Here's why Elon Musk's rocket landing is such a giant deal - it could reduce space travel costs to less than what it takes to buy a penthouse in NYC

On Monday, Dec. 21 SpaceX achieved what could be the biggest cost reduction in spaceflight history.

SpaceX shot a rocket up into space and landed it back on the earth, completely intact. And while landing a rocket back on its base might not sound that impressive, the impact it could have on the future of space travel is enormous.

Ben Thompson explained this feat beautifully in his newsletter, Stratechery.

It costs about the same to build a jumbo jet as it costs to build one of SpaceX's Falcon 9 rockets, and if we could re-use rockets the way we re-use aircraft, it would reduce spaceflight costs by more than a factor of 100. For a SpaceX Falcon 9 rocket, that would mean decreasing its current launch cost of $61.2 million down to $612,000, or lower - most penthouses in NYC go for a lot more than that.

A terrible business model

For nearly 60 years, the spaceflight industry has survived despite following a business model that would quickly put any other company under.

That's because the aerospace industry runs on rockets, which cost tens to hundreds of millions of dollars to build and launch, and then can only be flown once. They literally crash and burn and all that money goes up in smoke.

After a rocket has fulfilled its mission, most of it will fall back to Earth, land in the ocean, and sink to the seafloor, never to be seen again.

This would be like if the aircraft industry - think Delta or United - discarded its airplanes after every flight, which would get very expensive very fast.

If airlines adopted the same model as rockets, it would cost about $1.5 million per person for a seat, according to Tim Urban of WaitButWhy (and unearthed by Ben Thompson):

"An airplane costs around $300 million to build. So in this new model, in addition to paying for the crew's time and fuel, airlines have to spend $300 million extra each flight to build a plane...the price of a round-trip ticket between Chicago and San Francisco would now cost about $1.5 million per person and that's flying economy."

Reliable and sustainable rockets

What SpaceX did on Monday was set the stage for the first reusable orbital rocket - a rocket that can fly payloads into orbit more than once.

This is a huge deal that people have been talking about for years. In 2013, for example, Michael Belfiore wrote in Foreign Policy:

"Falcon 9 rockets are already the cheapest in the industry. Reusable Falcon 9s could drop the price by an order of magnitude, sparking more space-based enterprise, which in turn would drop the cost of access to space still further through economies of scale."

Driving this need for reusability is the fact that SpaceX is a privately-owned company. It cannot rely on an endless budget like the government-run space agencies that dominated the aerospace industry throughout the last half of the 20th century.

SpaceX, which is privately owned by billionaire entrepreneur Elon Musk, needed to find a way to be both reliable and, more importantly, sustainable, and reusable rockets are the ticket.

Musk has known this since SpaceX launched its first rocket into orbit in 2008, and SpaceX has been working toward a rocket landing ever since.

But Monday's historic touch down was just the beginning.

Now, SpaceX will have to demonstrate that it can consistently perform rocket landings after most, or ideally every, launch. Only then will the cost of SpaceX launches begin to fall - by how much remains to be seen.

Right now, SpaceX is the only launch services company, with rockets that can send payloads into orbit, who has demonstrated this revolutionary reusable rocket technology.

One of SpaceX's biggest competitors, the French-based company Arianespace, has discussed the possibility of re-usable technology but are still in preliminary design stages.

Paving the way to Mars

Last November, Jeff Bezos' company Blue Origin sent its New Shepard rocket into space, 62 miles up, and returned it just like SpaceX.

Unlike SpaceX, however, Blue Origin's rocket can not reach orbital space, which is important for sending payloads into orbit and reaching deep-space destinations like Mars.

Moreover, it takes more energy to reach orbital space, which starts at 99 miles up, and is why SpaceX's Falcon 9 is about 15 times more powerful than Blue Origin's New Shepard. A blunt comparison that Thompson explained on Stratechery is:

"What SpaceX just accomplished relative to Blue Origin is akin to the difference between a plane and a tossed ball, or, if you want to be generous, the difference between a plane and a hot air balloon," Thompson wrote.

In addition to slashing the cost of spaceflight transportation, SpaceX's reusable rockets could be a key player in sending humans to Mars.

NASA has announced plans to do this in the 2030s, but they have emphasized that it will be a round-trip mission. In order for that to happen, you must have a rocket on Mars that can launch astronauts off the Red Planet after they've landed. That will require a rocket landing, much like the one we saw Monday evening.

Moreover, the same technology SpaceX has used to make its rockets reusable, it plans to apply to spacecraft that could carry people to Mars' surface. Earlier this year, SpaceX released some illustrations for how it plans to do this with its Red Dragon spacecraft. Learn more here.