The bad news broke last month: U.S. consumer inflation hit 7.9% in March, the highest level of inflation seen in our country in the last 40 years. Gas prices passed $4 a gallon, reaching their highest levels in the U.S.
But you know who's really getting hit hard in the wallet today? That's right: Space companies.
"Space is hard"...on your wallet
For the longest time, start-up space stock SpaceX had the lowest prices in town, promising to put customer payloads in orbit for the low, low price of just $61.2 million per launch. Considering that companies like Boeing (BA +2.07%) and Lockheed Martin (LMT +0.97%) were charging as much as $400 million per launch at the time, it was a real bargain.
True, in 2016, SpaceX announced a small price increase -- but only to $62 million. And prices stayed put at that level ever since -- until last week.
Sometime between March 15 and March 22 (according to SpaceX website image captures by web.archive.org -- the internet Wayback Machine), the cost of launching a SpaceX Falcon 9 rocket to Geosynchronous Transfer Orbit (GTO) shot up from $62 million to $67 million -- an 8% increase. Similarly, the cost of a Falcon Heavy (FH) ride to orbit (which was not raised back in 2016) jumped 7.8% to $97 million.
Nor were those the only price hikes at SpaceX.
Image source: SpaceX.
On SpaceX's dedicated Rideshare webpage, prices have jumped from a baseline $1 million-per-200 kg-satellite cost to $1.1 million. On the webpage, they can bundle their small satellite with other customers' smallsats on a sort of smallsat express train into space.
The price to launch slightly larger smallsats has also gone up. For each kilogram a satellite masses over 200 kg, SpaceX now charges an extra $5,500. (E.g., a 225 kg satellite costs $1.24 million). Like the baseline cost, that price is also up 10% from when Rideshare was first announced in 2019. SpaceX explains that "pricing [was] adjusted in March 2022 to account for excessive levels of inflation."
In fact, "inflation" is a common refrain at SpaceX for both commercial and retail customers. On March 22, SpaceX informed customers it was raising prices 11%, to $110 per month, for Starlink satellite internet service, and raising the price of satellite dishes by 20% to $599. "The sole purpose of these adjustments," said SpaceX, "is to keep pace with rising inflation," reported SpaceNews.com.
What it means to investors
So the price of Starlink is going up just like the price of space launch. But what does this mean for investors?
In the case of Starlink -- not much. As we've discussed in the past, Starlink was never going to be competitive in urban locations with terrestrial cable internet from companies like Comcast (CMCSA +0.43%). At $99 or $110 a month, it's primarily a solution for rural internet customers who don't have any other option.
The situation with space launch, on the other hand, is much more interesting.
SpaceX's price increases will make rival space launch companies' prices somewhat more competitive (unless they raise prices as well). For example, rival smallsat launcher Rocket Lab (RKLB +3.64%) charges $6.5 million to launch a small satellite into orbit with its Electron rocket. But even assuming Rocket Lab doesn't raise prices as well, that still leaves it charging $5 million more than SpaceX charges for a small satellite launch.
Simply put, SpaceX's prices are so low right now that it can raise them with impunity, whether to cover the cost of higher inflation -- or simply because it wants to -- and preserve or even expand its profit margins at will.
For larger satellites, where SpaceX competes with the likes of Boeing and Lockheed's United Launch Alliance (ULA), and with Airbus's (EADSY +1.37%) Arianespace in Europe, the situation is similar. On the one hand, Falcon 9 prices went up. On the other hand, even at $67 million per launch, SpaceX still vastly underprices both ULA (where prices start at $109 million) and probably Ariane as well. (Ariane is targeting a $77 million launch cost with its new Ariane 6 rocket.)
It's also worth noting that, while the cost of a Falcon Heavy launch increased 7.8%, that rocket's capability also increased by 20%. Six years ago, SpaceX listed FH's payload capacity at 22,200 kg to GTO. Today, FH can carry 26,700 kg.
Even at $97 million, that remains a bargain price. Inflation or no inflation, SpaceX remains the space company to beat.
