Spaceport America and Virgin Galactic: The Numbers Never Added Up

Fourteen years ago, Virgin Galactic and New Mexico promised “tens of thousands” of tourists would fly to space from Spaceport America by 2019. Total thus far: 0.

by Douglas Messier
Managing Editor

When they announced in December 2005 that Virgin Galactic would locate its space tourism business in New Mexico, Virgin Founder Richard Branson and Gov. Bill Richardson made a number of eye-popping claims about why taxpayers should back a plan to build the Southwest Regional Spaceport to serve as the space tourism company’s home base:

• $331 million in total construction revenues in 2007;
• 2,460 construction-related jobs;
• $1 billion in total spending, payroll of $300 million and 2,300 jobs by the fifth year of operation; and,
• $750 million in total revenues and more than 3,500 jobs by 2020.

Virgin Galactic would sign a 20-year lease as anchor tenant and pay fees based on the number of launches it conducted. New Mexico would use the spaceport, Virgin’s presence and the funds generated to develop a large aerospace cluster.

Surprisingly, New Mexico would spend more money, $225 million, to develop a facility now known as Spaceport America than the $108 million that Branson planned to spend on developing a fleet of five SpaceShipTwos and WhiteKnightTwo carrier aircraft.

Among all the big numbers in the announcement, there was a truly astounding one that was deemed so important it was mentioned twice. (Emphasis added)

[Spaceport] Construction will begin in 2007 and should be completed by 2009/2010. Branson and Richardson confirmed that Virgin Galactic plans to inaugurate space flights out of New Mexico once construction of the spaceport is complete, and plans to send 50,000 customers to space in the first ten years of operation.

[…]

A design for SpaceShipTwo is now in its final planning stages and construction of the commercial prototype is expected to commence in 2006 and be flying by 2008. It is expected that five SpaceShipTwo’s and two White Knight Two carrier aircrafts will be built, in order to allow 50,000 customers to experience personal spaceflight over a ten year period up to 2019.

Fifty thousand! 50K. 5-0-0-0-0. Two thirds of the 74,122 people living in nearby Las Cruces as of the 2000 U.S. Census.

It seemed incredible. Unbelievable even. Fewer than 500 people had flown into space by 2005, which was more than 44 years after Yuri Gagarin had rocketed into orbit aboard Vostok 1. Now Virgin Galactic was going to put more than 100 times that number into space in only 10 years.

The number of flights required would be enormous. At the time, Virgin Galactic was considering flying one pilot and up to seven passengers. It would take a minimum of 7,143 SpaceShipTwo launches to fly 50,000 passengers. Each of the five vehicles would need to fly an average of 1,429 times.

The company’s later decision to fly with two pilots and a maximum of six passengers increased the number of flights to 8,334, Each SpaceShipTwo would need to launch an average of 1,667 times.

Those would have been unprecedented numbers. As of today, there have been 321 orbital and 20 suborbital crewed launches.

HUMAN SPACE LAUNCHES, 1961-2019
PROGRAM	LAUNCHES	FAILURES (INFLIGHT LOV/LOC)	ABORTS	FATALITIES
Orbital Launches
Soyuz	143	2	3 (2 in-flight, 1 launch pad)	4
Space Shuttle	135	2	0	14
Apollo	15	0	0	0
Gemini	10	0	0	0
Vostok	6	0	0	0
Shenzhou	6	0	0	0
Mercury	4	0	0	0
Vokshod	2	0	0	0
Subtotals:	321	4	3	18
Suborbital Launches (Above 50 Miles/80.4 Km)
X-15	13	1	0	1
SpaceShipOne	3	0	0	0
Mercury	2	0	0	0
SpaceShipTwo*	2	0	0	0
Subtotals:	20	1	0	1
TOTALS:	341	5	3	19
* The flight of SpaceShipTwo VSS Enterprise on Oct. 31, 2014 did not involve an attempt to reach space. The flight resulted in the loss of the vehicle and the death of co-pilot Mike Alsbury.

The X-15, which is the world’s most flown rocket-powered space plane, flew 199 times in 9.5 years. Only 13 flights reached suborbital space; one of them crashed, destroying the vehicle and killing pilot Michael J. Adams.

Branson’s rocket plane would be a much larger version of SpaceShipOne, which flew to space three times and under power only six times. Two of the three spaceflights experienced serious problems. That was not a lot of flight history.

