Thread by @LionnetPierre

We have modelized the economic equation of @SpaceX as a launch service provider (leaving aside Dragon, Starship and Starlink) with a view to uncover its cost and profit drivers. The idea was to use Falcon 9 as a benchmark for testing the economics of launcher Reusability. 1/18

The full research paper is available at linkedin, please read it to understand the assumptions and limitations. The key findings and highlights are posted in this thread. 2/18
linkedin.com/posts/eurospac…

We find that there is a very strong correlation between gross profit and launch cadence in launcher economics, in other words: without a sufficient volume of launch the launcher cannot be profitable, reusable or not. 3/18

Even with very optimistic assumptions a seemingly very affordable system such as the Falcon does not guarantee to be profitable without sufficient volumes. The break even for Falcon is between 6 & 8 flights, after that point the profit grows fast. 4/18

We also note that if reusability reduces the variable costs of operations, it increases the fixed costs (it improves EBITDA, but worsens EBIT). Once you include the D&A of reusable items capitalised to assets the economic advantage of a reusable system is less obvious. 5/18

The analysis also reveals that workforce costs are better appreciated as fixed costs since there is very little margin of flexibility with workforce in the launcher sector. By doing so we confirm that the main factor influencing the launch cost equation is launch cadence. 6/18

With this in mind, it is important to recall that a minimum demand to achieve the break-even point in launcher operations is a fixture of all launch systems economics, reusable or not. 7/18

I order to perform the economic analysis we had to make assumptions on Falcon 9 costs and economics. They are derived from public information on SpaceX and Falcon and are fully described in the paper. But something does not feel completely right with the assumptions. 8/18

In fact, if the Falcon launchers appears to be so cheap/profitable (we found that it yielded >2,5B$ in profit) one may wonder why SpaceX was so cash hungry. SpaceX known cash intake was >15B$ since 2002, with more than 8,5B$ raised in equity and >7B$ in customer revenue. 9/18

Then I can safely conclude that in average since 2002 SpaceX has faced costs in the order of 1B$/year. These costs have enabled Falcon 9 operations (>>100 launches), Dragon development and ops, Starlink deployment (2000 sats) and Starship development and tests. 10/18

This high cash burn rate doesn't fit well with the usual narrative that everything @SpaceX makes is cheap/profitable. 11/18

To take an extreme example, if we were to assume that the 'real full cost' of Falcon 9 was only 15M$/launch (as often stated by @elonmusk) the total profit on launch operations would have netted SpaceX a total of > 8B$, i.e. the same amount of equity raised so far. 12/18

If this money is not going to the investors, it must be spent on other corporate goals: R&D, assets, salaries, propellant, third party suppliers... these expenditures will have to be charged to the economic equations of Falcon, Dragon, Starlink and/or Starship. 13/18

This observation leads to 3 possibilities: a) Falcon 9 cost/revenue assumptions are overly optimistic i.e. Falcon 9 operations, general costs, value of assets and R&D are higher than reported and/or revenues are much lower than assumed, OR 14/18

b) SpaceX is already paying large cash dividends to its shareholders, OR c) some other operation at SpaceX is incredibly expensive, it could be the Dragon , the Starlink constellation and/or the Starship development. 15/18

In other terms: if Falcon 9 is so cost effective, and if investors are not rewarded, it means that everything else SpaceX is doing is way more expensive than usually credited for, this includes Dragon, Starlink and Starship. Hence the constant need for cash infusion. 16/18

This conclusion is slightly disturbing, as it moves around in circles lacking the actual financial statements to confirm or reject it. But one thing is sure, when a company is gobbling cash the money is usually spent, and this is the essence of a cost: money expended. 17/18

In conclusion, @SpaceX has demonstrated exceptional corporate abilities in proposing a disruptive approach to space systems design and operations (Falcon, Dragon, Starlink, Starship), but they are probably not as cheap as usually believed (or stated) by @ElonMusk. 18/18