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

By Bloomberg News, May 20 2017

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.

TheRealBabushka

TheRealBabushka

21 Apr 2012

Total posts 3034

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?

eminere

eminere

Qantas - Qantas Frequent Flyer

25 Sep 2013

Total posts 1127

He should really just stop.

GregXL

GregXL

Qantas - Qantas Frequent Flyer

26 May 2014

Total posts 395

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

David

David

24 Oct 2010

Total posts 2322

Indeed it does.

Mightyreds

Mightyreds

Qantas - Qantas Frequent Flyer

09 Feb 2015

Total posts 260

Yes about $10 million per annum.

Dubya

Dubya

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.

DBPZ

DBPZ

Virgin Australia - Velocity Rewards

26 Feb 2016

Total posts 101

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

FLX1

FLX1

31 Mar 2016

Total posts 644

@DBPZ:

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.


Hi Guest, join in the discussion on Richard Branson hints at all-new US airline after Alaska spat