Image credit: Press associate

The Story of the Virgin Empire and Their Struggles during the Pandemic

The success of Virgin is contributed to several factors including the talented founder’s skills. However, in this turbulent time, just like other hospitality and travel businesses, they are also facing some problems.
By Iris Cao | 7 min read
on July 9, 2020
Image credit: Press associate

Virgin Group was founded by Sir Richard Branson and Nik Powel, this group is currently one of the most famous British companies. Its headquarter is in London, owning a net value worth of over $7.5 billion and it has been a norm to see their products available almost everywhere. This group specializes in different sectors such as telecommunication, travel, leisure and entertainment, health and wellness, and financial services. However, when it comes to what Sir Richard Branson owns, then not everyone can have the answer for this, even Branson himself cannot say for sure how many businesses he is affiliated with. This is because this group has licensed to many other companies, which leads to the fact that their name even appears in mobile or car or beverage sectors while their main fields are about tourism and hospitality. 

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Courtesy: FT research-Virgin Group

As mentioned above, Richard Branson’s finances are hard to penetrate due to their complexity and opaqueness. While few of his large companies are completely owned by him, the other big-branded firms such as Virgin Atlantic, Virgin Money, Virgin Media, and Virgin Trains are owned by different major shareholders. In some cases, he simply allows his brand to be licensed by other companies with a condition that the company should have purchased a subsidiary from him, and these companies can be listed as Virgin Mobile USA, Virgin Mobile Australia, Virgin Radio and Virgin Music (now part of EMI). As the license holder of such a huge brand, Virgin, Branson receives his fees annually or triennially that can go up to hundreds of millions over time. 

By joining forces with other cash-rich partners, Branson was able to enter new businesses without using up the group's reserves and spending little in launching new ventures such as mobile telecoms. 

Now whether in health, entertainment, travel, or communications, the Virgin brand has become one of the most preferable, well-known companies in the world. By carrying out their standards such as unshakeable values, proactive customer service, and state of the art solutions, Branson has helped his Virgin to become one of the most powerful empires, which are trusted by just not a nation, but the whole generation. 

What Is the Story of Virgin?

Richard Branson started his business in 1966 when he left school at the age of 16. His first job was as a publisher of The Student magazine from the basement of a rented flat. Then he quickly changed his path to pop music, starting a mail-order business that sent records through the post to tens of thousands of teenagers, which was the base for the birth of Virgin Records. This is a chain of shops, with the first one opening off London’s Oxford Street in 1971. Right after he clinched the rights to Mike Oldfield’s Tubular Bells, the Virgin Records label was launched, which attracted several talented and popular artists at the time including the Sex Pistols, Genesis, and the Rolling Stones.

The birth of the million-dollar-child “Virgin Atlantic”

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Image credit: Virgin Atlantic

In 1984, Branson moved his business to a completely different area which is airlines. This billionaire entrepreneur started his airline Virgin Atlantic when his important flight to see his girlfriend from Puerto Rico to the Virgin Islands was canceled. Unlike normal people who would have waited for the next available flight, he hired a plane, borrowed a blackboard and wrote “Virgin Airlines” on the top of the blackboard. In a video by HP Matter, he says: “I went out to round up all the passengers who had been bumped and I filled up my first plane.”

Three decades later, Virgin Atlantic is the second-largest UK airlines. “But it hasn’t always been easy … during those 33 years”, Branson shares in a letter to his employees. 

The key success of an Empire: People

One of the reasons for the success of the Virgin brand is the excellent leadership skill of the founder, Branson. His respect for the employees is what has made the Virgin brand powerful and desirable. This characteristic was showed up after the chaos between British Airways and Virgin. 

In the 1990s, while the Virgin airline was trying to expand further, the British Airways with their “dirty tricks” campaign against Virgin rocked the industry. At that time, Virgin airline was composed of four planes flying and British Airways was putting efforts in killing off this Virgin. They even had a team of people illegally accessing the computer information of Virgin. They used the information to call Virgin’s passengers, pretended that they were from Virgin, and told them that the flights were canceled and moving them to British Airways. 

Understandably, Virgin did not just let it go, they took British Air to court and won $945,000 in damages, which was the largest libel settlement in UK history. However, instead of keeping the money to himself, he chose to reinvest into his Virgin Atlantic team.

After all, this Virgin founder credited all the success of his hundreds of companies to his employees. He believed: “the most basic and important factor of our success at Virgin has, and will always be, our people working together. So, this is true in life or business, to be successful, you need to connect, collaborate, and understand.”

Tips to be a successful entrepreneur shared by Richard Branson

Richard Branson, started his first business at the age of 16, has been an inspiration for other entrepreneurs in the world. Building his massive network has allowed him to get the connection with other leaders, and thus he holds in himself numerous valuable advice for any start-ups, entrepreneurs in general. Below, we include five tips that were shared by him. 

Tip #1: Taking risk is unavoidable for a successful business

“The luckiest businessmen are the ones who prepared themselves enough to take the greatest risks”. Branson also believes that: “Sometimes we can create our opportunity by simply taking necessary risks to open the door of innovation, progression, and success”

Peter Thiel, the co-founder of PayPal, used to say the same to Mark Zuckerberg, that “This world is changing so quickly that if you sit still and do nothing, that’s probably the biggest risk”. And Mark admits that it is still so true. 

Tip #2: They embrace failure

Branson has a nice quote about failure. He says, “Getting everything to go right at the first time is not easy at all, and business is like a giant game of chess – to improve, you need to learn from what you did wrong”. Like other successful entrepreneurs, they are not afraid of failure, they learn from it and apply it for their future success. 

