Starship Weaknesses Could Benefit Rocket Lab and Firefly

In its 14th test flight on Monday, SpaceX's Starship reached orbit for the first time and deployed 26 next-generation Starlink V3 satellites. Due to an engine failure, SpaceX shortened the mission and executed a controlled splashdown of Starship in the Pacific Ocean.

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Regular service is the next step. SpaceX aims to achieve routine Starship flights later this year, with CEO Elon Musk planning to launch 60 Starlink satellites per mission at that time.

Andrew Bonwick, Vice President of Product Development at Relm, said Starship is "expected to deliver more than four times the mass to orbit compared to other large rockets, especially the Falcon 9."

However, high capacity comes with limitations. Bonwick noted this leaves room for smaller launch companies.

One Rocket, One Orbit

Starship's size comes with trade-offs.

"Each Starship flight will only deliver payloads to a single orbit or a set of orbits," Bonwick said. He described this as "well-suited for mega-constellations and large payloads, such as space stations and data centers, which can occupy the entire payload."

Smaller customers have no choice. "However, small operators in low Earth orbit will have to compromise on orbit or rely on luck to hitch a ride," he said. Bonwick expects market demand for other launch options.

"This leaves ample room for other operators, where customers can pay a premium to have their payloads delivered at their desired time and location on smaller vehicles," he said.

Four Companies Poised to Benefit

Rocket Lab Corp. offers dedicated rideshare services on its smaller Electron rocket, allowing each customer's satellite to reach its chosen orbit. Demand appears strong—Rocket Lab's backlog at the end of the second quarter stood at $2.36 billion, up 137% year-over-year.

Firefly Aerospace Inc. offers the same dedicated flight service on its Alpha rocket. "Launch demand is the most constrained I've ever seen," CEO Jason Kim told CNBC in August.

Northrop Grumman Corp. participates in this space through Firefly. The defense contractor invested $50 million in the company to fund the development of the medium-lift launch vehicle Eclipse, jointly developed by both firms.

Voyager Technologies Inc. sits on the other side of the transaction. Its Starlab space station is exactly the type of full-payload cargo Bonwick said is best suited for SpaceX's Starship.

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Dedicated Launch Services Are Scarce

Small rockets remain difficult to book, with launch slots requiring reservations one to two years in advance, and few companies serving this market.

"Small rockets are like orbital taxis providing on-demand services," Ujjwal Chaudhry, Partner at Analysys Mason, told CNBC. His firm values the sub-1000 kg launch market at $5 billion for 2025.

Private competitors are adding capacity. Stoke Space said its Nova Pathfinder rocket is fully booked for the "coming years" and plans to reserve the vehicle for dedicated missions.

Monday's successful launch proves Starship is now the cheapest vehicle to reach orbit, but Bonwick's perspective suggests some customers will still pay a premium to choose their own orbit.

SPCX share movement: According to market data, SpaceX shares rose 1.97% to $148.34 as of the time of writing on Tuesday.