Sir Richard Branson knows how to make money. He’s a billionaire, after all. But his airlines?
They’re better known not for making money but losing it.
Remember Virgin Express, Virgin Sun, Virgin Nige-ria, Little Red, and Virgin America? None survives today. Virgin Australia is still around, but it’s notable for how much worse it’s performing than Qantas. And the flagship airline of the Virgin Group, Virgin Atlantic? It posted another annual loss last year, a year in which even strike-damaged Air France made a small profit. If you thought Virgin Australia’s six-point margin gap with Qantas was large, consid-er Virgin Atlantic’s nearly 16-point gap with British Airways.
Why is Virgin Atlantic so weak?
It wasn’t always so. The airline quickly reached profitability after launching in 1984, convincing the Thatcher government to let it challenge British Airways in the transatlantic market from London Gatwick. The collapse of America’s People Express gave Virgin an early boost, followed by an even bigger boost from the deaths of Pan Am and TWA, the only two U.S. carriers serving London Heathrow at the time. That gave Virgin an opportunity to jump in, becoming part of a four-airline quadropoly con-trolling the lucrative Heathrow-U.S. market.
As part of the privately held Virgin Group empire, Virgin Atlantic never published detailed financial re-sults. But it did claim solid profits from 1995 through 1999, following a brief liquidity crisis in the early 1990s, which Branson addressed by reluctantly sell-ing his treasured music business.
Conditions were just the opposite in 1999, when the transatlantic market was enjoying strong demand and all airlines were enjoying extremely low fuel prices. Amid the euphoria, Singapore Airlines paid nearly $1b for less than half of Virgin Atlantic. His timing was impec-cable: the first three years of the 2000s brought an economic downturn, higher fuel prices, and the 9/11 terrorist attacks, the biggest demand shock ever for airlines. No wonder The Economist once described Branon’s playbook as such: “Launch a company, build a brand, never mind the profits, and flog it at the right moment for a huge gain.”
If Branson’s timing was remarkable, so too were his marketing skills. Flying hot air balloons around the world, appearing in James Bond movies, dressing in drag, jumping off buildings…
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