Sir Richard Branson’s transport ventures fall into two categories: vaultingly ambitious projects involving spacecraft, hot air balloons and speedboats; and safer bets in markets that are, or have been, partly protected.
The former has generated yards of headlines, but the latter has yielded a fortune.
Branson’s Virgin Atlantic airline was portrayed as a punkish upstart when it took on British Airways in 1984, but for years BA and the tycoon’s carrier enjoyed a privileged position as the only UK carriers allowed to fly between JFK and Heathrow – one of the world’s most lucrative air routes. However, since the financial crisis – and the loss of that duopoly – Virgin Atlantic has struggled for profitability. It has lost £250m over the last four years, with Branson partly shielded from the losses through co-ownership of the airline with Singapore Airlines, which sold its 49% stake to Delta of the US for £224m in 2013. It was a considerable loss on a shareholding that Singapore bought from Branson for £600m in 1999.
Branson told the Observer this month that Virgin Atlantic was set to return to profit this year and was targeting record profits by 2018 after cutting unprofitable routes and receiving new Boeing Dreamliner planes, although he admitted that delays in receiving the aircraft had damaged his business. “We had to rush in planes that we would rather not have offered our passengers, and it cost us a lot of money. When you’re suddenly told you’re not getting 20 planes, the customer service was not exactly as it should have been.”
His recent attempt at creating a domestic feeder airline, Little Red, met with failure and will be closed next year. Despite the new pull of space, Branson said after 30 years in the airline business “it’s still got the same joie de vivre” and he was incredibly proud of his airline: “It’s like a daughter to me”. But the dowry is provided by rail. Branson has made an astonishing sum of money from the unglamorous business of operating a rail franchise, leased from the government. By 2017 he is expected to have taken away £300m in dividends from Virgin Rail, which operates the London-to-Glasgow Intercity West Coast route on an exclusive contract.
Since taking over the route in 1997, Virgin has shared £499m in dividends from the business with co-owner Stagecoach. The route’s financial success was buoyed by a contract renegotiation with the government in 2006 that was widely seen to have been generous for Branson and Stagecoach, much to the chagrin of Department for Transport officials. The DfT re-let the franchise to FirstGroup in 2012, turfing Branson out of the rail business, only to be forced to return it to Virgin when the process was deemed flawed. Under the current deal, Branson will run the route until 2017 with the possibility of a further one-year extension.
Whether seeking ministerial backing for Heathrow landing slots or winning rail franchise extensions, one of Branson’s best entrepreneurial gambits has been securing concessions or business from the government of the day. He bought Northern Rock from the state for £747m and his Virgin Care business provides NHS community health services in Surrey and Devon.
Along with co-investor Aabar Investments of Abu Dhabi, Branson has sunk $500m into Virgin Galactic. But his successes in more bankable fields have provided some ample compensation.
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