Thus, if you are new to the entrepreneurship world and facing some troubles at the beginning, then it’s good to bear in mind that it’s okay to lose and that embracing your failure and learning from it will help your business thrive even better. 

Tip #3: They are big thinkers

“When we began Virgin, I didn’t see it as an end in itself, a noun; I saw it as the beginning of a whole range of services, an adjective”. Branson also adds: “Successful businesses try to think of new solutions, innovations, sometimes those ideas might be crazy, but they aren’t afraid to let them fly”.

Tip #4: Strong teams and effective delegation

“Operating a huge business on your own is impossible – it is so important to the success of your business that you know how to delegate tasks that you are not able to do well,” Branson shares. 

Zuckerberg agrees: “It’s hard for any entrepreneurs to be successful if they do it alone. The big constructions that were built before, were not done by one, but many people together. Thus, you will need to build a good team to easily reach your success”.

Tip #5: Excellent communication skills

“Communication makes the world go round. It gives us connections and allows us to learn, grow and progress,” Branson writes.

Effective communication in the entrepreneurial world is not just being able to speak, it is more about listening. He says: “After all, you might be missing out if you’re not listening” 

Virgin’s Struggles during the COVID  

A successful brand will have the times of failing and they are unavoidable. During this COVID time, most hospitality services have to shut down the business. Virgin Atlantic and other Virgin companies are facing with the same problem.

Richard Branson has even taken out a loan using his Necker Island, which he owns and where he lives, as the collateral in the effort of saving the business. He also wrote an open lengthy letter. The loan and the letter aim to improve Branson’s image to the public, and especially with the British government, with the view of securing a more significant government loan that helps the airline business to survive. 

This is the harsh times for the tourism and hospitality sector since people do not go out and use the service, they do not have the desire to fly as well, which hurts this airline industry so badly. United, an airline company in the U.S. just announced their losses of $2.1 billion in just the first quarter of 2020. However, the airline is expected to gain $5 billion as grants and loans from the government to keep it afloat and let it keep paying its employees. Besides, this United Airlines has said it will continue to ask for $4.5 billion more. 

The picture for Virgin Atlantic is more daunting compared to United. The airline has not revealed exactly how much loss in revenue due to the coronavirus, but it has said that 80 percent of its service is being cut and 75 percent of its fleet is being grounded. Unlike the U.S. government, the British government shows their unwillingness to bail out airlines during the current crisis and has advised the companies in the industry to exhaust all other options before asking the government for money. When Virgin Atlantic submitted their request to get a loan of $500 million from the government, they were told to resubmit the application. Probably, the company had not done enough to show it had tried hard to get the money elsewhere.

Is Virgin losing the game?

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Image credit: Press associate

This time hurts the Virgin business in general. It is not a great time for activities like airplane trips, cruises, resorts, health clubs, and space travel. To help his business, Branson has pledged $250 million to save as many jobs at Virgin companies as possible while his net worth is reported of $4.4 billion. However, this using his own money could not help to save Virgin Australia. This airline has just announced that they are going into “voluntary administration”, which is similar to Chapter 11 bankruptcy protection in the U.S. Before Branson also asked for $1.4 billion from the Australian government, but he got rejected and the airline had to stop operating. 

In the U.K., Virgin Group and Branson are not receiving positive opinions from the public for several reasons. There has been a rumor that their employees have been asked to go without any payments for the whole eight weeks. This is just not good for the big brand like Virgin when the public thinks the major owner is kiting on a lovely beach on the tropical island that he owns while his employees are struggling. About the island, it is part of a territory that collects no income tax and Branson has not paid any for the past 14 years. This would make the British taxpayers contemplate that they are asked to foot the bill for saving the airlines. 

There are recent controversies that do not seem to support this Virgin group. In 2016, Virgin care, working as a provider of health care services, sued six National Health Service for the flaws in their procurement process. To ease the situation, NHS paid Virgin Care an undisclosed amount in 2017. Then there is the two percent processing fee donation site Virgin Money Giving had been gathering, despite that after a flood of social media criticism, it is now waiving that fee for the duration of the coronavirus lockdown.

Can one letter fix anything?

Branson appears to be trying to fix his public image by one length letter that includes all the rumors he has been facing. Firstly, there are no Virgin Atlantic employees that have been forced to get off eight weeks without any payment, they are doing it voluntarily. Secondly, his family moved to Necker Island not because they are avoiding taxes, but simply they love it there. Thirdly, Virgin Care donated all its settlement back to NHS. Finally, he said Virgin Money Giving is completely non-profit, thus it is not collecting any fees.

Before, the Virgin Group representative has confirmed that Branson has now raised bank debt against Necker Island but did not specify when or for how much. Thus, the initial reaction to the letter from the British government was not so positive, they remained unconvinced to bail out the Virgin Atlantic. Probably this has changed since Branson has actually taken out the loan. 

Meanwhile, there is an important lesson here for any entrepreneurs. The determined founders like Branson have the tendency to follow their instincts without caring about what others might think. That approach can rebound if you are in trouble and need help from others, for example government or public. Hence, when you suddenly find yourself in that situation, it is better not to rush in turning everything around with a single, lengthy communication, instead, accept that rebuilding one’s public image takes a lot of time and effort. Thus, taking small steps gradually and being careful in any movements will be a better direction for any big brands like Virgin empire. 

The article is also credited to Minda Zetlin, Kathleen Elkins.

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