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Jul 28, 2017

Branson gives up control of Virgin Atlantic cheaply, what does this mean for his brand?

Branson has sold off his control in Virgin Atlantic, a move that may well add to uncertainty about Virgin Australia's future ownership structure

Quite possibly the start of the end for Branson’s brand in 2013, when he launched Little Red, a UK LCC that failed badly

Virgin Australia has even more to think about this morning following the financial filings from its Middle East and Singaporean stake holders, with its co-founder Richard Branson selling off control over Virgin Atlantic for what looks like a low ball price.

This story, just on the Financial Times site, has not only the details, but that sad and pathetic underpants photo in 2013 that raised questions about his powers of judgement and continued relevance to aviation.

Branson owns 10 percent of Virgin Australia Holdings, alongside one fifth stakes held by Singapore Airlines, Etihad, HNA and Nanshan Group.

In filings yesterday Air France KLM is buying 31 percent of Virgin Atlantic from Richard Branson, who had sold 49 percent of that airline to US carrier Delta in 2012, giving it invaluable additional access to slot restricted London Heathrow Airport.

That leaves Branson with a minority 20 percent stake in Virgin Atlantic, while Delta and China Eastern both buy 10 percent stakes in Air France KLM, which gains an additional €751 million in capitol from those transactions.

The statements quoted in the FT story dress up these moves as creating a powerful trans-Atlantic alliance to take on longer ranging low cost carrier operations like those of Norwegian which close followers may have noted is showing its own signs of becoming financially stressed by selling its seats too cheaply.

The capacity of Air France KLM to differentiate their product from European low cost brands like Ryanair and easyJet is questionable, as they now offer options for business travelers that are often roomier and cheaper than those the French and Dutch legacy brands claim to be superior full service options.

None of this may be of direct relevance to Australian domestic flyers. But Branson has already relinquished his once total, and later, substantial stakes in Virgin Blue prior to its rebranding as Virgin Australia. His residual equity in VAH may shrink further, or even disappear.

Whatever else might be said about the challenges Virgin Australia faces, it needs unified and active support by its key stakeholders, and a plan to retain the loyalty of hard won corporate customers as the airlines shifts its popular wide body A330s and smaller Embraer E-jets off its domestic network in favor of putting those customers back into single aisle 737s.

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7 comments

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7 thoughts on “Branson gives up control of Virgin Atlantic cheaply, what does this mean for his brand?

  1. Creeper

    Rename it V Atlantic. Get rid of those pesky royalties.

    1. Dan Dair

      They could paint V-Jet in ‘Virgin’ red on a white tail…….
      I’m sure I’ve seen that somewhere before…… Maybe I just dreamed it.?

  2. comet

    Will Air France KLM bring its safety standards to Virgin Atlantic?

    Will Virgin Atlantic now adopt the Air France practice of hiring pilots who don’t know what to do if the aircraft’s speed indicators give a faulty reading?

    1. Dan Dair

      There are many aspects of European aviation safety protocols which make Australia look more like one of the poorer African nations, than a ‘1st world’ Western one.?

      That said, Air France have got themselves something of a reputation & it will take some time (with a good record) for the shine to come back, if it ever does.?

  3. Jacob HSR

    He is one strange man.

    Over 10 years ago I flew domestic on Virgin Blue – and I got the impression that it is a low cost carrier – no TV, no radio, no food, and the male flight attendant had pimples.

    (No complaints, that is what I expect of a LCC)

    But then he launched Virgin Active Gyms in AUS – which are very high end gyms located on the most expensive street in Vic.

    Yet, 10 years ago I was using Virgin prepaid mobile because it was the cheapest.

    Toyota has Lexus, Nissan has Infiniti, can Richard not come up with 2 names?

    1. Dan Dair

      Jacob HSR,
      It may not necessarily be all Richard Bransons’ own doing, but he has come up with different names for the two ‘products’ in his portfolio:
      Virgin Australia & TigerAir Australia.!

    2. michael r james

      The shtick behind the Virgin brand is neither cheap nor expensive etc. It is “you get what you pay for”. And mostly it has been true. That is why Virgin Atlantic made him seriously wealthy when it began: new planes (bought cheaply on the second-hand leasing market but nonetheless all of them had seat-back video when BA was running decrepit packed planes with few frills at stupid prices) at fair prices. Even my American colleagues in Oxford switched to VA (from their awful American lines or maybe having tried BA). I didn’t think Virgin Australia was LCC but that it was a cut above at fair prices without the crap from LCCs. OTOH JetStar is LCC and you get the crap “for free”. What you get extra from flying Qantas is a mystery. But no real choice between JetStar and Virgin.
      I also used Virgin prepaid mobile because Telstra gave me the runaround and Virgin had no-nonsense clear and fair prices. The more complicated plans are simply cover for trickery on costs and conditions. Of course he sold that to Singapore Inc. (Optus) as well.