Richard Branson’s Open Letter About The Virgin America Takeover

When people think of the Virgin brand, Richard Branson is probably the first person who comes to mind. There’s no denying that he’s a huge personality and played a big part in the inspiration for the airline, even if he’s not involved directly day to day.

Richard Branson reportedly owns about 22% of Virgin America, so he will pocket about $500 million once the merger between Alaska and Virgin America is complete.

Alaska-Virgin-America-Merger

So, how does Branson feel about the takeover? Is he happy to pocket $500 million and see his airline bought for an amazing price, or is he sad to see the brand swallowed up? A bit of both, it would seem, per the open letter he published today, following news of the merger.

On the surface Branson says he’s sad to see Virgin America merging, and that there was nothing he could do to stop it, given that much of his stake in the airline comes in the form of non-voting shares:

I would be lying if I didn’t admit sadness that our wonderful airline is merging with another. Because I’m not American, the US Department of Transportation stipulated I take some of my shares in Virgin America as non-voting shares, reducing my influence over any takeover. So there was sadly nothing I could do to stop it.

Our Virgin airline has much more to do, more places to go, and more friends to make along the way. The important thing now is to ensure that once Alaska witnesses first-hand the power of the brand and the love of Virgin America customers for our product and guest experience, they too will be converts and the US traveling public will continue to benefit from all that we have started.

Despite the turbulence and head winds, the journey remains thrilling and joyful, and I look forward to more future flights with Virgin America.

He spends the rest of the letter touting the areas in which Virgin America has succeeded, in offering a great onboard product:

Virgin America became the first airline to offer fleetwide WiFi, soothing mood lighting, touch-screen seatback entertainment, an on-demand food ordering platform, and power outlets at every seat on every flight. Our unique and stylish product and brilliant customer service have won every major travel award. The airline has also done something almost inconceivable in the airline industry: Virgin America won the hearts and fierce loyalty of consumers around the country. People love this airline.

There’s no denying that Virgin America has taken a different approach than other US airlines towards their onboard product. I’m still not convinced they’d succeed long term independently. Right now all US carriers are turning record profits, so it’s easy for them to think they’re doing amazing things (that’s why we’ve seen so many customer unfriendly moves from the legacies lately, despite them turning record profits), when in reality it’s just a combination of the economy and oil prices.

Richard-Branson

Bottom line

I find this open letter from Richard Branson to be interesting, especially his disappointment at the merger. I’m not sure if he’s just trying to be “patriotic” about his brand here, or whether he really feels this way. He’s a businessman above all else, and surely he knows that his investors got an incredible deal here.

Do you think Richard Branson is actually sad he couldn’t stop the merger, or is he just trying to be supportive of his brand and what he has built?

(Tip of the hat to The Points Guy)

Comments

  1. The thing I’m wondering about this is that presumably like most “Virgin” companies they only licensed the brand from the Virgin group and so that identity is not necessarily something that Alaska now owns lock stock and barrel.

    Depending on the terms of that licence, once Virgin America is absorbed and disappears, there may be nothing stoping RB and co. from starting up another Virgin America from scratch all over again. Although selling at the top of the game and walking away is probably the sensible business plan.

  2. I am wondering if this merger will lead to a new name too. From Virgin America to Virgin Alaska perhaps?

  3. @Dennis i think they’ve already confirmed that VX will be folded into AS and the name will remain Alaska Airlines. Of course, anything can happen between now and when the deal closes and when they fully merge

    Personally, I think that if he really wanted to Branson could have invested more money to save VX. Or Delta could use their influence with Virgin Atlantic to pick it up. Its possible that he didnt want to invest in VX any more than he already has but he also doesnt want to come across as not caring about the airline as well, which is why we have this letter

  4. Branson has a history of starting up Virgin brands, often under subsidy situations or sanctioned monopoly, of which he then exits after a period, licensing the name branding. He is pretty much textbook serial entrepreneur, who tends to have the knack to sell more or less at the right time.

    He may have not been able to stop it, but VX was developed and started peak prior to recession when people were flying, but legacy carriers had inferior product. Industry changed, legacy carriers merged and got better with newer planes. Low-oil and easy monetary policies have a perfect exit point.

    http://www.theguardian.com/business/2016/apr/04/sir-richard-branson-virgin-deals

    Apparently cried when selling Virgin Records. Given Napster, iTunes, streaming music event timeline, bet he was happy in retrospect.

  5. Anyone knows what’s Branson’s ROI on his VX investment? I’m surprised they made it through the Great Recession and emerged as a profitable airlines.

  6. I think its like anyone who starts and builds an empire brand. No matter what it is, you are always a bit sad to loose a part of it.

  7. letter that just went out to Elevate members:
    “today just four airlines control more than 80 percent of the U.S. market. By joining forces with Alaska Airlines – an airline that is also known for its leading operational performance and guest-focus – we are creating the best airline in North America and one with the size and market share necessary to compete in this consolidated environment.”

  8. He owns 22% of the airline, so what was he going to do about it? Crazy that in this globalized world, foreigners are still blocked from starting airlines in the US. Really puts into perspective why flights here cost more than Europe and Asia which have more open systems.

    The FAA should be very strict on safety controls, but blocking ownership stops great foreign airlines from competing, bringing better product and prices to all.

  9. Sir Richard’s always had an emotional attachment to the airline business that he hasn’t had with his other ventures, except for the record label. There were points where he could have flipped Virgin Atlantic but didn’t, selling a minority stake to make sure he stays in control. I think this was very disappointing for him, although admittedly the money makes up for it somewhat.

  10. The whole Virgin brand is like a bad lover. He will give you great foreplay then pulls out and let someone really bad taking over so you find yourself short of an orgasm or having to finish off yourself or go somewhere else. It is a frustrating business model he/ Virgin uses which now left me cold with his ventures as it is always sold off and managed badly. My two cents euphemism

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