Virgin Galactic's First Spaceflight on December 13th 2018 Source: Virgin Galactic

UBS believes there will be very lucrative ramifications from the space flight efforts currently led by Virgin Galactic, SpaceX and Blue Origin. A lengthy UBS report published on Sunday found that, in a decade, high speed travel via outer space will represent an annual market of at least $20 billion and compete with long-distance airline flights. Space tourism will be a $3 billion market by 2030, UBS estimates. "While space tourism is still at a nascent phase, we think that as technology becomes proven, and the cost falls due to technology and competition, space tourism will become more mainstream," UBS analysts Jarrod Castle and Myles Walton wrote in the note. "Space tourism could be the stepping stone for the development of long-haul travel on earth serviced by space." UBS expects the broader space industry, which is worth about $400 billion today, will double to $805 billion by 2030 when accounting for these innovations. While these sub-sectors would be a small part of that, Castle and Walton said "the outlook for the space economy, space tourism and long-haul travel using space has become much more bullish." Private space companies "are investing aggressively across the space opportunity," UBS said, and the firm believes access to space "is the enabler to broader opportunities for investment."

Revolutionizing long distance travel

Long haul airplane flights that are more than 10 hours in duration would "be cannibalized" by point-to-point flights on rockets, UBS said. The firm pointed to SpaceX's plans to use the massive Starship rocket it is building to fly as many as 100 people around the world in minutes. SpaceX said that Starship would be able to fly from New York to Shanghai in 39 minutes, rather than the 15 hours it takes currently by airplane.

A rendering of SpaceX's Big Falcon Rocket (BFR). SpaceX

UBS estimates that there are more than 150 million passengers a year that fly routes longer than 10 hours. Last year, those routes saw 527,000 routes on airplane that had an average of 309 seats, UBS said. "If we assume that 5 percent of these flights in the future are serviced by space at $2,500 per trip, the revenue opportunity as of today would be more than $20 billion per year as of today," UBS said "Although some might view the potential to use space to service the long-haul travel market as science fiction, we think ... there is a large market," UBS said. UBS noted that "it is unlikely that a rocket will carry over 300 people anytime soon," so the Starship's capacity of 100 will be the maximum for the foreseeable future. However, UBS believes there may be an "increased frequency of space travel during the day to enable the same volume of passengers," the firm said.

"Given the length of long-haul commercial travel, and the rules around crewing and take-off and landing time slot restrictions at airports, we think a re-usable rocket (especially if not land-based) would have materially better utilisation rates than a commercial plane," UBS said. As a result, UBS believes the $20 billion estimate "could prove conservative," the firm said. More than 10 percent of people in a recent UBS survey said they would choose a spacecraft over an aircraft for long distance travel. "While the timing of such a long haul service is uncertain, we think our base-case assumptions are conservative," UBS said.

Space tourism's market potential

The billions of dollars pouring into private space companies represents "a high level" of capital formation, UBS said. Even though space tourism "is still nascent," UBS said they believe the sub-sector "will become mainstream as the technology becomes proven and cost falls." To date, space tourism has largely been limited to the few flights organized by U.S.-based Space Adventures. Over the past two decades, the company has flown seven tourists using Russian Soyuz rockets. At a reported cost of more than $20 million per person, the private clients typically spent over a week on board the International Space Station. But now "there are a number of commercial space ventures to open up suborbital travel," UBS noted. Virgin Galactic and Blue Origin are leading those efforts, both getting steadily closer to launching paying tourists. "This area seems to be the market that has the greatest potential to gain traction quickly," UBS said.