by Bower, Tom
The applause was led by Mohamed Al Husseiny, the chief executive of Aabar Investments, who was sitting in the audience. In his reply, Al Husseiny praised Virgin for choosing Abu Dhabi as the centre of its space industry: ‘It will help us realise the dream of Abu Dhabi as the regional hub for space tourists as well as space-based science research and education.’ The self-congratulation revealed Al Husseiny as another disciple of Branson’s genius. The tycoon had raised $280 million from Al Husseiny in 2009 and a further $200 million after Whitesides’ promise of intercontinental travel.
Six days later, Branson arrived at the State Department in Washington to meet another believer. Hillary Clinton, the secretary of state, was hosting a conference on global investment. In her briefing notes, she was told about the help the department had given to Virgin Galactic. The government’s restrictions on international space flights using American technology had been relaxed, and the Department for Transportation had also waived many safety regulations to allow Virgin Galactic’s development. She was also briefed that take-off was imminent. ‘I’m excited he’s here,’ said Clinton, looking at Branson, ‘because many, many, many years ago I wanted to be an astronaut and I think he may be my last chance to live out that particular dream.’ NASA, her guests were later told, had rejected Clinton’s application because she was a girl. Branson smiled. Clinton’s endorsement was, some thought, payback for Branson’s collaboration with her husband’s environmental campaign. Whatever cynics believed, no one could deny that the Briton was firmly placed at the centre of the American Establishment. However, no one at the State Department’s reception was aware of his latest problems in Mojave.
Branson had ended his legal agreement with Burt Rutan during 2011. Despite appearances, Branson had never quite understood the politically incorrect maverick who doubted liberal causes, was sceptical about global warming and accused politicians of exaggerating the economic crisis. Rutan’s ill health was given as the reason for his retirement, although another explanation may have been his failure to deliver a successful rocket motor. Branson became the sole owner of The Spaceship Company and contracted Scaled to develop the project. Doug Shane, Rutan’s successor at Scaled, acknowledged his predecessor’s mistaken optimism: no one had ever built such a big hybrid motor, nor was anyone else interested in overcoming the technical problems. In theory, the motor could be built, but the costs would outweigh any advantage. ‘He’s trying to jump from the Wright brothers to a DC3,’ repeated Andrew Nelson, XCOR’s chief operating officer and Branson’s competitor. ‘No one has ever done that.’ Even Rutan acknowledged his own error. Before ending his partnership with Branson, he had started a new venture with Paul Allen, the co-founder of Microsoft, aimed at launching a Falcon 9 rocket into orbit from a ‘Stratolaunch’, a giant plane powered by six jumbo-jet engines. The Falcon’s motor used conventional liquid fuel rather than a mixture of rubber and gas. Branson was stuck with his inheritance. Searching for salvation, he contracted the Sierra Nevada Corporation, independent experts based in California, to save his rocket. His costs were mounting.
Branson denied any embarrassment. Although his predictions were repeatedly wrong, his ego deflected any discomfort. Realistically, he should have been humbled on 21 May 2012, when, without fanfare, Elon Musk launched a SpaceX rocket into orbit with 1,148 lbs of cargo inside a Dragon capsule. After docking with the International Space Station above Australia, and once the cargo had been transferred, the rocket returned to Earth with 1,455 lbs of rubbish. NASA paid Musk less than $50 million for the trip, much less than they had previously been paying the Russians. Five months later, SpaceX delivered 882 lbs of supplies to the space station and returned with 1,673 lbs of damaged equipment and specimens of astronauts’ urine and blood for analysis. Musk’s $1.6 billion contract from NASA for twelve missions was confirmed.
Unlike Virgin Galactic, SpaceX was approved by the space agency, and this fact, alongside the successful completion of America’s first commercial space flights and Musk’s announcement that his rocket was being converted to carry seven passengers through space by 2017, should have shaken Branson. But he was not silenced. ‘In this field,’ Branson said, ‘we don’t have any competitors. Land-based take-off – they can never compete with us for people going into space. I may be being naive, and there may be somebody doing something very secretive which we don’t know about, but my guess is that we are five or six years ahead of any competitor.’
