Virgin Galactic Moving Towards Maturity in Commercial Space Travel

Virgin Galactic Moving Towards Maturity in Commercial Space Travel

Exploration of space technologies for commercial use has been a buzz since the launch of the first artificial satellite Sputnik by the USSR in October 1957. Satellite television, cell phones, pinpoint GPS navigation, internet communication, earth mapping and accurate weather forecasting are some of the better-known commercial applications of Space technology. According to some industry experts, the size of the global space industry will grow to $805 billion by 2030 from $244 million in 2010.

Other than the above, human space flights are also of great interest to the industry, and more recently efforts are being made to exploit it for commercial benefits. Till now only government-funded scientific and military organisations like NASA, CNSA and Roscosmos have managed to put humans in space. The curiosity among the general public regarding space flight and interest among wealthy individuals to pay for a journey to space has prompted many companies to fund programmes to create a space travel & tourism industry. Companies like SpaceX, Blue Origin, Orbital science corporation and Virgin Galactic have active programmes at various stages of development to take advantage of this prospect.

Industry experts have estimated that the global Space Tourism market will grow to $1270 million by the year 2023, growing at the rate of 17.3% CAGR starting with the base year 2017 where it stood at $490 million. On the other hand, experts estimate that the Space tourism business could be worth $3 billion and long haul sub-orbital travel market to be worth $20 billion by 2030.

Human Space Flight

The first human to travel to space was Yuri Gagarin aboard Vostok – 1 on 12 April 1961 from Baikonur Cosmodrome in USSR now Kazakhstan. Since then many have made the leap aboard Russian, American and Chinese made space vehicles. Following these limited and expensive successes by wealthy and technologically advanced countries, a lot of time and effort has been invested in making space travel less complex and more affordable. Companies like Space X, Orbital science corporation, Blue Origin, Sierra Nevada Corporation and Virgin Galactic have active programmes to build / already built space vehicles to ferry humans to space.

Richard Branson promoted Virgin Galactic has been a part of this endeavour for a long time now. Promoted in 2004, the Company has done a lot of work since inception. Richard Branson himself an enthusiast of space travel has been a prominent supporter of exploratory work being undertaken in this field anywhere in the world.

Virgin Galactic

The Company entered into a deal with an American company named “The Spaceship Company” (a company co-promoted by virgin group and “Scaled composites” of California specialising in spacecraft manufacturer with composite materials), for the manufacture and purchase of space vehicles for Virgin Galactic’s sub-orbital human flight programme and other scientific space missions.

The deal envisaged that the latter would build a total of seven vehicles for Virgin Galactic, five of them to be called “SpaceShipTwo” the actual orbiters that will ferry humans to space, and two of them to be called “WhiteKnightTwo" the carrier quad jet transport aircrafts that will carry the orbiters to high altitudes from where the orbiters will self-propel to the outer atmosphere . Flight testing started in April 2009 with the first SpaceShipTwo prototype called VSS Enterprise rolling out, it flew a total of thirty-six missions, providing valuable flight data for five long years. It was however destroyed in an October 2014 crash, casting serious doubts over the safety aspects of the programme and also the ability of Virgin Galactic’s to continue funding the programme. The Company, however, bounced back and came out with a second prototype “SpaceShipTwo” called VSS Unity which made its maiden flight on 8 September 2016. On 13 December 2018, the prototype achieved its first orbital space flight by surpassing 80 km altitude a boundary set by NASA and United States Airforce as the official boundary of outer space. With that, the Company achieved the complete technology cycle needed to offer commercial orbital human flights as promised fourteen years ago during its inception. The first flight with a passenger took place in February 2019, when a team member of the flight team flew as a third member in a flight that reached 59.9km in altitude.

The Company has already signed up with more than 700 celebrities and scientists seeking an opportunity to go to space, for a ticket priced at $250,000 per person. The list includes Tom Hanks, Ashton Kutcher, Katy Perry, Brad Pitt, Angelina Jolie and Leonardo de-caprio. Richard Branson, however, believes the prices to fall to $70000 per person within the next decade.

