connected, refueled.

  25. Frackers are only becoming profitable now. They have massive capital and interest costs. A LOT of money had to be raised.

    Shale companies often tout their rock-bottom breakeven prices, and they often use a narrowly defined metric that only includes the cost of drilling and production, leaving out all other costs. But because there are a lot of other expenses, only focusing on operating costs can be a bit misleading.

    Riyadh-based Al Rajhi Capital dug into the financials of a long list of U.S. shale companies, and found that “despite rising prices most firms under our study are still in losses with no signs of improvement.” The average return on asset for U.S. shale companies “is still a measly 0.8 percent,” the financial services company wrote in its report.

    I am also saying SpaceX has nice operating margin but the R&D costs for SpaceX probably make them unprofitable. They have to spend a lot on Starship and Starlink.

  26. Even if we assume the first $62 million price had no margin in it. The rest of the calculations approximate the costs. Instead of four launch reuse with $16 million cost, $10 million at ten launch reuse then it is 30% more.$21 million at four launches and $13 million at ten launches. At $62 million price, then $41 million per launch is made at four launch and $49 million per launch at ten launches

  27. Volume of launch needs to go up for the price drop. If the Price elasticity of demand for rocket launches is not there then they cannot make more money dropping the price. It seems pretty clear that businesses are not lining up and ready to launch a lot more with even lower prices. Not in enough numbers to reward price cut. SpaceX is already over two to six times cheaper than competitors. We did not get 6 to 10 times the commercial launches. Therefore, they have to grow Starlink and other things to use more low launch costs and get rewarded with sustainable revenue. But it takes 5-10 years to get the big projects going. There is a lag on the elasticity of demand. More activity will be stimulated but business and government are not prepared to respond to take advantage. SpaceX is not upping prices to 10% below the lowest of ULA or Ariane or Russia. They went cheaper but then lowered their costs with reusability.

  28. But SpaceX shows signs of not wanting to be that company. They want to remain too cheap to compete with, but to lower the cost enough that they get a lot more cash flow.

  29. Thought about this more and there is plenty of motivation for SpaceX to keep pushing their own costs down. Every dollar of cost reduction results in one dollar of profit. This is analogous to how frackers have worked to lower their own costs even though they are already profitable.

  30. They have not had a dramatic price drop for what they charge to launch something.

    In the meantime they are on block 5 of the Falcon 9, have demonstrated three relaunches per core, have designed rockets to be relaunched with less refurbishing work, etc, etc, etc.

    So to me it most certainly does make sense.

  31. No way a 30% margin. Run the numbers again at 16% best case. I don’t even think FAR will allow that high of margin and nothing points to different price for different folks; That I have seen.

  32. SpaceX needs to push costs down even more to make Starlink so for now they are improving on their own apart from immediate competition. But yes long term BO needs to step up.

  33. The overriding metric for expansion in to space is cost. The lowest hanging fruit to reduce cost is 100% reuse and we are well on our way to that.

    Once we have 100% reuse the next variable is throughput. Given that each kg of mass to a destination must help pay off its launch vehicle it stands to reason that a BFS that an be used 20x more often will have a greatly reduced cost to deliver a kg of mass than a BFS that is used less frequently.

    This means that the amortized cost to deliver a kg of mass somewhere is directly tied to the duration of the round trip to that location. This means that kg to LEO cost is about one sixth the kg to Moon cost and the kg to LEO cost is about one 100th the kg to Mars cost.

    It is fun to think about colonizing Mars. I actually think about this quite a bit. Unfortunately the economics of delivering “stuff” to a destination favor LEO and the Moon over Mars. Don’t even think about the asteroid belt.

    Now don’t lose hope- there is another variable to consider which is the suitability for ISRU. LEO has no ISRU potential apart from sunlight. The Moon has good potential and Mars as very good potential.

    To me the Moon is the best initial place to go. Close enough for good throughput and low costs, plenty of local “stuff” to rearrange.


  34. Blue Origin or another competition is needed to drive the launch price further down.

    Because without that, SpaceX can perfectly sit on their big 80% profit margin from whatever reuse they already do, still beat ULA and not give us cheap space access, just relatively cheaper.

  35. As I said long ago SpaceX will be ridiculously profitable because their only competition is ULA. Any booster reuse results in incredible profit margins for SpaceX and they can price themselves to beat ULA by a healthy 20%.

    This will obviously go on until BO shows up or SpaceX is regulated as a monopoly (a very long way off).

  36. Free advice to Mr. Wang regarding USC class on Space design.

    SpaceX and BO have such a lead that they won’t be resoundingly beaten in the market place until somebody comes up with something that is cheaper and more reliable. At this point in time you cannot beat SpaceX/BO with reusable rockets using traditional chemical propulsion- they are too far ahead. The contending options for dethroning SpaceX and BO are:

    Within 10 years:
    Hypersonic space planes (something China is looking in to). Lots of complexity with this solution.

    SSTO nuclear rockets (something Russia is looking in to). Probably H2 with LANTR LOX afterburners for liftoff to boost thrust.

    Within 20 years:
    Beamed power. Make the rocket a simple heat exchanger and put the lasers/masers on the ground where you can add redundancy and do easy maintenance.

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