business

Virgin Galactic's Space Odyssey

Richard Branson's plans for suborbital tourism may sound pie-in-the-sky, but he has the details all worked out

By Burt Helm

When the first space vacations are available, Richard Branson will be there selling them. On Sept. 27, Branson's Virgin announced a partnership with Paul Allen's Mojave Aerospace Ventures and SpaceShipOne designer Burt Rutan's Scaled Composites to allow tourists to take a two-hour trip aboard a suborbital space craft in 2007. But Branson has visions of space cruiseship vacations up to an orbiting hotel. Yet at prices of $190,000 a ticket, can "Virgin Galactic," the proposed space-tourism company, make this a profitable venture anytime soon?

Virgin sure thinks so. It has already planned the "three-day experience" for the suborbital flight -- down to the on-board song that will be played at the trip's arc (Space Oddity by David Bowie). "[The experience] will be like camp" says a Virgin official, where all tourists will be housed, fed, and trained in the same "deluxe" complex.

FREE FLOATERS.

  According to Virgin, the first day will include a run of medical tests, including a CT scan, followed by a trip briefing, and time on a simulator. On the second day, passengers will ride on-board the White Knight mothership (the craft from which the space ship drops), and sit in a cabin designed to look exactly like the interior of the space vessel.

From there, they'll watch the previous group's launch. On day three, passengers jump into the hot seat. Once in space, they'll be allowed to float around the cabin for three to five minutes before the ship returns to earth.

Branson's dream has been in the making since at least 1995. But it wasn't until two days before SpaceShipOne's first X-Prize-winning flight on Sept. 29 that Virgin announced its timeline for developing space tourism. The $21.5 million deal with Paul Allen's Mojave Aerospace Ventures (the company that funded designer Rutan and owns the rights to SpaceShipOne), allows Virgin to build as many as five souped-up versions of the initial prototype SpaceShipOne.

TOO AMBITIOUS?

  Virgin plans to spend $100 million developing this new version of the vessel (called SpaceShipTwo), which will have increased payload capacity, more sophisticated safety systems, and a larger cabin designed to hold five passengers plus one pilot. Virgin Galactic hopes to launch its first vessel, to be christened the VSS Enterprise, in the winter of 2007 or the spring of 2008.

Though Virgin Galactic says it eventually wants to offer several flights a week out of two locations, it plans to roll out the program slowly, starting with only one flight a week from the Mojave desert. But even this sounds unrealistically ambitious to space analysts.

"[SpaceShipOne] flew to space three times, and each time it had significant problems," says Marco Caceres, senior space analyst at Teal Group, an aerospace research and consulting firm. "They certainly need to work out the kinks." He says Virgin Galactic's development timeline is far too optimistic and that its costs estimates are likely too low.

"The technology is complex," says Caceres. "All it takes are a few delays, and [costs] go sky high.... I'd be very impressed if they get to the point where they're launching three or four times a year" in the first year. Virgin officials disagree.

50-ISH ASTRONAUTS.

  Still, Virgin faces considerable hurdles, and it must also pass muster with the Federal Aviation Administration. According to FAA spokesperson Hank Price, the agency and Congress still need to develop the proper safety regulations.

Safety issues aside, is real demand out there? According to a Virgin official, a joint feasibility study by Virgin and Mojave Aerospace Ventures estimates at least 15,000 people in the U.S. would pay more $100,000 to take a two-hour suborbital ride. But Futron, a space research organization that commissioned a suborbital tourism market study by Zogby in 2002, found about 500 to 800 people would be able and willing to pay if the ticket price were set at $100,000 -- about half of what Virgin says it will charge. (No surprise here: The majority of the participants are expected to be married men in their 50s.)

Still, even if the lower number is accurate, that would be enough to sell out Virgin Galactic, which plans to make a maximum of 104 flights (a total of 520 passengers) in its first year.

CHEAP LAUNCHES.

  As for margins, Virgin Galactic won't disclose specifics about projected operating costs. But with five passengers paying $190,000 a ticket per flight for a total of $950,000 in per-flight revenue, Virgin Galactic could stay in the black. Currently expendable rockets launching similarly heavy (though nonhuman) payloads, like Bristol Aerospace's Black Brant XII cost approximately $600,000 per launch, much higher than what the planned SpaceShipTwo's launch costs would be.

That would be the ultimate irony, considering what's going on in the traditional airline business right about now: better margins and profits in outer space than down here in Earth's atmosphere.

Helm is a reporter for BusinessWeek Online in New York

Edited by Beth Belton

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE