Richard Branson has been ridiculed for his unwillingness to expend his personal fortune to save the airlines he founded. But can you blame him? I certainly cannot.
Virgin Australia is in Australia’s version of bankruptcy protection. Virgin Atlantic is on the brink.
But thus far, both have been denied government loans. In the case of both airlines, there are complicating factors at play. Delta Air Lines owns a 49% stake in Virgin Atlantic and has expressed unwillingness to invest further in its wavering partner. The optics of taxpayers bailing out a company that is 49% owned by a foreign company are not pretty. Virgin Australia has owners from around the world including Singapore Airlines and Etihad.
And then there’s the Richard Branson personal wealth issue, which I laid out earlier today. With a net worth of over $4 billion, many are wondering why Branson is asking for taxpayer assistance instead of raising the money himself.
It seems like a fair question. Branson doesn’t pay much in taxes since he has chosen to live in the British Virgin Islands, a tax haven. Surely he can put some more skin the game, right? It’s not like he’s wholly self-made. Instead, he used taxpayer-funded infrastructure to build his empires.
Well, perhaps. But this idea that he has $4 billion sitting in a bank account is an absurd fantasy. His money is tied up in his various ventures, all of which are doing poorly at the moment. I’d guess that his net worth is much less today than it was a month ago and that his liquid reserves are limited.
But this also seems to me like a misplaced effort to punish Branson for his collective frustration over the Virgin brand. Virgin considers itself an upscale and swanky brand, but often fails to deliver. Furthermore, its underperforming rail service and questionable (though arguably reasonable) lawsuit against the UK’s National Health Service did not exactly win Virgin many fans.
When EasyJet was bailed out, Sir Stelios Haji-Ioannou was not asked to contribute money to save his airline. He’s a billionaire too. So why Branson? Because he’s a little more wealthy? Can you blame him for trying to shield his personal fortune? I wouldn’t put my house up as collateral if I already had more than enough to retire comfortably, just to save one of my pet projects.
It may be that the Virgin Atlantic should not be saved. Perhaps the jobs and competition are not worth the price tag. Perhaps, with demand likely to recover very slowly, British Airways and foreign completion will be enough to temper prices and allow a new competition to emerge. But that decision should not be made on the basis of whether Branson kicks in. He’s done his job, helped to create many jobs, and aid for Virgin should not be held hostage over his personal contribution.
Either the government loan makes sense or it does not. Is preserving competition and saving jobs with the risk of the loan? Branson is just a distraction.
Debit, I’ve missed your comments.
Has he just stopped visiting/commenting altogether or did you ban him/her?
I did not ban him. Recently, I warned him to cut back on his personal attacks, but he is welcome here.
Debit, come back. You are missed…
Third point. A lot of my American friends are told to have “six months worth of savings”. Ignoring how unlikely that is for some people, by circumstance or choice, why aren’t the businesses expected to too?
Given Delta’s investments in Virgin Atlantic, Aeromexico, Air France KLM, China Eastern and LATAM it would be their responsibility to look after their interests – why buy a stake the first place?
But if DL themselves dont have the cash saved to cover 6 months of issues of all of the above airlines, plus themselves (and its not like they were lacking in profit in 2019) then why buy in with nothing to support it all when, inevitably, the whole thing goes sour?
As someone who lives in London, (and as a BA loyalist) the UK gov should definitely loan Virgin money. To continue refusing to do so would be totally asinine. Virgin provides MUCH needed competition to BA and employs tens of thousands in the UK. The gov can put all sorts of requirements (e.g. pay cuts for management, restructuring, etc.) on the loan, but to let Virgin fail would put tens of thousands out of work (not even counting the staff at Heathrow T3 who would lose their jobs) and would give BA a monopoly.
This is the curse of companies who feature a “superstar” or “celebrity” owner/CEO. People tie the personal wealth of the leader to the financial well-being of the company, even though there are firewalls and liquidity issues preventing that from being true in most cases.
Limited liability company. The responsibility of the shareholders is limited to the shares they subscribed. If any of those shares haven’t been paid, they must pay. Otherwise, no legal obligation whatsoever.
Government assistance / bailout exist because they have an interest in keeping unemployment numbers down, among others.
All these talk that says some millionare should help their company or give more cash is stupid. It is just a form of jealousy whereby the poor blame the rich simply because they are rich. You have more money than I do, therefore you are wrong. The justification of this absurd logic is because the number of poor and lazy-ass far bigger than the rich.
Unless the bailout is coming at the expense of the taxpayer. Especially when we know full well (as in the case of the U.S. carriers) that they will end up filing Chapter 11 anyway in a few months.
Then complain to the government which you elected democratically, not the share holders personally.
How much did Branson make from the Virgin America sale?
