“The government shouldn’t step in to bail them out. They should let them go bust,” Richard Branson told US news channel CNBC in 2009. In the discussion, which was about whether the government should intervene to save Virgin Atlantic’s competitor British Airways, the billionaire expanded an argument popular with free marketeers. “The likes of Virgin Atlantic and there should be…..
EDITORS’ PICK|777,082 views|Apr 20, 2020,08:36am EDT
Billionaire Sir Richard Branson has responded to criticism over Virgin’s handling of the coronavirus crisis. In an open letter to “the Virgin family” Branson thanks his 70,000 staff and addresses “comments” on his “net worth” and the need for government money to support the businesses they work for.
Since the start of the coronavirus pandemic Branson has faced scrutiny after an early decision to ask Virgin airline staff to take eight weeks’ unpaid leave.
The move was met with a barrage of criticism. Richard Fuller, the Conservative MP for North East Bedfordshire since 2019, slammed Branson in Parliament, claiming that Branson should use his net worth to pay the unpaid leave and that it could be covered by the “interest on your wealth” claimed by Fuller at the time to be £3.8 billion, “for eight weeks.”
As Forbes pointed out at the time, Mr Fuller’s estimation of Branson’s net worth assumes the £3.8 billion is a cash asset that can gain interest sitting in a bank account. Forbes today pegs Branson’s net worth at $4.2 billion. Branson has an estimated $600 million (£520 million) in cash and investments outside his Virgin brands.
Branson responded to this in his letter: “I’ve seen lots of comments about my net worth—but that is calculated on the value of Virgin businesses around the world before this crisis, not sitting as cash in a bank account ready to withdraw. Over the years significant profits have never been taken out of the Virgin Group, instead they have been reinvested in building businesses that create value and opportunities. The challenge right now is that there is no money coming in and lots going out.”
Last month, Branson moved to protect the futures of his 70,000 employees announcing a $250 million rescue package. A spokesperson for Branson confirmed that the $250 million would come from “Richard and Virgin group” and would not be paid by Virgin Atlantic.
On claims that Branson does not pay U.K. income and capital gains tax on his investment success, Branson uses the letter to address, “comments about my home.” Adding, “Joan and I did not leave Britain for tax reasons but for our love of the beautiful British Virgin Islands and in particular Necker Island, which I bought when I was 29 years old, as an uninhabited island on the edges of the BVI. Over time, we built our family home here. The rest of the island is run as a business, which employs 175 people. As with other Virgin assets, our team will raise as much money against the island as possible to save as many jobs as possible around the Group.”
Branson also gives the clearest indication yet that Virgin Atlantic desperately needs government money to survive this pandemic warning that “hundreds of thousands more jobs will be lost” across the sector.
He adds, “We will do everything we can to keep the airline going–but we will need government support to achieve that in the face of the severe uncertainty surrounding travel today and not knowing for how long the planes will be grounded.
“This would be in the form of a commercial loan–it wouldn’t be free money and the airline would pay it back.
“The reality of this unprecedented crisis is that many airlines around the world need government support and many have already received it. Without it there won’t be any competition left and hundreds of thousands more jobs will be lost, along with critical connectivity and huge economic value. Virgin Atlantic started with one plane 36 years ago. Over those years it has created real competition for British Airways, which must remain fierce for the benefit of our wonderful customers and the public at large.”
Last week Virgin Atlantic was told by the U.K. government to resubmit its proposal for a £500m coronavirus bailout package.
The Financial Times reported that the U.K. government was left unimpressed with its initial bid, which included a $622 million (£500m) package of commercial loans and guarantees.