Virgin Galactic enters space tourism era with commercial debut

Fifteen years later than planned, Richard Branson’s vision for space tourism is poised to become a reality.

Virgin Galactic Holdings Inc. will begin commercial operations Thursday when it sends six people to the edge of space and back. It’ll offer paying passengers several minutes of weightlessness during the 90-minute research mission from New Mexico.

It’s a crucial milestone for the company, which was started by Branson in 2004 and had hoped to carry tourists to the cosmos as early as 2008. Over the years, Virgin Galactic has endured multiple fatal accidents, regulatory investigations, lawsuits and other setbacks. The company, long hailing itself as the world’s first commercial spaceline, also has watched competitors SpaceX and Blue Origin LLC start their own versions of passenger service first.

“This is a big deal, right? It’s the thing we were founded for,” Mike Moses, Virgin Galactic’s president of spaceline missions and safety, said in an interview. “The market would have loved for us to fly before now. Our customers would have loved for us to fly by now. But now we’re ready.”

If all goes according to plan with its latest launch, Virgin Galactic expects to move soon to a regular cadence of monthly commercial flights, bringing in much-needed revenue. The company has lost hundreds of millions of dollars each year since it went public in 2019 while generating only nominal sales.

Its market value, which once hovered around $14 billion in 2021, fell below $900 million earlier this year. Its shares have rebounded modestly as the company prepares to prove out its business model, closing Wednesday at $4.74 apiece, valuing the venture at $1.3 billion.

“It’s virtually impossible to have a healthy launch business that does not launch regularly,” said Caleb Henry, director of research at space advisory firm Quilty Analytics. “If you can’t launch regularly, then you can’t amortize the cost of your very expensive launch vehicle over multiple missions.”

Research Mission

Thursday’s flight, called Galactic 01, will carry several members of the Italian Air Force on a research mission, giving them a rare opportunity to run experiments and test payloads in a space environment. The event will be livestreamed beginning at 11 a.m. New York time from a facility near the town of Truth or Consequences, New Mexico, about 150 miles south of Albuquerque. 

The passengers include Walter Villadei and Angelo Landolfi of Italy’s air force, as well as Pantaleone Carlucci, an engineer with the National Research Council of Italy. They’ll be joined by Virgin Galactic employee Colin Bennett and two pilots.

The company’s primary vehicle is its VSS Unity, which is carried aloft under the wing of an unusual, twin-fuselage carrier aircraft called VMS Eve. Once the pair reaches an altitude of 46,000 feet, the spaceplane detaches and ignites a hybrid rocket-engine, propelling it to sub-orbital space. The craft is expected to reach a height just above 50 miles, where the crew can see the curvature of the Earth from the dark of space, before gliding back down to the runway.

Virgin Galactic has had lofty ambitions for this spaceflight model. In its early days, the company took deposits from A-list names including Ashton Kutcher, Justin Bieber and Leonardo DiCaprio. Tickets initially cost a quarter of a million bucks apiece before going up.

But Virgin Galactic faced serious setbacks during development. In 2007, three employees at Scaled Composites, a contractor started by aerospace entrepreneur Burt Rutan, were killed during an engine test for Virgin Galactic’s spaceplane. In 2014, one pilot died and another was injured when a Virgin Galactic vehicle crashed during a test flight. The company acknowledged some customers canceled reservations following that accident for various reasons.

Still, Moses said the majority of customers have remained. “These folks have been patient for a long time.”

Virgin Galactic marked an important milestone in 2018, when it reached space for the first time, sending two co-pilots to an altitude of 51 miles. It has since sent several more crewed test missions to space.

In 2019, the company went public via a reverse merger with a special purpose acquisition company, capitalizing on the blank-check boom to refill its coffers. At the time, Virgin Galactic predicted an imminent start to commercial operations and that it would be flying more than 1,500 customers a year by 2023.

Branson’s Flight

The company appeared to be nearing a breakthrough in 2021, when it launched its billionaire founder to space. The high-profile flight garnered headlines across the world as Branson beat Jeff Bezos, but it soon emerged that the mission had deviated from its intended flight path, prompting a brief investigation overseen by the US Federal Aviation Administration.

Virgin Galactic continued to put off commercial operations for more than a year as it upgraded the vehicle. During that time, it also battled lawsuits over issues such as information disclosure. And it burned through cash — about $400 million last year alone.

“That’s not a healthy way to run a business in the long term,” said Henry of Quilty Analytics. “That’s not a healthy way to run a business in the medium term. That is something that you want to get away from as fast as possible.”

Virgin Galactic returned to space last month with a test flight that paved the way for its commercial debut.

Paying passengers are critical for Virgin Galactic, whose business is centered on space tourism. Moses said a regular cadence of flights will be able to generate a “healthy return” for the company.

That business model is a bit different from competitors SpaceX and Blue Origin, which have other revenue streams such as launch services or cargo supply missions for NASA.

“Branson founded Virgin Galactic almost 20 years ago now,” Henry said. “He’s been very patient with trying to see this company through to success. I would say the time is coming where they really do need to deliver on that.”