I can't think of
any experience that anyone's going to have in their
life that will be more wonderful extreme than
going to space. Richard Branson has made it
the goal of his company, Virgin Galactic, to
open space for everyone. And he's
not alone. Fellow billionaires Jeff Bezos
and Elon Musk are also in the space tourism
business as a new space race takes off. Even NASA said that it
would open up the International Space Station
to paying visitors. But accessibility to
space tourism remains limited to the richest of
the rich, with ticket prices ranging from hundreds
of thousands of dollars to millions. Still, experts believe the
space tourism market has massive potential. A recent survey found that
about 39 percent of people with the net worth
of more than five million are interested in
paying at least 250000 dollars for a Virgin Galactic
flight to the edge of space. As many as
two point four million people or more could
be interested in this opportunity. This is
a supply constrained business. A space ship can
only run about five times a month. So as
we think about the demand relative to supply being
very constrained, that's a classic luxury good
dynamic where there's scarcity. Based on the
ticket prices that we've seen today, the pace of
development that we see and the supply that
we have forecasted. NSR projects that the
revenue sizing represents a 14 billion dollar
cumulative opportunity, assuming that launches start
within the next one or two years and
continuing through 2028. But the point of
entry is staggering, development of the space tourism
programs is costing these companies billions and whether
or not they can make up this money and
turn a profit in an unproven market remains
to be seen. The technology that's
required is extensive. It's essentially rocket
technology, which is expensive, takes a long
time to develop. There are numerous
government and safety regulations and to make
it all the more challenging, We are
talking about launching people and the risks,
the regulations, the requirements are much
more constrained versus launching cargo or things
of this nature. Others are questioning the
massive amounts of money being spent on
developing space tourism when we have some very
pressing issues to deal with right here on Earth. The road to space, if you
like, is a narrow and somewhat treacherous footpath
that is not accessible to, you know,
to very many people. And I think what we
are trying to do, what Richard Branson set out to
do and what Virgin Galactic is now doing
and the other commercial space companies is, is to
try and transform that road to space from a
narrow footpath to a broad highway. And if we can
do that, then it's you know, it will open up
space to many more users. And that, in our view, is
going to be one of the answers to, you know,
managing some of the significant challenges down here
on planet Earth. Space tourism is generally
broken down into two main categories, suborbital and
orbital, with a suborbital flight, we're
not actually completing a full orbit
of the Earth. So the suborbital rocket will go
up to the edge of space. So we are assuming
this is going to be around 100 kilometers and
they come right back down. At the forefront
of making orbital space tourism a reality
is Virgin Galactic. Virgin Galactic experience
would entail customers coming, doing about three
days of training and then strapping in to
the spacecraft, which is joined to a carrier jet
aircraft that would lift it up to about
50 thousand feet. Altitude, drop it. The rocket motor of
the spacecraft would fire carry people up to the edge
of space to kind of do the slow
backflip in microgravity. It's where you get
a few minutes of weightlessness and kind of
get to see the experience of space and
then without power, because at that point,
the rocket motors already fired and spent, it would
glide back down through the atmosphere to land
on a runway. Right now, Virgin Galactic
is bleeding cash. The company has reported
adjusted EBITA losses of over 50 million dollars for
each of the last three quarters and did not
record any revenue in Q2 of 2020. At the moment, the revenue
from our customers sort of remains in the bank
accounts, and it will be recognized, of course, as
soon as these customers take their flights. Any
stock and any opportunity where there is no revenue
generation can lend to a highly
volatile scenario. So more visibility towards
revenue generation as a catalyst for stocks
with no revenue. Virgin Galactic has raised
over a billion dollars in funding since its inception
in 2004, though a lot of that money has
come from British business magnate and founder Richard
Branson and an Abu Dhabi sovereign
wealth fund. Since then, more than 600
people have reserved a seat for the 90
minute tour, paying anywhere between 200000 to 250000
dollars per ticket, depending on when
they purchased it. Virgin says none of the
money from ticket sales has been used for funding
the development of its space vehicles. Instead, sales
were a way to gauge market interest. We have a huge amount of
evidence that there is a very big, robust, sustainable
market for private individuals to fly to space
and we will say very confident that that can
be achieved at price points that can make
space flight operations like Virgin Galactic commercially
successful in the short term. Virgin
Galactic stopped selling tickets in 2018 following
the company's first successful space flight and
is now offering customers refundable 1000
dollar deposits, Virgin says 700 people have put
down deposits so far and they will be given priority
to buy tickets when sales resume. But a
number of technical issues and a tragic accident during
a 2014 test flight that killed one of the
pilots have caused delays in launching customers
to space. It was a moment which
clearly anybody involved in this or any sort of
business, you know, you hope that you'll get through it
a test program without that sort of event.
