The Myth Of A Dramatic Shift In The Launch Industry

by: Dhierin Bechai

The notion of a dramatic shift is exaggerated.

Heavy launchers have lower costs per kilogram payload.

Companies such as SpaceX, Lockheed Martin, and Boeing focus on heavy satellite launches.

Satellites are becoming smaller, but this is not a universal trend.

Recently, Seeking Alpha published a news item about disruptive forces on the launch industry, partially sourced from Bloomberg. The item about the successful Rocket Lab launch lacks some detail and depth because it is put in a bullet point layout.

At the end of the item, the price point is mentioned:

…The company's 56-foot tall Electron rocket costs $5.7M per launch, compared to almost $60M for SpaceX's 230-foot Falcon 9.


It is rocket science in some way, but it is not rocket science to conclude that this is a comparison that makes little to no sense. Obviously, the comparison shows the difference in costs as well as size, but I think there is insufficient reasoning provided to speak about a dramatic shift in the launch industry. I've been primarily covering the commercial aircraft industry here on Seeking Alpha, but with my aerospace engineering background, I can also add a few useful things about launch vehicles and space missions.

In this report, I will show that there are certain trends in the launch industry. However, speaking about a 'dramatic shift' from the established likes of United Launch Alliance (a joint venture between Boeing (BA) and Lockheed Martin (LMT)) and SpaceX (SPACE) to new companies such as Rocket Lab might be a bit over the top because not all trends go against medium- and heavy-lift launchers provided by Boeing, Lockheed Martin, Northrop Grumman (NOC), or Ariane, a joint venture between Airbus (OTCPK:EADSF) and Safran (OTCPK:SAFRF). I will also shortly discuss why private innovators are important to publicly-traded launch vehicle manufacturers as well.

Capabilities at a price

Table 1: Launch vehicle classification (Source: AeroAnalysis International)

What makes the comparison or even the mention of SpaceX launch costs rather odd is the fact that a launch vehicle from one category is compared to launch vehicle from another category; The Electron launch vehicle is one from the small-lift category while the Falcon 9 easily covers the medium- to super-heavy-lift class.

Table 2: Launch cost information various rockets (Source: AeroAnalysis International)

Looking at the capabilities and costs, we can see that the targeted launch costs are just a fraction for the Electron of what you would pay for a SpaceX Falcon 9 launch, namely 9%. At the same time, the Electron rocket developed by Rocket Lab carries a payload of 150 kgs versus 5,500 kgs for the Falcon 9. So, the launch costs for the Electron rocket are low but so is its payload capability. This also shows in the launch costs per kg; per kilogram payload of the ULA (an alliance between Boeing and Lockheed Martin) and SpaceX rockets have costs that are just 30 to 70 percent of the costs for the Electron rocket. So, the cost element might not be the right thing to look at to call this a 'dramatic shift'... on the contrary.

Afbeeldingsresultaat voor space x

Source: Reuters

Designing and manufacturing a satellite for a specific mission is just one of many parts that determine mission success. In order to fulfill the mission or meet mission requirements, the satellite has to be brought in the correct orbit with the desired accuracy. Assuming that all launch vehicles will be able to insert the payload in orbit with the desired accuracy, there still is a big difference in the orbit capabilities. The 4 rockets from SpaceX and United Launch Alliance are able to put satellites in a geostationary transfer orbit. In a geostationary transfer orbit, the satellite is brought into an elliptical orbit after which it starts its transfer to a geostationary orbit. In the geostationary orbit, the satellite's positioning relative to a spot on Earth does not change. The advantage is that ground station antennas do not have to move to detect signals, which means that costs on ensuring pointing stability and pointing accuracy for the ground station antennae and the satellite are saved and essentially there is no need for a big network of ground stations.

The geostationary orbit requires the satellite to be at an altitude of 35,768 km, which means that in order to properly communicate with the ground station enough power is required that needs to be generated by solar panels. The vehicle design should also include a thermal control system that keeps seasonal variability in mind rather than eclipse time. In part, the mission drives the orbit requirements which partly drive the satellite design. To meet requirements, the geostationary satellites tend to be bigger requiring a launch vehicle that has enough specific impulse to insert the satellites into their initial orbit. Examples of geostationary satellites are communication satellites and meteorological satellites. The Telstar 19V launched in July 2018 by SpaceX had a launch mass of 7.1 metric tons marking the heaviest commercial communication satellite launched to date.

