SpaceX. Blue Origin. Virgin Galactic (SPCE -3.32%). What do these three companies have in common, and what sets them apart?

The similarities are pretty obvious. Each of Elon Musk's SpaceX, Jeff Bezos' Blue Origin, and Sir Richard Branson's Virgin Galactic are space companies, founded by and to a large extent financed by billionaire backers. Each company has successfully sent rockets to space, or at least the edge of space.

But the differences among SpaceX, Blue Origin, and Virgin Galactic could be even more important to investors preparing to invest in the space economy.

New Shepard rocket launch.

New Shepard rocket launch. Image source: Blue Origin.

Blue Origin

Let's begin with Blue Origin. It's working to develop an orbital-class rocket that could deliver payloads to low Earth orbit. But currently, the company is running test flights only on its smaller New Shepard suborbital rocket, with the aim of starting a space tourism business that will carry passengers to the edge of space, and then land them back on Earth. Blue Origin hasn't published a ticket cost for these voyages yet, however, so it's hard to say how profitable -- or even viable -- the business will be once it gets off the ground.

And in any case, although Blue Origin's founder is also the major stockholder of publicly traded Amazon.com, Blue Origin itself is not a public company, so you couldn't invest in it even if it did turn out to be a good investment.

VSS Unity flying free over New Mexico during June 25 glide test flight.

Virgin Galactic's VSS Unity in flight. Image source: Virgin Galactic.

Virgin Galactic

In contrast, Virgin Galactic is a publicly traded company. It is a business you can invest in.

Indeed, it's the only one of these three companies that can make that claim. Although Virgin Galactic has a sister company, Virgin Orbit, that is in the business of putting satellites in orbit, Virgin Galactic is dedicated entirely to human spaceflight -- first by sending space planes on suborbital flights so that tourists can enjoy a few minutes of weightlessness before landing. (Later on, Virgin hopes to develop hypersonic space planes for commercial point-to-point transportation.)

In contrast to Blue Origin, Virgin Galactic has published the ticket price for trips on its space planes: $250,000. Moreover, Virgin thinks the demand for its service will be so high that it can raise prices once it begins flying.

Before it can do that, though, Virgin needs to wrap up test flights on its VSS Unity space plane, and a recent postponement in the flight schedule suggests that won't happen until Q2 or Q3 of this year. Analysts are now predicting that commercial operations may not begin at Virgin Galactic until 2022.  

And here's the thing: By then, it may be too late.

SpaceX Starship with moon in background.

Artist's depiction of SpaceX Starship with moon in the background. Image source: SpaceX.

SpaceX

Why? Because SpaceX.

SpaceX, as you've probably heard by now, successfully launched and landed its SN10 prototype Starship earlier this month. Like Blue Origin's New Shepard, Starship is designed to be entirely reusable, requiring only maintenance and refueling between trips to space. That's in contrast to most space rockets, which are expendable -- discarded after each launch -- such that a new rocket must be built for each new launch. (Even Virgin Galactic's VSS Unity space plane is partially expendable. It needs a new engine cartridge after each launch.)

But unlike Blue Origin's New Shepard, and unlike Virgin Galactic's VSS Unity, SpaceX's Starship is an orbital class rocket. Meaning that not only can it go up, but it can go up fast enough to maintain its speed and orbit the Earth, and only come back down when it wants to.

For investors, this is a crucial difference.

How SpaceX will dominate space tourism from 2023 onwards

Currently, Virgin Galactic plans to charge its customers $250,000 (or more) for space tourism flights that last two to three hours -- most of which is atmospheric flight time to and from space, and only four or five minutes of which will actually be "in space." Blue Origin's flights will last only about 11 minutes start to finish. Because neither company's spacecraft can actually escape Earth's gravitational pull, their time in actual "space" must be necessarily brief.    

Not so with SpaceX and Starship. While originally designed as a Mars transport vessel, and later tweaked to carry astronauts to the moon and back, Starship would also serve admirably as a space tourism vessel.

Once the company gets the final kinks worked out, each Starship should be able to carry up to 100 passengers on flights of essentially unlimited duration -- to the International Space Station, to the moon, or just 'round and 'round the Earth in orbit, providing literally hours, or days, of space fun for its customers.

And it can do this for a bargain price.

Musk has estimated the operating cost of a Starship launch at just $2 million. Divided among 100 paying passengers, that works out to a cost of service of just $20,000 per head. And that means that...

Well, do the math. Assume Musk wants to undercut the prices of Virgin Galactic and Blue Origin, and also earn a tidy profit for SpaceX. Were he to set a ticket price of, say, $50,000 for Starship, he could underprice Virgin Galactic's $250,000 ticket price by 80%. And if SpaceX's launch cost is only $20,000 per passenger, SpaceX could earn a 60% operating profit margin at that ticket price -- about the same profit margin that SpaceX is targeting with its Starlink internet service.

SpaceX, by the way, plans to launch its first space tourism flight with Starship in 2023, flying eight passengers on a weeklong expedition to the moon and back. If Blue Origin and Virgin Galactic want any piece of this market at all, I suspect that's the deadline for them:  

Find a way to compete with SpaceX before 2023, or else find another business model.