Branson: Behind the Mask (26 page)

Only one complaint was formally recorded. Bassim Haidar, a Lebanese tycoon, wrote that although he had paid his deposit six years earlier, his chance for a flight was receding: ‘I can’t get Branson to say when we will fly. I’m very disappointed in him. He’s not the “can-do” businessman he likes to project to the media.’ Instead of receiving details of his space flight, continued Haidar, Virgin sent him advertisements for other Virgin products – a game safari in South Africa, a hotel in Morocco and flights on Virgin Atlantic. To his disappointment, even the lunch arranged to meet Branson soon after he signed up was cancelled because, according to Haidar, Branson preferred to ‘do his usual self-promoting antics at another show for the media’.

One disgruntled non-celebrity could be ignored, but Branson could no longer disregard his skewed timetable. To divert attention from the delays, he approved a conference in Palo Alto, California, on 26 February 2012 focusing on the ‘Next Generation of Suborbital Researchers’. Virgin’s publicists arranged for their test pilot, David Mackay, to be photographed with Neil Armstrong, the first man on the moon. Although their meeting was brief, Armstrong did curtly endorse Virgin Galactic. ‘In the suborbital area,’ he said, ‘there are lots of things to be done.’ Simultaneously, Virgin posted advertisements announcing the company’s recruitment of pilots to fly WhiteKnightTwo and SpaceShipTwo. Finally, William Pomerantz, Virgin Galactic’s vice president of special projects, appeared. First came the sugar: ‘Across the globe, hundreds of Virgin Galactic future astronauts are preparing to turn their dreams into reality.’ Then came the adjustment of expectations. Virgin Galactic, said Pomerantz, ‘hopes’ to perform the first rocket-powered test flight by the end of 2012, and ‘commercial flights will begin one or two years later’. At best, Virgin Galactic was seven years late and, on its
own account, was holding over $40 million of deposits without paying any interest. Branson’s genius was to profit from unchallenged ambitions.

Six weeks later, a ‘Global Aerospace’ summit was held at the St Regis Hotel on Saadiyat island in Abu Dhabi. The star was George Whitesides, NASA’s former chief of staff, who had replaced Will Whitehorn as Virgin Galactic’s chief executive. Whitehorn had fallen out with Stephen Murphy and, despite their long association, Branson had apparently not insisted on Whitehorn remaining. After all, he had failed to deliver the rocket.

Whitesides, a self-confessed ‘space geek’, presented his host’s tiny kingdom as ‘the centre of technology research and international tourism of the region’. To confirm that anointment, Virgin appointed Steve Landeene as the chief adviser for Spaceport Abu Dhabi. Landeene’s arrival, said Whitesides, foresaw the arrival in Abu Dhabi of passengers from New Mexico after a one-hour flight. The appointment, he continued, coincided with the ‘move into the final stages of test flights prior to commercial operations at Spaceport America’. Landeene would also arrange attachments for students at Abu Dhabi’s Zayed University to work as interns at Virgin Galactic’s headquarters in London.

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.’

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 claims 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.

Fuel prices, peak oil and the scarcity of energy had become his preoccupation. ‘There will be an energy crisis within a decade,’ he repeated. ‘Energy, especially oil, is running short.’ To prove his resolve, in 2011 Virgin’s publicists released photographs of Branson hosting Jimmy Wales, the founder of Wikipedia, and Tony Blair in Necker. There was little surprise that the former prime minister had visited Necker in April 2010; he had holidayed with his wife and their son Leo in the Cliff Lodge suite at Ulusaba, Branson’s private game reserve in South Africa. The standard rate for paying guests was £2,480 per person per night. Using his personal relationship with a politician to promote Virgin’s financial interests was so natural that Branson’s publicists automatically revealed that his discussions with Blair in Necker were about the ‘energy crisis, the Carbon War Room and global warming’. United by their commercial relationship with Vinod Khosla, they were exploring options to generate ‘green’ profits. With his own money invested in ‘green’ ventures, Branson had good reason to barnstorm across the globe promoting his ideology. His political agenda enhanced his quest for profits.

Speaking to the converted in Manhattan, Branson appealed with unusual passion to the ‘Green Generation’ for ‘a revolution
in the way we think about the world and in the way we work together for the common interest. This revolution will reinvent our economic system to ensure sustainability of life on our planet by developing a world of prosperity for all in a low-carbon economy.’ The more often his ideological message was repeated, the more reliant he became on Khosla.

Khosla had launched his first investment fund for the renewable-energy industry in 2009. He bullishly claimed that his second fund, started in 2011 and including his company Gevo, was oversubscribed. ‘I challenge anybody to claim that clean tech done right is a disaster,’ Khosla said. At their peak, each fund was worth over $1 billion.

Financing, Khosla knew, depended on good relations in Washington in order to obtain government grants. Since 1986, Khosla had declared donations of about $440,000 to the Democrats, including to President Obama for supporting alternative fuels. Branson was also helpful. ‘I had the profile, the financial resources and the time to do more,’ he said about his efforts to help Khosla. Having mastered government regulations to extract subsidies in Britain, he applied his expertise to working with officials and congressmen in Washington. He was knocking at an open door.