Virgin Orbit takes OneWeb to court over canceled launch contract

Space

WASHINGTON — Virgin Orbit is suing OneWeb for refusing to pay a termination fee for canceling all but the initial four of the 39 launches it ordered from Virgin Orbit in 2015 to fill gaps in its planned constellation of at least 648 broadband satellites.

According to a complaint Virgin Orbit filed June 4 in U.S. District Court for the Southern District of New York, OneWeb quietly canceled 35 of a planned 39 launches last June, triggering a $70 million termination fee spelled out in the contract. Virgin Orbit says OneWeb still owes $46.32 million. The lawsuit was first reported by Law360.com.

OneWeb, the complaint says, agreed four years ago to pay Virgin Orbit $234 million — or $6 million a launch — to loft its satellites one or two at a time into low Earth orbit using the air-launched LauncherOne vehicle the Long Beach, California, company expects to debut this year.

OneWeb, which counts Virgin founder Richard Branson among its investors, launched its first six satellites in February aboard an Arianespace Soyuz rocket and intends to continue using Soyuz to deploy the bulk of its constellation 35 satellites at a time.

Will Pomerantz, vice president of special projects at Virgin Orbit, said June 6 the company still expects to fly at least four missions for OneWeb.

“While we don’t have a comment on this matter specifically, we’d like to voice our on-going support for OneWeb’s mission of providing affordable, low-latency internet access across the globe via satellite,” Pomerantz said by email. “We are excited by the success of OneWeb’s initial test satellites, and we look forward to flying their spacecraft soon, and to helping support and sustain their constellation for many successful years to come.”

OneWeb spokesman Katie Dowd declined to comment on the ongoing litigation.

Virgin’s complaint

According to Virgin Orbit’s 14-page complaint, Virgin and OneWeb entered into a launch services agreement May 20, 2015, that called for four “initial firm launches” to start in 2017 and 35 “remaining firm launches” to start in 2018. The contract included options for an additional 100 launches at an agreed upon $6 million per launch, meaning Virgin Orbit stood to earn between $234 million and $834 million under its agreement with OneWeb.

Virgin Orbit says OneWeb sought during the spring of 2017 to reduce the number of launches, pay less per launch, “and spread out the launch dates for several years beyond the original terms.” OneWeb, according to Virgin’s complaint, also balked at escalating termination fees built into the contract, saying its lenders objected to incurring the increased obligation. Virgin Orbit at first agreed to slow the rate of escalation and then agreed to freeze it at a flat $70 million through June 15, 2018, while negotiations over a revised contract continued.

On June 7, 2018, after months of negotiations, Virgin Orbit sent OneWeb a new written proposal. On June 14, 2018 — the day before the contract termination fees were set to resume their rise — OneWeb canceled the 35 “remaining firm launches” but left intact the agreement covering the four initial launches, according to the complaint.

Virgin Orbit told the court that OneWeb had paid $26.25 million toward the 35 launches since signing the contract in 2015 but had fallen $19 million behind on its payments by the time it canceled the launches last June and incurred $2.1 million in associated late-payment fees.

Last July, about six weeks after canceling the 35-launch order, OneWeb sent Virgin Orbit $22.36 million, or roughy $1.26 million more than it owed in past-due payments and late fees.

Virgin Orbit says that even after factoring in last July’s payment plus the $26.25 million OneWeb had previously paid toward the now-terminated launches, OneWeb still owes it $46.32 million.

OneWeb, per the complaint, maintains that it doesn’t owe Virgin Orbit any money for canceling 35 launches.

After failing to resolve the dispute through informal mediation, Virgin Orbit decided to sue for breach of contract, seeking the $46.32 million plus legal fees and past due interest.

Jeff Foust and Caleb Henry contributed to this story from Washington.

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