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Accumulation of a financial base in detail

Posted by: Ekkehard Augustin - Thu Jul 21, 2005 11:31 am
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Accumulation of a financial base in detail 
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Post    Posted on: Sun Aug 27, 2006 9:36 am
The Newsletter „Fifth Virgin Galactic Newsletter“ (www.spacefellowship.com/News/?p=1652 ) is reporting that
Quote:
SS2 will carry 6 passengers and two pilots.


So the correct number of passengers per flight of SS2 is really six instead of seven. Based on this I calculated the (new) profit for five years after breaking even by using the most recent of the two Excel-spreadsheets published at this board. I changed the number of passengers down to 6 and set the investment else to $ 50 mio and the interests to zero. Then I subtratced the variable costs listed in the last column of the first table (break-even-analysis cols A to V) from the revenue per flight which is gibven by 6 passengers times price for customers else $ 20,000 and then subtracted all the permanent fixed costs used in the table since these numbers are all the costs per five years.

The result is 387,072,011.83. The ROI-information from Virgin Galactic applied to the total invetsment of $ 150 mio that I here used in the table also results in $ 375 mio profits in five years after breaking even if it is taken into account that the first five years are required to break even from the loss zone into the profit zone.

So I am closer to the correct nmuber than thought before – the larger difference has been caused by the larger number of passengers only. I mow get a profit of $ 77,414,402.37 while Virgin’s information seems to mean $ 75 mio per year after breaking even.

Obviously the error is 3.333...% only. Then the costs per year are higher by $ 2,414,402.37 only. They might be labour costs or included into the safety margin. That margin really seems to be required. I don’t know what they are for – they might have to do with thoe motors, with propellant, with transportation, with mission control or anything else. But it is possible also that the requirement of the margin means depreciations and costs of Virgin’s Involvement into America’s Spaceport of New Mexico. If it were the depreciations only they would have financed the spaceport nearly alone by $ 200 mio which the would depreciate over ten years then – of course their profits would be much higher then than I calculated because the $ 200 mio would have to be incorporated into their investments: $ 350 mio at 25 % per year ten years long are $ 875 mio. This I can’t imagine at present.

The variable costs per flight according to the Excel-spreadsheet are $ 44,575.13.

This moment I am not sure if I will base an enhanced model on the ROI-information because of the low error margin.

The published Excel-spreadsheet tells that the number of passengers until break-even is 14400 – 2400 flights in five years at 6 passengers.per flight and 480 flights per year. Then each SS2 would fly 96 times per year – turn-around-time 3.8 to 3.9 days. In the neyt five years after breaking even they would fly 36,600 passengers because their busienss plan tells 50,000 passengers in ten years. Per years these would be 7320 passengers per year = 1220 flights per year. These are 244 flights per vehicle and thus turn-around-time of around 1.5 days.

May be that they have removed the idea to break even after five years – they might think to be faster or less fast or they consider might have given up to look at the break-vene-time because the number of registered people has grown to 60,000 people according to the newsletter:
Quote:
More than 60,000 people have now registered an interest in becoming Virgin Galactic Astronauts...


So perhaps I will do new calculations using the ROI-infomration instead of the Break-even-point-information.



Dipl.-Volkswirt (bdvb) Augustin (Political Economist)

most recent Excel-preadsheet about Virgin Galactic



PS: To be fair – to some degree I find something suspicious here...


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Post    Posted on: Wed Jul 04, 2007 12:31 pm
May be time to mention two points.

A longer time ago there was an article quoting Alex Tai that Virgin Galacitic will invest around $ 250 mio - may be $ 225 mio was correct (I would have to check the article. This number should be applied to look not only for the total profit after 10 years of operation - but also to get new insights into costs etc. I am pushing this again and again because of another study of mine.

Next there is a new number about contractors today - the article "Sales Strong for First Seats Aboard Virgin Galactic's Spaceliner" ( http://www.space.com/news/070703_virgin ... sales.html ) says that there are 200 contractors at Virgin Galactic in between. This is 43 contractors more than the most recnet number.

And the pace the number of registered people is increasing at seems to prove to be unexpectedly stable.

So to me it looks as if the accumulation of a financial base for private development(s) of orbital vehicles would be taking place really.



