Now I understand why Skylon is such a clever idea. From the comments on this slashdot posting about SpaceX's progress in returning a first stage booster to its landing pad under powered flight, I learned that most of the fuel a rocket uses is to get itself moving sideways not upwards (a posting on xkcd, Orbital Speed, makes the situation crystal clear).
If you think about it then, Skylon can spend a lot longer inside the atmosphere, breathing in its oxygen and hydrogen propellant mixture and gaining speed, than if it was simply going straight up, although of course there will become a point (presumably rather less than orbital velocity?) where friction will negate any further gains from staying in-atmosphere.
Judging from Elon Musk's comments on the [lack of] competitiveness of Ariane, ESA might well be advised to spend all its lifter budget on subsidising Reaction Engines instead. :-)
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