But it happened. And I think the important
thing, which is what we did, was to take a breath,
take a pause to make sure that we did everything
we could to learn from from that event. And I am sure as a
result of that process, you know, we have a better
a safer spaceship, a better, a
safer organization. Virgin Galactic is
making progress. The company has completed 27
of the 29 milestones set forth by the
Federal Aviation Administration for getting its spacecraft
ready for commercial service. And it's also
successfully completed two piloted test flights. Virgin Galactic says that
it plans two more crewed space flight tests
before it flies Sir Richard Branson in the
first quarter of 2021. At that point, the company
would be ready to begin servicing
its customers. Robbie Vaughn is one
of those customers he purchased his ticket back
in 2006 for 200000 dollars and despite the
long wait,Vaughn is unwavering in his support
for the company. I've been with Virgin Galactic
so long, I feel like that I've got an
inherent equity and how that company goes and
builds and achieves its goals. In fact, Vaughn's
belief in the company seems to be contagious as
his entire family has now put down deposits
for Virgin tickets. Experts say this type of
customer loyalty is no coincidence. It's about more
than space travel. It's about
building community. It's about building
a membership program. It's about an experience
and an experience with the Virgin brand as well. Virgin Galactic really
caught my interest primarily because of
Sir Richard Branson. he tends to achieve goals
that he goes after. You know, that was a big
part of me wanting to become part of this team
and see it through. Throughout the years, Virgin
Galactic has kept ticket holders entertained with
perks such as vacations to Branson's private
island in the Caribbean. Now, even those who
don't have a few hundred thousand dollars for a
ticket can have a hand in the
company's future. Virgin Galactic and social
capital Hedosophia are merging to form the
world's first and only publicly traded human
spaceflight company. Shortly after Virgin Galactic
went public, the company seemed to double down
on its plans to provide the ultimate
customer experience. Shares of space company
Virgin Galactic up sharply on news of a new CEO,
a 30 year veteran of Disney, most recently
running the international parks division. So he's
got the consumer experience, but no
aerospace background unless you count the recently
finished Star Wars land. Virgin Galactic, this is
their core business. This is the main proposal
they came up with. And while they have a
number of other side ventures and longer term
bets that they're looking at, space tourism
is their core business. One of those side ventures
is a contract with NASA. Shares of Virgin
Galactic are surging this morning. This comes after
news just moments ago that was out that the
company has signed a deal with NASA. Under that
deal, Virgin Galactic is going to be developing
a recruitment and training program for private astronauts
seeking to visit the International
Space Station. In addition to astronaut
training, Virgin Galactic recently announced a
partnership with Rolls-Royce to develop a
supersonic plane. If it succeeds, the
project could prove very lucrative for Virgin. A 2019 Morgan Stanley
report forecasted that the market for high speed
travel could reach 800 billion dollars in annual
sales by 2040. SpaceX is working on
something similar, saying that passengers could one
day travel from New York to Shanghai in as
little as 40 minutes atop the company's
starship rocket. Still, analysts think that
space tourism will be Virgin Galactic's bread
and butter. If you look at the
intentions and some of the filings that the company has
made, their goal is to develop a space
tourism industry, to fly passengers and essentially make
space tourism as common as getting in
an airplane and flying across country, Although we
are working hard to to leave the planet, We're
actually doing that in order to, you know, to
make life better down here. And I think our
own particular part of that is to provide a platform
for many, many people to gain that planetary perspective,
to have that that change in perception of
who we are and where we live that has just
been, you know, available to very, very few
in the past. The second major player
in the suborbital space tourism market is Jeff
Bezos's Blue Origin. The company has conducted
a number of successful test flights, though unlike Virgin,
it has yet to complete any tests with
people on board. Earlier this year, Blue
Origin was criticized for asking workers to
travel from D.C. to Texas to conduct a
test flight for its new Shepherd rocket at the
height of the coronavirus outbreak. Blue Origin has
not announced the price for its tickets, but Bezos
has said in the past that flights will be
competitive with others in the suborbital
tourism industry. The entire experience will
only last about 11 minutes and look
