Space tourism: Galactic Gamble - Is the market Virgin's to lose?

This is"a pure piece of risk capital and it is based upon the fact that we perceived at the time that the only way this was ever going to happen was if we did it. This is a high-risk venture," says Virgin Galactic president and 20-year Virgin group public relations veteran Will Whitehorn, reflecting on the origins of his spaceline at its headquarters in Piccadilly, London.

For $200,000 per seat that spaceline is offering in the next few years a few minutes of weightlessness with a cabin to float around in at a 110km (68miles) apogee during a 90min trip.The journey comprises 1h of spiralling to the 50,000ft (15,250m) air launch altitude with the WhiteKnight Two mothership, seconds of rocket-powered ascent into space at Mach4 in SpaceShip Two, followed by about 20min of glide back to the runway.

Making it happen means the Virgin group, Virgin Galactic's investor, has, says Whitehorn,"carried on investing. You're looking at buying a couple of big commercial planes as the scale of the investment, which for Virgin, with the kind of risk it is in, is a big, big project."

When he says big "commercial planes" Whitehorn is not talking Airbus A321, but the original jumbo: "It is a fully charged up, rack rate Boeing 747. You are talking that scale, [and] getting to commercialism,we'll be up in the $250-350 [million] range." That $350 million is for the prototype WK2 and SS2, all the equipment needed at the company's commercial launch site, New Mexico's Spaceport America, and one more operational mothership and four SpaceShip Twos.

© Virgin Galactic Scaled Composites designed WhiteKnight Two prototype during its third flight

On 25 March the prototype WK2, called Virgin MotherShip Eve, had its third test flight that lasted more than 2h 30min. Virgin Galactic refuses to give any details about its test-flight programme, but it has said that eight tests were completed during the flight. That third flight came seven weeks after the second test on 5 February. Between the two, Eve's vertical stabiliser fins can be seen to have been modified. Flight International had reported that witnesses to its 21 December 2008 maiden flight had noticed some yaw instability. The prototype SS2 is expected to be attached to Eve for carry flight tests this year.

If the prototypes can not be used commercially the contract will increase to three carrier aircraft and six spaceships. The spaceline also has an option to buy a further seven SS2s under the original deal, first signed with Virgin Galactic's vehicle developer, the Mojave air and spaceport-based company Scaled Composites. But now that contract is with the Virgin group, Scaled joint venture The Spaceship Company. Such a scale of investment may not seem unknown for the owner of Virgin Atlantic, but the risk is that development costs spiral and become a funding black hole.

"We don't want to be in this position, we're not happy with it," Whitehorn saysabout Virgin group's status as both manufacturer and operator."If there was a manufacturer out there and we were just the customer, we would have been happy with that. It would have been more akin to the [airline] models we know. Becoming a manufacturer has been going back in history. Howard Hughes was a great example [of a manufacturer who was an airline]."

Scaled developed for Microsoft founder Paul Allen the SpaceShipOne and WhiteKnight I vehicles that in 2004 won the Ansari X Prize when SS1 became the first spacecraft to reach space twice in two weeks. Some of the technology intellectual property used for SS2 is already owned by Allen and the rest will be The Spaceship Company's and Scaled's. Whitehorn cites Scaled as the key to what he describes as a huge cost saving. "If you had given a project like this to a Boeing or EADS or Lockheed [Martin] or Northrop Grumman and done it in the classic military sense we would have been looking at a considerably higher cost."

Such a bill may not have reached the €1 billion ($1.32 billion) price tag EADS Astrium put onits own suborbital space jet development project,but even Virgin's $350 million investment looks ambitious in a worldwide credit drought. But Whitehorn is sanguine about Virgin's financial commitment to the project:" We live in a real world, we live in uncharted territory, so I wouldn't ever say it [getting cut off] won't happen but I would certainly say at the moment [Virgin group has] been incredibly supportive."

His explanation is that the Virgin group thought a recession was coming and scaled back its investments. Virgin Galactic is now the group's only large-scale investment.

What Virgin knows best, market research, has been the basis for the decision to start and maintain that investment when there was no known spaceline business model to help set a path through the current crisis. Whitehorn describes that research as "absolutely crucial" and typically lacking in aerospace: "Everything has been engineering-led that people have done in the past," says Whitehorn.

That marketing was possible because the public response to Sir Richard Branson's September 2004 Virgin Galactic launch saw the company gain a "small cadre" of customers. Virgin Galactic and Scaled had discussed a commercial SS1 and Branson announced at the 2004 launch a first flight in 2007. The commercial SS1 idea was then dumped when the "small cadre" put an emphasis on floating around in the cabin. Looking back on the SS1 idea, Whitehorn now thinks "we could have been flying by now [2009]". The decision to abandon the flight-proven SS1 and instead develop the larger SpaceShip Two and its carrier aircraft has meant a substantially longer and costlier development period.

And like SpaceShipOne the SS2 in-service date has slipped, by a year about every 18 months since SS1 was dropped. Last year saw 2010 become the new in-service date. Whitehorn now avoids dates and only talks of development milestones"all tracking good".

But heinsists that the cadre had led to "a business plan we could evidence and it looked like we could fund the [larger] vehicles. I think we have sold more tickets as a result [of SS2] and we hope to sell 700 tickets by the time we are flying commercially."

Because SS2 would be so much larger than SS1, its carrier aircraft's capability had to increase,"allowing us to internally think of the vehicle as a Boeing 747 as opposed to a Concorde". Whitehorn says the 747 was a success because Boeing designed it to operate as a freighter as well as a passenger aircraft. "I think that is where we think we are getting with SS2 and WK2, something that has a workhorse role. With WhiteKnight we have built in other capabilities, the other fuselage [can carry] lots of scientific equipment so there is a market for it there. It also has a capacity to lift a higher payload to a higher altitude," referring to the proposed satellite orbiting LauncherOne rocket.

The spaceship and its mothership, in Whitehorn's eyes, could become technology demonstrators."These vehicles will provide some amazing data on large-scale composites. Because of the flying regime we are going to learn a lot more than ever before in a practical sense," he says.

In October 2002 consultancy Futron published aspace travel study forecasting that by 2021 "over 15,000 passengers could be flying [suborbitally] annually, representing revenues in excess of $700 million". Seven years on, Whitehorn is confident Futron got it broadly right: "I think the market is around that number of people over 10 years and in the $100,000-200,000 capacity." After selling hundreds of tickets,Virgin Galactic's London-based sales and marketing arm reported an after-tax profit of £136,400 ($193,000) in the first publicly available accounts.

This September will be the fifth anniversary of Branson's launch, but Whitehorn is still focused firmly on the future."I don't think there is anyone now who would disagree with the idea that we will do space tourism."

Source: Flight International