Small rocket business

Virgin Orbit has a unique launch capability, but it has come at a high price

“I don’t see how that business case closes.”

Eric Berger – Oct 6, 2020 7:30 am | 76

Cosmic Girl takes to the skies for the final captive carry test flight in the LauncherOne development program, April 12, 2020. Credit: Virgin Orbit/Greg Robinson

The slim white, red, and black rocket dropped into the blue sky for the first time in late May. For a few tantalizing seconds, all appeared well as the booster cleared the 747 carrier aircraft and ignited its NewtonThree engine.

The engine burned brightly in the thin atmosphere, but it was not to last. The line feeding liquid oxygen into the rocket engine breached, and, without a supply of oxidizer, the kerosene fuel would not burn. As the engine starved, the rocket was lost—and so were Virgin Orbit’s hopes of reaching orbit on its first try out.

In the wake of this letdown, company officials were upbeat, promising to move swiftly toward another launch attempt. “We took a big step forward today,” said Dan Hart, the chief executive of Virgin Orbit, hours after the rocket tumbled into the Pacific Ocean.

Left unsaid, however, is what future the company would step into. Virgin Orbit stands among more than a dozen well-funded, credible ventures in the United States and abroad seeking to develop reasonably priced rockets capable of delivering small satellites into orbit.

The challenge for Hart and his company is that one of the enabling features of this new generation of smallsat launchers is their low price. These new companies, of which Rocket Lab has been the first and only competitor to reach orbit, are promising makers of small satellites timely and low-cost rides to precise orbits. To accomplish this, they must be able to build their rockets for less and run a lean operation.

As Virgin Orbit drives toward its second launch attempt late in 2020, it is not clear whether the company will be able to pull this off. Started in 2011 by Sir Richard Branson as an offshoot of his Virgin Galactic space business, Virgin Orbit has not revealed how much it has spent to date. But industry officials estimate it has expended between $500 million to $700 million developing LauncherOne and the infrastructure to support it.

A lot of this money has been spent on building a large, capable team. The company says it has 575 employees now as it seeks to reach orbit and build multiple rockets for subsequent flights. By industry standards, it’s a relatively large team.

“The way to keep your cost in check is to keep your team size reasonably small,” said Rob Meyerson, who served as president of Blue Origin from 2003 to 2017 before founding a consulting business, Delalune Space. “The years add up, and 575 people is a lot for building a small launch vehicle.”

So how did this happen at Virgin Orbit, and is there still a path to profitability? Ars spoke with half a dozen people at senior levels in the small launch industry, including former employees, to find out. Some agreed to speak on the record, others requested anonymity.

Competitor costs

The sources for this article unanimously agreed that spending one-half to three-quarters of a billion dollars to reach an initial launch attempt represents an outsized amount of money for a purely commercial company. Certainly, government efforts to design and develop new liquid-fueled rockets have cost much more than that, but there is little comparison to others in the class of LauncherOne.

From its founding in 2002 to its first launch attempt in May 2006, SpaceX spent about $100 million developing the Falcon 1 rocket, which had a comparable lift capacity as LauncherOne of about one-half metric ton to low-Earth orbit and two launch sites.

Likewise, Rocket Lab CEO Peter Beck said his company spent nearly $100 million getting its Electron rocket into space. Astra has spent about the same amount on its Rocket 3.0 vehicle, which made an orbital launch attempt in early September. These two rockets are smaller and slightly less capable than LauncherOne.

Finally, there is Firefly Aerospace. Its Alpha rocket is larger, with about double the payload capacity of LauncherOne. The company laid off virtually its entire workforce in 2016, but it has since returned with a bigger rocket with a completely new design. According to Firefly founder Tom Markusic, through Max Polyakov’s Noosphere Ventures, Firefly Aerospace has since raised and spent approximately $160 million in total. It is targeting a launch before the end of 2020.

“Use of funds included constructing our headquarters, manufacturing and test facilities in Texas, launch site development at Vandenberg, design, development and testing of the Alpha launch vehicle, complete production of the Alpha Flight 1 vehicle, construction of a prototype Orbital Transfer Vehicle, and beginning production of Flight 2 and 3 vehicles,” Markusic said.

