Kessel Run

The SpaceX Falcon 9 rocket was named after the Millennium Falcon from Star Wars—the ship that Harrison Ford’s character Han Solo claimed had “made the Kessel Run in less than twelve parsecs.” The Falcon 9 has been launched a total of seven times since 2010. It has not failed to reach orbit even once. In fact, on its fourth voyage into space one of the nine engines in its first stage failed. Chunks of that motor can be seen dropping away in the video—and yet the rocket still made it safely to orbit and delivered a cargo ship to the International Space Station. The cargo ship is called Dragon, named after the song Puff the Magic Dragon.

On September 29, 2013, the first of the new upgraded versions of the Falcon 9 was launched from Vandenberg Air Force Base. Besides being bigger and more powerful, it will soon have the capability of flying the first stage back to its launch facility for reuse—a game changer for the rocket industry once it happens.

But the space launch business has already felt a serious disturbance in the Force, even before full reusability has been demonstrated. On December 3 a Falcon 9 delivered a satellite for SES (a Luxemburg based corporation) into a geosynchronous transfer orbit. Although the delivery of yet another telecommunication satellite designed to broadcast television signals may seem hardly important—so unremarkable that it probably never even made your evening newscast—for the rocket industry and telecommunication industry, the world has been changed forever.

How so?

For the last several years the United States has been losing in the business of launching commercial satellites. The U.S. dropped from 66 satellite launches in 1998 to zero in 201. Other players have taken our place and our jobs: primarily the Russians with their Proton, Dneiper, and Soyuz rockets and the Europeans with their Arianne 5. Even China, India and Japan have gained market share. What happened? The American launch industry simply priced itself out of business, to the point that even American companies had turned to the Russians and the Europeans. Only U.S. government missions have continued to use American rockets. For instance, when Direct TV and Dish Network needed to launch another satellite to provide TV signals to American consumers, they’ve mostly used the Russians to put their satellites up. Likewise, SirusXM Radio—the satellite radio company—used Russian rockets to launch their American-made satellites. When Las Vegas-based Bigelow Industries sent two test modules of their inflatable space stations into low Earth orbit, they used Russian Dneipers—rockets formerly designated the SS-18 Satan by NATO back in the Cold War era. The Dneiper was originally an ICBM designed to rain nuclear fire on American cities. Since then, the now capitalistic Russians have converted them into launch vehicles for commercial satellites.

And the reason that the Russians and the Europeans got all the satellite business was very simple: they beat all the American companies on price—by a significant margin.

But that all changed on December 3, 2013. At 5:41 PM Eastern Standard Time, a Falcon 9 took a 100 million dollar satellite belonging to the second largest telecommunications satellite company: SES of Luxemburg. They paid SpaceX less than 60 million dollars to put their expensive satellite into a geosynchronous transfer orbit: its low point is 183 miles and it high point is 50,000 miles (a quarter of the way to the moon). Now that it’s in that orbit, the satellite will fire its motors to circularize that orbit at 22,500 miles: a geosynchronous orbit, meaning that the satellite’s rotation around the Earth matches the rotation speed of the Earth, so that the satellite appears to be hovering over one spot above the Earth—in this case, a spot above southeastern Asia—twenty-four hours a day.

What made this an economic earthquake for the satellite launch business is the price of the launch. Sixty million dollars seems like a lot until you consider that the European Space Agency would charge close to 250 million dollars for their Arianne 5 to do the same thing. That’s right. SpaceX undercut the Europeans by nearly 200 million dollars. They undercut what the Russians can charge—and even the Chinese have expressed an inability to compete with SpaceX on price.

There’s a reason that NASA has selected SpaceX to fly cargo to the International Space Station and why they’d like them to eventually (probably by 2017 at the latest) to fly astronauts there. Currently the Russians charge the United States more than seventy million per person to take American astronauts to the International Space Station. With the retirement of the Space Shuttle, that’s the only way Americans can fly to space. Once SpaceX starts flying, however, the cost per seat in a Dragon—which can take seven people at a time—the per seat cost will drop to less than 20 million per person: nearly one-fourth the cost of relying upon the Russians.

Space X now has a backlog of over 50 launches scheduled for the next five years worth more than four billion dollars. The satellite launch business—with current annual revenues of about 35 billion dollars—is returning to America with a vengeance—along with the American jobs. Where the United States had become an insignificant bit player in commercial satellite launches, it could once again become dominant. The companies that have launched satellites up until now will either have to find a way to lower their prices to match what SpaceX has now demonstrated it can do—or else they will go out of business. The real Falcon can do a far better “Kessel Run” than its competitors.