Richard Branson hints at all-new US airline after Alaska spat

By Bloomberg News, May 20 2017
Richard Branson hints at all-new US airline after Alaska spat

Billionaire Richard Branson signaled he may jump back into the U.S. airline business after tussling with Alaska Airlines over how long the carrier must pay royalties on his Virgin America brand.

Alaska has to keep paying “unless we decide to start another airline. So, we’ll see what happens,” Branson said in an interview Thursday with Bloomberg TV.

When asked if he would create a new carrier, he said, “watch this space.”

The serial entrepreneur’s comments hint at a return to the U.S. airline industry following Virgin America’s US$2.6 billion sale to Alaska in December.

Branson maintains he should be compensated for the brand through 2040. Alaska, which plans to retire the Virgin America name in 2019, has said it doesn’t need to pay for a brand it isn’t using.

Branson could find room for a new U.S. airline as the major carriers have held back the supply of seats in recent years and have been saddled with higher costs because of new labor deals, said Samuel Engel, an aviation consultant with ICF.

“There’s always space for another airline in the U.S.,” Engel said. “It is a competitive and dynamic market, and the consolidation that has taken place in the last 10 years that has run parallel with capacity constraint only increases that opportunity.”

Virgin America paid Branson a licensing fee of 0.7 percent of revenue, a deal set to continue after the Alaska deal.

Virgin America began service in 2007 and over the years it built a following of customers with its style, music and purple lighting on a fleet of Airbus A320 family jets. Alaska, which flies Boeing 737 planes, has said it will abandon the purple lighting in favor of blue.

Read more: Alaska Airlines drops Virgin America brand, business class seats

Virgin America won a string of airline awards from travel magazines, and built a network of routes that crossed the U.S. That made it an attractive takeover target for Seattle-based Alaska, which was seeking a bigger piece of the California market and the lucrative transcontinental business. Alaska beat out JetBlue Airways to buy Virgin America.

Alaska didn’t respond to a request for comment. Other Branson-backed airlines include Virgin Atlantic and Virgin Australia.

How would Virgin ensure control of the US airline, with the constraints under existing US legislation governing airline ownership?

The legislative landscape hasn't changed. What can he do now to secure control over this new airline that he couldn't do with Virgin America?

Qantas - Qantas Frequent Flyer

25 Sep 2013

Total posts 1244

He should really just stop.

Qantas - Qantas Frequent Flyer

30 May 2013

Total posts 369

Why should he just stop?

Qantas - Qantas Frequent Flyer

26 May 2014

Total posts 468

Does VA also pay license fees to Virgin?  In a low margin business 0.7% of revenue is significant cost.

24 Oct 2010

Total posts 2561

Indeed it does.

Qantas - Qantas Frequent Flyer

09 Feb 2015

Total posts 377

Yes about $10 million per annum.

31 Mar 2016

Total posts 622

Which is equivalent to a few drops in the bucket of VA annual overall Rev$(AUD 4.7b in 2015) and perhaps not even among the top 5 largest items in their mkting & PR budget...

The alternative is to build your own brand fm scratch.  In the airline industry, it's an endeavor which typically takes yrs, if not decades, to invest in+develop to achieve a level of consumer awareness approaching  par with your largest incumbent competitor(s).

Qantas - Qantas Frequent Flyer

31 Jan 2014

Total posts 21

It may be a significant cost, but they also get a benefit (higher loads, higher yields, higher revenue) out of using the highly regarded Virgin branding. This is particularly true for international customers, especially in markets served by Virgin Australia and Virgin Atlantic. These customers expect a certain level of quality that the Virgin branding embodies and that they may not receive from the legacy carriers.

Virgin Australia - Velocity Rewards

26 Feb 2016

Total posts 97

Would this new airlines be VA's allience by default?

31 Mar 2016

Total posts 622


Depending on your definition for "alliance".  VAm and VAu hv been partners for over a decade in terms of code-sharing and FFP crossover earning+perks opportunities.

If R.Branson relaunch/reincarnate VAm in the U.S., I fully expect such brand will retain a similar level of partnership with VAu.

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