something like this. For the Blue Origin
experience, You would spend about a day training at
their facility in West Texas before you strap
into their six passenger domed capsule that's sitting on
top of their 60 foot tall New Shepherd
rocket booster that would ascend just like a
normal rocket straight up through the atmosphere to an
altitude of about 60 miles high or so. And you'd float for a
few minutes in microgravity before the capsule
reenters, deploys parachutes and then just touches down
in the desert floor in Texas. Like Virgin Galactic,
Blue Origin has gotten a huge injection
of funding from its billionaire founder, Jeff Bezos,
who's also CEO of Amazon. Bezos has
previously admitted to putting over one billion dollars
a year into Blue Origin through the sale
of Amazon stock. It's this endless cash
flow that frees Blue Origin from having to depend
on space tourism as its main revenue driver. Blue Origin, they're not
trying to finance anything essentially with
their suborbital program and flying people to
the edge of space. This really is what would
be known as a development pathfinder
for them. It's essentially helping them
develop their larger rocket known as New
Glenn and other spacecraft systems such as their
Blue Moon lunar lander. That's kind of this longer
term pathway for them. And the suborbital tourism
side of it is essentially a way to see
whether or not some of these technologies work and
and really get them up and running. Proving
out its technology is critical now that Blue Origin
has penned a 579 million dollar contract with
NASA to build a crude lunar lander for
the agency's Artemis program. The goal is
to land U.S. astronauts back on the
moon by 2024. SpaceX and Dianetics are
also working on the project, but Blue Origin
received the lion's share of the
contracts funding. The range in award totals
comes due to the differences in each team's
bid and approach to achieving NASA's goals. But Blue Origin's ambitions
go much further than space tourism and even
landing on the moon. In an interview with CBS
last year, Bezos said that humans have no choice
but to go to space because our population is getting
too big for the earth to sustain. We are
in the process of destroying this planet and
we've sent robotic probes to every planet
in the solar system. This is the good one. So we have to preserve this
planet and we can do that using the
resources of space. Bezos went on to say
that the purpose of Blue Origin is to help
build the infrastructure to take advantage of
those resources. As part of
that infrastructure. Bezos envisions humans living
on space colonies, an idea originally
conceived by Princeton University physicist
Gerard K. O'Neill in the 1970s. But before that can happen,
the cost of access to space must decrease
dramatically, which Bezos believes can be achieved
by private industry. On the more pricey side
of space tourism, are orbital experiences. Such as going to
the International Space Station. At the forefront of
this market is SpaceX. The SpaceX experience would
see up to seven passengers training for a few
weeks for a launch you launch out of
Cape Canaveral, Florida, sitting on top of a
230 foot tall Falcon nine rocket booster. The launch
process and getting to the International Space Station
or to orbit would take a few hours, at least
in some cases up to like 20 hours to reach
where your destination is. And then you'd return
back through the atmosphere. The capsule
would deploy its parachutes and then it'd
actually splashdown in the Gulf of Mexico or
in the Atlantic Ocean. Earlier this year, Spacex
is crew Dragon Capsule and Falcon nine Rocket
became the first commercially built and
operated spacecraft to carry NASA astronauts to
the International Space Station. NASA gave SpaceX
more than three point one billion dollars to
develop Crew Dragon as part of the
commercial crew program. This is in addition to
the hundreds of millions of dollars of its own
cash that Musk said that SpaceX had spent in
developing the spacecraft. The goal was to build
a system to carry astronauts to and
from the ISS. But SpaceX could use the
technology for its own purposes as well. SpaceX,
The company, founded by Tesla's Elon Musk,
announcing it's partnering with Space Adventures, a
space tourism business to send up to
four people into orbit. Space Adventures already has
some experience in this realm. In the
early 2000s, The company helped organize several
trips for private tourists to the
International Space Station aboard Russian Soyuz rockets,
but has not flown another client since the
SpaceX Space Adventures experience would not include
docking with the ISS. Instead, tourists would
spend five days orbiting the Earth atop
SpaceX's crew Dragon capsule. SpaceX has also
penned a separate deal with Axium to fly
three tourists to the International Space
Station. The launch is planned
for October 2021. Spacex and its partners have
not announced a price for the tickets yet, but
they are expected to be in the range of
