Xcor’s Customers are Fighting to Recieve a $100,000 Refund After the Space Tourism Company Goes Bankrupt
Xcor’s story and their 282 ticket holders is a cautionary tale for the age of space tourism. Customers were asked to dish out US$100,000 for a ticket, but after years of flight delays, customers wanted their money back.
Nael Hamameh expected to fly into space in 2015, but 2015 came and went. After hearing no word about the progress, Hamameh requested a refund.
Xcor said they would attempt to find someone else to purchase his ticket by the end of 2017, but at the least, he would be refunded $35,000. However, in November 2017, Xcor filed for bankruptcy.
Now Xcor’s aspiring astronauts are left wondering whether they’ll get a portion of their ticket price back.
One Xcor customer, Steve Jones, 43, hired a lawyer, David Keesling, approximately a year and a half ago. In an interview in November Keesling said that there was only a slim chance that the funds could be recovered and the number of parties involved in the case complicates the process.
Jones, a commercial pilot who lives in Tulsa, Oklahoma, explained that coming up with that kind of money for the Xcor ticket was a sacrifice. He lives in an apartment, doesn’t drive the newest car and it’s a lot of money.
Hamameh, 37, said he was saddened by the news of Xcor’s bankruptcy, but for him, it wasn’t because of the money but because of the dream that will never come true.
Xcor revealed their plans for the two-seat Lynx space plane in 2008 at a press conference in Beverly Hills and estimated that flight tests would start in 2010.
They stated that the vehicle could eventually fly tourists to space up to four times a day.
Flights would reach an altitude of around 62 kilometres above the Earth — below the height that the US military and Federal Aviation Administration consider being the edge of space, but high enough that passengers would feel 90 seconds of weightlessness.
The company based in Mojave was founded by Jeff Greason, Aleta Jackson, Doug Jones, and Dan DeLong, who were colleagues at a now-defunct reusable rocket company. That company had intended to send a 19-metre-tall, thumb-shaped vehicle to space that would return to Earth using a giant propeller.
As per Crunchbase, a platform that tracks fundraising Xcor eventually raised at least $19.2 million. Customers who wanted to be among the first 100 people to ride the Lynx paid $100,000 upfront, while others who chose to wait had the option to pay in instalments.
In 2011, Nasa announced that they would hire Xcor to ferry experiments into space. At the time, the company was seen as the main competitor to British billionaire Richard Branson’s Virgin Galactic, which had also established a base at the Mojave Air and Space Port.
As Xcor continued to develop the Lynx, the company wooed potential customers.
A significant attraction for Cyril Bennis, 70, was the private flight, with just him and a pilot. In comparison, Virgin Galactic’s space plane seats eight people, including the two pilots.
Bennis has wanted to go to space since meeting Nasa astronaut John Glenn as a child in Ireland. So in 2008, he paid the $100,000 ticket price.
Bennis explained that at the time Xcor’s vision looked very good on paper. It had good, established people around it. Plus, Bennis and other would-be space tourists took the trip out to Mojave several times to visit the company’s Lynx production facility, view prototypes, and speak with staff.
On one trip, the group even underwent jet fighter training, which Bennis described as a great thrill. He said no one was ever any wiser. There was never any doubt in our minds, any inkling that there was a problem within the company.
However, behind the scenes, Xcor was finding it had underestimated the complexity of the Lynx’s development and the funding needed to accomplish it.
In 2015, Greason, Xcor’s chief executive, was replaced by Jay Gibson, a former Beechcraft Corp. executive who had previously worked as assistant secretary of the US Air Force. In 2016, the company stopped development on Lynx and focused on a contract to build an upper-stage rocket engine for United Launch Alliance, a joint venture of Boeing Co. and Lockheed Martin Corp. that launches national security satellites for the US government. That was the company’s most promising near-term source of revenue. That same year, Xcor laid off about half of its 50- to 60-person workforce, including Amon.
In January 2017, Gibson and Tom Burbage, president of the board of directors sent a letter to ticket holders, claiming that working on the upper-stage rocket engine would in no way diminish their will and actions to finish building the Lynx and start the flight test phase. They stated that for now, they were unable to share a reasonable time frame for the expected space flight.
Xcor depended on funds from the ULA contract. However, that ran out abruptly. Without mentioning ULA by name, Gibson told a Senate committee hearing last year that Xcor had thought it had a funding commitment from the prime contractor on a propulsion project through the year and beyond.
But Xcor was told the contract was terminated with less than 30 days’ notice, Gibson explained during his confirmation hearing to be deputy chief management officer of the Defense Department.
Gibson left Xcor in June 2017, not even two weeks after his nomination was announced.
Xcor board member Michael Blum was named acting chief executive. Gibson was later promoted to chief management officer at the Pentagon but resigned in November. The Wall Street Journal reported before Gibson’s resignation that he was forced out for a “lack of performance.”
However, on his third or fourth day on the job, Blum was forced to terminate all remaining employees. The company was out of money and was unable to make payroll as a result of the loss of the ULA contract.
Blum said he had held out hope that a white knight could be found, even in a distressed sale of the company but sadly this did not come to fruition.
After Xcor filed for bankruptcy some of their customers wanted to know what happened to the $35,000 that was part of their deposits since it was supposed to be kept separate in an escrow account and refunded in the event of an incident such as this bankruptcy. But many customers were unsuccessful in connecting with or getting answers from Intertrust Group, the organization they said was in charge of those escrow accounts.
A spokesman for Intertrust Group, a corporate management group based in the Netherlands, wrote in an email that when there is an escrow agreement in place, Intertrust will execute according to what’s been defined in that escrow agreement. However, the spokesman said he could not offer any further details.
A Justice Department spokeswoman said in a November email that information about the escrow accounts was not of the public record in this pending case.
Milan Karki, 41, one of Xcor’s ticket holders did receive $34,500 from the escrow account. He reached out to Intertrust in May and received the funds in September after Intertrust said there was an escrow account with his name. His ticket was purchased in 2013.
Bennis intends to go to Amsterdam to meet with Intertrust officials face-to-face and get answers on behalf of the whole group.
Both Bennis and Jones have not given up hope on their dream of spaceflight. Each talks about trying to get a spot on a future Blue Origin suborbital flight.
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