SpaceX Starlink October 7, 2020 launch (Source: SpaceX)

The Coming U.S. Small Launch Crash, Thanks to SpaceX Rideshare

With at least 11 companies worldwide planning to launch their first small launch vehicles in 2021, there’s not enough existing business to support them all, making 2022-2023 a time of bankruptcies and consolidation. The biggest problem facing small launch companies is a dramatical plunge in the cost to orbit through the SpaceX rideshare program, with regularly scheduled trips to LEO and SSO. 

“SpaceX flights are like ‘transit buses to LEO’ that can offer rides for competitive prices,” said Bryce Space Senior Space Analyst Phil Smith. “The premium price for on-demand launch on a smaller vehicle is considered attractive for those that want to manage schedule or need to be delivered to a specific, atypical location.”

Leveraging the reusability of the Falcon 9, SpaceX is putting payloads into LEO or SSO at a list price of $5,000 per kilogram today.  Rocket Lab’s Electron costs $25,000/kg to LEO while Virgin Orbit’s LauncherOne is slightly less at $24,000/kg.  ABL, Astra, Firefly, and Relativity Space want to join the club of small launch firms this year, making a total of up to 6 U.S. providers seeking business in volume to pay off hundreds of millions of dollars in R&D.   

For rideshare brokers and commercial constellation operators putting up large number of satellites for imaging, IoT (Internet of Things), and RF geolocation services, the drastically lower cost of SpaceX rideshare can’t be beat.  SpaceX can put between 2 to 4 times as many spacecraft into orbit per dollar over a dedicated small launch vehicle rideshare, even factoring in markups for third party organizers and an in-space carrier/tug, such as those built by D-Orbit or Momentus, to deliver satellites into final orbits.

Limiting rideshare missions in small launch business plans leaves Rocket Lab and new U.S. entrants fighting to land customers out of a smaller customer pool limited to government agencies and potentially constellation replenishment missions. Newcomers are counting on volume and the ability to conduct an average of one to two flights per month, using it to keep pricing affordable on a per launch – not per kilogram – basis.

The Department of Defense and NASA are willing to support a reliable base of two or three U.S. small launch companies for their needs to manage and control launch schedules and delivery to different inclinations, with DoD’s ultimate goal to launch satellites on demand as needed for replacement and surge capacity in time of crisis.  Small launch efforts in China, India, and South Korea will be supported by their respective governments for national security and economic development purposes, with profitability desirable but not required.

Launches for constellation replenishment missions is unproven, since in-orbit spares and a constellation’s built-in redundancy act as a buffer against single satellite loss, providing time to find a slot on regularly scheduled rideshare missions.  Iridium, OneWeb and Telesat have expressed interest in purchasing dedicated launches for satellite replacement missions, but the total number of replacement missions per year across the LEO broadband sector is likely to be in the low single digits over the next three to four years.

If limited customer prospects outside of rideshare wasn’t bad enough, competition between small launch providers worldwide will continue to drive down pricing both on dedicated launch and SpaceX rideshare missions. New small launch entrants ABL and Relativity Space are advertising launch costs under $9,600/kg to LEO and Rocket Lab is working towards first stage reuse of its Electron rocket to increase its launch rate and presumably for lower costs per launch, forcing everyone to squeeze hard to lower costs.

But SpaceX Falcon 9 rideshare is the elephant capable of squashing nearly everyone.  A new Falcon 9 launch lists at $62 million with a cost of around $2,700/kg to LEO, while SpaceX currently charges $5000/kg on its rideshare missions.   SpaceX has plenty of pricing margin to work with, with Elon Musk telling Aviation Week that it costs around $15 million to refly Falcon 9. At a 100% markup, a $30 million Falcon 9 reflight works out to a bit over $1,300/kg, allowing SpaceX to the luxury to lower pricing when it wants to rather than defensibly react to the pricing strategies of others.

It is hard to see how any firm that doesn’t conduct a successful flight by the end of this year will be able to break into small launch in any meaningful fashion, short of a major breakthrough in lowering costs. Existing U.S. launch firms will struggle among themselves for customers as they try to break even.

Small launch providers who hope to survive over the next four years will have to find a way to bring costs down to $5,000/kg or less to LEO and be prepared to find further savings as SpaceX lowers the cost of Falcon 9 as needed to capture more market share. Bringing Starship into commercial service will further challenge launch providers, with initial cost to LEO substantially lower than $1,000/kg.

Doug Mohney

Doug Mohney, a principal at Cidera Analytics, has been working and writing about IT and satellite industries for over 20 years. His real world experience including stints at two start-ups, a commercial internet service provider that went public in 1997 for $150 million and a satellite internet broadband company. Follow him on Twitter at DougonTech or contact him at dmohney139 (at) gmail (dot) com.

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