Business Stripped Bare (10 page)

My executive team was keen that I sell up and take the money, but my instinct was to run the other way. As I've explained, for a good slice of the upside, I'll generally accept the greater risk. Then Brett called up his supporters and they came round to see me to try to persuade me to hold on and build the company. On the way back to the hotel lift I took Brett aside and said, 'You know, you didn't need the posse: I'm not going to sell.'

Then the fax arrived. And we were back to square one.

Quarter of a billion Australian dollars.
There it was, Cheong's offer, in black and white. Brett and I sat there staring at it. This was
twenty-five times
the amount it had cost us to create, less than a year ago. Were we going mad?

I rang up Andy Cumming, our corporate director at Lloyds TSB in London. I told him we had an offer of A$250 million on the table and that we could sell tomorrow, but we wanted to keep hold of the airline. If we turned this lucrative deal down, would the bank still support us?

Andy and many of his bank colleagues have been very helpful allowing us to grow and prosper. They knew the score. Andy said our other projects were safe – we still had their backing.

Then we went back to the sofa and stared some more at the fax.

The next morning we made our decision. We called a major press conference, with dozens of TV cameras and most of the Australian press, at the terminal in Brisbane. There was hush when I stood up.

'Hi, everyone. I've got some good news and some bad news. The good news is that I have this cheque for A$250 million.' I held it up. (The cheque was a prop, written out on a Qantas Savings Bank cheque belonging to one of the airport managers.) 'And I'm back off to England. Obviously, we've had a fantastic time in Australia. It's sad that we are selling out today – it's an offer we can't refuse.'

Some Virgin Blue girls broke down in tears. I was so startled I forgot my lines. Before I could recover myself an Associated Press reporter rushed out of the hall to file her story. This news would be around the world in a matter of minutes. 'Only joking!' I cried, ripping the cheque up into tiny pieces. I threw them up into the air. 'There is
no way
we would sell out.'

There were cheers and loud hurrahs. The AP reporter heard the commotion, came back and went white. 'I'll lose my job because of that!'

I got down on my hands and knees and kissed her feet.

The night before, as we sat there staring at that fax, Brett and I had become more and more convinced that something was fishy. Singapore Airlines just seemed
too
desperate to get rid of us in Australia and New Zealand. Why would they throw good money after bad, propping up an obviously ailing company like Ansett?

We came to the conclusion that Singapore Airlines had no intention of propping up Ansett. Ansett's only hope was if we could be made to blink, and give up Virgin Blue in return for cash.

The very next day they decided to pull the plug on Ansett, and on 13 September 2001 the company was placed into voluntary administration and the fleet was grounded. Competition from Virgin Blue and the shock of September 11 and the attack on the Twin Towers in New York City knocked the last breath out of them.

More than 16,000 people lost their jobs – the largest single loss of jobs in Australian history. The Ansett collapse became a political issue in the Australian election campaign of 2001. Kim Beazley, the Labor opposition leader, made a promise to keep the airline going and subsidise the jobs. But this brought a challenge from John Howard, the Liberal leader, who said that the free market should dictate and propping up a dying airline wasn't good for Australia. Howard's coalition victory with the National Party put paid to any plans to restart Ansett.

The black irony of September 11 was that many Australians stopped travelling abroad because of fears of terrorism. Instead they turned, en masse, to their own country for holidays in the outbackyard, Cairns and the Gold Coast. As a result, Virgin Blue – with no competition from Ansett – doubled its fleet in six months, then doubled it again, and doubled it again. Its thirty-six aircraft were nearly 100 per cent full, since many chose not to go to Europe or the US.

In terms of productivity, Virgin Blue was streets ahead in the efficiency stakes: while Ansett had carried 10 million passengers at its peak with 16,000 staff, Virgin Blue was employing 4,000 people to carry 15 million.

'Virgin Blue is a lot of media hype.'

'The market is not big enough to sustain Virgin Blue.'

'Virgin Blue doesn't have deep enough pockets to cope.'

'Qantas will employ any options to see off the interloper.'

'They'll be unlikely to survive a year.'

'Claims by Richard Branson that domestic fares are high are misleading.'

This was a range of opinions from senior airline executives quoted in a number of press interviews. We were certainly beginning to make waves in some Qantas back room or other. When I announced we had been given the British rights to fly to Australia (all that was left was for the Australian government to grant us landing rights), a scathing article in the
Australian Financial Review
said that our plans were a 'lot of hot air'.

Enough was enough. In 2003, I wrote a letter to the
Australian
.

I'm willing to lay down the following challenge to Geoff Dixon. If Virgin Atlantic is flying to Australia within 18 months he'll agree to eat humble pie by flying on our inaugural dressed as one of our stewardesses serving our customers throughout the flight. If I'm not flying to Australia by December next year I'll be prepared to do the same on a Qantas plane from London to Australia.

I enclosed a mock-up picture of Geoff's head on top of a Virgin stewardess's shapely body.

Geoff's reply was curt. 'We're running an airline – not a circus.'

Qantas shares promptly dropped 3 per cent.

Virgin Atlantic began flying into Australia in December 2004. And Geoff never did wear the outfit!

Brett is fastidious about his baby. A few weeks before Virgin Blue was floated on the Australian stock exchange, a group of financial journalists were waiting to interview him about the numbers. He was due off the flight from Brisbane to Sydney but there was no show as the last stragglers came down the exit ramp. An airport staffer was sent to collect him. He was on the flight, but he was helping attendants vacuum the aisles, remove the dirty drinks cups and recross the seat belts to ensure a faster turnaround. He knew that punctuality was the key to successful business – and flotation.

