This summer an Emirati investment firm secured exclusive rights to what may be the next wave in adventure tourism and could place it on the cutting edge of scientific research.
On July 28, Abu Dhabi-based Aabar Investments signed a $280 million deal with Richard Branson’s Virgin Galactic, gaining a 32 percent stake in what is now a $900 million foray into the great unknown.
Virgin Galactic, which vows to be the “world’s first commercial spaceline,” had been shopping for an outside investor for six months when it signed with Aabar at the EAA AirVenture show in Oshkosh, Wisconsin. Branson and Aabar CEO Mohamed Badawy al-Husseiny signed the deal following Branson’s inaugural flight in Virgin’s jet-powered carrier aircraft which will be used to launch the spacecraft.
“This transaction carries multiple potential for the creation of an exceptional platform for space infrastructure, such as research labs, space centre[s] for commercial travel and much more,” a Virgin press release quoted Aabar’s Husseiny as saying at the event.
Until Husseiny came on board, the venture was solely funded by Branson himself. Virgin expects that Aabar’s infusion of new capital will completely fund the project until operations begin.
Credit Suisse was the bank handling the all-cash transaction and served as advisor and placement agent to Virgin throughout the process.
Jeffrey Culpepper, head of the investment banking department in the Middle East and North Africa region for Credit Suisse, said that though investors interested in Virgin Galactic came from all over the world, the final decision to accept the Abu Dhabi proposal came down to chemistry.
Sheikh Mansour bin Zayed al- Nahyan is chairman of the International Petroleum Investment Company, which is Aabar’s largest shareholder, and he is also a member of Abu Dhabi’s ruling family. When Nahyan met Branson, the pair seemed to agree about the potential of Virgin technology.
“It was not the most aggressive bid, but it was the right bid,” Culpepper said.
Branson was particularly drawn to Sheikh Mansour’s hope that Virgin Galactic would further Abu Dhabi’s existing attempts to bring the UAE to the forefront of space research and education.
On a mission
Aabar intends to build a launch facility or “spaceport,” for both manned and unmanned launches in Abu Dhabi. This initiative comes on the heels of several related efforts, which mark a palpable shift in focus toward outer space for the UAE.
In 2006, the country opened the Emirates Institution for Advanced Science and Technology (EIAST). The center lists space research and exploration as one of its four current focuses.
On July 29, the EIAST launched DubaiSat-1, the country’s first satellite from Baikonur Cosmodrome in Kazakhstan and two more like it are in production. The $50 million satellite will take pictures of the region to be used for urban-planning, monitoring climate change and in case of a natural disaster.
DubaiSat-1 was designed and built with the help of South Korean firm SaTReC, but officials intend for its successors to be manufactured completely in the Emirates and should be ready for launch in 2020.
An observation center and “space academy” is also planned for the UAE. The 4C GEOC (Global Earth Observation Center) will at first display images from Italian satellites already in orbit, but the $30 million center will launch its own satellite when it becomes fully operational in 2012.
Culpepper said Sheikh Mansour hopes for Abu Dhabi to be the ultimate destination for studying space and related engineering through the combination of state of the art training and opportunities to experience space through Virgin’s technology.
“They like the idea of having the transfer of knowledge to the Middle East,” said Culpepper. Eventually, Sheikh Mansour also hopes to integrate space technology into the country’s public schools.
Virgin’s launch system may be able to reduce the cost of a ticket to space from $200,000 to $20,000
The ride
The Abu Dhabi spaceport will be home to Virgin’s mothership called “WhiteKnightTwo” and a commercial spacecraft called “SpaceShipTwo,” the original design of which won Virgin a $10 million prize from the X Prize foundation in 2004.
Virgin Galactic has redesigned traditional space travel using a launch vehicle or mothership, which takes off from a runway much like an airplane. The mothership rises to 50,000 feet and then releases a spacecraft containing six passengers and two pilots.
According to William Whitehorn, president of Virgin Galactic, the mothership is currently surpassing expectations in test flights in New Mexico, having so far reached a height of 52,400 feet (50,000 are needed for a successful launch). SpaceShipTwo will be publicly unveiled this December and will begin test flights soon after. The United States Federal Aviation Administration has yet to approve the system for commercial operation.
Despite the pending FAA approval, five SpaceShipTwos and three motherships are currently in production in Mojave, California. The vehicles are being built by aeronautical firm Scaled Composites, and Whitehorn expects to begin operations at Spaceport America in New Mexico in late 2010.
Because the mothership is able to land and be completely reused, the Virgin launch system is more eco-friendly than any space travel system in existence and also uses environmentally responsible materials and bio-fuels. Further more, a reusable launcher means less debris left in space and shorter rocket burn.