Roughly, then, this means that Virgin Orbit has outspent its competitors by as much as five times when it comes to rocket development. The company says it has a unique capability as a result (we’ll get to that). Regardless, raw expenditures matter when the company is selling a launch for about $12 million per flight—and perhaps clearing a small increment of that after expenses.

“I don’t see how that business case closes,” Rocket Lab CEO Beck said in an interview. “How do you spend that much money and have a return on investment? And moreover, if you’ve spent that much money and you are where you are, maybe it’s time to have a re-think.”

Origin of Virgin Orbit

The story of Virgin Orbit begins more than a decade ago, just a few years after Branson founded Virgin Galactic to bring space tourism to the masses. Galactic planned to use a large, expensive, custom-built White Knight Two aircraft with a wingspan of 43 meters as the first stage for its suborbital space plane. As early as 2007, a few company officials considered the use of the carrier aircraft for launching satellites to increase revenues from the vehicle.

This remained a back-burner idea until around 2011, when a recent Virgin Galactic hire, Will Pomerantz, was tasked with formalizing the idea and turning it into a business. The company really began to ramp up design of a rocket to be dropped from an aircraft thereafter, hiring several key employees from SpaceX who had worked on the Falcon 1 and Falcon 9 rockets and were looking for the next thing.

Chris Thompson, a founding employee at SpaceX, played a key role in designing LauncherOne beginning in 2012, and later he would be joined by other SpaceX transplants, including propulsion specialist Robin Ringuette, launch directors Tim Buzza and Roger Carlson, and mission operator John Couluris.

These former SpaceXers, along with a handful of other engineers, would form a relatively small nucleus that made progress on Virgin Orbit’s rocket. As they got deeper into design studies, these engineers realized that White Knight Two could probably only carry a rocket ultimately capable of lofting about 100kg into orbit. They also had concerns about availability of the aircraft—would Virgin Orbit have secondary priority after the space tourism business? And finally, Virgin was finding that White Knight Two needed a lot of maintenance that may not sustain frequent flights.

All of this led the rocket firm to break away from using the composite aircraft to search for a commercial alternative, finally settling on a 747, which had a built-in capacity to carry a flight engine under its left wing. The company purchased a 14-year-old jet within the Virgin Atlantic fleet already named Cosmic Girl. Sources say it cost about $12 million, and some $20 million in modifications began in late 2015.

At the time, employees said the rocket offshoot of Virgin Galactic—Virgin Orbit would not be formally separated from Galactic until 2017—operated similarly to SpaceX in its earlier days. The business ran fairly lean, and it felt comfortable to move fast, testing some but not exhaustively. “At the time, we felt that failure was an option,” one former employee said.

Sources say the environment began to change in 2016, when long-time Virgin Galactic President Steve Isakowitz left to become chief executive of The Aerospace Corporation. In March of the following year, the newly formed Virgin Orbit named Dan Hart, who had spent decades as a system engineer at Boeing’s Space division, as its president. Hart had a successful record, but he also instituted a more cautious approach.

Ideas to fly sooner were discarded, sources said. For example, the engineers recognized the potential for the liquid oxygen feed line to break during the rocket’s drop from the aircraft and engine ignition, but this was something that could not be tested on the ground. Perhaps, they thought, they should just drop a first stage out of the plane to test it? That way they need not finish the rest of the rocket, and they could get real flight experience faster. But this idea was nixed.

This may help explain the change in the company’s timeline for its first launch. In May 2018, Pomerantz told Ars he anticipated making a handful of flights before the end of that year, and the company aimed for a dozen launches in 2019. (The company’s first launch didn’t come until May 2020.)

Asked about changes Hart made at Virgin Orbit, Pomerantz said the new company president brought an added focus on crew safety to the company. “We have this relatively unusual fact of having crew onboard the aircraft, which makes us different from most other launchers,” he said. “As the system matured, some components and systems needed testing or even redesign work to help us make sure that the crew and ground team were safe.”

To ensure crew safety, Hart added in several flight tests and a rocket drop test into the program.

Meanwhile, Virgin Orbit’s engineers encountered some challenging and novel problems for a horizontally launched, liquid-fueled rocket. For one, it was difficult to design a rocket that could sustain horizontal flight loads full of propellant. They also had to learn how to super-cool the oxidizer on the ground, because it would remain stowed for about an hour from the time the rocket was topped off until LauncherOne was dropped from Cosmic Girl.

