Reaction Engines' Skylon reusable spaceplane project has been given a boost, with analysis by the United States Air Force Research Laboratory (AFRL) confirming the feasibility of the SABRE engine cycle concept that lies at its heart.
The feasibility study conducted as part of a Cooperative Research and Development Agreement (CRADA) with the AFRL’s Aerospace Systems Directorate (AFRL/RQ) looked at the thermodynamic cycle of the SABRE concept. That is, whether the engine is able to do what Reaction Engine claims it can do. According to AFRL, there's no theoretical problem with the concept if the engine is properly built and integrated.
The SABRE (Synergetic Air-Breathing Rocket Engine) is a scramjet. That is, it reduces the propellant load because it acts as a jet while in the atmosphere and a rocket in space, so it doesn't have to carry as much oxygen to burn the liquid hydrogen fuel. It does so at velocities above Mach 5 (4,500 mph, 7,200 km/h) before flying into space, when it switches to rocket mode to achieve the even faster speeds needed to reach orbit.
The limit of the engine is how hot it gets. Above a certain point, even the best metal alloys soften and melt. At hypersonic speeds, the air is coming into the engine at 25 times more force than that of a Category 5 hurricane and the heat is like something blasting out of a cutting torch.
Paradoxically, before it can be burned, the air needs to be cooled dramatically, so as it enters the SABRE it passes over a series of heat exchangers that use the cryogenic hydrogen fuel to cool it down from 1,000° C (1,832° F) to minus 150° C (minus 302° F) in 1/100th of a second. Previously, this sort of heat exchanger was the size of a factory, but the SABRE uses one that's small and light enough to be installed inside the scramjet.
Reaction Engines and AFRL are currently collaborating on vehicle concepts that can use the SABRE engine. These not only include space launch vehicles, but also hypersonic aircraft and military applications of the Reaction Engines heat exchanger technologies.
"The activities under the CRADA have allowed AFRL to understand the SABRE engine concept, its pre-cooler heat exchanger technology, and its cycle in more detail," says AFRL/RQ program manager Barry Hellman. "Our analysis has confirmed the feasibility and potential performance of the SABRE engine cycle. While development of the SABRE represents a substantial engineering challenge, the engine cycle is a very innovative approach and warrants further investigation. The question to answer next is what benefit the SABRE could bring to high speed aerospace vehicles compared to other propulsion systems. Although application of the SABRE for single stage to orbit space access remains technically very risky as a first application, the SABRE may provide some unique advantages in more manageable two stage to orbit configurations. Furthermore, the heat exchanger technology also warrants further investigation for applications across the aerospace domain."
I just took a closer look at the engineering design. It doesn't work at all like a jet engine, beyond a general ability to compress air as it enters. The important bit for me is that there's a pre-burner combustor which [feeds a heat exchanger which heats helium which] drives the air turbo-compressor. This means that the combustor which powers the compressor is a different combustor from the one which generates thrust. Hooray! No need to build high-performance mega-valves! That removes one of my concerns about the viability of SABRE. 
