Boeing's venture arm HorizonX announced on Tuesday it will invest $20 million in Sir Richard Branson's space tourism company Virgin Galactic to help develop the technologies needed to make hypersonic air travel possible one day.
The investment from the aerospace giant comes as Virgin Galactic prepares to become the first human spaceflight company to go public. Virgin Galactic is planning to list on the New York Stock Exchange before the end of the year, through a merger announced in July with Social Capital Hedosophia, a special-purpose acquisition company created by venture capitalist Chamath Palihapitiya.
"Our teams have been talking for quite some time now," Virgin Galactic CEO George Whitesides told CNBC. "The broader capabilities of Boeing are unmatched in mobility and experience in human spaceflight, so we're over the moon about this partnership."
Boeing will have a minority stake in Virgin Galactic once it goes public, as the investment is in return for new shares of the company. Once the merger closes, Virgin Galactic will have a valuation of $1.5 billion, with SCH retaining a 49% stake.
"Twenty million dollars is a drop in the bucket for the $1 billion that they've raised," Brian Schettler, senior managing director of Boeing HorizonX Ventures, told CNBC. "It's really to catalyze a bigger partnership and align the companies to explore the future of high-speed mobility and commercial access to space."
Schettler says Virgin Galactic, and the broader industry, are at an inflection point for commercial access. The space tourism company is in "the final stretch" of testing, Whitesides said, adding that the company "still feels good about going into operation next year."
Virgin Galactic said in July that it was on track to begin flying its first customers next year. The company has a backlog of 603 customers as of the end of June. Additionally, since its two most recent test flights reached the edge of space, Virgin Galactic says it has received interest from more than 3,000 new potential customers.
The company's spacecraft Unity holds up to six passengers along with the two pilots. The spaceship is dropped from a jet-powered aircraft at about 40,000 feet before firing its rocket motor, reaching over three times of the speed of sound as it climbs toward space. Unity carried one passenger during its February test flight, the company's chief astronaut trainer Beth Moses, and is now in the process of moving its operations from test facilities at the Mojave Air & Space Port in California down to Spaceport America in New Mexico.
"We have to bring the spaceship down to New Mexico and then we'll start our final batch of test flights, testing out the cabin," Whitesides said.
Virgin Galactic today has about 800 employees at its flagship and manufacturing business units. The company has two more spacecraft under construction in Mojave and plans to expand its fleet to five by the end of 2023.
Whitesides and Schettler emphasized the investment from Boeing will allow the companies to explore developing a vehicle capable of flying around the world at hypersonic speeds.
"The other exciting part of this is the high speed mobility part," Whitesides said. "There's nobody bigger or better at long-range mobility than Boeing."
There are a variety of new approaches being developed to make point-to-point high speed travel a reality, whether it's SpaceX's idea of a landing and reusing an orbital rocket or flying at hypersonic speeds through the upper atmosphere. Hypersonic is a speed at Mach 5 and higher, or more than five times the speed of sound. According to Virgin Galactic, while a business jet from Los Angeles to Tokyo would take 11 hours, a hypersonic jet would make the trip in two hours.
"There's a new chapter that's going to start getting written over the coming years," Whitesides said.
Whitesides expects the two teams will be able to further dig into hypersonic technologies. This was "Phase III" of the plan Virgin Galactic showed investors recently, as the company outlined the "significant market opportunity" from point to point. That case is backed by a March UBS report, which estimated that Virgin Galactic's main business of space tourism has a potential market of $3 billion a decade from now – but the point-to-point market would be as much as $20 billion.
Virgin Galactic would need to build new vehicles, because point to point is not what its current spacecraft are built to do. Whitesides said "this is a multiyear process" that's only just beginning. "There's work to be done in terms of propulsion, there's work to be done in terms of aero structures and various other places," he said. Now, Virgin Galactic has Boeing involved in its effort.
"Part of the exciting possibility here is to sketch out a design architecture or design pathway for what we think are the most commercially successful designs," Whitesides said.
"If we can bring together some of the great customer insights from the Virgin Group airlines … if we can bring in some of the deep technical, historical insights Boeing has built up over decades of time, if we can bring some of our rapid prototyping and build capabilities to the table, and then we can add in these high reusability, high Mach vehicles that we'll soon bring to the table," Whitesides added.