Branson cedes Virgin Atlantic control
Billionaire, 67, says deal will allow airline to ‘prosper and grow’ as he gets older
Billionaire Richard Branson says he’s ceding control of Virgin Atlantic Airways Ltd so that the carrier can join what it claims will be “the most significant joint venture in aviation.” For Virgin, the deal may be as much about gaining a lifeline after years struggling to keep up with British Airways.
Branson, 67, said in an open letter when Air France-KLM Group announced the purchase of 31 per cent of Virgin Atlantic on Thursday that the deal, tied to an expansive trans-Atlantic alliance, will allow the UK carrier to “prosper and grow” in coming decades “as I get a little older.”
The entrepreneur will pay a price for that reassurance, surrendering ownership to the Atlantic Chief Commercial Officer Shai Weiss said in an interview that Branson, who plans to stay on as the Crawley, England-based carrier’s chairman, remains “entirely committed” and “doesn’t have a back seat” when it come to business and management.
The Air France-KLM investment and expansion of the existing Delta joint venture to include the Franco-Dutch company and Italy’s Alitalia represents a “pure alignment of interests” that will safeguard Virgin’s future for at least the 15 years spanned by the alliance agreement, Weiss said. French company and Delta Air Lines Inc, which holds a 49 per cent stake, leaving him with just 20 per cent of a company launched with cash from his original record label and which he has described as “truly a labour of love.”
Branson acknowledged the forces that have seen Virgin Atlantic lose ground to BA, which he said has a “stranglehold” on slots at London’s Heathrow Airport. He added that the biggest UK airline is also more dominant after forming IAG SA with Spain’s Iberia and buying up rivals BMI, Aer Lingus and Vueling.
What Branson didn’t say is that Virgin had an opportunity to make many of the same purchases, but neglected to do so as he spread his energies between Virgin-branded businesses spanning trains, gyms, cola, banking, mobile phones and most recently space travel.
The £220 million ($288 million) that Air France-KLM will pay for its Virgin Atlantic stake hints at the UK carrier’s lack of global standing, indicating a valuation of £709 million for the whole of company. IAG is worth £12.3 billion, Air FranceKLM €3.44 billion ($4 billion) and Delta, which bought its Virgin holding after a deal in 2012, some $36 billion.
Resurgent US demand that’s seen the carrier perform “much, much better than expected” in recent months might even mean that it avoids the full-year loss forecast by Chief Executive Officer Craig Kreeger in March as the pound slumped in the wake of Britain’s vote to quite the European Union, he said.
Virgin also remains a household name despite a limited network and a fleet including ageing Boeing Co. 747s and discontinued Airbus A340s — testimony to its continued focus on remaining stylish and youthful even after 33 years of hard slog in the ultra-competitive trans-Atlantic market.