How Will Virgin Galactic Make Money?

This article takes a look at the numbers…

Virgin Galactic will generate revenue from the following services:

  • Suborbital flight experiences for Ultra High Net Worth Individuals.
  • Selling optional exclusive luxury experiences and products to Future Astronauts (customers with a reservation) and Astronaut Alumni (customers who have flown into space).
  • Microgravity research services
  • Commercial astronaut training

However, Virgin Galactic will make money primarily through selling suborbital flight experiences delivered using their unique spaceflight system.

The Virgin Galactic Spaceflight System

The Virgin Galactic spaceflight system consists of a large aircraft called the Virgin Mothership (VMS) which carries the passenger carrying spacecraft called the Virgin Spaceship (VSS). Each VSS carries 2 crew and 6 passengers. Both the VMS and VSS are reusable.

VMS
VSS

The Experience

Flight profile

Running the Numbers

Each VSS flight –

  • Carries 6 passengers at $450,000 per passenger, delivering $2.7 million of revenue.
  • Has $586,000 of operational costs associated with it:
    • Rocket motor costs which includes replacement of the rocket motor: $250,000 to $275,000 (in the future they expect to reduce the cost to $121,000);
    • Customer costs which includes insurance, and customer training & experience: $193,000; and
    • Flight operations costs which includes fleet management, consumables and other flight related operational costs: $118,000
  • Will deliver a gross profit of $2.114 million and gross margin of 78%.

Each VSS –

  • Costs between $30 million and $35 million to build and will need to fly 17 times before it becomes profitable.
  • Is built to last for 10 years and to be flown up to 50 times a year (i.e. approximately once a week).

Assuming Virgin Galactic’s annual losses continue at 2020 levels of $273 million, they will need to operate 130 flights per year to breakeven. They will have 1 VMS and 1 VSS vehicle available to provide commercial service by the end of 2022 (i.e. 50 flights per year). By the end of 2023 they will have 1 VMS (Eve) and 2 VSS (Unity, Imagine) vehicles available to provide commercial service (i.e. 100 flights per year).

Virgin Galactic will need to build and operate 1 additional VSS vehicle in order to be able to breakeven in a year. Assuming they start building a third VSS in 2022, it would be available to carry paying passengers in late 2024, which means that the earliest Virgin Galactic could breakeven is 2025.

Virgin Galactic has stated that their target fleet size is 2 VMS and 5 VSS… this is also the size of their hangar at Spaceport America.

Virgin Galactic has also stated that their goal is to launch 400 flights a year per spaceport. This would give each spaceport an annual capacity of 2,400 passengers delivering estimated yearly sales of up to $1.08 billion. To achieve this with their target fleet size, Virgin Galactic would have to increase VSS flight cadence to 80 flights a year/vehicle, or build 3+ additional VSS vehicles and at least 1+ additional VMS vehicles (and at least one more hangar).

That is how Virgin Galactic will make money assuming everything goes very well.

For information on what could go right/wrong read this – Virgin Galactic’s Strengths, Weaknesses, Opportunities, and Threats (SWOT).

References

A Concise Guide To Virgin Galactic’s Sales Strategy

Virgin Galactic’s Strengths, Weaknesses, Opportunities, and Threats (SWOT)

Space Tourism Market Analysis

When Could Virgin Galactic Run Out Of Money?

Spaceport America and Virgin Galactic: The Numbers Never Added Up

Here’s How Virgin Galactic Will Earn A Profit

We’re Hopeful That Virgin Galactic Holdings Will Use Its Cash Wisely

Virgin Galactic Q3 2020 Earnings Presentation

Virgin Galactic Announces Fourth Quarter And Full Year 2020 Financial Results

Virgin Galactic Investor Presentation

What Does A Spaceport Contract Look Like?