Bloomberg News: “Branson Hints at New U.S. Airline Venture After Alaska Spat”

Seems that Richard Branson’s Virgin Group and Alaska Airlines are having disagreement how long Alaska is required to pay licensing fees due to the purchase of Virgin America.

Branson argues that they should be compensated until 2040 while Alaska is not willing to pay any fees after Virgin America brand is retired sometime in 2018.

You can access the Bloomberg News article here of which below is an excerpt:

Billionaire Richard Branson signaled he may jump back into the U.S. airline business after tussling with Alaska Air Group Inc. over how long the carrier must pay royalties on his Virgin America brand.

Alaska has to keep paying “unless we decide to start another airline. So, we’ll see what happens,” Branson said in an interview Thursday with Bloomberg TV. When asked if he would create a new carrier, he said, “watch this space.”

The serial entrepreneur’s comments hint at a return to the U.S. airline industry following Virgin America’s $2.6 billion sale to Alaska in December. Branson maintains he should be compensated for the brand through 2040. Alaska, which plans to retire the Virgin America name in 2019, has said it doesn’t need to pay for a brand it isn’t using.

Conclusion

Sounds like this Brandon’s “threat” of starting another US airline, if Alaska fails to pay its fees to Virgin Group, is more of a negotiation tactic than anything else.

Virgin America was bleeding money for years due to very unfortunate launch around the financial collapse in the late 2000’s. Now the airlines in the US are printing money (not sure how this environment will last) due to consolidation and less competition.

You would think that both parties had agreed about the licensing fees or termination agreement when Virgin America was sold to Alaska. It was clear that the airline wouldn’t use both brands going forward.