Shares of space tourism pioneer Virgin Galactic (SPCE 1.37%) gained 2.5% through 11 a.m. ET on Monday. The company's new and improved share price appears to be benefiting from bad news for another space company entirely, however: SpaceX.
On Saturday morning, SpaceX conducted its second-ever attempt to launch a fully stacked Starship test vehicle atop a Super Heavy booster, aiming to circle the globe and crash the former into the Pacific Ocean, and pseudo-land the latter in the Gulf of Mexico. Instead, both vehicles exploded in flight.
NYSE: SPCE
Key Data Points
The threat from SpaceX
Virgin Galactic is currently the only space tourism company carrying paying passengers on regular flights to the edge of space. Jeff Bezos's Blue Origin company has a similar vehicle capable of making the flights, but its rocket, the New Shepard, has been grounded since an unmanned version blew up midair in September 2022.
New Shepard is expected to return to flight later this year. SpaceX, however, is arguably a greater threat to Virgin Galactic than is Blue Origin -- at least in the field of space tourism. Once it has been proven safe to fly, the SpaceX Starship could potentially carry as many as 100 tourists to space, per flight -- versus somewhere between three and six passengers per flight for both Virgin Galactic and Blue Origin.
What's more, unit economics suggest that a SpaceX Starship designed to carry tourists might be able to charge far less per ticket than either Virgin Galactic or Blue Origin could -- as little as anywhere from $10,000 to $100,000 per ticket -- and conduct longer and more interesting flights to boot.
Why this matters to Virgin Galactic
Saturday's aborted Starship test flight doesn't remove this threat from Virgin Galactic entirely, but it does delay it -- pushing it out farther into the future. SpaceX will have to conduct more test flights before its spaceship can be considered safe for human spaceflight.
How long this will take is anyone's guess, but given that seven months elapsed between SpaceX's first full-stack Starship test flight and its second, and that several more test flights are likely, my guess would be that Virgin Galactic has at least a couple of years before it needs to worry about Starship honing in on its space tourism business.
Therefore, Virgin Galactic now has some breathing room. Investors should hope it uses this time wisely.
