Friday, May 19, 2017

Branson Hints at New U.S. Airline Venture After Alaska Spat

Billionaire Richard Branson signaled he may jump back into the U.S. airline business after tussling with Alaska Air Group Inc. 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 $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.

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 Corp. to buy Virgin America.

Alaska didn’t respond to a request for comment. Other Branson-backed airlines include Virgin Atlantic Airways Ltd. and Virgin Australia Holdings Ltd.

(Cory Johnson and Michael Sasso - Bloomberg Business)

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