RICHARD BRANSON is well on the road to achieving his ambition to
become a major player in the UK air industry.
He already has a high profile through his growing Virgin Atlantic
Airways business which looks set to increase even further following the
weekend disclosure that he is in rescue negotiations with Davies &
Newman, parent company of Dan-Air, Britain's oldest independent airline.
Dan-Air shares were suspended yesterday at 23p compared with a peak of
550p two years ago.
At the moment there are no plans to merge Dan-Air with Virgin
Atlantic. The talks are aimed at co-ordinating the marketing and
operational activities of the two airlines as part of a #20m-#25m
fund-raising package by Davies & Newman.
Dan-Air's banks, led by Lloyds Bank, are unhappy about the prospect of
having to inject more money into the airline given the small likelihood
of any profits and the proximity to last year's #53m rights issue.
Dan-Air lost #35m in 1991 and further losses of around #7m are
expected this year. The deal with Virgin is expected to be finalised
within the next fortnight and is thought likely to persuade large
investors such as Mercury to provide funds. One of Dan-Air's most
valuable assets are its Gatwick operations and the landing slots at
Britain's second-busiest passenger airport.
If Mr Branson succeeds in integrating Dan-Air's European operations
into Virgin's existing long-haul business, it will enable him to become
an even more formidable opponent to Lord King's British Airways.
It is just eight years since Mr Branson created Virgin Atlantic
Airways, against the better judgment of his closest colleagues and
Coutts bank who were concerned that it would eat into the hard-earned
profits of the music business. However, in that time it has achieved a
reputation for good-quality service, notably to the USA which has made
it more of a threat to the larger-established players such as British
Airways and the American carriers, than its size alone would suggest.
The aim of the airline is to create a unique value-added service
providing only two classes, upper and economy class, which respectively
offer a higher standard of service, often at a lower price than
competitors. Virgin Atlantic currently flies Boeing 747s to New York,
Miami, Orlando, Los Angeles, Boston, and Tokyo. It is awaiting landing
slots to fly from Heathrow to South Africa, Singapore, Australia, and
other US destinations.
Building up Virgin Atlantic Airways is the main challenge facing
Richard Branson following the sale of the Virgin Music Group to Thorn
EMI for #510m cash in March. As the world's largest independent record
company, Virgin had artistes such as the Rolling Stones, Phil Collins,
and Bryan Ferry on its books.
Mr Branson received about #380m from the deal, but he made his first
million almost 20 years ago following the signing of Mike Oldfield and
the subsequent success of his ''Tubular Bells'' released in 1973.
Mr Branson has come a long way from the launch of the Student Magazine
in January, 1968, his first business venture, and is now one of the UK's
most successful entrepreneurs. He has not had a totally easy path to
riches, not least the group's short-lived foray from the rock market to
the stock market.
The music, retail and property, and communications divisions of Virgin
Group were floated in November, 1986, on the Stock Exchange. The
airline, clubs, holidays, and aviation services businesses were kept as
part of the privately-owned Voyager Group. However, the City is not
known for its appreciation of those who differ from the straight
pin-striped norm. It failed to appreciate the unorthodox business style
of Richard Branson and the share price suffered accordingly, never
managing to break decisively above the 140p offer price.
Disaffection with his stock market experience prompted Mr Branson to
launch a management buy-out following the stock market crash of 1987.
The 41,000 shareholders accepted the offer of 140p a share, valuing the
group at #248m. The company was delisted from the Stock Exchange and
remains one of the largest private companies in the UK with a worldwide
turnover in excess of #750m.
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