This launch system also significantly cuts the cost of space flight by launching the spacecraft when it is already 50,000 feet in the air.
“The more efficient a system is, the cheaper it is to operate,” said Whitehorn. The Virgin system is able to launch a spacecraft 10 times cheaper than traditional ground launches, which may allow Virgin to eventually decrease the ticket price from $200,000 to $20,000.
Whitehorn also insists that this launch system is safer than any other in existence. But, he said, though space tourism will be the first function of the launch system, Virgin Galactic’s priorities are in the more scientific capabilities of the mothership and SpaceShipTwo. And although Aabar Investments is giving no interviews on the subject, Jeffrey Culpepper said the research and satellite launch capabilities of the Virgin system were the main pull for Aabar as well.
“It’s a space launch system, not a tourism business,” said Whitehorn, adding that when the spaceport is fully operational it will contain a mechanism for launching small satellites for the use of the UAE and other parties.
Culpepper said that after the commercial space flights are approved by the FAA and running smoothly in New Mexico, Aabar will hand over an already pledged additional $100 million specifically to improve Virgin’s satellite launching capabilities.
“It’s more than just about tourism and fancy hotels,” said Culpepper.
The suborbital flights can also greatly decrease the price of what Whitehorn calls “human science,” meaning manned space experiments. Experiments requiring microgravity, such as some pharmaceutical experiments, currently demand an expensive trip to the international space station. With the Virgin spaceports, this would no longer be the case.
Take off
Space travel in the UAE is regulated by the General Civil Aviation Authority (GCAA) much as the FAA regulates space travel in the US. However, changes to this system have been suggested.
“It’s time to design and set up the mechanism for a nationwide program for research in all fields, and the immediate aim is for such an authority to define a space policy,” said Ahmed al Mansoori, director general of EIAST at the Global Space Technology Forum in 2008.
Professor Clint J. Wallington teaches a course on commercial spaceflight at the Rochester Institute of Technology. He said all of Virgin’s vehicles will be subject to FAA standards because they are being manufactured in the US. However, the individual governments of the launch locations will oversee the operation of the vehicles.
Despite the fact that not a single paying customer has yet to take a Virgin Galactic flight and the technology has yet to receive government approval, Culpepper said Aabar’s investment was not as risky as it may seem.
“Advance ticket sales made it a profitable business before the first rocket went into space,” Culpepper said.
The “spaceline” has already registered more than 85,000 people who wish to be among the first to take a sub-orbital ride, including Star Trek star William Shatner. Only 300 of the pre-paid passengers have paid in advance, but the total amount of their deposits is more than $40 million, Virgin Galactic said. The deposits range from just $20 to the full $200,000 and determine where the potential astronauts fall in the queue.
Each commercial flight will allow the spaceship passengers to experience zero gravity and see views of the earth below. Whitehorn said that this would be a draw for the Abu Dhabi spaceport.
“With this location, you get a fantastic view. You’d see everything from Lebanon to the Arabian peninsula to Egypt,” he said. Flights will also be available from New Mexico and Sweden, each offering a unique view of the Earth.
Eventually, Virgin would also like to offer orbital commercial flights, which would allow ordinary people to fly from Australia to England in 2.5 hours.
So far in human history, 500 people have been to outer space. Virgin Galactic intends to match that number in their first year of operation.
According to Premjit Bangara, travel manager for Sharaf Travel, the only travel agency authorized to sell spaceflight tickets in the region, demand should match this goal. Bangara said that the partnership “has created quite a stir” in the region, drawing interest from a variety of age groups and professions.
Though Sharaf is contractually forbidden from releasing specific regional sales figures, Bangara says that registration in the Middle East is going strong.
“We see a mix of high net-worth individuals and also young professionals who want a spot of adventure and can afford it. It therefore is a mix of young entrepreneurs and older, wealthy individuals sharing a passion for adventure,” Bangara said.
Operations at the Abu Dhabi spaceport are at least three years away, but Whitehorn said that if anyone wanted to specifically register for an Abu Dhabi Virgin Galactic flight, “We’d be happy to hold the place for them.”
Virgin wants to offer orbital commercial flights able to fly from Australia to england in 2.5 hours
Market Turbulence
After other banks and advisors had told Branson that it was not the right economic climate to seek an investment of this size, Culpepper says that Branson was all the more determined to find an investor.
“It sends a message of optimism to the market,” Culpepper said, adding that he sees the deal as a sign of hope for the global economy.
And with the obvious show of interest in Virgin Galactic from the investing world, multiple sources close to the deal said the company will very likely go public in the future.