He had held to this line for five years – ever since predicting Virgin Galactic would begin taking passengers into space in 2007 – until, passing through Warsaw in October 2012, he became rather more candid. Appearing before a group of students, he volunteered that he could no longer predict when Virgin’s passengers would float in space. He was, he admitted, in the dark. He then resumed his management of expectations.
The following month, he flew to Mojave with his daughter, Holly. For the cameras, he glad-handed many of his 175 employees, featured in a group photograph and ended by signing autographs. But in the executives’ offices he wanted answers about the troubled tests. On one occasion, a motor had burst into flames and fire-fighters had refused to quench the fire in the oxidiser tank, an incident which served as a reminder of the difficulties inherent in developing such a motor. Doug Shane’s solution was to recruit engineers to build a completely new engine using liquid fuel. Branson replied that he needed something immediately. Shane reassured his boss that the rocket would make a powered flight during 2013. There would be spectacular flights in which Branson would feature as the star amid bursts of publicity. In private, they also agreed to develop an alternative motor powered by conventional fuel.
In his office alongside the Mojave runway, Stu Witt, the airport’s chief executive, comforted by all his flying and hunting trophies hanging on the walls, uttered a tart truth: ‘Things have not gone as planned for the past nine years.’
16
Slipping
Days after Elon Musk’s success, Branson was nibbling a fresh crab sandwich in Vancouver. He was on familiar territory – regaling a journalist with his life story to grab publicity.
His arrival in western Canada in May 2012 followed a familiar pattern. Standing at the door of a Virgin Atlantic aircraft, he lifted a hostess into the air and grinned at the photographers. His routine was not as dramatic as jumping off a hotel roof wearing a tuxedo, but nonetheless he always appeared to enjoy the spotlight.
Watching from the foot of the aircraft steps was Christy Clark, the controversial premier of British Columbia. Although Virgin Atlantic would employ only twenty people at the airport, Clark could not resist the opportunity to stand beside the celebrity. ‘You’ll find that prices have come down since Virgin Atlantic announced it was coming on this route,’ Branson told Clark. ‘This is what happens whenever we start new routes.’ His certainty silenced any contradiction. ‘We’ve been practising new airline routes on the Africans,’ he continued, hinting at the costly disasters of Virgin Nigeria and Virgin Atlantic’s abrupt exit from Kenya, which had been blamed on high costs. Virgin’s record in Canada was hardly any better. Virgin America and Virgin Megastores had come and gone, bearing huge losses. Virgin Mobile had been revived but was struggling. Even Virgin Atlantic had previously closed its routes to Canada due to their unprofitability. His airline’s return, he said, would attract 40,000 passengers from his rivals in the first year. Branson’s target was a risk, the ideal magnet for Vancouver’s aspiring entrepreneurs, who were each willing to pay $400 to hear his wisdom on becoming rich in a speech for which Branson would receive his standard fee – about $250,000.
There were no empty seats at the Vancouver Convention Centre. One thousand four hundred people were there to seek inspiration from, in the organisers’ description, a ‘transformational leader in the international business community and someone who has turned incredible challenges into opportunities that have changed people’s lives’. Helped by Virgin’s publicists, the organisers explained that ‘Branson cl
aims to have established eight separate billion-dollar companies and oversees 400 Virgin companies in 30 countries. Across its companies, Virgin employs nearly 50,000 people in more than 30 countries and had global revenues of some $21 billion in 2011.’
The reality did not match the hyperbole. Equating products bearing Virgin’s logo with Branson’s direct management of Virgin companies was disingenuous. But the exaggerations did not harm his credibility. His audience welcomed the self-styled ‘benevolent billionaire’ offering a catchy homily: ‘A business is simply you coming up with an idea to make a difference in other people’s lives.’ He also offered something more. The publication of Screw Business as Usual had become the platform for his sermon to inspire ‘a better world’.
