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.