Will Europe Really Build a Reusable Rocketship?

Ariane rocket on pad at sunset

Airbus (NASDAQOTH: EADSY) . ArianeGroup. Arianespace.

Before I say anything else about these companies, I think it's best to clearly lay out the ownership structure of Europe's newest space monopoly. Airbus is an aerospace giant best known for its airplanes, which compete with Boeing in the commercial airline industry. But in partnership with French defense company Safran , Airbus is also the majority owner of ArianeGroup (formerly known as Airbus Safran Launchers ), a space services giant with $3.5 billion in annual revenues.

ArianeGroup in turn serves as the prime contractor and holding company for seven other subsidiaries, including Arianespace, the self-proclaimed "world's leading satellite launch company" for commercial and government customers. With $1.5 billion in annual sales, Arianespace alone provides nearly half of ArianeGroup's revenue stream. Arianespace currently operates three types of launch vehicles -- all disposable: the Airbus-built "heavy" Ariane 5, "medium" (and Russian-built) Soyuz, and "light" Vega (from Italy).

That's where today's story begins.

The trouble with SpaceX

For several years now, Arianespace has been complaining that its rockets, which cost anywhere from $137 million to $200 million to launch , are having trouble competing with lower cost launchers from America's SpaceX, which charges as little as $62 million for a new rocket launch.

Ariane's troubles got a whole lot more serious in December 2015 when SpaceX successfully relanded the first stage of a Falcon 9 rocket back on Earth. Things got even more serious six months later, when SpaceX landed a rocket on a barge at sea . Fast forward one more year and the dilemma facing Arianespace got downright dire: SpaceX successfully reused one of the rockets it had previously recovered.

SpaceX could soon build one rocket, then fly it multiple times , spreading out its construction cost across multiple missions and cutting the cost of each launch dramatically. Such a business model would pretty much guarantee SpaceX could undercut on price any competitor still running on an "expendable" business model in which rockets that cost tens of millions of dollars to build are discarded after just one launch.

If you can't beat 'em, imitate 'em

Arianespace is not blind to this threat. For a few years now -- basically ever since SpaceX began landing rockets back on Earth -- Ariane has been floating ideas for designing a reusable rocketship of its own. What kind of vessel might this be?

The first idea was ADELINE, a reusable spaceplane similar to the Space Shuttle, which might see its first flight by 2025. More recently, Arianespace has been talking up a reusable "Prometheus" rocket , a la SpaceX's Falcon 9, which could enter service by 2030. Details on the latter, however, are pretty sketchy. It's not even clear whether Airbus and Arianespace envision a rocket that could land on Earth under its own power, as Falcon does, or something more along the lines of an " engine drops off and we grab it as it floats down by parachute " plan, such as United Launch Alliance has discussed in its own reusability musings.

Those details may be moot in the end, however, because as ArianeGroup CEO Alain Charmeau revealed in a recent interview with Germany's Der Spiegel , Airbus and its subsidiaries may not be as enthusiastic about reusable rockets as they first let on.

The trouble with reusables

In a wide-ranging interview that began with an update on the new Ariane 6 rocketship that Airbus is building for Arianespace, Charmeau delivered a diatribe about how SpaceX's low prices are designed to "kick Europe out of space," and ended with a discussion of the economics of reusability, Charmeau let slip the real reason Airbus has lagged SpaceX in developing reusable rockets: jobs.

Charmeau explained: If "we had ten guaranteed launches per year in Europe, and we had a rocket which we can use ten times, we would build exactly one rocket per year. That makes no sense... I cannot tell my [manufacturing] teams: 'Goodbye, see you next year'" after they build just one rocket. In order to keep his employees on the payroll and building rockets consistently, Ariane's CEO muses he would need Ariane's customers to guarantee a minimum of "maybe 30 launches per year."

To date, Ariane has managed to cobble together only about three launch orders for its new Ariane 6 rocket -- too few to justify designing it for reusability or installing his hypothetical Prometheus engines on board.

Jobs, jobs, jobs

In essence, Charmeau is arguing that the space industry -- in Germany at least -- is actually a jobs program: "It creates jobs in Germany. And those companies and their workers pay taxes, which end up in the German state budget." Ariane builds multiple expendable rockets, instead of one reusable rocket, because this creates more work for German workers -- even if that work turns out to be essentially make-work.

From Airbus's employees' perspective, I suppose that makes sense -- until it doesn't. In the short term, relying exclusively on expendable rockets to launch satellites at Ariane is a way to guarantee full employment for the company's engineers, mechanics, and so on. In the longer term, though, if the high cost of maintaining all these jobs means that Airbus and its subsidiaries cannot compete with SpaceX on cost, it could end up bankrupting Ariane -- and kicking Airbus "out of space" despite Charmeau's best intentions.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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