His focus was on entrepreneurs. Businessmen, he told his audience, should no longer chase profits but focus instead on ethical success. ‘Doing good is good for business,’ he said. Previously, he considered being ‘a caring human being’ required him to delegate ‘good people to run each of Virgin’s 300 companies worldwide’. But then he admitted: ‘I hadn’t even begun to scratch the surface of what was needed to be done to help ensure the survival of the planet. I was also very aware that there was too much poverty in the world. Those of us who have been fortunate enough to acquire wealth must play a role in looking how we use those means to make the world a far better place.’ Virgin Unite, he said, would ‘confront those global problems such as starvation and inequality’. To prove his commitment, he had visited two charities in the city – a youth centre and a housing group – and donated $51,000. Unite, he wrote in his book, ‘doesn’t believe in throwing money at problems’.
The audience applauded. His mistaken mention of ‘Vancouvians’, the misdescription of the ‘province’ as a ‘state’ and his reference to Christy Clark’s ‘Colombian government’ were brushed aside by the audience as amusing errors. Nevertheless, over a lunch of shepherd’s pie and treacle pudding, some expressed surprise at his poor oratory. The hall had not been energised. No one, however, questioned his sincerity.
‘I never saw myself as a business person,’ Branson explained to the journalist while he ate his crab sandwich and offered a revised autobiography. ‘I just started off in the 1960s as somebody who wanted to create a magazine to help campaign against the Vietnam war. And then the business came along in order to pay the bills for the magazine, and ever since then I have created things often out of frustration. Virgin Atlantic was created because I hated the experience of flying other people’s airlines … I’ve never been particularly interested in making money.’
Billionaires do not evolve by indifference to wealth, and Branson was no exception. Virgin Records was not created to pay for Branson’s student magazine, because the magazine closed down just as the company was launched. Nor was the magazine created ‘out of frustration’, but rather from a schoolboy’s burning ambition. As he admitted in 1986, when his memory about the history of his record business was more precise, ‘People thought that because we were twenty-one or twenty-two and had long hair we were part of some grander ideal. But it was always 99.5 per cent business.’ Since then, dozens of trusting people had been ‘screwed’ by Branson’s tough demands for profits from their ideas and their work. Humiliated, they rarely challenged his own rebranding as an evangelist unmotivated by money. His self-portrayal as an altruist, ambitious to ‘save the world’ from an environmental catastrophe, was applauded. His suggestion that another airline – namely Virgin – might fly between London and Vancouver was, however, a questionable method of improving the atmosphere.
Over the following weeks, Branson energetically repeated his commitment to changing the world. ‘Those that continue with “business as usual”,’ he said soon after his visit to Vancouver, ‘and focus solely on profit maximisation, won’t be around for long – and won’t deserve to be.’ Business, he told a newspaper, should consciously set out to ‘do good’ rather than chase profits. ‘One of the most devastating theories of the Seventies was that – no matter what it took – the primary purpose of business was to maximise value for shareholders. This led to a variety of social ills where businesses polluted, discarded employees at the drop of a hat, or created unsustainable short-term gains.’ No one dared to question the contradictions. His airlines were pollutants, Virgin ceaselessly sought profits from trains, airlines, health and banking, and the company’s employees were dismissed when the profits disappeared. Those events sat uneasily with Branson’s promotion of ‘doing good’.
One year later, it became clear that Branson’s gamble in Vancouver had flopped. Instead of flying 40,000 passengers to Heathrow, Virgin Atlantic carried under 9,000 of the 535,000 passengers in total. To limit his losses, the airline would fly only in the summer and not contract its employees during the winter.
