Even though air travel is in doubt, he might yet pull it off.
Harvard Business School strategy guru, Professor Michael Porter, famously described the airline industry as “one of the least profitable industries known to man”. He said most airlines are predominantly losing money, “punctuated by brief periods of mediocre profits”.
Virgin Atlantic’s profits have not always been mediocre, but it has certainly often lost money, achieving an operating profit only twice in the 2010s. Predominantly long haul, it has faced intense competition over the years, with British Airways controlling more landing slots at Heathrow – especially on the profitable routes across the Atlantic.
In the calendar year 2019, Virgin Atlantic turned over almost £3b, made a pre-tax loss before exceptional items of £30m and employed some 10,000 people. Thanks to Covid, the airline in 2020 lost £669m before tax and exceptional items on turnover of £0.9b,and staff numbers were cut to just below 6,000.
Besides this huge reduction in staff, Virgin Atlantic has needed over £1.5b from rescue deals and sell-offs to stay airborne during the pandemic. This has included hundreds of millions of pounds from Richard Branson’s Virgin Group, which owns 51% of the business. US airline Delta, which owns the remaining 49%, contributed too.
Virgin Atlantic has been in private hands for the whole of its 37-year existence but now, fresh from his trip to the edge of space, Branson is reputedly planning to list the airline on the London Stock Exchange this autumn. This IPO (initial public offering) has come as something of a surprise – but is it really?