Virgin may be down but Branson’s not out

Is the Virgin brand in the throes of a mid-life crisis? It certainly seems to be under pressure as never before. At the very least, Sir Richard Branson, the living embodiment of the brand, faces critical decisions affecting the future of all his most high-profile operations.

In the case of Virgin Media, which has been much more troublesome than even he can have anticipated, he has an opportunity to cash out handsomely. But, if he does so, the unseemly retreat could shatter public confidence in his boosterist brand. Then there’s Virgin Trains. The loss of the Cross Country rail franchise to Arriva was an unexpected blow. All the more reason why his consortium (the other partners are Stagecoach and GNER) is under pressure to succeed in the current battle for the East Coast franchise.

And let’s not forget Virgin Atlantic, the backbone of the Branson empire. Recent deregulation of North Atlantic commercial air routes is both an opportunity and a formidable threat for Virgin Atlantic. On the one hand, it could undermine the privileged premium margins Branson’s operation, along with BA, have enjoyed over the years. On the other, there may be an explosion of low-cost flight opportunities on these routes, and Branson seems much better placed to exploit this new situation than starchy, corporate BA.

Of course, crisis is nothing new to Branson. Over the years, there have been plenty of failed Virgin enterprises (who now remembers Virgin Computers, Virgin Vodka or the overblown triumphs of Virgin Cola?) But these hardly matter when weighed against the successes. It is Branson’s appetite for calculated risk, his ability to capitalise on new commercial opportunities and his enthusiastic, intuitive approach to marketing which have time and again made Virgin the most popular company to work for in Marketing Week surveys.

Yet there are those who think that, this time, he has bitten off more than he can chew. Virgin Media was a huge gamble with Virgin’s brand reputation and there is little evidence it is paying off. What looked like playing to one of Branson’s traditional strengths – pitching the Virgin David against Murdoch’s Goliath – has backfired. Indeed, the prospective private equity owner of Virgin Media, Carlyle, is said to see Virgin branding as part of the problem. However, it seems unlikely Branson will take the money and run. The reputational risk to his other enterprises would be too great.

Nor should Branson be overly concerned on the train front. His handling of the recent West Coast rail disaster was masterly – witness the timely personal appearance on the scene; the underlying point, tactfully made, that had it not been for Virgin’s investment in advanced rolling stock, casualties would have been far higher. The odds are his consortium bid for East Coast will succeed.

But it is the Open Skies agreement that will give Branson the biggest opportunity to demonstrate his traditional canniness has not been dimmed by age (he’s a 57-year-old youth brand).

Commentators have latched on to a potential alliance with short-haul operator BMI as the best way of maximising his opportunities. The scale of such a project – its ambition, the risk it runs and the colossal investment involved – have all the traditional Branson hallmarks. The question is, does he still have the appetite for it?

Stuart Smith, Editor

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