Commentary: Space travel? Virgin Galactic leads the race
Richard Branson’s space travel company has recently listed and, according to Trinity College Dublin’s Louis Brennan, it is poised to provide healthy returns to investors.
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DUBLIN, Ireland: Richard Branson rang the opening bell at the New York Stock Exchange on Oct 28 as Virgin Galactic became the first commercial spaceflight company to list on the stock market.
It was valued at more than US$1 billion following its merger with publicly-listed holding firm Social Capital Hedosophia, then experienced a 20 per cent drop in its share price after a week of trading. It is now worth around US$800 million.
READ: Richard Branson’s Virgin Galactic takes off in NYSE debut
The route to success in the space tourism industry is bound to be a wild ride and Mr Branson is hoping his first mover advantage will bring healthy returns in the long run. Indeed, this high-risk venture could well pay off – it is just a question of when.
A 90-MINUTE FLIGHT FOR US$250,000
Virgin Galactic was founded in 2004 to offer paying customers a trip into suborbital space. For US$250,000, anyone can take a 90-minute flight into the upper reaches of the atmosphere where they will experience a few minutes of weightlessness and see the curvature of the Earth’s surface.
According to Virgin, 600 people from some 60 countries have already made their reservations, while a further 3,700 people have registered for the opportunity to buy flights once ticket sales are back on offer.
This suggests that the combination of Mr Branson’s marketing prowess and the allure of space for humans are a plausible value proposition for investors.
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Virgin is also offering a much cheaper route to experiencing space than its competitors. There have only been seven space tourists to date and none since 2009.
All travelled on a Russian Soyuz spacecraft to the International Space Station (ISS) at a reported price tag of tens of millions of dollars.
This artist’s illustration courtesy of SpaceX shows the SpaceX BFR (Big Falcon Rocket) passenger spacecraft, which has only been shown in designs and images so far. (Photo: AFP)
MORE SEATS TO SPACE
NASA announced in June that it would offer trips to the ISS at a cost of US$35,000 per night, not including the cost of a taxi ride there from SpaceX and Boeing.
The cost of these rides is likely to be at least US$60 million, which is what NASA pays to take its astronauts to the ISS, and these visits are due to start in 2020.
In September 2018, SpaceX unveiled its 2023 lunar passenger flight that would take Japanese billionaire businessman Yusaku Maezawa and six of his guests on a space flight around the moon using its Big Falcon Rocket for an undisclosed, but certainly a very substantial, price.
READ: Commentary: SpaceX launch shows corporations, not governments, are setting the space agenda
VIRGIN’S SUBSTANTIAL PROGRESS
Although it has yet to fly any paying passengers and is currently loss making, Virgin Galactic aims to be profitable by 2021, based on completing 115 flights that generate US$210 million in revenue.
By 2023, it is forecasting revenues of US$590 million and expects to have flown more than 3,000 passengers. Since that number is a tiny portion of the target market of high net-worth individuals with assets of at least US$10 million, its projections could well be achievable.
And, currently, Virgin Galactic appears to be ahead of Elon Musk’s SpaceX and Jeff Bezos’ Blue Origin in fulfilling the vision of space tourism.
While Virgin Galactic has failed to deliver on expectations in the past – it missed its own targets for flights commencing and experienced a catastrophic accident in 2014 – it has more recently made substantial progress. In December 2018 it achieved its first suborbital space flight.
Given that achievement and subsequent progress, it seems likely that commercial flights could commence within the next 18 months.
It is also diversifying its offering as it gears up for launch. In collaboration with the sportswear maker Under Armour, Virgin Galactic has developed a line of high-tech clothing that its passengers will wear on their flights.
At the same time, it is moving into its new facilities at Spaceport America in the desert lands of New Mexico.
Sir Richard Branson rings a bell on the floor of the New York Stock Exchange (NYSE) as Virgin Galactic (SPCE) begins public trading in New York, U.S., October 28, 2019. REUTERS/Brendan McDermid
Spaceport America, where Virgin’s flights will take off from and return to, has a US$220 million investment by the New Mexico government. It is also here that passengers will undergo three days of training to prepare for the G-forces and weightlessness that they will experience on flights.
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THE BUSINESS OF SPACE
The business of space tourism is only just beginning. Air travel similarly started small with a limited target market, but grew to become a mass market with many commercial air carriers and millions travelling every month, served by airports that over time became large commercial hubs.
The trajectory for space tourism travel in the decades to come has the potential to be similar. From a highly niche market, it can become one that has much broader appeal when costs reduce.
At the same time, spaceports can, like airports before them, become large concentrated centres of commercial activity.
Should Virgin Galactic maintain its first-mover advantage in space tourism in the years ahead, there is the prospect for healthy returns to investors in this high-risk venture.
Louis Brennan is Professor of Business Studies at Trinity College Dublin. This commentary first appeared in The Conversation.