The additional tests and engineering problems, as well as the inevitable schedule slips in rocket development, all contributed to the schedule slip from 2018 to 2020.

Funding secured?

For a long time, funding was not an issue for Virgin Orbit. The team remained relatively small, and within Branson’s sprawling Virgin empire, the space tourism and rocket enterprises were treated as skunkworks-type operations. They enjoyed a degree of autonomy and freedom to experiment. As the other Virgin companies prospered during an economic boom, every year the profit-less space enterprises would receive the development funding needed to continue.

“We just knew the money was going to come in every year, and it never felt like we were in extinction mode,” said one former employee. “It was a good thing, because we knew we were going to have another meal.”

This may be changing. The COVID-19 pandemic has not been kind to Branson’s businesses, most of which are predicated on the travel and leisure industries. This summer, he sold as much as half a billion dollars of stock in Virgin Galactic to shore up his other enterprises. Given this, pressure is likely rising for the space side of the Virgin portfolio to begin turning a profit.

So how does Virgin Orbit do that? The first step, of course, is getting LauncherOne safely into orbit and beginning to fly commercial and government missions. That may happen within the next few months, or early 2021.

The company’s biggest selling point with LauncherOne is that it offers the first-ever air-launched, liquid fueled rocket. If Virgin Orbit can begin flying its rocket reliably, and on a relatively short turnaround, using a 747 as a first stage means that it could offer service to any orbital location for small satellites on short notice.

“The nice thing about developing a different type of launch service with new capabilities is that we can serve different types of markets, including entirely new types,” Pomerantz told Ars. “The investment we have made in the development of this new system plus our production facility unlocks a lot of different revenue lines for us, including some where we can generate a particularly nice return for our investors while still giving our customers a hell of a deal.”

Given that it’s difficult to see Virgin Orbit making back its investment through the sale of launches alone, industry sources speculated about other ways the company may be able to recoup some of the money already spent.

Path to profitability

One potential avenue is licensing the LauncherOne technology to other countries, as Lockheed Martin does with the F-35 fighter jet with State Department approval. Under such a scenario, a country without a launch industry might pay something on the order of $200 million to license the technology, and those countries could fly LauncherOnes from their own soil.

However, this may run afoul of the Treaty on the Non-Proliferation of Nuclear Weapons, which blocks the sale of technology that could be used to deliver nuclear weapons. And it is not clear whether countries would want to license the technology, as they might be more interested in supporting a home-grown launch startup.

Another idea is that the US military may value an air-launched rocket that could provide on-demand service to any orbit. The thinking here is that the Air Force or Space Force may provide some baseline of contracts in order to keep this service online.

However, one source noted that this capability already exists in the form of the Pegasus rocket. Built by Orbital Sciences Corporation, the Pegasus booster first flew in 1990, and it, too, dropped from a carrier aircraft. It has flown 44 missions over the last three decades, and as a solid-fueled rocket it should theoretically be available even more on demand than LauncherOne.

The reality is that the US military has not been all that interested in Pegasus, serving as the primary customer for about 20 percent of its flights. The military has not flown on the rocket since 2008. Pegasus has never been used to get a warfighter asset into space.

“I don’t understand why everybody doesn’t realize that this capability already exists,” this industry source said. “It’s sitting on a runway, it’s a solid rocket. I don’t understand how Virgin has proliferated this concept of being unique in this regard.”

Pomerantz disputed this notion. “I’m sure everyone thinks their baby is different and special, but I think I can fairly objectively say that a liquid-fueled, air-launched system is one of a kind,” he said. “Pegasus was obviously a great trailblazer in the realm of air launch, but our system is so different from that one in terms of its concept of operations and the corresponding flexibility that it’s still in a different category.”

In some sense, this is true. The Pegasus rocket was essentially assembled from off-the-shelf components from leading aerospace firms. Because it relied so heavy on suppliers, the rocket was expensive. It now costs as much as $40 million per launch.

Virgin Orbit is trying to do that faster, better, and cheaper. The best thing it can do now is prove the doubters wrong by flying soon—and then often.

Eric Berger Senior Space Editor

Eric Berger is the senior space editor at Ars Technica, covering everything from astronomy to private space to NASA policy, and author of two books: Liftoff, about the rise of SpaceX; and Reentry, on the development of the Falcon 9 rocket and Dragon. A certified meteorologist, Eric lives in Houston.

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