The struggle for his airlines’ survival reflected Branson’s true values. With his approval, John Borghetti, the newly appointed chief executive of Virgin Blue in Australia, had slashed costs by 40 per cent by firing staff. Under pressure from Qantas, whose market share had recovered, Virgin Blue was unable to pay Branson a dividend and the share price fell towards 35 cents. The same purge was inflicted on Virgin America. Flying fifty-one jets between sixteen cities, the airline was still haemorrhaging around $100 million a year. His prediction of profits and a flotation in 2013 would not be fulfilled. To survive, he squeezed his costs, despite his employees’ reaction.
In 2011, Virgin America’s flight attendants sought to join the Transport Workers Union. In his submission to represent them, Frank McCann, the union’s director, wrote that Virgin’s attendants had discovered that ‘work rules are inconsistently enforced, promises regarding rest, vacation and benefits are often broken, and discipline for minor violations can be unnecessarily harsh and inconsistently applied’. Branson did not address their complaints. Instead, he appeared in TV commercials urging Virgin America’s staff not to join the trade union. Membership, said Branson, would take their ‘independent spirit and uniqueness away’. He pleaded, ‘Say “no” to the old way of flying and say “no” to the TWU.’ In a tight battle, Branson narrowly won the ballot.
Similar disillusionment had arisen among Virgin Atlantic’s staff. Branson enjoyed comparing BA’s stuffy pilots in their stiff caps with Virgin Atlantic’s cool airmen cosseted by glamorous blonde hostesses simpering over pop stars. In the past, Virgin employees had enjoyed sizzling toga parties in tropical locations and boozy parties in foreign hotels, especially if Branson was on board. Their proprietor always stayed in the same hotel as the airline’s crews. But those heady days had become a fond memory. Virgin Atlantic was losing money, Branson usually flew on his Falcon and he was invisible at the company’s headquarters in Crawley. In interviews, he boasted about delegating power, but his staff questioned his managers’ skills and knew that no major decision was taken without his approval. A 2010 poll of Virgin Atlantic’s pilots organised by their union, BALPA, echoed their doubts about Steve Ridgway.
‘There’s no strategy,’ a pilots’ representative told Ridgway.
‘That’s for us to worry about,’ Ridgway replied.
‘You treat us like fodder,’ countered the trade-union leader. ‘Your headquarters are overstaffed and your car park is full – and all you’ve got are thirty-four aircraft. EasyJet’s headquarters are smaller and they manage 220 aircraft. You’re too small to survive.’
The trade unionist noted that the regulator’s decision to award the profitable London to Moscow route to easyJet had humiliated Branson. ‘We are very disappointed with the result,’ Branson had said, ‘which flies in the face of what the consumer wants and our economy demands.’ He did not explain why travellers would choose Virgin’s £400 return fare from Heathrow and reject easyJet’s fares, which started at £125 from Gatwick. ‘What can we do to fight that?’ Branson asked Ridgway. ‘Nothing,’ was the answer.
Virgin Atlantic was drifting. Branson’s advocacy of ethical business did not reassure his pilots, who
feared that the airline might collapse. In that event, they would normally be re-employed by the next airline at the bottom of the pecking order and expect to lose half their income. Their misgivings were magnified by Branson’s new mantra of deriding profits. Ryanair’s and easyJet’s profits were growing, while Virgin Atlantic lost money every year, but instead of dealing with his airline’s managerial weakness, Branson remained intent on continuing with his environmental crusade.
Spending a few million had bought him considerable status among the Greens, but his laurels were fading. The Carbon War Room’s new staff had not championed a fresh campaign. The Virgin Earth competition had become bogged down, with the suggestions submitted by the eleven finalists deemed to be uncommercial. Branson declared that the competition remained ‘open’, but Crispin Tickell and others involved at the outset became confused over whether the rules may have been changed to avoid awarding the first $5 million to a ‘winner’. That possibility was denied by Branson’s spokesman. Environmentalists also questioned how an airline owner could criticise polluters and at the same time pledge that ‘Virgin will spend up to £5 billion to finance Heathrow’s expansion.’ Branson shrugged off the doubters. He believed that everything would be resolved – his airlines’ survival, pollution and his fate – once renewable fuel became profitable.