“Virgin likes to take on seemingly immutable problems, and try to overcome them,” he said in 2018.
But these days, Branson’s business empire is facing what may still be the biggest challenge.
Virgin Atlantic filed for bankruptcy protection for the U.S. last week as part of a $ 1.5 billion recapitalization plan to maintain solvency amid its worst economic downturn ever. The airline’s operations are continuing, although they are not expected to be profitable again until 2022. Sister company Virgin Australia has also undergone a restructuring under new owner, Bain Capital.
In response to the crisis, Branson has pumped funds into the struggling companies, which could mean less resources for bold new ventures, at least in the short term. (Virgin Group is a UK-based investment and branding company that functions as Branson’s private wealth management firm.)
At the same time, 2020 should be a big year for Branson’s commercial spaceflight company Virgin Galactic (SPCE), increase the stakes for their success.
Virgin Galactic has been a Wall Street success story this year despite not being profitable yet. Galactic plans to make Branson itself the first non-crew member on a business spaceflight early next year – a risky bet, but one that, if successful, could attract other passengers and create great opportunities for the space business.
“It’s apparently a very fat move, but you have to respect the skin in the game that Branson brings in, by being the first person to do it,” said Ark Invest analyst Sam Korus.
Virgin did not immediately return a request for comment on this story.
Travel company ellinde
The pandemic has decimated the travel industry, and experts expect no significant improvement without an effective Covid-19 vaccine as treatment. Even when (if) the virus goes down, there may still be financial and other barriers to travel – in a recent survey by the International Air Transport Association, 66% of respondents said they would travel less for leisure and business in a post-pandemic world.
In April, Branson asked the UK and Australian governments for financial support for Virgin Atlantic and Virgin Australia, “in the face of severe travel uncertainty.” In an open letter to employees, Branson said the survival of the two airlines is important for competition in the sector.
At the time, Branson’s Virgin Group had already pumped $ 250 million into the companies in response to the pandemic. He even offered his Necker Island estate in the Caribbean as collateral “to raise as much money as possible against the island in order to save as many jobs as possible in the group.”
Virgin Group consists of more than 35 companies and employs more than 60,000 people worldwide.
The UK government rejected Virgin Atlantic’s request for a commercial loan. In July, the airline unveiled a $ 1.5 billion restructuring agreement to remain solvent, just days before it returned passenger flights. As part of the deal, Branson’s Virgin Group is contributing £ 200 million ($ 262 million).
Last week, Virgin Atlantic filed for Chapter 15 bankruptcy protection in New York, which shelters U.S. assets from foreign companies undergoing restructuring proceedings in their home state. The company has laid off more than 3,500 employees and closed its base at Gatwick Airport in London, but says it “remains confident” in the recapitalization plan.
Virgin Australia was also unable to secure direct financial support from the Australian government – it went into voluntary administration in April and sold in June to US private equity firm Bain Capital.
Virgin’s other travel companies are in a similarly difficult place.
Branson launched in February its luxury cruise line, Virgin Voyages, which will sail in April for its first voyage to the Caribbean Sea. But then the coronavirus pandemic hit and in the early days brought particularly bad PR to the cruise industry, as several ships became coronavirus hotspots.
A group of cruise line operators, including Virgin Voyages, said last week that they had agreed to suspend U.S. cruise operations until at least October 31, as cases of coronavirus in the United States continue to grow.
Even after the cruise returned, Virgin Voyages could struggle to attract the kind of rich young adult travelers they hope to meet. Ticket prices for a three- to four-day voyage on Virgin’s first ship were set to range from $ 1,600 to as much as $ 19,000 – a huge demand at any point, but especially in the wake of one of the worst economic downturns in American history.
Virgin Group has released health and safety information – including cleaning procedures and social distance guidelines – for its cruise, airline, gym and hotel businesses.
“Virgin companies worldwide are implementing broad security initiatives so you can travel, play, stay well,” the company says on its website.
The future of Virgin
Even so much of the rest of the business empire of Branson flounders, Virgin Galactic remains a bright spot.
Despite a very turbulent year for Wall Street, Virgin Galactic’s shares have risen nearly 55% since January, as the company begins work on commercial space operations. Galactic debuted on the New York Stock Exchange in 2019, following a deal that gave new investors a 49% stake in the company.
In recent months, Branson has sold hundreds of millions of dollars in Virgin Galactic stock to push money back into Virgin’s traditional travel business, Bloomberg reported. Virgin Galactic’s stock plunged briefly in May after Virgin Group announced it would sell up to 25 million shares of Galactic to support the broader business, potentially signaling a signal among investors about investing in space.
Virgin Galactic plans to send groups of paying customers on short, scenic flights to the edge of space, where they will linger weightlessly for a few minutes as they view the cosmos through the plane’s windows. Tickets for the trip cost about $ 250,000.
The company said earlier this month that it had received more than 700 deposit payments for space flight tickets effective June 30. Branson is expected to be the first non-crew member to fly aboard the suborbital car company, SpaceShipTwo, early next year. (The car can carry eight people, including the two pilots.)
Virgin Galactic is not expected to be severely affected by the pandemic, as the extremely wealthy customers it seeks are less affected by the economic crisis, said Korus of Ark Invest.
“Space is a super exciting area right now. A lot of things that people thought were impossible are being proven possible,” Korus said. “Of course there is still an enormous amount of risk involved, but if [Branson’s] flight is successful in the first quarter of next year, this concept of space tourism is unlocked and de-risk. ”
Galactic has also been working on parlaying its missile technology into an aviation company that moves people between computational speeds between cities, an area of business that could also have enormous representation potential. Korus predicted that such an industry could eventually grow to roughly $ 300 billion in annual revenue.
He said the success of Virgin Galactic, while other travel-related companies struggling to represent a kind of “changing of the guard” in the way people think about the future of travel.
“Innovation takes hold in tumultuous times,” Korus said. “Nobody wants to invest in new technology when things are going well … but as soon as there is a crisis, it provides that catalyst to invest in new technologies.”
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