Dipl.-Volkswirt (bdvb) Augustin (Political Economist)


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Post    Posted on: Wed Jul 04, 2007 3:36 pm
Another thing to think about is that not all flights will be made from the same location and Virgin Galactic will have to invest in infrastructure at different launch sites which will add to their costs.

It is also likely that there will be high maintenance costs for the vehicles (possibly because of FAA rules requiring frequent inspection) and the expected life span of the vehicle may be considerably less than anticipated.

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Post    Posted on: Thu Jul 05, 2007 7:17 am
Hello, Andy Hill,

as far as I understand Aley Tai's words quoted by space.com the around $ 250 mio include all the infrastructure - in particular the investment into America's Spaceport required.

The maintenance costs are already included into the fixed costs I applied. They appear to keep the estimation that the profits will be 25% per year of their total investment over ten years. At a total investment of $ 250 mio this would be $ 62.5 mio per year and thus $ 625 mio over ten years.

All the informations together applied during this thread still mean that these profits will be got within five years - beginning in the sixth year of operations. So really there will be profits of $ 125 mio per year beginning in that sixth year.

The infrastructure in Sweden for example seems to exist already and is going to be improved by investments of others as far as I remember news about that. There is an interest by those others which makes them invest themselves and thus freeing Virgin Galactic from the required investment.

Thos informations I have in my archive as far as I remember and I would have to lookf for them - but I don't know if I find time for it and when.



Dipl.-Volkswirt (bdvb) Augustin (Political Economist)

EDIT: I don't know if someone of you have done it also but I just because of interest applied the Excel spreadsheet available to it and found variable costs of $ 25,461.... per flight. The number of passengers in ten years projected in the business plan is 50,000 people. This means 5,000 people per year and thus 833 to 834 flights per year since SS2 can carry six passengers.

At a profit of $ 125 mio per year beginning in year 6 of operations there would be a profit per flight of around $ 150,000 - which would mean that something has changed because at the least price the revenues are $ 120,000 per flight only. The least price will be higher perhaps but it still can be significantly below $ 100,000. At a price of $ 100,000 the revenues per flight would be § 600,000. After subtraction of the profits of $ 150,000 $ 450,000 are left that would be costs. After subtraction of the variable costs next a bit less than $ 425,000 are left as fixed costs per flight. These would include maintenance...

EDIT-2: Just this moment I recognized that maintenance costs would be included into the variable costs as far as they occur per flight only. In that case they won't be fixed costs. The $ 25,461.... are NOT propellant costs only - the flights are suborbital and the propellant costs of less than $ 10,000 of the Block DM may serve as a reference. That propellant is consumed after the Block DM is in orbit already and thus would be far from sufficient to get into orbit.

The maintenance will be done by Scaled Composites as far as I know and so the costs will depend on Burt Rutan and his team. They will want more business and thus try to keep the costs low.


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Post    Posted on: Fri Sep 14, 2007 1:10 pm
Ekkehard Augustin wrote:
Hello, Andy Hill,
833 to 834 flights per year



How much of their profits would be eaten away by a .001% catastrophic failure rate?

I wonder how they will handle their first crash with paying customers?

Hopefully they will have gotten some really decent insurance by then, but still...

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Post    Posted on: Tue Oct 09, 2007 5:33 pm
Hello, James Summers,

I can imagine that they handle catastrophic failures of manned flights like airlines do. The passengers will be offfered an insurance. The loss of a vehicle will be no problem because of Bransons wealth.

Another point regarding that are the numerous test flights planned before the first operational flight.

Since I alreday talked about the CXV in this thread the most recent calculations done in the CXV-thread should be mentioned here. The costs of the QuickReach2 seem to be much less than calculated earlier. This means that the profit margin of the CXV might be much higher.

If this will be confirmed then the CXV turns into a real source of accumulation - which then may be accumulation for lunar vehicles. More realistic and reasonable will be to imagine that the accumulated capital from the CXV will go into one pool with the accumulation from WK2/SS2 from which then suborbital, orbital and lunar flights could be funded in parallel.

I still apply the idea that Virgin Galactic might use a CXV and a QuickReach2.



Dipl.-Volkswirt (bdvb) Augustin (Political Economist)


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