WASHINGTON — As Virgin Galactic prepares to finally begin commercial flights, the company is providing new details about how its next generation of vehicles can put the company on a path to profitability.
In a May 9 earnings call, company executives said they were on track to perform the first spaceflight in nearly two years by its SpaceShipTwo suborbital vehicle, VSS Unity, in late May from Spaceport America in New Mexico. That flight, designated Unity 25, is intended to be a final test before beginning commercial flights.
Virgin Galactic announced May 8 the crew of company employees who will go on the flight. Mike Masucci will be the commander of the flight with CJ Sturckow as pilot. The vehicle will also carry four company mission specialists: Jamila Gilbert, Christopher Huie, Luke Mays and Beth Moses.
The company is moving ahead with the powered flight, the first since July 2021, after a successful glide flight by VSS Unity on April 26. “We were very pleased with the way both our ships performed,” Michael Colglazier, chief executive of Virgin Galactic, said in the call, referring to both VSS Unity and its mothership aircraft, VMS Eve, that carried it aloft. “The flight provided the necessary data to clear the vehicles for our next mission, Unity 25.”
He said later in the call the company wasn’t planning any changes to the vehicles after the glide flight. “We’ve cleared ourselves to move forward,” he said. “At this point, this is pretty much dialed in to the technical operations team moving through their procedures.”
The company has not announced a specific date for the flight other than late May. Colglazier said in the call they were “two and a half weeks away or so” from the flight.
If Unity 25 is successful, Virgin Galactic expects to conduct its first commercial flight, called Galactic 01, in late June. That will be a dedicated research flight for the Italian Air Force under a contract announced in 2019. Colglazier said commercial flights, carrying both private astronauts and research payloads, would follow on “regular intervals.” The company previously said they expected to be able to fly VSS Unity about once a month.
Delta-class financials
Virgin Galactic used much of the earnings call to talk not about the upcoming Unity 25 flight but development of its Delta class of next-generation suborbital spaceplanes. The company provided new details about the economics of those vehicles.
“The Delta class will be the driver of revenue growth and profitability for the company,” said Doug Ahrens, chief financial officer, on the call. “We expect very attractive margins from the operation of our six-seat Delta class vehicles.”
With a ticket price of at least $450,000 per customer, Virgin Galactic expects to generate a minimum of $2.7 million in revenue per flight. The operating costs per flight are about $400,000, which include the costs of flying both the spaceplane and its mothership as well as training and hospitality costs for its astronauts. The company projects the amortized cost of each Delta-class spaceplane at $100,000 to $120,000 per flight, based on a production cost of $50 million to $60 million and estimated lifetime of 500 flights.
If those numbers hold, Ahrens said that would result in healthy profit margins. With a flight rate of once per week, each Delta-class vehicle would pay for itself in about six months, he projected.
“With such attractive economics associated with the Delta class, we remain laser-focused on the production of the program,” he said.
However, it will be several years before Virgin Galactic will be able to reap those benefits. Colglazier said the company is spending this year finalizing the design of the vehicle, which will have the same outer mold line as Unity but with changes to its composite structure and upgrades to other systems, like avionics. That will make the vehicle lighter and faster to turn around between flights.
The company expects to start assembling the first Delta-class vehicles at a new factory near Phoenix in 2024, with test flights in 2025. Commercial service with the first Delta-class vehicles is projected to start in 2026.
Executives said they were watching their cash flow to ensure they have enough money to get there. The company reported a net loss of $159.4 million in the first quarter with only negligible revenue. The company’s net loss was $93 million in the first quarter of 2022, with increased research and development costs for its Delta-class vehicle a key factor in the steeper loss.
Virgin Galactic is taking steps to reduce its cash burn. The end of overhaul work on VMS Eve and VSS Unity will reduce some spending. The company is also pushing back work on new mothership aircraft that will be used with the Delta-class spaceplanes, delaying expenditures on them by about a year.
Colglazier said they concluded that VMS Eve would be sufficient to handle the test flight campaign for the Delta-class vehicles in 2025, meaning that the new aircraft would not be needed until those spaceplanes begin commercial service in 2026.
“We’re quite happy with how Eve came through the modification program,” he said, and has the capacity to both support Unity commercial flights and Delta-class test flights in 2025. Deferring work on the future motherships enables “a more consistent cash burn going through the next couple years.”
The company ended the quarter with $874 million in cash, cash equivalents and marketable securities on hand. “Clearly, the current economic environment demands operational flexibility,” Ahrens said, calling moves like delaying work on the future motherships “effective levers that can be employed to manage costs.”
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