SpaceX/Musk: The Rocket Business

Elon Musk, CEO of The Space Exploration Company – commonly known as SpaceX – has given his thoughts on the rocket business.

Musk details how SpaceX is on-track to be cash flow positive this year, contrasts the Falcon 1 with Orbital Sciences’ Pegasus launch vehicle, and talks about how SpaceX handles range fees, load analyses, and other launch service elements.

This is part three of the interview conducted by Braddock Gaskill.
PART 2: In the last update you mentioned that SpaceX was looking to be cash-flow positive. I was wondering if you could define cash-flow positive a little more precisely, and how SpaceX was getting there.

Elon Musk: Well, cash flow positive is a much more objective measure than accrual accounting. You can also call it positive on a cash-accounting basis, rather than an accrual account basis. You can’t play fancy games with cash accounting, as you can with accrual accounting.

So the reason actually we are cash flow positive is because our expectations are that we will receive more cash from customers than we will spend in R&D, general overhead, manufacturing and launch activity. Is that mostly from launch contracts, or is that from other work – or expecting COTS?

Elon Musk: It’s primarily from advance payments on launch contracts, and there is some small amount of development money that has been paid for customization and specialization – things that were somewhat “off menu”, if you will, but which were asked for by our customers. Some for our readers work for Orbital Sciences, and have made comments about SpaceX that they’ve lived through this before, in that Pegasus was originally priced a $6 million per launch. They had a couple failures, they had their review, they made their improvements, their market didn’t quite emerge, and now they’re $20 million per launch. I was wondering if you could possibly contrast where SpaceX is going to where Orbital Sciences has gone, and how you intend to avoid launch cost increases.

Elon Musk: I think there is valid skepticism in the market because, obviously, you have that example. Although, frankly, I think people tend to draw far too many generalizations on the basis of far too few examples in the launch business.

There is a fundamental difference in architecture between ourselves and the Pegasus. I think if you were the smartest person on earth you could not make the Pegasus cheap.

The reason I say that is because it is a five stage rocket. You’ve got an airplane, which is a dedicated Lockheed L-1011. No matter how many times you launch, you have to maintain that plane at several million dollars per year. You have to have dedicated pilots.

Your range safety is much more complex because you essentially have a man-rated system – you are interacting a rocket and a plane with people on board, and then launching it with maybe 20 or 30 feet separating the pilot and that rocket. So I think that complicates things.

Then you have three solid rocket motor stages, including a complete hypersonic airplane in the first solid rocket stage. And then you have the fifth stage, which is the liquid apogee HAPS stage. So if you were the smartest person on Earth, I don’t think you could make that system very cheap.

If you look at ours in contrast: it is a two stage rocket, no wings, no control surfaces, both stages are the cheapest propellant you can use, LOX/Kerosene.

We pay $1.90 per gallon of rocket propellant grade Kerosene…[laugh]…I can’t fill my car up for that…and the liquid oxygen in Texas – unfortunately in Kwajalein it ends up being a little more expensive than I’d like – but certainly in the continental United States you can actually buy liquid oxygen for about 40 cents per gallon.

Range safety issues are far less because the rocket is only fueled at the time of launch, and we’re able to get away with, for example, a thrust termination system instead of strapping explosives to the vehicle. Some of our readers have remarked that launching spacecraft is more than just the vehicle; you perform load analyses for the clients, payload separation systems, clean room services, range fees, and all of these things add up for the launch vendor, and may be a sort of burden on them.
I was wondering if you have any innovations in those areas, or if you feel these are things that should be somehow restructured in the launch industry?

Elon Musk: There are some realities, such as the range fees, which we have only limited influence over. We are working closely with the Army and Kwajalein range services to be as efficient as possible – without taking any shortcuts that would sacrifice safety of people – trying to find ways to just be more efficient about the range time, because they are really quite high. They [range fees] are a little higher than we expected initially.

As far as the problem of the load analyses, we’ve done several at this point, so I think we understand, at least, what level of effort is required for coupled loads analyses of relatively sophisticated small satellites – not necessarily in the class of the big satellites, but also not completely trivial.

The price being quoted on the web is all-inclusive. Unless someone asks for something special – like they want to have a multi-satellite adapter. On the Malaysian satellite launch, the Malaysians wanted to put on some secondary satellites; there is some extra charge there because of the multi-satellite integration.

But if someone has sort of a normal satellite, and it doesn’t have any special requirements, and isn’t gonna put a mission assurance process burden on the launch, then it’s an all inclusive price. Could you briefly characterize the team you’ve assembled at SpaceX, and how the environment at SpaceX differs from most of the launch industry?

Elon Musk: Ironically, most SpaceX personnel come from Boeing, Northrop and other space companies. It is the sometimes Dilbertian environment, not the individual engineers, that holds those organizations back.

When companies become very large, internal communication weakens, the original clarity of purpose becomes diffuse, decisions are made by committee with common sense and personal responsibility often taking a back seat and most senior managers are so far from the actual hardware, that their once good judgment becomes impaired.

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