Virgin Galactic says full effect of pandemic on its business still unknown

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WASHINGTON — Virgin Galactic executives said May 5 that the suborbital spaceflight company has taken measures to resume regular operations during the coronavirus pandemic, but said they didn’t yet know its overall impact on the business.

During an earnings call for its first quarter financial results May 5, George Whitesides, chief executive of Virgin Galactic, said the company in March first reduced, then suspended, on-site operations at both its manufacturing facility in Mojave, California, as well as at Spaceport America in New Mexico. About two thirds of the company’s employees worked from home during that time.

In April, Virgin Galactic started to gradually return people to those sites, invoking a “critical infrastructure” designation by the federal government for aerospace companies. Through measures ranging from social distancing and use of facial coverings to testing of employees for COVID-19, Whitesides estimated that more than 90% of employees who need to work on site are now able to do so, although the company encourages those who can work from home to keep doing so.

Whitesides said the success of those measures was demonstrated by an unpowered test flight of the company’s SpaceShipTwo vehicle from Spaceport America May 1, the first flight of the vehicle since it was moved to the spaceport in February. “It was a really big deal to get off this last flight,” he said. “We’re able to create updated operational protocols that allow our team to operate safely and carry out test flights.”

However, he said the full effect of the pandemic on the company’s operations and overall business is not yet known. “It is too early to quantify the duration and severity of the impact that COVID-19 will have on our business and our pace of progression,” he said.

Whitesides said Virgin will perform at least one more glide flight of SpaceShipTwo from Spaceport America, followed by a series of powered test flights. “Our focus for this year, from a company and engineering perspective, is working to get the vehicles and our operations prepared for long-term regular commercial service,” he said.

That’s unlikely to involve commercial flights this year. “Looking forward to the rest of 2020, our primary focus is executing on our test flight program and ensuring the safety of our workforce given the challenges associated with the COVID-19 pandemic,” said Jon Campagna, Virgin Galactic’s chief financial officer. “Because of this, we anticipate minimal revenue for the remainder of the year.”

Whitesides also appeared to back away from a goal he expressed in the company’s previous earnings call in February of flying company founder Richard Branson to space by the end of the year. “We also remain focused on flying Richard Branson to space as soon as we can,” he said, but did not explicitly state that it would take place this year.

Campagna said the company, which reported a net loss of $60 million for the first quarter of 2020, had nearly $420 million of cash on hand but was taking steps to reduce its burn rate to preserve liquidity. That included temporarily reducing compensation for executives and directors, and “deferring or eliminating” nonessential hiring.

Despite the financial impacts caused by the pandemic, Virgin said that more than 400 people had signed up for its “One Small Step” initiative announced in February, where those interested in buying tickets pay a $1,000 deposit to be first in line when the company resumes ticket sales. The company didn’t give an update on when those ticket sales might resume or what price they will charge.

Whitesides said the company had not seen “any meaningful increase” in refund requests from existing customers because of the pandemic. “We think the major factor here is that the financial profile of many of our customers helps limit the impact of economic downturns on our business,” he said. The company, which reported in filings last year it had 603 customers, currently says it has about 600.

Virgin also announced May 5 that it had signed a Space Act Agreement with NASA to support work on future high-speed transportation systems. The company has emphasized long-term ambitions to develop point-to-point vehicles for passengers and cargo, leveraging technologies developed for SpaceShipTwo.

The agreement, Whitesides said, will allow the company to work with NASA experts “to make quicker progress on key areas that are the long-lead technology areas for a high-Mach vehicle.” He specifically cited work on thermal management and propulsion systems for a vehicle capable of flying three to five times the speed of sound.

He declined to discuss the terms of the agreement with NASA, which he said was not yet ready for public release. Most such Space Act Agreements are either reimbursable, where the company pays NASA for the cost of using facilities or other resources, or involve no exchange of funds.