Few companies can boast revenues worth tens of millions of dollars before actually delivering the "ultimate experience" promised - but that is what Virgin Galactic has achieved with its sales pitch that fulfils the dreams of the Apollo generation's wealthier members to carry them beyond the Earth.
In New York at the 23 January unveiling of Virgin Galactic's launch system, these customers saw pictures of the prototype SpaceShipTwo (SS2) that would carry them into the heavens, and its carrier aircraft, the White Knight II (WK2).
That tantalising dream of travelling above the 100km (62 mile) boundary separating the Earth from space has seen 250 customers, mostly in their forties and fifties, sign up for a trip through direct contact and a new network of 90 agents worldwide, generating $35 million in full ticket purchases and deposits, all of which is held in escrow.
Unsurprisingly, the sales and marketing arm of Sir Richard Branson's suborbital tourism venture, London based-Virgin Galactic Ltd, has shown an after-tax profit of £136,400 ($274,800), in the first publicly available financial accounts since the project's launch in 2004 and the UK company's establishment in June 2006.
But is Virgin's vision of personal spaceflight going to pay for its development costs and turn a profit? According to its 2006 suborbital and space tourism market study, US consultancy Futron concludes that a suborbital services business could, in its first year of operation, expect an annual demand of 1,000 people at a seat price of $200,000.
The Virgin's venture's economics had been the subject of a feasibility study carried out by Scaled Composites after the 4 October 2004 SpaceShipOne flight that saw its financier, Microsoft founder Paul Allen, win the $10 million Ansari X prize. The Scaled study led to a proposal for the Virgin group's investment committee, which was subsequently approved.
At the Royal Aeronautical Society on 27 September 2004 Branson and his partner in the space venture, Scaled president Burt Rutan, announced their plans that predicted the first suborbital commercial flights early in 2007 and a development cost for the Virgin group of $100 million.
These days the talk is of a first commercial flight in 2010 and a total cost for the project of around $250 million. SS2 and WK2 development costs have increased to $120 million, with $80 million of that spent, and there are a further $150 million expected costs for the fleet's manufacture, the ground-segments procurement and the operations implementation at its yet-to-be built headquarters, New Mexico's Spaceport America.
"This is high-risk capital because no one has ever done this before. This is the largest investment we have ever made," says Virgin Galactic president Will Whitehorn.
Funded by the Virgin Group, which operates like a venture capitalist, Whitehorn describes the pool of available money as "in the hundreds of millions". He explains that the quarter of a billion dollar price tag for Virgin Galactic is affordable because the spend is drawn out over many years, while the fund is receiving income from a range of other more mature investment projects.
If development is successful, a fleet of two WK2s and five SS2s will be constructed and Virgin Galactic has an option to buy seven more SS2s. Whitehorn's goal after three years in operation is to have two flights a day, with each of SS2's six passengers paying $200,000. If every flight were full, with 50 weeks of 10 flights, the annual revenue would be $600 million.
However, Virgin Galactic's chief pilot Stephen Johnson told Flight he expected that, in the first year, one flight a week was the target. Such a rate would see the current 250 passengers' flights completed in just over 40 weeks, generating $50 million.
The company seems to be looking far beyond a successful start to the Virgin Galactic venture. Whitehorn describes a scenario where he would approach the financial markets to fund the development of SpaceShipThree, a hypersonic vehicle for a point-to-point service that would leave the atmosphere to transport passengers to destinations around the world.
Related blog
- Technical Editor Rob Coppinger's blog Hyperbola
Source: FlightGlobal.com