50 million dollars. Despite these deals and
the high expected price point of tickets, space tourism
does not seem to be the main
focus of SpaceX. Their core business has
been flying satellites and launching spacecraft for both
Pentagon as well as NASA and others and
flying cargo to the International Space
Station. And this would essentially be
just a boon to what they already have
in place. Elon Musk's main dream for
the company, to build a fully reusable rocket that
would take humans to Mars and beyond. But this could at least
in part, be funded by space tourism. We're faced
with a choice, which future do you want do
you want the future where we become a space spring
civilization and are in many worlds and are out
there among the stars or one where we are
forever confined to Earth? And I say it
is the first. Over the last decade,
companies like Virgin Galactic, Blue Origin and
SpaceX have made great strides in spaceship
technology, but there's still one big challenge
they must overcome before space travel can become as
common as air travel, proven safety. There are a myriad of
risks that are involved in space flight. Obviously, the
launch operations is always the riskier part
of space flight, but there's also
environmental factors. There is
physiological stressors. We have a space
environment itself with radiation exposure, with micrometeorites that
also pose a danger to these health
concerns may be more pronounced in the days
long orbital tours like those planned by Space X,
as opposed to the shorter trips that Virgin
Galactic and Blue Origin are targeting. But only time and
experience will tell. Right now, the United States
is the only country with national regulations
for human spaceflight for the private sector and
in there we have requirements for the pilots
and for the flight crew to some extent. But we do not
have regulations that stipulate specific requirements for
space flight participants. The FAA, which
is the regulating body for commercial space
flight in the U.S., does recommend that
spaceflight participants get a medical consultation up to
12 months prior to their flight. But this
is not required. Ultimately, it will be up
to the operator who they choose to allow to fly. And we can see right
now with Virgin Galactic, they're trying to minimize
the limitations on anyone who can fly because
they want to get the opportunity to everybody. We look at the health and
fitness of each of our customers. We look at
that initially and then we'll be checking it in,
you know, the final days and hours before that flight.
We've had many of our customers fly centrifuges
and zero G flights. We've done a lot of
work on that health and fitness structure. And, you know, the good
news is that, you know, that most people who want
to fly should not be prevented from doing so in
terms of health and fitness. But if something
does go wrong, liability waivers for the
most part, shield space travel companies from
any wrongdoing. There is a liability
requirement under US law directed from Congress. And then states also
have added their own template language that
spaceflight participants would sign and that
launch operators are required by law to give to
the space flight participant prior to the flight, where
they say that they acknowledge the full risks,
that they're taking these risks upon themselves
and they will not help the operator or the
US government liable in the event of accident
or injury or death. For the foreseeable future,
space tourism will remain a luxury experience
if you're able to reach scale and reliability,
then you can bring prices down. More competition
comes in offering different services and
you will eventually democratize. But despite
anyone's ambition to truly democratize the industry,
it will take time. And in order to
survive during that time, you are likely going to
have to either focus on the government or a very
small niche market until you can expand. Virgin
says that although the company hopes to bring down
ticket prices in the long term, in the short
to medium term, prices might actually go up because
the market is so constrained. But having a
niche market may not necessarily be bad when
dealing with wealthy customers. In fact, some
investment experts argue that the widening wealth
gap in the U.S. will actually provide the
richest of the rich with more money to
spend on such experiences. Virgin Galactic, SpaceX and
Blue Origin all have different reasons for getting
into the space tourism business, whether it's
to develop and prove out technologies to
allow humanity to take advantage of cosmic resources
to colonize Mars or to give us a greater
perspective about our own planet. The reality is that
at least in the near future, space tourism will
not truly make our cosmos accessible
for all. Regardless, it will likely
make space companies a pretty penny. The space
tourism industry is an industry waiting
to happen. We are just waiting for
that technology to lift off.
