Virgin

It occurs to me that with hundreds of millions being spent on crewing Virgin’s air fleet that spending a few tens of millions to build and operate Space Ship Two might be justified on personnel policy grounds. Giving the Virgin airlines pilots a chance to go to an elite school to learn to be White Knight pilots or Space Ship Two pilots might make them happier, more productive workers who spread good cheer and promote good labor relations. The same could be true for customer and aircraft ground personnel. So the Virgin Galactic investment might make sense for labor morale and not just for marketing and to keep the owner happy.

XCOR

I like Lynx (see The Space Review this week). At $17 million, it needs operating profit of $4.25 million to achieve a 25% return for investors. I don’t think XCOR has been seeking debt financing (contrary to the philosophy of take the smallest possible risk) so strategic investors can invest with their heart and be happy seeking a slightly lower monetary return. $4.25 million assuming 1/3 going to the space line and 1/3 going to cost would leave 1/3 to pay investors so XCOR would need to capture $12.75 million/year of the market. At $100,000/flight that’s 128 flights or about 5% of their annual capacity assuming three vehicles and 50% up-time for each vehicle and 4 flights/day.

With some predicting a 15,000 seat market ($3 billion/year at $200,000 which is closest to EADS’s estimate) and Futron at 500 seats growing to thousands of seats over a couple of decades ending at about $700 million/year in 2021, XCOR’s required fraction of the market to achieve a 25% investor return is about 25% of seats or 14% of money given their initial price point in a 500-seat/year market 2% of the money in a $700 million/year market or 1% of a 15,000 seat market (0.5% of the money).

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If either of these teams is to begin test flights in 2010 and service in 2011 or 2012, I’d look for announcements like “fully funded”, regulatory hurdles met, various announcements about engineering hurdles, then an actual test flight program. It would be nice if they gave a public timeline of minimum time from each event to first paying participant flight. I don’t think more secrecy than is necessary for mystery and buzz is beneficial with each team taking a different approach and offering a well-differentiated product that requires extensive disclosure to meet regulatory hurdles and attract customers.