Branson was gambling that an unproven, experimental technology could fly more times than any vehicles before it. He was betting Virgin Galactic could operate safely in an industry known for catastrophic explosions.

Richardson, in turn, was wagering nearly a quarter billion tax dollars that the company could deliver on its promises.

A Sudden Increase

But, there was one other curious aspect of the announcement. When Branson unveiled the SpaceShipTwo project in September 2004, he predicted Virgin Galactic would fly 3,000 passengers in the first five years with his fleet of five spaceships carrying five passengers apiece.

Less than 15 months later, the estimate had morphed into flying 50,000 passengers in 10 years with five slightly larger ships carrying as many as seven passengers each.

But, was there really a market for that many flights? The press release made it seem as though it existed.

“Currently, there are 40,000 registrations from individuals from 120 countries,” the release said. “Virgin has an unprecedented record of innovation, past performance in implementing new commercial ventures, demonstrated insightful leadership, and sound business planning.”

Note the word used: registrations. The number of people who had expressed interest in the flying to space. It did not represent ticket sales or even people wealthy enough to afford a $200,000 flight. Not everyone who could afford one would be willing to risk their lives on a first-generation space tourism vehicle.

Virgin Galactic had signed the first 100 customers who had put down between 10 and 100 percent of ticket price. That was impressive enough for a vehicle that didn’t exist. It put the company 0.2 percent toward their goal of 50,000 ticket sales.

Among the first signups was “actress/skincare expert and space enthusiast” Victoria Principal, who called the chance to fly into space “the opportunity of a lifetime.”

That opportunity has required a very long wait. Technical problems, two fatal accidents and four fatalities have pushed Virgin Galactic’s time table more than a decade to the right. Virgin Galactic’s costs have soared to more than $1 billion — 10 times more than what Branson originally planned to spend.

To date, SpaceShipTwo has flown exactly two suborbital flights and zero paying passengers from the Mojave Air and Space Port in California. Commercial flights from New Mexico are not expected to begin before June 2020 — about 8.5 years after Branson dedicated the Virgin Galactic Gateway to Space terminal-hangar building there.

The long delays and lack of flights limited ticket sales. By the time they were suspended after the fatal crash of SpaceShipTwo VSS Enterprise in October 2014, the number of ticket holders was more than 700. That figure has since dropped to over 600 — about 1.2 percent of 50,000. The company plans to restart ticket sales after commercial operations begin next year.

Supporting Studies That Didn’t

To support the extravagant promises Virgin Galactic and New Mexico made to taxpayers, the press release cited two reports the state government commissioned. One was a business plan written by the Arrowhead Center at the New Mexico State University (NMSU). The other was a market study done by the Futron Corporation of Bethesda, Md.

The number 50,000 doesn’t appear in either of them. Nor do the projected number of SpaceShipTwo flights in the reports come close to allowing Virgin Galactic to fly 50,000 passengers in a decade.

Neither the NMSU nor Futron study did any technical analysis to determine whether Virgin Galactic’s fleet of ships could reach the launch cadence required to fly that many people.

NMSU Business Plan
[Full Report]

The NMSU business plan includes estimates for crewed suborbital flights for 2006-2010 from a Federal Aviation Administration (FAA) study produced in 2002.

The FAA report estimated a maximum of 2,173 flights during the five-year period. The estimated U.S. share of that total would range from 220 (constrained) to 1,632 (robust) launches.

New Mexico’s share of the U.S. total during those five years would range from 56 flights (25 percent of the constrained estimate) to 1,221 flights (75 percent of the robust estimate).

Assuming seven passengers aboard each flight, SpaceShipTwo would fly between 392 and 8,657 people from New Mexico during that period. With six passengers, the numbers drop to between 336 and 7,326 passengers.

Virgin did not expect to have SpaceShipTwo flying before 2008, with the new spaceport ready in the 2009-10 time period. Both of those dates are at the end of the time period used in the document.

The NMSU business plan makes no attempt to calculate the number of flights from 2010-2020. It does note that while the constrained scenario is likely in the near term, rapid growth might be possible during the 2010’s.

If the industry and New Mexico hold to the current tack of pursuing safety and delaying commercial launches until the technology is proven, the former scenario will be attained in the short run. This short run strategy, however, will allow the latter scenario to become more and more likely in the long run.

In fact, some of the operating plans for companies interviewed in compiling this analysis suggest that it might be possible to realize even faster growth, particularly after 2010.