The Electron rocket can bring satellites into a low-Earth orbit [LEO] or a sun-synchronous LEO. In sun-synchronous orbits, the satellite passes over a certain spot on Earth at the same time each day. If full Earth coverage is desired, more satellites will be required and possibly there is need for a network of ground stations as the satellite positioning relative to the ground station changes and there are instances where there is only a short window where communications between a ground station and satellite are possible. Low earth orbits are used mostly for Earth observation, tracking, and scientific purposes.

We've now briefly discussed two types of orbits and what we can conclude is that different orbits have different characteristics that might have implications for mission requirements and satellite design or in other words "different missions might require different orbits". So that is yet another element that makes the comparison of a GTO capable rocket to an LEO capable rocket a bit more out of place.

Comparing in class

In order to assess the importance of Rocket Lab's Electron rocket, we should look at the launch costs in its class and some other factors.

Table 3: Small-lift launch vehicle class (Source: AeroAnalysis International)

What we see is that in the payload class of up to 2 metric tons there are 17 launch vehicles operational. What we see is that this launch class is dominated by the US, China, and Russia while countries such as Iran and North Korea also have presence. Out of 17 launch vehicles, you could say that half of the companies are from countries that the US and other countries from the West do not have a very good relation with. The US and Russia do collaborate on ISS missions, but whether companies, institutions, and the US government are very willing to launch their satellites by a fully Russian vehicle remains a big question. So, Rocket Lab could potentially do good business in this segment.

The table above can easily be expanded with payload information and costs.

Table 4: Launch cost information various rockets (Source: AeroAnalysis International)

What we see is that the Electron rocket does not have the lowest launch costs per kg. Simultaneously, we think it is fair to point out that in the same way you can't compare a Falcon 9 Heavy to the Electron, you can't compare a Minotaur IV (produced by Northrop Grumman's Orbital ATK) launch vehicle with the Electron. There is just too much of a difference between launching a 2 metric ton payload and launching a payload weighing a couple of hundred kilograms. So we focused on the <1 metric ton class, which possibly driven by demand coincided reasonably well with a <500 kg class. What we see there is that Electron launch costs are favorable at $38,000 per kg. The Electron has the lowest launch costs in the <500 kg class after the Chinese Long March 11. Alternatives from Northrop Grumman are significantly more expensive. In the <200 kg class, the Rocket Lab launch vehicle even is the only reasonable option.

Trends and capitalization

What is important to be aware of is that there is not a single trend in the launch market. In general, it seems the market is trending towards lighter satellites. For geostationary satellites, we haven't observed that trend.

Figure 1: Intelsat satellites masses per launch year (Source: AeroAnalysis International)

What we see in Figure 1 is that for geostationary communication satellites (owned by Intelsat) the launch masses have gone up. So rather than decreasing payload requirements, payload requirements for geostationary satellites seem to be increasing. Fitting that trend, this year the heaviest commercial communicate satellite was launched weighing 7.1 tons. The increasing weight of communication satellites and interplanetary travel is what SpaceX and United Launch Alliance are primarily trying to facilitate with their bigger and more expensive rockets.

What the likes of Rocket Labs are trying to capitalize on is the very-small satellite market. Satellites for LEO are becoming smaller. For companies and institutions that do need to get a satellite in orbit, but do not have the funds to develop big satellites or do not require big satellites miniaturization is a good solution.

Figure 2: Nanosatellites launches per year (Source: nanosats)

These days satellites can be as small as 125 cubic centimeters weighing 250 grams. The first launches with these so-called PocketQubes already took place in 2013. The more common standard for nanosatellites is CubeSat. CubeSat satellites have a mass of 1-2 kg and dimensions of 1000 cubic centimeters. A 3U CubeSat consists of 3 stacked cubes of 1000 cubic centimeters and can weigh up to 3-4 kg. These are extremely small launch masses with the size of a milk carton.

