At long last, Europe has a space rocket, the Ariane 6, able to compete with Elon Musk's SpaceX and its ubiquitous Falcon 9. The Ariane 6 isn't a reusable rocket, it arrived four years later than it was supposed to, and it probably costs about twice as much as a Falcon.

But for ArianeGroup, and its parent company Airbus (EADSY -0.15%), their Ariane 6 rocket is finally a success.

First time is the charm

On Tuesday, July 9, to the repeated refrain of trajectoire nominal (translation: A-OK), Airbus sub-subsidiary Arianespace launched its new Ariane 6 rocket for the first time, built by its own parent company, ArianeGroup. Airbus is in turn a 50-50 owner of ArianeGroup, sharing ownership with France's Safran. For simplicity's sake, let's refer to this whole group as Airbus from here on out.

Before this launch, Airbus had relied on heavy-lift Ariane 5 rockets for large satellite launches. But the last Ariane 5 was launched on July 5, 2023.

So for more than a year, Airbus had no heavy-lift rockets to launch. (Its other launch vehicle, the Vega rocket built by Italy's Avio, is good only for small payloads up to two metric tons.) 

So you can see why Airbus investors would be enthused by the news. The Ariane 6 was designed to cut Airbus launch costs by half and make the company more competitive with SpaceX.

Now that it has begun launching, Airbus can finally try to begin fulfilling its promises. But it will probably fail.

The problems with Ariane 6

Airbus, best known as a manufacturer of commercial jets, also operates a sizable space business, which is grouped (much like Boeing does) with a sizable defense business, Airbus Defense & Space. That division accounts for about 17.5% of the company's $72.3 billion in annual revenue, according to data from S&P Global Market Intelligence.

The division is not particularly profitable, however, with an operating profit margin of less than 2%. And one big reason for that is the high price and low volume of its space launches.

Ariane 6's arrival will probably help to lower Airbus' launch costs somewhat. Thanks to government subsidies, the Ariane 62 version of the rocket (with two side boosters) should cost Airbus customers no more than $77 million per launch. The larger Ariane 64 (with four boosters) will cost closer to $126 million after subsidies.

Each of these prices is less than Ariane 5's launch cost of about $164 million. But both are more than the cost of a SpaceX Falcon 9 launch (currently $70 million).

Adding to Airbus' problems, even the larger Ariane 6 variant has a payload capacity to low Earth orbit of only 21.6 metric tons. Falcon 9 outclasses that at 22.8 tons -- and at barely half the cost of the Ariane 64.

Nor is this Airbus' only problem. When SpaceX started launching Falcon 9 rockets in 2010 at a price less than half what Airbus charged, the French company recognized the problem. By the time SpaceX began launching the reusable Falcon 9 in 2015, Airbus had already begun work on designing Ariane 6 to launch at a competitive price.

But it has taken 10 years to get Ariane 6 off the ground, and SpaceX has not been standing still all this time. It has reusability down to a science at this point, launching and landing more than 300 times, amortizing the cost of its rockets over multiple launches, and making itself more and more profitable with each launch.

With Falcon 9 rockets now regularly launching, landing, and relaunching as many as 20 times before needing to be retired, the cost to SpaceX is now just a fraction of the $70 million it charges per launch. It's probably not quite $3.5 million ($70 million divided by 20 launches) because Falcon 9 second stages are not reusable. But it's probably getting close.

For SpaceX, this is great news, and almost certainly part of the reason it is now a profitable space company. But this is a price that neither Airbus -- nor anyone else on planet Earth -- can possibly hope to compete with. Not even with a new Ariane 6 rocket.

The upshot for investors

As good as the Ariane 6 news is for Airbus, the cost savings are too little, and the rocket has arrived too late to effectively compete with SpaceX in the space launch market. This isn't enough to make Airbus stock a buy.