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Falcon 9 in hangar
The first stage of the Falcon 9 that landed December 21 in SpaceX’s hangar near Launch Complex 39A. What might the economics of reusable Falcon 9 vehicles look like? (credit: SpaceX)

Increasing the profit ratio

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After a December 21 launch and landing, Elon Musk posted an image and message on December 31: “Falcon 9 back in the hangar at Cape Canaveral. No damage found, ready to fire again.”

If the first stage can be reused ten times, the total cost, including the second stage and everything else, falls to $20.8 million.

The price of a Falcon 9 is $62.1 million to deliver 13,150 kilograms to LEO, or $4,654 per kilogram. The Falcon 9 Heavy price is ( ) $90 million to deliver 53,000 kilograms to LEO, or $1,698 per kilogram. The consumables amounted to about 0.3 percent of the price, Musk said in a 2012 interview, and the price of oil has dropped by more than 50 percent since then. SpaceX has claimed that if reusability is mastered, the price can fall by “two orders of magnitude” or about 99%. The resulting per-kilogram price of $16.98 to orbit is pretty impressive considering that to ship 20,000 kilograms of cargo from Austin to Sydney costs about $25 per kilogram (but that may include customs duties).

Modest first stage reusability

Elon Musk has previously said that the first stage amounts to 75 percent of the total price tag. If the first stage can be reused ten times, and the cost of maintaining and operating the stage per flight is one percent of initial manufacturing costs, then the first stage contribution will drop from $46.6 million to $5.3 million and the total, including the second stage and everything else, to $20.8 million. That would result in $1,559 per kilogram on a Falcon 9 reusable.

A variety of other improvements are planned. Pumping consumables from two of the three cores for the Falcon Heavy to the center core can increase mass delivered by about 20 percent. This is the only way payloads weighing 45,000 to 53,000 kilograms can be delivered, so it is already included in the Falcon Heavy price per kg. The Falcon Heavy will benefit more from first stage reusability.

Next, consider a comparable calculation for the savings due to first stage reusability ten times, assuming that a Falcon Heavy second stage represents the same amount in the price tag as a Falcon 9 second stage. The Falcon Heavy price would be $23.7 million, or $447 per kilogram.

Second stage reusability and beyond

Reusability of the central core of Falcon Heavy will be more challenging than for Falcon 9 because staging will occur higher and further down range. Reusability of second stages will be more challenging still. That will be required to reduce the second stage portion of the price tag of the Falcon Heavy from $15.5 million to something less.

Even if total reusability is achieved for 100 uses, the price will still be about 1.3 percent of current prices with an interest rate of 0 percent (1 percent for construction, 0.3 percent for consumables). If it takes 10 years for 100 uses, then even if the interest rate is 7 percent, the interest cost would have to be recovered in the price tag. At 10 flights a year, that would leave the price tag at least 2 percent of current prices.

Another advantage, at least for GEO launches, will be that Boca Chica, the planned location of SpaceX’s new launch facility, is at 26 degrees latitude vs. Cape Canaveral’s 28.3.

Elon Musk mentioned in his 2012 interview using a cheaper fuel. For example, the Raptor engine is expected to use cryogenic methane. Kerosene has a slightly lower energy content than liquid methane per kilogram, but about twice liquid methane’s density. The methane-burning Raptor engine’s vacuum specific impulse of 363 seconds is higher than the kerosene-burning Merlin 1D’s 348 seconds. Liquid methane costs about $1.35 per kilogram at the December 29 spot price. With the amazing recent drop in the price of oil, gasoline’s cost is about $0.73 per kilogram, so it’s not clear which fuel will be cheaper. However, speculators are betting the nominal price of oil will rise about 50 percent over the next nine years and the nominal natural gas prices will rise about 70 percent. My narrative is that the fuel won’t matter very much to the price for some decades, so don’t worry too much about which will be cheaper.

SpaceX will have little incentive to lower their prices below what the market is willing to bear. If they can interest buyers at a price of $50 million, they do not need to go any lower.

It will take some years for all of this to happen. SpaceX’s first order of business is to do extensive ground testing of the recovered first stage. We can hope that SpaceX will recover another first stage to do flight testing of a recovered first stage like it did with its Grasshopper test vehicle. Next will be test flights with second stages attached to the first stage being reused. This might take some years.

SpaceX will have little incentive to lower their prices below what the market is willing to bear. If they can interest buyers at a price of $50 million, they do not need to go any lower, except perhaps to offer Elon Musk’s Mars colonization flights or a venture where SpaceX has taken an equity stake. A $50 million price for a Falcon 9 might only increase demand from 80 to 100 flights, but it would increase the profit by $30 million per flight. It will take a second successful launch company to offer flights below $30 million before SpaceX is forced to drop its price to nearly match the drop in its costs.

Demand side

For all of the reusability to matter, demand will have to substantially increase. If there’s only 87 launches per year like this year, and it only takes a few days to recertify each first stage, then we might need only eight or nine first stages built every year.

I’m optimistic that demand will increase. At $23.7 million, nine Dragons launched on a Falcon Heavy could take 63 people, including 54 passengers, for $439,000 each for launch costs. Assuming a reusable version of the Dragon could also be developed, maybe a round trip ticket to orbit could be $1 million with only first stage and Dragon reusability. The venerable Futron Zogby Space Tourism Market Study found 30 percent of “Qualified Individuals” would be willing to pay $1 million for an orbital ticket. One estimate is that there are 12.4 million “Accredited Investor” households in the US. With three people per household, is it likely that 10 million Americans will be taking trips to orbit in my lifetime? Probably not. But who knows?