Mr Branson's balloon broke its moorings at its launch site in Morocco last week while it was being inflated. The envelope drifted into Algerian airspace and crashed.
Yesterday the Virgin boss said that the envelope could be so badly ripped that it might have to be replaced. A new balloon would not be available until the third week of January.
He said: "We have a feeling that the Algerians, in trying to be helpful, have done quite a lot of damage to the balloon. We would have liked them to have left it. We know it landed intact in the desert. It was unceremoniously removed. We will be inspecting it over the next couple of days.
"It's not as good as we had hoped. We will decide early next week whether we have to build a new one or not.
"If we do, the fabric will not be as good and we would have 20 per cent less time in the air. It takes four months to deliver the fabric we are now using."
Even if Branson's team does decide to repair the old balloon, the earliest likely launch date would be the end of the week, by which time one of five other rival balloon teams could well have seized what the National Geographic magazine has called "the last great aeronautical adventure within the earth's atmosphere".
A spokesman for the Breitling Orbiter team, involving Briton Andy Elson, said it was possible their balloon might launch from Switzerland tomorrow.
And solo balloonist Steve Fossett, who has already flown a balloon halfway round the world, is ready to lift off from St Louis, Missouri, as soon as the weather is favourable.
All six teams are looking for calm, low-level winds to allow their balloons to rise swiftly high into the earth's atmosphere.
For a successful journey, this has to be combined with access to a jet stream, high-altitude winds that can blow at 250 mph.
Weather experts have told five of the six teams to make their flights in winter, when the jet streams are faster and less prone to breaking up, and there are fewer thunderstorms.
If a round-the-world trip is made, there is doubt that the Virgin team might make the attempt at all. Mr Branson said: "That we would review at the time. I have always thought that one of the balloon teams would be successful this year. The technology is progressing every year."
The teams are:
Virgin Global Challenger: Richard Branson, Per Lindstrand and Rory McCarthy.
Mr Branson has spent hundreds of thousands of pounds attempting to become the first trans-global balloonist, employing Swedish balloon designer Per Lindstrand to create the largest balloon on earth.
With a capacity of 1.1 million cubic feet and a height of 194 ft, the Challenger is large enough to support a crew of three and a gondola comfortable enough to withstand the cruel temperatures of the upper atmosphere.
It contains caviar, champagne and Christmas pudding, in case festive celebrations have to take place in the sky.
Equipment has been added to prevent a repeat of January's near-disaster, when the Challenger fell to earth because its helium gas contracted at night.
Solo Spirit: Steve Fossett.
Seen by some balloon commentators as the favourite. He holds the record for a long-distance balloon flight, sailing round half the world in January, from the US to India.
Unlike Branson and his high-tech giant balloon, Fossett takes a distinctly low-tech approach.
He will fly lower, at around 20,000 feet, and use an unpressurised gondola, using portable oxygen supplies and wearing thermal underwear to keep warm rather than air-conditioning. His balloon will be smaller at 350,000 cubic feet. Fossett's theory is that the simpler the balloon, the less there is to go wrong.
Breitling Orbiter: Bertrand Piccard, Wim Verstraeten and Andy Elson.
The team includes a Briton - Elson, a Belgian - Verstraeten and a Swiss - Piccard.
Their balloon will taxi around the Alps from the Swiss village of Chateux d'Oex, and across the Mediterranean, before hitting a jet stream above north Africa.
It is another large high-tech air-conditioned affair, with a 500,000 cubic feet envelope, containing helium and hot air.
Their round-the-world attempt in January ended when a 69p fuel clip leaked kerosene into the gondola, forcing the Breitling team to descend.
Global Hilton: Dick Rutan and Dave Melton.
Aviation adventurer Rutan is a veteran of long-distance flights, being the first man to fly non-stop around the world in a plane, without refuelling: the Voyager, an ungainly craft with long droopy wings was designed by his brother Burt.
On this flight, he will be carried by a balloon made by Bristol-based Cameron Balloons, whose Roziere helium and hot-air envelopes are being used by all teams, except Virgin and Dymocks.
The 420,000 cubic feet balloon is the third high-tech, high-altitude craft, with an air-conditioned gondola, which will fly near the heart of the jet stream at 30,000 feet. It is to take off from Albuquerque, New Mexico.
J Renee: Kevin Uliassi.
The second solo flyer, Uliassi will follow the low-tech and low-altitude strategy of his compatriot Fossett.
With a balloon named after his wife, an envelope resembling a "giant, white ice-cream cone," and a cramped unpressurised gondola made out of foam, Uliassi is an unlikely contender for the $1m (pounds 600,000) prize.
But he is an experienced balloonist. He plans to launch from a gravel pit in Rockford, Illinois, where he can inflate his 420,000 cubic feet envelope away from the gusts of wind that tore Branson's Virgin Challenger away from its moorings.
Dymocks Flyer: Bob Martin, John Wallington.
A project on a different dimension to its rivals, the Dymocks Flyer is less a high-altitude balloon, more a basket-in-space.
Australian Wallington and American Martin are to float 24 miles to the outer atmosphere, where they will conduct experiments for Nasa.
Their balloon is also the only one to be launched from the southern hemisphere, with a route plan running from east to west. It would be ready to launch from Alice Springs from 28 December. It is also the only one of the six contenders which has an envelope filled solely with helium, which expands as it rises until it reaches the huge capacity of 39.5 million cubic feet.
The gondola has life-support systems, electricity, running cameras and scientific data gathering machines. It is pure white to reflect solar radiation.Reuse content