Richard Branson’s inability to grow Virgin Atlantic Airways Ltd. as fast as he’d like has pushed the billionaire’s space business to the top of his agenda.
Branson, who revealed plans yesterday to transform his space-tourism venture into a major company in the satellite launch market, said he’s “deeply frustrated” by government opposition to expanding Virgin Atlantic’s London Heathrow hub and the granting of antitrust approval to British Airways (IAG) for the purchase of Deutsche Lufthansa AG (LHA)’s U.K. unit BMI.
With Heathrow operating at 98 percent of capacity, BMI had presented Virgin with an opportunity to add scarce takeoff and landing positions, while moves by the U.K. Department for Transport to defer an overhaul of its aviation policy mean the chances of adding flights by expanding the airport are receding.
“We made an offer for BMI and BA made another one to stop us getting it,” Branson, 60, said in an interview at the Farnborough air show outside London. “In the meantime, what should be happening is more runways, so we’re very sad at what the DfT has said about delaying the review. It’s holding Great Britain back and holding us back.”
U.K. Prime Minister David Cameron should intervene and reappraise the government’s stance on aviation, which has included a ban on a third runway at Heathrow, Europe’s busiest airport and the third largest worldwide, “as soon as possible,” Branson told Bloomberg News at the expo.
The DfT said today that a call for evidence on the future of London’s airports will be delayed until later in the year. Transport Secretary Justine Greening instead published a draft policy framework focused on liberalizing the market to encourage competition from foreign airlines.
Some expansion can be achieved by securing slots to be surrendered by British Airways owner International Consolidated Airlines Group SA following the purchase of BMI for 172.5 million pounds ($268 million), the entrepreneur said.
“A few crumbs are going to come off the table and be given to us by the competition authorities,” he said in a separate interview on July 8 after Virgin Atlantic’s inaugural service to the tourist destination of Cancun, Mexico. The airline aims to fly to Moscow next year using former BMI slots and wants to use others to set up a Scottish shuttle service to restore feeder traffic that will be lost with takeout of its former ally.
The constraints to boosting growth at Virgin Atlantic contrast with Branson’s success in expanding the U.S.-based Virgin Galactic space business.
The unit had taken deposits from 529 “future astronauts” as of this week, more than the total number of people to reach space in the 50-year history of manned launches. Each person is willing to pay $200,000 to be fired to 360,000 feet (110 kilometers) above the earth and experience weightlessness and see the curvature of the planet during a six-minute descent.
Singer Sarah Brightman, physicist Stephen Hawking and X-Men director Bryan Singer are among clients, according to Virgin, which aims to sell 700 tickets by the time of the six-passenger SpaceShipTwo craft’s first commercial flight, due next year.
Branson said in Farnborough that Virgin Galactic’s tourism arm has the potential to lure thousands of high net-worth customers and has, as yet, “no competitors on the horizon.” Paul Allen, the billionaire co-founder of Microsoft Corp. (MSFT:US) said Dec. 14 that his Stratolaunch Systems Inc. plans to build a plane to launch satellites, cargo and people within five years.
Virgin Galactic’s business prospects have been enhanced by the first contracts to send satellites into space at a fraction of the cost of current programs.
Virgin’s LauncherOne rocket, which aims to enter service by 2016, would employ the same WhiteKnightTwo carrier aircraft to be used in the first stage of passenger trips to reach 50,000 feet before using its own boosters to climb to low earth orbit.
Several dozen launches have already been booked by remote- sensing specialist GeoOptics Inc., high-resolution imaging startup Skybox Imaging, satellite aggregator Spaceflight Inc. and prospective asteroid miner Planetary Resources Inc., backed by Ross Perot Jnr., Virgin said at an air show presentation.
The venture will carry payloads of 500 pounds into orbit at a cost of about $10 million, versus $30 million right now.
“When we first dreamt this up the last thing we thought about was satellites,” Branson said at the air show. “But suddenly you realize, good grief, we’ve got the best launch vehicle for a satellite ever, so let’s do it. It’s not great news for people already putting satellites into space, but we think it will open up a whole new market.”
The entrepreneur said that while Virgin Galactic is the realization of a childhood dream and that he’d be “extremely happy” for the unit to break even, the extension of its business into satellite launches puts it on a new footing.
“It’s gigantic,” he said. “Being able to put thousands of people into space, we can get a return. But with us being able to put satellites into space I think there’s a lot of money to be made. I think the financial gamble we’ve taken will pay off.
At Virgin Atlantic, Branson said he did all that he could to secure BMI and its vital slots at a reasonable price.
“That was the right offer for BMI,” he said. “We’re doing the best we can. Ever since we set up the airline 28 years ago Heathrow has been full.”
Adding bigger planes such as the six Airbus SAS (EAD) A380s that Virgin Atlantic has on order would help squeeze more traffic out of the carrier’s limited slots, though business passengers tend to prefer a range of departures and the current global economic situation isn’t ideal for the model, Branson said.
“I think the A380s in this current climate we will delay further, because there’s a recession going on,” he said. “What we want are slightly smaller, slightly more efficient planes.”
Growth is easier to achieve at the Virgin group’s other airline interests, Branson said, citing Burlingame, California- based Virgin America Inc. and Virgin Australia Holdings Ltd. (VAH), headquartered Brisbane, in which he holds minority stakes.
“We’re becoming a major airline in America and Australia,” he said. “That shows what we can do when we don’t have slot restrictions.”
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