Inflation may be heading toward outer space.
Tustin-based space tourism company Virgin Galactic Holdings Inc. is increasing the cost of a single suborbital ride in its spacecraft from $450,000 to $600,000.
While the company (NYSE: SPCE) only brought in $7 million in revenue last year as it began its nascent commercial operations, it says each launch center it is aiming for, known as a spaceport, will eventually generate more than $1 billion annually with new spacecraft, greater flight frequency and higher ticket prices.
In a call with analysts on Feb. 27, the company also said its own “conservative assumptions” show the potential pool of aspiring astronauts is an eye-popping 300,000 worldwide, growing at an estimated annual rate of 8%.
Mike Moses, who oversees the commercial spaceflight program for Virgin Galactic, said there is a “clear opportunity to keep expanding our fleet of spaceships and other ships with the goal of adding multiple spaceports around the globe.”
Adding spaceports—based on the airport model—is needed but it takes time since such expansion will require support and commitments from governments and communities.
While space tourism is still in its infancy, Virgin Galactic, founded by British mega-entrepreneur Richard Branson, sees a treasure trove of demand for its short but thrilling rocket-powered voyages a bit over 50 miles above Earth.
The round-trip flight, which takes an hour, includes about three to four minutes in which passengers can leave their seats at the peak altitude and float around in weightlessness.
The spaceship with passengers and crew aboard is borne aloft underneath a twin-fuselage airplane known as a mother ship, and then blasts off on its own toward the edge of space.
Local Astronauts
Virgin Galactic in January carried Laguna Beach resident Neil Kornswiet, the co-owner and chief executive of Optium Capital LLC of Newport Beach, aloft in its sixth commercial mission. Other Orange County businesspeople waiting their turn include Julie Hill, the former chair of UCI Foundation.
When the company first started taking reservations for flights, the expected cost was cited at $200,000 a seat.
A key to the company’s future is the next generation Delta spaceship, which will carry six passengers instead of the current four.
The ships will be tested next year, with commercial service expected to start in 2026.
The company said in November it planned to halt flights of its existing Unity craft in the middle of this year to focus its resources on development of the Delta class of suborbital vehicles.
Delta Economics
“With a current backlog of approximately 725 future astronauts, new sales are not planned to open until we are closer to the launch of our Delta fleet,” according to Virgin Galactic’s CEO Michael Colglazier.
“We’ve laid out the unit economics of a single Delta ship. With six seats, these ships can deliver a revenue per flight of $3.6 million at current pricing levels,” Colglazier said.
In addition, Delta will be able to fly eight times per month, compared to once a month now.
“Allowing for annual maintenance cycles and an appropriate amount of redundancy, we expect each spaceport will be optimized with a fleet of four to five spaceships and two mother ships. This set of assets should enable a range of 300 to 400 spaceflights per year per spaceport in steady state operation.”
The CEO noted a hypothetical spaceport that operates 300 flights a year at $3.6 million per flight, generates over $1 billion per year in revenue from the spaceflights themselves.
Virgin Galactic had $982 million in cash and cash equivalents as of Dec. 31, and Colglazier said “we do expect to bring on additional growth capital to fund the assets needed, primarily additional spaceships and mother ships to expand our business at an appropriate rate.”
More Spaceports Likely in the Coming Years
Having more spaceports is central to Virgin Galactic Holdings Inc.’s growth plans, but they will take time.
Right now, the company’s launches are all run from Spaceport America in New Mexico, which officials call the “world’s first purpose-built commercial spaceport.” It was built at a cost of nearly $220 million and funded by state and local jurisdictions.
Chief Executive Michael Colglazier sees the need to increase that number of launch and return facilities.
He said the company will “take that fully utilized spaceport model to governments and communities in other parts of the world that wish to develop a local space economy.”
It generally takes five years to get a spaceport up and flying.
“And so, 2029 seems to be the right place for a second spaceport,” Colglazier told analysts on Feb. 27
“There’s many places we can have that next spaceport come forward, and then ideally, more following from that. But five years out from today is about the right target for that,” he added.
Spaceport America is owned and operated by the state of New Mexico and is 30 miles southeast of the city Truth or Consequences. Virgin Galactic is the anchor tenant there.
