By Benjamin Katz and Micah Maidenberg
July 12, 2021
Richard Branson is officially an astronaut. Now, Virgin Galactic Holdings Inc.’s true test begins: Can it translate his flight into a steady stream of space tourists?
The British entrepreneur beat fellow billionaire Jeff Bezos to the edge of space. Mr. Bezos is set to embark on his own space flight later this month aboard his Blue Origin LLC’s rocket. The two men are part of a new generation’s space race, both attempting to expand access beyond the reach of government and research missions—at least to a handful of high-net-worth individuals who can afford it.
Virgin Galactic shares, which have attracted a big retail following, were up more than 7% premarket Monday after Sunday’s event.
At the crux of Galactic’s business model will be whether demand for space travel is sustainable. Analysts have been trying to figure that out, looking at various comparatives, from the use of private jets to the number of people who have climbed Mount Everest.
“It’s like a Venn diagram” of thrill-seekers and high-wealth individuals, said Ron Epstein, an aerospace industry analyst at Bank of America.
The 90-minute flight was a critical marketing moment after years of slow progress and setbacks. A devastating 2014 failed launch resulted in the death of a Virgin crew member.
“I think and hope we showed the world today it’s going to be possible to see this planet from space, and what that could be like,” Chief Executive Michael Colglazier said after Sunday’s launch. “The scale which [we] were able to share that with the world through this live stream was really important.”
Mr. Branson’s role was to assess the experience for a private customer, from training, to how the company helps passengers build confidence before takeoff, to the actual launch into space, Mr. Colglazier said. For new astronauts, that process is being streamlined to between five and seven days, he said.
In the next few months, two more flights are set to take off, one more manned by Virgin crew and a second carrying members of the Italian Air Force. Starting next year, the company’s commercial space flights will begin in earnest from 2022 as it aims to increase to some 400 flights a year.
To get to that number of flights, Mr. Colglazier estimates the company will likely need “high-single digit to low double-digit number of spaceships.” From there, Virgin Galactic is preparing to build additional spaceport facilities, potentially in other countries.
About two million people can afford to go to space, according to equity analysts at Vertical Research Partners, with that high-net-wealth population growing at around 6% each year. It estimates that Virgin needs to transport around 1,700, or about 0.08% of those individuals, to space each year for its model to work.
What aspiring astronauts are willing to pay isn’t yet clear. Blue Origin received more than 20 bids in excess of $4.8 million to grab the first seat on its first passenger mission next week, which analysts say indicate a high level of untapped demand. Space tourism could generate close to $4 billion in annual revenue by 2030, according to an estimate from UBS last year. Virgin says it is aiming to generate $1 billion for every spaceport it constructs.
As of March, Virgin Galactic had about 600 bookings, priced at an average of $250,000, with $80 million in deposits from would-be astronauts. UBS estimates that the price point for tickets will likely rise to between $300,000 to $400,000 per ticket, with prices potentially becoming more accessible as operations scale and costs reduced.
Ticket sales were paused after the 2014 catastrophe. Mr. Colglazier said the plan is to release a next tranche of tickets toward the end of summer or early fall.
Write to Benjamin Katz at firstname.lastname@example.org and Micah Maidenberg at email@example.com
Dow Jones & Company, Inc.