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Comment by engi_nerd | Hacker News Reader

There is a lot of money thrown around in commercial space, but it is not a particularly high-margin business. http://spacenews.com/39492orbital-eyes-broader-antares-busin... This cites Orbital Sciences (now Orbital ATK) CEO David Thompson as saying that the profit margin on CRS was about 5.5% and they hoped to reach 6% with CRS-3.

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So with a 5.5% margin the $1.6 billion contract would be expected to yield $88 million in profit? Given what I'm assuming are large R&D expenditures on top of launch-related costs, I wonder whether the business is sustainable.

I used to work for Orbital as a NASA contractor. I never dealt with the business end of things, but the margins were small and very stable so long as there was work to be done (i.e. a giant (sub)contract on some huge NASA project). It wasn't exactly a pressure cooker of a work environment. The government stuff was a very different atmosphere than the commercial side.

I too am a former Orbital employee. I worked on the sounding rocket program. It was very much a pressure cooker because of the incessant pressure to work more overtime and do more missions in less time.

I always heard that other parts of the company were far more laid back. Wish I had worked in one of those parts.

Yeah, I worked there for 6 years, mostly at Goddard on the HST project. It was very relaxed - to the point of boredom at times (that's why I left, despite the insanely cool work). The guys in Virginia (where I worked about a year or so, but still on NASA stuff) told a different story about the Orbcomm and other commercial rocket businesses. I have no idea what it's like today though.

5.5% profit, if reliably realized, is sustainable. It's comparable to a conservative investment return. That said, most businesses strive for more than that.

Yea where I live I get 7% (over inflation) on treasury bonds (it's kinda insane here, but 5.5% does seem like a low value). I assume all missions are fully insured to prevent bankruptcy with such low margins?

If it is so I would imagine simply improving the reliability track of the vehicle to lower insurance would have a very large effect on profitability. If they could eventually tank the insurance partially/completely in house (given a low chance of failure) that would be even better.

"We're not losing money AND we get to shoot things into space" sounds like a winning business model to me.

The R&D is baked into the contract itself.

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