A few years ago it was recognized that CubeSat launches would increase significantly next to the miniaturization trend. So there would be more smaller satellite launches, but there was no appropriate dedicated launch vehicle available. This means that CubeSats would travel as secondary payload and cost savings on small satellite design was partly undone by high fixed launch costs. A negative consequence is that there is little flexibility and some launch vehicles providers refuse to facilitate CubeSat launches. Although the primary payload absorbs most of the costs, CubeSat launches as secondary payload are relatively expensive compared to dedicated launch vehicles. As a secondary payload, a CubeSat launch costs roughly $100K. Our calculations show that on board of a dedicated vehicle this could come down to $50K depending on the configuration of the CubeSat and how many co-launching satellites there are.

Important to keep in mind is that launch costs are expressed per unit weight, but that does not mean that if you want to launch a 3 kg mass on a vehicle capable of carrying 300 kg of payload you will only pay for the 3 kilograms that you are launching. That is the main reason why CubeSats have been launched as secondary payloads and can only be launched when the primary payload is ready for launch as well. It also means that the Long March 11 which has a launch cost per kg of $10K might not be that cheap after all for smaller satellites.

What makes the Rocket Lab's Electron a fitting solution to capitalize on the trend of smaller LEO satellites is the fact that it has a relatively low payload capability. That means that its design is tailored to low payloads resulting in lower costs and a rocket can be 'filled' quicker with payload resulting in a lower bar. In 2017, an Indian rocket carried a record-breaking 104 satellites including 103 smaller satellites. Indian launches can happen a third of the costs of launches in the US or Europe. For the 103 smaller satellites we calculated that the launch in India costed $70K-$72K per satellite. In the US or Europe, this would have cost $215-$225K though 3U quoted prices are around $295K, 30 percent higher than our estimate. Rocket Lab aims to achieve launch costs of $5 million per launch. This would mean that the launch costs per satellite would come down to $138K-$150K, again applying the 30% we get to $180K-$195K which falls at the lower side of the $180K-$250K quoted price range of Rocket Labs. So the price would come down by 15 to 40 percent, which is a big cost saver for smaller satellite developer. Next to that, the big advantage is that the CubeSats can be launched as primary payloads or as co-launches. This means that there is no dependency on the primary payload and its contribution to paying the launch bill. This results in more flexibility and schedule control for manufacturers, owners, and operators of the smaller satellites.


We think that calling the successful Electron launch a dramatic shift and connecting its launch costs to that of the SpaceX Falcon 9 does not do just to the purpose of either launch vehicle. The SpaceX Falcon 9, Falcon 9 Heavy and ULA counterparts are primarily focused on bringing bigger satellites in orbit. There is demand for interplanetary capabilities and geostationary communication satellites are not following the trend of miniaturization. So there is a demand for more capable lift vehicles.

The costs of the big launchers are beneficial on a per unit weight basis, but comparing those specific weights does not tell the full story either. Comparing the total costs makes the Electron launch vehicle look cheap while comparing the vehicles on unit payload weight basis makes the Falcon 9 Heavy and some other launch vehicles look cheap. Reality is that comparing both launch vehicles is like comparing a Cessna Citation business jet to an Airbus A380: Different payload class, different mission, different target group, and different capabilities.

Companies have been developing smaller satellites meaning that the smaller satellites have to be launched as secondary payloads. Due to launch economics of the heavy lifters, the price point for CubeSats as secondary payload on bigger lifters is unfavorable. The Rocket Lab is revolutionary in the sense that it is one of the few 150 to 250 kg payload launch vehicles with capabilities and its costs are tailored to small satellite and nanosatellite (CubeSat) launches supporting the trend of smaller and more satellites in low-earth orbit for tracking and imaging purposes.

What is rather unfortunate but maybe for the best is that companies such as SpaceX and Rocket Lab are private firms and are not accessible for investment for retail investors. Both companies spark innovation in their respective classes facilitating the commercialization of space at lower costs. The benefit of such private innovators is that they are pushing the publicly traded launch vehicle companies to innovate as well to bring their costs down. We saw SpaceX doing amazing things by landing boosters for re-use, the design, engineering, and tests for such achievements are costly and can be quite difficult to justify when you also carry a responsibility to increase shareholder value.

Disclosure: I am/we are long BA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.