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The flight was the first of three final demonstration flights before commercial service begins. (ddp)

Space blasts off

20 July 2021, 7:20 pm CEST, written by UBS Editorial Team

Jeff Bezos, founder of Amazon and , and , founder of Virgin Galactic, both blasted off into space this month, bringing us closer to real space tourism. What are opportunities in the space economy?

Bezos and his crew travelled 60 miles above the Earth for a 10-minute sub-orbital space flight and enjoyed three minutes of weightlessness in the Blue Origin vessel The . The group included Bezo's brother Mark Bezos, Oliver Daemen, a student from the Netherlands who had purchased a ticket, and 82-year old Wally Funk, a pioneering woman in the US aviation industry and member of the Mercury 13, a group of women who in 1961 underwent the same training as the Mercury 7, NASA’s all-male crew of original astronauts. Funk became the oldest person to travel to space.

Earlier this month, Branson and five Virgin Galactic crew members rocketed to the edge of space, in their own sub-orbital flight. At an altitude of about 50 miles, the group also experienced three minutes of weightlessness before entering back into the Earth’s atmosphere.

"I have dreamt of this moment since I was a kid but honestly, nothing could prepare you for the view of Earth from space," Branson told reporters after landing. In addition to fulfilling a personal fantasy, the space flight was meant to demonstrate that Virgin Galactic’s space vessels are ready for commercial passengers who can afford a ticket.

A sub-orbital trip with Virgin Galactic previously cost around USD 250,000 and the company is reported to have sold around 600 of those. Bloomberg News reported that the price of a seat may go up, going forward. Elon Musk has purchased a ticket, reported the Wall Street Journal.

Blue Origin is keeping tight-lipped on ticket costs. But for his flight, Bezos had auctioned off one of the seats. The winning bid was $28 million. The anonymous winning bidder declined to take the inaugural flight and is said to be joining at another time. This opened a spot for Daemen, the son of Joes Daemen, CEO of Dutch private equity firm Somerset Capital Partners, who had participated in the auction. Daemen is considered Blue Origin's first paying customer who has made it to space. "This marks the beginning of commercial operations for New Shepard" Bob Smith, CEO of Blue Origin. For UBS marketing purposes

And for those who feel sub-orbital isn’t enough, Musk’s SpaceX has plans to eventually take people into for five days, circling Earth every 90 minutes, for USD 55 million.

The space economy

The UBS Chief Investment Office (CIO) expects the space economy to expand from what was USD 340bn in 2019 to almost USD 1trn in the next couple of decades. While much of the excitement is focused on space travel, the Chief Investment Office sees opportunities in addition to tourism.

Reusable Rockets

Over the next decade, launch costs are predicted to decline 10-fold. Part of this decline will be driven by the mainstream adoption of reusable rocket technology. Since the early days of the space shuttle, reusable rocket technology has been seen as a key solution to achieving economic and sustainable access to low orbit space.

While fuel accounts for most of the weight of a rocket, most of the cost is in the hardware. This argues for substantial cost saving from reusability. Both Space X and Blue Origin are betting on reusable rocket technology for sending medium- to-heavy loads to geostationary orbit (GEO) with their and New Shepard rocket models, respectively.

Satellites and more

The rising demand for bandwidth over the next couple of decades, due to new applications like the Internet of Things (IoT) and automated cars, suggests to us a wider role for broadband, particularly as connectivity costs fall. According to UBS, digital data doubles every two years. Mobile data traffic, in particular, will witness exponential growth from the sensors, cameras and navigation of autonomous cars, especially when 5G download speeds become standard.

As we become increasingly reliant on for collecting data, we also see a proliferation of applications for data analysis in logistics, agriculture, maritime and retail (e.g. supermarkets tracking produce to ensure it is organically sourced, or fishing boats being monitored to ensure they are fishing legally). We also believe satellite networks will become an increasingly versatile and cost-effective solution to address the connectivity needs of the IoT industry.

Further into the future, CIO also sees the potential for asteroid mining and space-based manufacturing, but notes the high barriers that lie ahead given the high costs and complexities associated with these industries.

In terms of investments, at this early stage, CIO prefers existing listed companies in the aerospace, satellite and communications segments. New space start-ups may offer investment opportunities in private markets.

For more details on our views, please see our Long Term Investment theme on Space, by CIO analyst Carl Berrisford.

Please reach out to your financial advisor on ways to get exposure to the space economy.

Main contributor: Wendy Mock

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