Virgin Galactic Tumbles After Delaying Branson Flight Again
(Bloomberg) -- Virgin Galactic Holdings Inc. sank after saying its next test flight to space won’t occur until May, three months after the previous plan and further delaying the company’s space tourism trips.
The new schedule also pushed back Virgin Galactic’s plan to carry billionaire founder Richard Branson on a separate test that had been set for the first quarter, since his flight would need to follow the May trial. Branson’s trip is likely for this summer and dates for it are being considered, the company said on a conference call Thursday evening after reporting quarterly results.
The shares plunged 14% to $36.50 before the start of regular trading Friday in New York, putting the stock on course for its sharpest decline since mid-December. Virgin Galactic had advanced 78% this year through Thursday as anticipation built for its commercial debut.
The delays underscore the challenges for Virgin Galactic as it seeks to get its space trips up and running. The company plans to resume sales after Branson’s flight.
President Mike Moses said electromagnetic interference problems caused a computer problem in December, when the rocket’s engine failed to ignite during a test flight. Virgin Galactic replaced flight-system computers but then uncovered additional EMI issues as it prepared for a Feb. 13 flight. Those problems will take until May to correct.
“Investors looking for a shorter runway for profitability or even commercialization of their space tourism business have been disappointed,” said Andrew Chanin, co-founder and chief executive officer of ProcureAM, which runs a space ETF that holds Virgin Galactic shares.
The report “is another good lesson and example that space is a tricky business,” Chanin said in an email.
The Las Cruces, New Mexico-based company also announced its first revenue flight, a space journey with three members of the Italian Air Force that is planned for late summer or early fall.
After the flight with Italians, Virgin Galactic plans a pause for maintenance and other preparatory work ahead of commencing regular customer flights in early 2022. The company has a backlog of 600 customers who have paid for trips to space.
On a conference call to discuss financial results, Virgin Galactic CEO Michael Colglazier downplayed the significance of the test-flight delays. He also pushed back on questions about whether the company has adequate cash to sustain any future delays while still planning increases in capital spending.
“I don’t think this is a big slip at all, it’s eight or nine weeks,” Colglazier said. Virgin Galactic has more than $650 million on its balance sheet and is spending about $60 million per quarter, he said.
The company plans to debut its second spacecraft in March, followed by a third later on. After that, however, Virgin Galactic will transition its assembly processes to a new “Delta class” spaceship that can be built faster and will require less maintenance than its three predecessors, Colglazier said.
Virgin Galactic is targeting 400 annual suborbital flights in the future, with as many as three daily from the spaceports where it operates. All the initial flights will be from New Mexico.
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