Space tourism company Virgin Galactic (SPCE +1.04%) got its start in 2017. The company then IPOed in a special purpose acquisition company (SPAC) transaction in 2019, sent its founder, Sir Richard Branson, to space in 2021, and began regular commercial spaceflights in June 2023. Every couple of years, it seems, Virgin Galactic has something interesting to report.
But what investors want to know is: When will Virgin Galactic report its first profit?
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Key Data Points
Costs and profits
The answer will probably be longer than "in a couple more years."
A few months ago, I walked investors through the financial dilemma facing Virgin Galactic, which boils down to this: Virgin Galactic spends $125 million per quarter on operating costs but brings in far less than $125 million in revenue. (In fact, last month Virgin Galactic confided that it's going to collect only about $1 million in revenue in each of the next two quarters.)
Because profit equals revenue minus cost, it's now a mathematical certainty Virgin Galactic won't turn profitable before the end of this year. But when will Virgin Galactic earn a profit?
After figuring out how many spaceplanes Virgin Galactic needs to build and the number of times it needs to fly them each quarter in order to generate $125 million in revenue to offset its $125 million in costs, I concluded there's no solution for Virgin Galactic to turn profitable before 2026 at the earliest. (2026 is the year the company first begins flying its new class of Delta spaceplanes, thus doubling the size of its space fleet).
After 2026, however, I calculated that Virgin Galactic might turn profitable if it can build a fleet of eight spaceplanes, fly each of them once per week (or 100 total flights per quarter), and collect at least $1.25 million in ticket revenue per flight.
And it seems Virgin Galactic agrees with me.
The Ars interview
Last week, you see, Ars Technica senior space editor Eric Berger was able to get Virgin Galactic President Mike Moses to sit down for an interview, and give up some facts and figures on what this space company is planning for its future in general -- and for its Delta-class spaceplanes in particular. Among the revelations:
- Virgin Galactic's next flight could take off as early as Sept. 8 but will carry only three paying passengers. (VSS Unity was originally rated to carry six, so this flight will collect only half the revenue investors expected, which helps to explain why next quarter's revenue will be so low.)
- VSS Unity, which first flew in 2016, was designed to fly 500 to 1,000 times -- or 10 years -- before retirement. (Depending on which comes first, the spaceplane might therefore be ready to retire in 2026.)
- Unlike VSS Unity, which was manufactured and assembled "layer by layer" like building "a Lego Star Destroyer," as Moses put it, Delta-class ships will be built and assembled as three modules: forward fuselage, aft wing, and "feather" reentry system.
- Ultimately, Virgin Galactic wants "a couple dozen" Delta-class spaceships. In the nearer term, the first Delta will be ready to flight test in late 2025 and will enter commercial service in 2026.
- Disposable engines for Delta can currently be built at the rate of 20 per month, permitting an upper limit of 60 total flights per quarter. (So ramping up to 100 flights will require a production line expansion.)
- Finally, to reach 100 flights per quarter, Virgin Galactic will need a second "mothership" and a total of "four to eight" Delta-class spaceplanes.
Interestingly, that's the same number (at the high end at least) of spaceplanes that I calculated Virgin Galactic would need to reach breakeven profits.
The upshot for investors
Analysts polled by S&P Global Market Intelligence currently think Virgin Galactic will flip from losing money to making money in 2027 and grow its profits steadily thereafter. And yet, seeing how Virgin Galactic's official estimates align so well with my very unofficial estimates reinforces my belief that I've got a better grasp on the company and its prospects than the analysts do.
And unfortunately for investors, this means the analysts are probably wrong about Virgin Galactic.
If we assume the first Delta-class spaceplane begins flying in 2026, and flies once per week carrying six passengers paying $1.5 million in combined ticket prices, this implies $78 million in revenue that year. That's not enough to turn a profit on $125 million in operating costs, and the situation gets worse if Virgin Galactic continues flying fewer than six passengers per flight, generating correspondingly less revenue.
Jump ahead to 2027, and Virgin Galactic might earn a profit if it begins flying enough passengers paying the company's recently raised ticket price of $450,000, and/or the company is able to get a second or third Delta-class spaceplane into service.
That's if absolutely everything goes right, however. Fewer passengers per flight, fewer flights per month, too many passengers paying $250,000 instead of $450,000, or fewer planes in service -- any of these factors holds the potential to throw off the timeline and prevent Virgin Galactic from earning a profit in 2027.
And even if everything does go right, there's still the cost of building an extra mothership and "four to eight" new spaceplanes -- at $50 million to $60 million a pop -- to consider. These added costs, too, must be subtracted from Virgin Galactic's revenues, pushing profitability further off into the future.
Long story short, Virgin Galactic may eventually turn itself into a profitable company. But if I were a betting man, I wouldn't lay odds on this happening in 2026, 2027, or 2028, either.