As we prepare to bid farewell to the 2010’s, the number of commercial suborbital spaceflights stands at 13. In addition to SpaceShipTwo’s pair of crewed flights, Blue Origin’s reusable New Shepard capsules have made 11 flights to space with no one aboard.

The Futron Study

Futron’s market study included flight estimates for an 11-year period from 2010-2020. Figure 3 shows the total addressable market worldwide and New Mexico’s share of it.

The number of total flights worldwide were estimated at 82 in 2010 with a 10-fold increase to 852 in 2020. The total addressable market was for 3,839 flights worldwide during that period.

New Mexico’s flights would increase from 61 to 426, accounting for 50 percent of global flights in 2020. The state’s estimated share would have been 2,385 launches over the 11-year period.

A total of 2,385 SpaceShipTwo flights with seven passengers apiece would have equaled 16,695 passengers. That figure drops to 14,310 passengers with six paying customers in the cabin.

The 852 flights worldwide in 2020 would have averaged 2.3 per day or one every 10 hours 17 minutes. With 426 flights that year, New Mexico would have averaged one flight every 20 hours 34 minutes.

It should be noted that Futron’s estimates envisioned other suborbital operators at Spaceport America. They also came with a substantial disclaimer. (Emphasis added)

“These launch forecasts, for orbital and suborbital flights, are based on quantitative analyses of projected commercial and government launch activity. However, these are forward-looking estimates and represent an upper limit on the amount of launch activity that could take place from the facility—depending on the ability of the state to attract launch vehicle operators to the spaceport—rather than a definitive forecast on the actual number of launches expected to take place there during the forecast period,” the report stated.

In the end, the studies New Mexico commissioned to justify spending $225 million to build the Southwest Regional Spaceport did not support the claim that Virgin Galactic would fly 50,000 people to space in 10 years.

The Future Ain’t What It Used to Be

“We look forward to working together to make the ‘Final Frontier’ a reality for tens of thousands of pioneering space tourists,” Virgin Galactic President Will Whitehorn said in December 2005. “Our activities will prove the commercial viability and excellent safety technology behind private personal spaceflight and give birth to a new industry in New Mexico.” (Emphasis added)

Whitehorn has long since moved on from Virgin Galactic, leaving others to try to make good on the extravagant promises of 2005. And the company is no longer talking about flying 50,000 people into space.

Virgin Galactic made its flight projections public in a pair of investor and analyst presentations filed this summer with the Securities and Exchange Commission (SEC) as part of its planned $808 million merger with Social Capital Hedosophia.

Before we dig into the estimates, let’s first take a look at the disclaimer that was the second slide in the analyst presentation. (Read a clearer version here.)

To summarize, the presentation is for informational purposes only, is not all inclusive, and includes a lot of “forward looking statements” about the business that might never happen. The financial and operating forecasts and projections have not been reviewed by independent public accountants.

Back to the Future

The numbers in the presentations are much closer to Branson’s original 2004 estimate of 3,000 passengers in five years than they are to the 50,000 promised the following year when the spaceport deal was announced.

Virgin Galactic plans to begin flying passengers in June 2020 on its lone completed spacecraft, VSS Unity. The vehicle would carry four passengers initially, increasing to five in 2021.

SpaceShipTwo-02 and SpaceShipTwo-03, which are now under construction in Mojave, would be completed by the end of 2020 and 2021, respectively. They would begin carrying five passengers per flight before moving to full capacity with six.

Virgin Galactic is also planning to build two additional SpaceShipTwos carrying six passengers apiece at the onset. Those ships would begin flights in 2022 and 2023.

The chart above shows the number of passengers rising from 66 next year to to 1,565 in 2023. In total, Virgin projects flying a total of 3,242 passengers over the four-year period.

SpaceShipTwo Flight and Passenger Projections
	2020	2021	2022	2023
SpaceShipTwo vehicles	2	3	4	5
Total flights per year	16	115	170	270
Total # of passengers flown	66	646	965	1,565
Launch cadence	13.4 days*	3.18 days (76 hours)	2.14 days (51.5 hours)	1.35 days (32.4 hours)
Average number of flights per vehicle	8	38.33	42.5	54
Number of passengers per flight	4.1	5.6	5.7	5.8
Sources: Virgin Galactic/Social Capital Hedosophia data and Parabolic Arc calculations * Assumes seven-month flight period beginning in June 2020

The number of flights would increase from 16 next year to 270 in 2023. SpaceShipTwos would go from launching about once every 13.4 days to once every 32.4 hours during that same four-year period. The five spaceships would need to launch 54 times apiece to conduct 270 flights in 2023.

