Europe's Arianespace ("Ariane") has a problem, and its name is SpaceX.

Back in 2015, California Congresswoman Loretta Sanchez related a conversation she had had with a top exec at Airbus's (EADSY -0.15%) struggling space subsidiary Ariane in which the exec jokingly asked Sanchez if she could find some way to "get rid of SpaceX," because otherwise it was going to drive Ariane out of business with its ultra-low launch prices. But SpaceX didn't go away. So one year later Ariane decided to take matters into its own hands.

To compete with SpaceX launch prices (currently $67 million for a Falcon 9 rocket launch), Ariane would introduce two new rockets: A medium-lift Ariane 62 costing $77 million to launch payloads comparable to what Falcon 9 can lift, and a heavy-lift Ariane 64 with twice the payload and a launch price of $126 million (so a price slightly cheaper than two Falcon 9 launches). Collectively, these rockets would be known as the "Ariane 6" family of rockets, replacing the company's existing Ariane 5 rockets, and would aim to cut the cost of Ariane's launches by at least 50% (from the $164 million cost of an Ariane 5 launch).

But things are not working out as planned.

Overdue and overpriced

Let's start with the timeline. Ariane 6 was originally supposed to debut in 2020, but COVID got in the way. Ever since missing that deadline, the new deadline for first launch has gotten pushed back again and again.

Late last month the European Space Agency (ESA) announced its latest date change for Ariane 6's maiden launch: somewhere between June 15 and July 31, 2024. A second flight is targeted for later in the year, and by 2025 Ariane hopes to be launching nine or 10 times per year.

And honestly, I'm afraid that's the good news about Ariane and its Ariane 6 rocket. The news about the rocket's price is considerably worse.

Recall that Ariane originally targeted a 50% cost reduction between Ariane 5 and Ariane 6. Asked about the price at a press briefing earlier this year, though, Arianespace CEO Stéphane Israël first blamed inflation, complaining that Ariane has to work with a "real economy," then flat-out declined to say how much the rocket will cost, telling reporters to "speak...with our customers," as Ars Technica reported in September. Taking the hint, Ars dug up a June speech from ESA Space Transportation Director Toni-Tolker Nielsen, who confided that Ariane 6 is looking likely to cost about 40% less than Ariane 5 -- not 50%.

But now, even 40% looks over-optimistic.

40%...with subsidies

In October, Ariane asked ESA's member states (ESA is both a shareholder in and a customer of Ariane) to more than double their subsidies for Ariane 6's operations to help keep the price of Ariane 6 competitive with SpaceX rockets. Notably, according to France's La Tribune, Ariane had originally told the EU that Ariane 6 would be so cheap that it would require no subsidies to operate Ariane 6. But by 2021, Ariane had reversed course and asked for 140 million euros per year.

Now Ariane has upped that request to 350 million euros per year.

So what does this mean for Ariane's Ariane 6 price -- and the ability of this space company to compete on price with SpaceX? Well, let's consider: First, assume that Ariane succeeds in getting Ariane 6 airborne next year. Then further assume it succeeds in hitting a launch cadence of 10 flights per year shortly thereafter. Divided among 10 flights per year, 350 million euros ($384 million) works out to $38.4 million in subsidies per launch. Add that to the $77 million initial estimate for the cost of an Ariane 62 rocket, and what do you get?

$115.4 million per launch.

And that means that in the best-case scenario (the price per launch will look even higher if Ariane launches fewer times per year) Ariane is actually cutting its real launch cost by not 50%, or even 40%, but only 30%.

What it means for space investors

Granted, for Ariane's European customers, the cost of the subsidies may not be important. All they will be paying is the $77 million subsidized cost -- not the $115 million unsubsidized cost. Granted, too, they may be happy to pay this price, even if it remains a bit more than what SpaceX charges, in the interests of supporting Europe's "regional champion" rocket launch company.

And they may not have much choice. Ariane has already retired its Ariane 5 rocket, and that means that if European companies want to ride a local rocket to space, Ariane 6 is pretty much the only choice they've got. (Italy's Vega rockets are smaller, and have proven somewhat unreliable of late, and Russia is no longer providing Soyuz rocket rides to European companies.)

Still, the fact that Ariane 6 has turned out to be so much more expensive than previously promised does highlight the relative cheapness of United Launch Alliance's Vulcan Centaur (recently reported to have won a half dozen Space Force missions for $105.5 million apiece), and of course SpaceX's Falcon 9.

Ultimately, that may be the most important development from all this subsidy talk: A subsidized Ariane 6 may sell well in Europe -- but around the world, everyone else will probably opt to buy cheaper rockets from SpaceX and ULA.