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Single stage to orbit (SSTO) is the way to go for cheaper space travel but so far it has defeated the available technology. Basically the reason for needing multiple stages is that carrying all the mass of a rocket into orbit makes the process inefficient and costly. With multiple stages mass can be dropped as the fuel in it is used. The problem with multiple stages is that re-using stages is difficult because they obviously have to be retrieved in one piece and without salt water damage if they are to be reused and there is obvious waste if they are expended. Despite the existance of some wayout plans for vastly more efficient techniques such as Space Towers which will lower an elevator down from orbit and Launch Fountains which would use a stream of projectiles to suspend structures in space, the near term technique of choice seems to be the use of air breathing engines for the initial boost to something like mach 5 after which an efficient rocket provides the remaining boost into orbit.
The suggestion that the SSTO is a step closer comes with claims by Reaction Engines Limited a British company to have under development a new form of hybrid engine which does not have the drawbacks of earlier planned hybrid strategies. They predict economically viable SSTO could be with us by 2012
The SABRE Engine represents a huge Advance over Liquid air Cycle (LACE) Technology.
In the past, attempts to design single stage to orbit rockets have been unsuccessful largely due to the weight of oxidiser such as liquid oxygen. One possible solution to reduce the quantity of oxidizer that a vehicle is required to carry is being able to use atmospheric oxygen in the combustion process. The SABRE engine achieves this with its two modes of operation: its air-breathing and conventional rocket capabilities. This is made possible through a synthesis of elements from rocket and gas turbine technology.

The design of SABRE evolved from liquid-air cycle engines (LACE) which have a single rocket combustion chamber with associated pumps, pre-burner and nozzle which are utilised in both modes. LACE engines employ the cooling capacity of the cryogenic liquid hydrogen fuel to liquefy incoming air prior to pumping. Unfortunately, this type of cycle necessitates very high fuel flow.

These faults are avoided in the SABRE engine, which only cools down the air to the vapour boundary and avoids liquefaction. This allows the use of a relatively conventional turbo compressor and avoids the requirement for an air condenser.

The SABRE engine is essentially a closed cycle rocket engine with an additional pre-cooled turbo-compressor to provide a high pressure air supply to the combustion chamber. This allows operation from zero forward speed on the runway and up to Mach 5.5 in air-breathing mode during ascent. As the air density falls with altitude the engine eventually switches to a pure rocket propelling SKYLON to orbital velocity (around Mach 25).

Air collection is via a simple conical two shock inlet with a translating centrebody to maintain shock-on-lip conditions. The centrebody moves forward to close the inlet for re-entry. A bypass system is used to match the variable captured air flow to the engine demand. This bypass flow is reheated in order to recover the momentum lost through the capture shock system.

The thrust during air-breathing ascent is variable but around 200 tonnes. During rocket ascent this rises to 300 tonnes but is then throttled down towards the end of the ascent to limit the longitudinal acceleration to 3.0g.
Space.co.uk have a video of Richard Varvill, Technical Director of Reaction Engines Limited, discussing the SABRE engine. Richard discusses the remarkable technology being developed to support a single stage to orbit spacecraft.
See http://www.reactionengines.co.uk/sabre.html