Unanswered Questions

Since the investor and analyst presentations are essentially sales documents, they leave a lot of questions unanswered.

A key question for New Mexico is how many SpaceShipTwo flights will take place at Spaceport America. Although New Mexico serves as the company’s home base, Virgin Galactic is in active negotiations with parties in Italy and United Arab Emirates to fly from spaceports in those countries.

The company also previously announced plans to launch from Kiruna Airport in Sweden. Groups in other nations have also expressed interest in hosting SpaceShipTwo flights.

Virgin Galactic has not announced any specific dates from which they would begin flying from locations other than Spaceport America.

Another question is how accurate Virgin Galactic’s projections will be once rival Blue Origin begins flying passengers in its New Shepard suborbital vehicle.

After 11 successful suborbital flight tests, Jeff Bezos’ company is planning two more launches with no one aboard before flying test subjects. The additional tests will likely push crewed missions into next year.

Blue Origin has not announced when it will begin selling tickets or what it would charge. As a result, Virgin Galactic’s investor slide on its main competition doesn’t provide much information.

There is also the question of what happens if Virgin Galactic suffers another bad day similar to the one when VSS Enterprise was destroyed. The NMSU report pointed out the risks:

Perhaps the most troublesome and, therefore, most important technological force New Mexico faces in developing and managing the Southwest Regional Spaceport is safety. A fatal accident in commercial aviation barely attracts attention beyond the evening news and causes only a minor hiccup in air travel, if having any effect at all.

A fatal accident in a NASA mission, for example the Shuttle, grounded the fleet for nearly two years and caused a national debate about the merits of manned spaceflight. An accident, which is certainly possible in the emerging commercial space market, could be fatal to the industry if not to particular individuals.

Of course, it’s impossible to predict when a fatal accident could occur. Or what impact it would have on Virgin Galactic’s operations. Would it ground the entire fleet? For how long? Would the company suffer mass cancellations?

Given the small number of flights and the novelty of the vehicles, it’s very difficult to know just how reliable the SpaceShipTwos will be once they enter commercial service.

A Pyrrhic Victory

Fifteen years ago this week, on Sept. 27, 2004, Branson announced plans for a fleet of five suborbital rocket planes that would fly 3,000 people into space over five years beginning as early as 2008.

Fifteen months later — buoyed by New Mexico plan to spend $225 million on a custom-built spaceport and 40,000 “registrations” of interest — that prediction grew to 50,000 passengers in 10 years without any increase in the number of spaceships to be built.

In retrospect, the predicted number of flights and passengers were far beyond either the technology or the market could support. They were not supported by the studies New Mexico commissioned.

Current plans are much closer to the original predictions Branson made before he negotiated a spaceport deal with Richardson. Whether even those number can be achieved remains unknown.

The promises made in December 2005 were unrealistic. But, they worked. The New Mexico Legislature voted to fund construction of a spaceport the state had been wanting to build for 15 years.

The citizens of Dona Ana and Sierra counties voted to increase taxes on themselves to help fund what they promised would be an economic boon to a relatively poor part of the state.

Those residents are still waiting for most of those benefits to materialize 14 years later. They also continue to pay extra taxes to support the spaceport.

The state’s effort to use Spaceport America to create an aerospace cluster with thousands of well paying jobs has sputtered. Only a handful of additional tenants have chosen to locate there.

In addition to making monthly lease payments, Virgin Galactic is obligated to pay fees based on the number of suborbital launches it conducts. Without that extra revenue, Spaceport America has been forced to seek millions in additional funding from the state government to cover operating expenses and improvements needed to attract more tenants.

On Dec. 7, 2009, Richardson and California Gov. Arnold Schwarzenegger traveled to Mojave Air and Space Port on a stormy fall day for the public unveiling of Virgin Galactic’s first SpaceShipTwo, VSS Enterprise.

California’s state government had refused to provide any money for improvements to the Mojave spaceport where VSS Enterprise was built. Richardson, it appeared, had made a wise investment in luring Virgin Galactic away to the Land of Enchantment.

Today, New Mexico’s decision looks more like a Pyrrhic victory. As Virgin Galactic gears up to begin flying tourists next year, it remains to be seen whether Spaceport America will ever live up to its promise and justify the hundreds of millions spent to build it.