The Company also plans to provide orbital launch vehicle service for small satellites aboard its LauncherOne Rocket which is to be launched mid-air from a modified Boeing 747 aircraft called CosmicGirl.

Other than that, the Company has made several collaborations with NASA, WorldVu corporation, Boom technologies and Under Armour to bring in additional business.

Funding

The Company, through its development phase since 2004, had availed of a number of measures to raise capital for its development and operational activities. The Virgin group itself made an initial investments of $100 Million followed by the New Mexico Government infusing $200 million in the spaceport facility to be used by the Company, and then another $ 280 million by Aabar investments of Abu Dhabi, (the sovereign wealth fund of the Abu Dhabi government in exchange for 31.8% stake in Virgin Galactic and launching tourism and scientific flights from Dubai).

The latest in this endeavour is the pact it has entered to with a company called Social Capital Hedosophia. The deal is envisaged in lines of a corporate merger with one company being a private company and another a publicly listed company and post-merger the combined entity becoming a publicly listed company.

Maiden Listing

The Company announced its merger with Social Capital Hedosophia (a listed special purpose investment vehicle) where the latter will become owners of 49% of Virgin Galactic’s shares. The deal to be concluded by the Second half of 2019 would bring in much-needed funding to continue operations until the Company starts to turn profits. Chamath Palihapitiya, the founder of the fund, will take charge as chairman. $600 million was raised by Social Capital Hedosophia in 2017 in what is called a "Blank Cheque IPO” and its founder Chamath Palihapitiya (who is also investing another $ 100 million US Dollar of his personal wealth into this venture) had promised during the IPO, “We’ll scour the world for two years to find a promising late-stage company to take public”. Their search seems to have concluded with Virgin Galactic. The new entity will be known as Virgin galactic and would replace SCH (Social Capital Hedosophia) on NYSE.

The value that this deal is offering to erstwhile investors of SCH (Social Capital Hedosophia), is that the suborbital flights offered by Virgin Galactic can be used to drastically cut down the time taken in intra planet (within earth) transcontinental flights, and the volume of business that it would generate both in terms of human travel and cargo would bring in substantial revenue.  However, it remains to be seen how many of those investors would bite into this Science fiction like proposition being forwarded by the promoters.

Competitor Success

Most prominent private Company in this business that has made it big is SpaceX, promoted by South African Entrepreneur Elon Musk. The Company uses a semi expendable launcher called Falcon 9 and among other things uses a capsule called Dragon to ferry cargo and astronauts to International Space Station. Another company close to the materialisation of suborbital travel capability is Blue Origin with its New Shephard reusable rocket, which has performed demonstration flights on several occasions. Other than Space X, others have either signed in prospective space tourists or are already in talks. SpaceX has managed to get significant business with NASA to ferry astronauts and cargo to ISS (International space station) and other future NASA missions.

Conclusion

Space travel is a relatively mature technology now, NASA & Rosocosmos having laid down the required scientific and engineering foundations that have led private ventures like SpaceX, Blue Origin, Orbital Science Corporation & Virgin Galactic to take it further. They have worked on it and painstakingly brought it to a stage where it is mature enough to make commercial space travel accessible to private individuals. Sub-orbital travel can be a great value proposition seen as the next generational jump to Supersonic travel. However, still, more research work needs to be done regarding human body endurance of such flights, as they must still have travel like astronauts in spacesuits, and only medically fit enough people being allowed to undertake such flights.

The true value proposition of this application of the current state of the technology is the bringing about of the next generation of evolutionary change in the high-speed air transportation sector. At this point of time, any investment into this capability may seem to many as a little ahead of time, (as was the case with supersonic transporter Concord). But for visionaries like Richard Branson and Chamath Palihapitiya this represents a leap of faith, to somewhere they believe the next shape of human endeavour is taking the mould.

It would be fascinating to see where this venture goes from here. Other ventures have already tasted success. There is no reason to suspect that Virgin galactic would go bust now; its revenue-generating capability is where all the eyes will be gazing at going forward.

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