“Virgin likes to face seemingly insurmountable problems and try to get over them,” he said in 2018.
But today, Branson’s business empire is facing what may be its biggest challenge.
Virgin Atlantic last week filed for US bankruptcy protection as part of a $ 1.5 billion refinancing plan aimed at maintaining solvency amid the worst economic slowdown since Ever. The airline’s operations are continuing, although it is not expected to return to profit until 2022. The sister company Virgin Australia is also undergoing a restructuring under its new owner, Bain Capital.
In response to the crisis, Branson pumped money into struggling businesses, which meant there were fewer resources for bold new projects, at least in the short term. (Virgin Group is a UK-based investment and branding company that operates as a private property management firm of Branson.)
At the same time, 2020 is arguably a pivotal year for Branson̵
7;s commercial aerospace company Virgin galaxy (SPCE)
, raise the stakes for its success.
Virgin Galactic has been a Wall Street success story this year despite the fact that it hasn’t turned profitable yet. Galactic plans to make Branson the first crew member on a corporate space flight early next year – a risky bet but if successful, could attract other passengers and open up. Great opportunity for the space travel business.
“It’s obviously a very bold move, but you have to respect the skin in the game Branson is putting in, because be the first to do it,” said Ark Invest analyst Sam Korus.
Virgin Group has so far invested more than $ 350 million in its companies as it ended the coronavirus crisis, and that amount continues to grow, according to a company spokesperson. The spokesperson also noted that in recent months, Virgin continued to invest in its satellite business, Virgin Orbit, beginning to produce ventilators to help address the country’s shortages during the period. pandemic period.
Travel business disaster
The pandemic has wreaked havoc on the tourism industry and experts are not expecting a significant improvement without the effective Covid-19 vaccine or treatment. Even (or if) virus subsides, there may still be financial and other barriers to travel – in a recent survey by the International Air Transport Association, 66% of people were Questioners said they would travel less for entertainment and business in a post-pandemic world.
In April, Branson asked the UK and Australian governments to provide financial assistance to Virgin Atlantic and Virgin Australia, “given the serious uncertainty surrounding travel.” In an open letter to employees, Branson said the existence of the two airlines is crucial to industry competition.
At the time, Branson’s Virgin Group pumped $ 250 million into companies in response to the pandemic. He even suggested a mortgage on his Necker island in the Caribbean “to raise as much money from the island as possible to save as many jobs around the group as possible.”
The Virgin Group is comprised of more than 35 companies and employs more than 60,000 people worldwide.
The British government has rejected Virgin Atlantic’s request for a commercial loan. In July, the airline unveiled a $ 1.5 billion restructuring deal to maintain solvents, just days before resuming 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 protects U.S. assets of restructuring foreign companies in their home countries. The company laid off more than 3,500 employees and closed its facility at London’s Gatwick airport, but said it was “confident” in its refinancing plan.
Virgin Australia was also unable to secure direct financial support from the Australian government – which entered voluntary management in April and sold it to US private equity firm Bain Capital in June.
Virgin travel agencies have similarly struggled.
Branson in February launched its luxury yacht route, Virgin Voyages, which will embark on its maiden voyage to the Caribbean in April. But then the coronavirus pandemic struck and brought PR especially badly for tourism in its early days, when several ships became hotspots for the coronavirus.
A group of travel route operators, including Virgin Voyages, said last week they had agreed to suspend US travel activities until at least October 31 due to subsequent US coronavirus infections. continued to increase.
Even after the tours continue, Virgin Voyages may have a hard time attracting the kind of rich young adult tourists it hopes to serve. Fares for a three-to-four-day trip on Virgin’s first ship are set to range from $ 1,600 to $ 19,000 – a big question at any given time but special amid one of the worst economic recessions in US history.
Virgin Group has made health and safety information available – including cleaning procedures and social outreach instructions – for its travel, airline, gym and hotel businesses.
“Virgin companies around the globe are implementing large-scale safety initiatives so you can travel, have fun, stay healthy,” the company said on its website.
Even for the majority of the rest of Branson’s business empire, Virgin Galactic is still a bright spot.
Despite a wildly volatile year for Wall Street, Virgin Galactic shares have risen nearly 55% since January, when the company started commercial space travel. Galactic launched on the New York Stock Exchange in 2019, following an agreement to give new investors a 49% stake in the company.
In recent months, Branson has sold off hundreds of millions of dollars of Virgin Galactic shares to recoup money back into traditional Virgin travel businesses, Bloomberg reported. Virgin Galactic shares fell briefly in May after Virgin Group announced it would sell up to 25 million shares of Galactic to support its broader business, potentially signaling concern among investors. Investments in the space sector have been slowed down.
Virgin Galactic plans to send groups of paying customers on short, beautiful flights to the edge of space, where they’ll hover weightless for a few minutes while gazing at the universe through the windows of the plane. Tickets for the trip cost around $ 250,000.
The company said earlier this month it had received more than 700 down payment payments for air tickets into space as of June 30. Branson is expected to be the first crew member to fly on. The company’s subsidiary orbital vehicle, SpaceShipTwo, early next year. (The vehicle can carry eight people, including two pilots.)
Virgin galaxy Ark Invest’s Korus says it won’t be hit hard by the pandemic, as the extremely wealthy customers the company seeks are less likely to be affected by the economic crisis, Ark Invest’s Korus said.
“Space is such a super interesting field right now, so many of the things that people think are impossible have proven possible,” Korus said. “Obviously there is still a large amount of risk involved, but if [Branson’s] Successful flight in the first quarter of next year, this space travel concept is unlocked and risk-free. ”
Galactic has also been working to bring its rocket technology into an air travel business that brings people back and forth between cities at record speeds, an area of business that could also have revenue potential. large entry. Korus has predicted such an industry could eventually grow to around $ 300 billion in annual revenue.
He said Virgin Galactic’s success while other travel-related businesses struggled could represent a kind of “changing guard” in the way people think about the future of travel.
Innovation works in times of turmoil, says Korus. “Nobody wants to invest in new technology when things are going well … but as soon as there is that crisis, it provides that catalyst for investing in new technology.”