On Thursday 13 November 2003, Brett and I were partying hard with a crowd of Virgin Blue people at the Loft cocktail bar in Darling Harbour. We staggered out at 4 a.m. Three hours later, and under the harsh lights of a television crew that had followed us throughout the process, we set off for meetings with bankers and investors.

My meeting with Goldman Sachs a few days later was one of the most encouraging I have ever had in business. The Virgin Blue flotation was eleven times oversubscribed. Two hundred and fifty institutional investors were demanding 3.8 billion shares! Impishly, I wondered if I should call for Geoff Dixon to raise the white flag on his own business.

On 8 December 2003, the day we floated Virgin Blue on ASX, we had a market capitalisation of A$2.3 billion. Virgin's return on its investment was staggering. But what was even more satisfying for me was seeing Brett, the founding partner, and his team also reaping the rewards of Virgin Blue's success.

Brett's share was A$80 million. Today, he is one of the richest Australians under the age of forty-five, thanks to the millions he made from the flotation. Ask him why he doesn't want to go and retire to a Queensland beach, and he just shakes his head. He can see the opportunities ahead, when Virgin starts flying from Australia to the United States. And besides, he still loves running Virgin Blue.

Maintaining a consistent tone in the face of rapid growth was a key requirement – and here, brand values helped enormously. I think Brett's naturally a Virgin sort of person. Had he never worked with us, his thinking would not be radically different today. But I believe thinking about the Virgin brand enabled him to focus, and to convey values quickly and efficiently to his colleagues and his staff.

The business now employs over 4,200 people – and it is difficult to get around to everybody – but Brett insists on speaking at every induction course to new recruits. At these sessions he is refreshingly honest. He says that a cabin crew member's job can be tiring. If a person has the temperament to smile, stick with it and enjoy it, then that's fine; but he won't throw money at people because they're miserable. He believes it's ludicrous to pay people inflated salaries in order for them to have a bad time in a service job they hate. Look, he says, give it three years or so, then decide. If you like it, stay on – but if you don't then life's too short.

Brett recently recalled to me, 'I was adamant when we started this airline that we would do it from scratch. There was an airline in New Zealand for sale and we didn't want to go near it. I felt we had to start with our own. Our airline wouldn't have been ours if we bought someone else's baggage.' (It's a point discussed earlier: you can't restructure culture. If you've burnt people, if you've killed their enthusiasm or commitment, then changing office spaces or putting a few more dollars in their pocket will not unduly affect the culture that exists.)

At the time of writing this book, the aviation industry is facing global issues that are more challenging than at any time I have known. Virgin Blue and Qantas share prices have fallen and both are having to reduce capacity and look to cut costs to meet our soaring fuel bills. This is the time when a management team really have to prove how strong they are, and show calm leadership and good judgement. I think Virgin Blue was Qantas's wake-up call, and in Geoff they had a talented and capable CEO who has done the job that needed doing. On the other hand, the story of Virgin Blue has been one of bold expansion and great delivery; now, in order to weather these storms, Brett and his team will have to show other qualities, such as protecting your downside and assessing risk.

Now, Virgin Blue is its own, unique proposition. The understanding of the Virgin brand is very strong, and they've taken it and run with it. They've hybridised the Virgin brand with their own national culture to produce something exciting and different – though I have to say success has not made Brett any less cheeky.

On Saturday 29 March 2008, we held a ball for 3,000 people in our massive hangar in Brisbane, a twenty-minute ride from the city centre. Before the big event, I was invited to Brett's home for a VIP reception in the garden. I was a bit precoccupied that afternoon. I had just returned from Makepeace Island, which is being developed as a holiday destination for Virgin Blue staff, family and friends. It's a wonderful tropical island, teeming with wildlife. I had just been given a briefing about a campaign that was hotting up on the island. I was told that Makepeace was the indigenous home of the Queensland tree frog and that this was a protected species. Our plans for the island were endangering the frog and this was causing upset in the local community. I'd been told that there might well be a protest at Brett's VIP party, but that I didn't have to worry because the police would cordon it off. I presumed it was all under control, but the idea that we might have slipped up so badly over a hot ecological matter was concerning. Was I really so out of touch? I'd never even heard of the Queensland tree frog. Neither had anyone around me. Was I getting sound advice?

So there we all were, in Brett's garden, with several major politicians, including Australia's Federal Treasurer Wayne Swan, when, at 4.40 p.m. exactly, Brett took a call on his mobile.

He turned to me and said: 'Do you know anything about this, Richard? There are some protesters heading towards the house with placards and banners.'

I told Brett about the frogs on Makepeace. 'They're Queensland tree frogs,' I said.

Brett whistled through his teeth.

'What?' I said.

'Did you say
Queensland
tree frogs?'

'Yes. What?'

Just at that moment there was a commotion outside on the street and a security guard came bursting through to say that the protesters were heading for the garden. Within minutes, there was a band waving banners and shouting: 'Makepeace not war on the tree frog' and 'Sir Richard – shame on you.'

Brett said: 'Richard, we've got to deal with these protesters and talk to them.'

I just froze.

'Richard, you have to talk to them. It's the
Queensland tree frog
for goodness' sake.'

I couldn't think how to respond. But Brett stepped forward and I realised, with a sinking heart, that I had to give him moral support. I strode up beside him. Locking eyes with me, the protesters turned their protest signs around.

The placards read: '
You've Been Punked, Love Brett
.'

*