Throwing the dead cat

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Sinad O’Sullivan is a former senior research scientist at the Harvard Business Schools Institute for Strategy and Competitiveness.

Touching the face of God has never seemed so trivial.

A backdrop of space tourism craze in 2021 has seen Richard Branson and Jeff Bezos go head-to-head in a heated race to launch manned spacecraft.

Two years later, Virgin Galactic’s first commercial launch with paid customers on June 29 was lackluster.

While they say all press is good press, it appears that not even the global attention highlighting commercial exploration efforts via the OceanGates Titan submarine can excite investors about Virgin’s latest milestone.

Sure, the stock briefly broke the grumpy bonds of gravity

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but the long-term picture is rather inferior to the moon:

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Will the rocket of space tourism ever regain propulsion?

The Space Sector-adjacent crowd can be divided into three broad groups based on their views on the Billionaire Space Race shenanigans.

The first group are those who believe that hype (and its symbiotic organism, scam) is a distraction from achieving the goals of Serious Science and exploration.
The second are those who believe that commercial space tourism, regardless of how and by whom it is funded, will have tremendous value for humanity, due to something about understanding our unique place in the universe.
Finally, there are those (largely outside the industry itself) who wake up and pray to Elon Musk before checking the $SPCE share price at the same time as their $DOGE portfolio on Robinhood.

No matter what camp you’re in, the economy of Virgin Galactics’ bid that will build High Net Worths shelling out $450,000 for a 4-5 minute thrill ride has gotten harder and harder to defend, even for hardcore supporters of the sector.

Right now, VG has about 800 customers, most of whom paid just $25,000 non-refundable for a heavily discounted ticket price of $250,000. Hoping to begin commercial flights as early as 2008, the airline is fifteen years too late to start servicing its backlog of demand.

That means costs have defied gravity: Virgin Galactics’ net losses over the past three fiscal years have risen to just over $1.1 billion.

Last month’s flight brought in $600,000, not that much.

Assuming losses for the future equal the lowest for those years ($273 million, in 2020) and that each VSS Unity aircraft carries the maximum of six passengers at full ticket price, Virgin Galactic will need to fly 102 times by a year to break too. This is a flight every 3-4 days.

But assuming its future losses are the same as last year, $500 million, Virgin will have to fly every day to break even. Under the scenario of spending $500 million annually servicing hundreds of ticket prices at the discounted fare of $250,000, taking just four instead of six passengers, Virgin Galactic would have to fly several times a day to stay profitable.

Given that 10% of the VG’s capacity has been donated to research and science, these already challenging numbers are starting to look more dire. Take into account natural delay factors such as weather and flight readiness windows, and the short-term business model seems impractical.

The SpaceWorks NewSpace Index, which indexes and tracks space sector SPACs, highlights the difference between the relative weakness of leak-seeking space SPACs like Virgin Galactic and established groups like Boeing and Northrup Grumman.

A rebalancing within the industry and a clear segmentation between the two types of space companies would be welcomed by space industry traditionalists who want to do Serious Science without worrying about billionaires and their jokes. Surprisingly, even many within the industry who championed these NewSpace industrialists for improving life on Earth and contemplating our human existence remained silent regarding the launch.

And what about the millions of children around the world who will be fascinated and inspired by the possibility of one day going to space, to quote Richard Branson? Well, if they’re anything like investors, they’ve probably switched to Next Big Thing AI Discord servers, anyone?

I think what we’ve just witnessed is the launch of the dead cat of space tourism.

Further reading
Kill space zombies