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Virgin Orbit in jeopardy: Will Branson’s company return to space?

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Last week, space launch company Virgin Orbit temporary paused operations and furloughed most of its 700 employees in an attempt to buy time for an investment rescue plan. BELLA RICHARDS looks at what went wrong and what the future holds.

Virgin Orbit (VO) has had a busy 2023 so far, but not necessarily in a good way. After failing to put satellites to orbit from Spaceport Cornwall on 9 January, the company announced in mid-March that it had begun a temporary pause of operations and furloughed most of its 700 employees in an attempt to buy some time while it finalises an investment package.

The company, which is part of billionaire Sir Richard Branson’s Virgin Group, completed several successful launches before the high-profile UK launch. While many analysts expected such a problem to happen eventually, it has put the company and the UK launch industry’s future into a crisis. But what happens now, and will Virgin Orbit be flying satellites into space any time soon?

What actually happened?

VO’s LauncherOne is dropped from below the 747 ‘mothership’ before launching satellites into low Earth orbit. (All via Virgin Orbit)

On Thursday 16 March, CNBC broke the news that VO had held a meeting with its staff the day before, announcing it was furloughing almost all employees and pausing operations for a week. According to anonymous sources, the company said it hoped to provide an update on the news within a week.

In a US Securities and Exchange Commission filing, the document said the operational pause was placed to “conserve capital while the Company conducts discussions with potential funding sources and explores strategic opportunities. There can be no assurance that these discussions will result in any transaction”. Further, the filing claimed VO expects the pause to continue through 21 March.

VO was founded in 2017 and has completed six spaceflight missions – two of which ended in failure. Structured to grow the small satellite market, Virgin Orbit’s modified Boeing 747 aircraft, dubbed Cosmic Girl, is designed to carry its LauncherOne rocket to 35,000ft, where the converted airliner drops the rocket in mid-air for it to launch into orbit and deploy satellites.

While VO has completed successful launches at the Mojave Air spaceport in California, – aside from its maiden flight in 2020 – the event on 9 January represented the first time the company attempted to operate outside of the US. However, the night launch from Cornwall to put seven satellites into orbit hit trouble when it was announced that LauncherOne had suffered an ‘anomaly’, and the rocket had crashed back into the Atlantic. 

Investigation during the weeks that followed revealed that a $100 component was the culprit of the failure. VO confirmed on 14 February that a fuel filter had “dislodged” from its position and created a ripple effect of issues, including starving the vehicle of fuel, which then ultimately caused the rocket to be unable to reach orbit.

Financial woes

Will Virgin Group founder Sir Richard Branson continue to support VO until it can stand alone?

While the news of VO’s cash position plastered every major publication on 16 March, it “has been expected for a while”, says UK space industry analysis company, Seradata.

“With a cash burn of about US$40m a quarter, and with few imminent cash-generating LauncherOne launches imminent – a situation not helped by the failure of its air-launch attempt taking off from Newquay –  analysts had been predicting since last year that Virgin Orbit would not have enough cash to continue much further”, the company said in a statement.

By the end of the third quarter of 2022, VO obtained US$71.2m in cash. This was boosted by an additional US$45m injected by Branson by the end of 2022. Then, in February, VO raised an additional US$10 million in the form of an unsecured convertible note from Virgin Investments Limited (VIL), the investment arm of the Virgin Group.

“We became aware a few months ago that the cash burn rate meant that they would need more cash if they were to continue operating,” said David Todd, head of Space Content at Seradata. “While the firm has launch bookings, it did not have many in the near term to help its revenue position.”

In hopes that VO will survive the cash crunch for another year, Todd said the company would need to raise at least US$160-170m. “Once they start launching, they will start generating revenue, so that makes things a lot better for them,” Todd said.

What happens next?

LauncherOne’s main stage is seen falling back to Earth shortly after separating from the rocket’s upper stage during the company’s Launch Demo 2 mission in January 2021. 

Essentially, VO will need a large cash injection before it can even think about resuming operations. As of 17 March, the Financial Times said that VO was in discussions with two financial investors about a potential buyout or fundraising scheme. Anonymous sources told the FT that VO said all options were “on the table” in discussions with potential financial investors. Investors may buy the business as a whole, or a stake to get VO back into a positive cash flow. The announcement comes as VO awaits clearance from US safety authorities to launch its next mission in California. But, if the company is still in financial problems, the launch will unlikely occur, the source said.

However, on 19 March, Sky News broke news that the spaceflight company was in talks with two restructuring firms, Alvarez & Marsal (A&M) and Ducera, both based in New York, as a fallback option if it cannot source funding.

Unfortunately for VO, any sale price will be a fraction of its original valuation of US$3.7bn, the FT source added, especially considering the launch failure. “It was costing $50m in cash a quarter to run as it stands today,” the person told the FT. “They started on the back foot because they didn’t raise enough cash. Then it has been a series of mishaps and delays that impacted them.”

Other lifelines are a possibility, but unlikely. The UK government could inject more money into VO (on top of the £7.35m it invested in 2019), but as Todd says, there are other launch vehicles being built – such as Orbex Prime in Scotland – that will meet the needs of the UK space industry. In an email, a UKSA spokesperson said: “This is a commercial matter for VO, and we are engaging regularly with the company to understand next steps. We recognise that launching into space is an inherently challenging endeavour – that’s why we continue to support multiple projects to make the UK the leading provider of commercial small satellite launch in Europe by 2030, generating jobs and growth in communities across the UK.”

Beyond VO’s four walls

The potential collapse of VO would impact large numbers of companies within the space supply chain.

This situation will not only impact VO, but several other companies and organisations whose operations significantly benefit from the company’s survival. For Spaceport Cornwall, there is mixed opinion about its future. On one hand, its future profit was tied to Virgin Orbit’s ability to launch horizontally. However, its prime location will attract other operators’ interest, and the company is therefore confident in its future. In a statement from Cornwall Council’s Louis Gardner, which owns the spaceport, the councillor said: “Our focus at Spaceport Cornwall is to continue to grow the space cluster in Cornwall, alongside progressing relationships with spaceflight operators.”

While Spaceport Cornwall will likely bounce back in a matter of time, VO has made several launch site proposals with other nations that are now hanging in the balance. In April 2021, VO and the Brazilian Space Agency announced plans for operating orbital launches from the Alcântara Space Centre. Further, VO announced a subsidiary called Virgin Orbit Brazil in June 2022 with plans to start launching this year. In September 2022, it also signed with Australian property developer Wagner Corporation to launch from Toowoomba Wellcamp Airport in Queensland in 2024. What will happen to these partnerships? VO’s hoped for updates in the coming days will hopefully bring clarity to the future of these launch sites.

While Virgin Orbit’s immediate future is in jeopardy, it could well be looked back upon as a blip for the UK space industry. If the UKSA and Spaceport Cornwall’s comments are anything to go by, the UK has the resilience – and ambition – to push through these obstacles and become a strong, spacefaring nation. 

Bella Richards

21 March 2023

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