From what I could find at tie time of sale he had a 20% stake which would translate to about 500 million dollars in 2018. Much of that money was invested in Virgin galactic would be my guess. As well as used call off the AF-KLM purchase of 31% of Virgin Atlantic.
Currently his biggest asset most likely is virgin galactic against which he could borrow money but banks are currently tight on lending money against stock as well as for stock that has had a wild ride recently.
Not much. It was a hostile takeover
Highly recommend reading his book: https://www.amazon.com/Losing-My-Virginity-Survived-Business/dp/0307720748
From a British perspective, whilst I believe in the nationalisation of rail in the UK, the Virgin rail franchise was quite popular with consumers. I think the Virgin brand is quite popular but Branson certainly lost a lot of respect and admiration after his NHS lawsuit.
I used the Virgin trains every month for the last 3 years. UK is in the Stone Age when compared to rail system in countries like Italy, Spain and France. What a joke. Overcrowded trains, outrageous tickets prices, never on time, old rail tracks that won’t allow the train to go at higher speeds. Very similar to the situation in the US with Amtrak.
Like others I am a BA fan and have never flown Virgin. Friends have and initially liked it but some have switched back to BA. I think the UK government should make an offer to invest, taking a majority stake in the airline. For example a £500 million loan should also involve the UK government acquiring around 80% of the shares as preference shares plus one “golden” share with a veto and at least 2 seats on the Board. The government shares could be bought back and cancelled (if Delta and Branson want to maintain their holdings) or sold on the open market, such monies going to repay the loan plus interest, until all is repaid. What I am not sure is if Delta would countenance that even if Branson did. I also think Virgin Australia should get a similar offer from the Australian government
What’s your opinion on how safe VS award bookings with partner airlines are? I have an ANA F flight in a month booked with VS miles. What if VS goes under before then? Will my ticket be honored by ANA, assuming travel is even viable by then?
If the past is any indication of the future, your ticket will still be valid. Hopefully travel restrictions will be somewhat lifted by then so you can enjoy the flight.
Thanks, that’s good to know. I’ll probably reschedule for a later, safer date, because if VS goes under then any further changes would probably be difficult if not impossible.
I saw what Lucky wrote and I don’t disagree. My point was that if VS declares bankruptcy, it will likely not liquidate or cancel its Flying Club program. Yes, in a worst-case scenario that VS liquidates, it is unlikely (though not impossible) that ANA would honor your ticket.
Any advice/thoughts for those of us sitting on Virgin Atlantic miles?
Virgin Australia closed off its (spun off) loyalty program today to new bookings. If Virgin declares bankruptcy, expect something similar, though hopefully on a temporary basis. In the past, bankruptcies have not led to the cancellation of frequent flyer miles.
I do have a fair number of Virgin miles and want to fly the new Virgin A350 when it starts serving LAX and also try the Delta A350 or A330neo, which I have not done yet. Under the circumstances, I WILL be looking to make those bookings in the next couple of days, even noting that I may wind up getting hosed on the fuel surcharge from Virgin Atlantic if they go under…
Lucky says that if Virgin Atlantic liquidates, then ANA may not honor the tickets. Should we assume that Virgin Atlantic won’t be liquidated? Thank you.
@Scott, see my comment above. I’d say liquidation is highly unlikely (versus bankruptcy, which is much more likely).
I hope you are right. Though if it goes into liquidation our miles may become valueless. In any case, I’m not going to put spend on my VS credit card until things get clearer.
Having an alternative that is nearly as good makes it easy.
The Australian government is NOT going to bail out Virgin; it is unthinkable that they would even consider it, as Virgin is majority owned by foreign interests, including state-owned/controlled enterprises ( SIA, Etihad, Chinese).
But I agree that Branson is under ZERO obligation, legally or ethically, to spend his own money on Virgin Australia.He can walk away, just like every other shareholder. The situation in the UK is less black and white.
Virgin lost their UK rail network some time ago, they lost it because they refused to meet workforce pension obligations.
More money for old beardy and less for the workforce was the issue at the heart of this.
Not paying taxes in the UK really doesn’t seem to help him in this case (of course the Virgin group did pay UK taxes though). That plus the NHS lawsuit and you will have a hard time in the public opinion.
I had the great pleasure of flying Virgin Atlantic IAD-Hong Kong, Shanghai, IAD and the experience was terrific: great service, beautiful aircraft and very classy … and that may be the problem: BA is considered a national asset; EasyJet is air transport for the masses but VA is seen as a wealthy man’s toy catering to pampered folks and the Virgin adverts worldwide certainly promote that image of glamour, sophistication, “hipness”. I think that’s why the UK government – and to a degree the Aussies – are so wary of bailing ut the Virgin brand; it looks (not that it necessarily is, but it looks) like you are bailing the rich and powerful which is never a winner in such a toxic atmosphere as we currently live in.