Start Your Own Airline, No Experience Necessary.

In 1977, British television and radio banned the Sex Pistols’ single, God Save The Queen. It sold 100,000 copies. It’s a critical and rebellious song aimed at the British monarchy and Queen Elizabeth II. The song caused controversy due to its anti-establishment lyrics. Virgin Records released the album that November. Never Mind the Bollocks, Here’s the Sex Pistols was the only studio album from the Sex Pistols. The band imploded.

Last week on Methods of Prosperity:

Richard Branson gave Mike Oldfield his Bentley. It was a gift in exchange for performing live. Mike Oldfield became Virgin Records’ top-selling artist from 1974 to 1976. His is debut album, Tubular Bells, was the label’s top selling record. The revenue bankrolled all the other artists. Richard failed to sign prominent bands like 10cc, The Who, and Pink Floyd. Punk rock was the new sound. The most notorious band was the Sex Pistols. EMI dropped them, followed by A&M. The Sex Pistols signed with Virgin, releasing God Save the Queen. Their one and only studio album titled, Never Mind the Bollocks, Here’s the Sex Pistols caused a scandal. Police arrested a Virgin record store manager for advertising it. Richard recruited a linguistics professor to help win the case. In court, the professor was a key witness. He explained to the court that bollocks had nothing to do with testicles. It actually meant priests or rubbish. The professor was also a clergyman. The court dropped the case. Signing the Sex Pistols marked a significant turning point for Virgin Records.

Part 56. Sir Richard Branson (conclusion).

You can read this week’s TL;DR here.

Key Lessons:

• Solve a problem for yourself and then for others.

• Numbers don’t lie but people lie with numbers.

• You don’t need a business plan.

• Use creative financing.

• Imagine what if.

Now there’s a collectible version of this newsletter! Methods of Prosperity newsletter number 19 is available to collect as of July 5, 2024. If you’re so inclined you can permanently own it!

In 1978, John Lydon, also known as Johnny Rotten from the Sex Pistols formed Public Image Ltd (PiL). Former Sex Pistols members Steve Jones and Paul Cook formed The Professionals. By 1981, Virgin was a major label. Bands including Japan, XTC, and Simple Minds generated a lot of revenue. Another band called the Human League had a number one album. They pioneered synth-pop in the early 80s. The Human League achieved major success with their 1981 album Dare. It was their third studio album and sold over 3 million copies globally. Virgin released the fourth single, Don’t You Want Me in the UK on 27 November 1981. It’s the band’s best known song.

Virgin went from having no cash reserves to more money than Richard Branson knew what to do with. He started a short-lived listings magazine called Event. Virgin lost money on that, but made up for it with sales from The Human League, Simple Minds, and Phil Collins. Face Value, Phil Collins’ debut solo album became an immediate success. It reached No. 1 on the charts in the UK, Canada, and other European countries. Face Value made it onto the top ten in the US. His song, In the Air Tonight was a huge hit. In 1982, Do You Really Want To Hurt Me by Culture Club was a breakthrough hit single. Boy George, the band’s androgynous singer became a phenomenon. Virgin released Culture Club’s album, Kissing to Be Clever on 8 October 1982 in the United Kingdom. The following year, Karma Chameleon was the next massive hit single from Culture Club. Featured on the group’s 1983 album, Colour by Numbers, the song is the group’s biggest hit. It reached number one on every chart around the world. Their second album sold almost 10 million copies. In 1980, Virgin lost $900,000. By 1982, Virgin made $2 million of profit on sales of over $50 million. In 1983, sales shot up to $94 million and profits soared to $11 million. 40 percent of which came from Boy George.

In 1984, Richard Branson knew nothing about the airline business. He was on his way to Necker Island, a private island paradise in the British Virgin Islands. Branson purchased Necker Island in 1976 and it’s been his private paradise ever since. His girlfriend Joan was waiting for him there. He was in Puerto Rico airport trying to get to her. American Airlines had cancelled his flight. The airport terminal was full of stranded passengers. Making a few calls to charter companies, one of them agreed to take him to the British Virgin Islands. It would cost him £2,000. He divided the price by the number of seats on the plane. Then he made a sign that read, “Virgin Airways $39 single flight”. He walked around the airport terminal and soon filled every seat on that charter plane. As they landed, a passenger turned to Richard and said, “Virgin Airways isn’t too bad. Smarten up your service a little, and you could be in business.” This was his “what if” moment that sparked Virgin Atlantic.

It wasn’t long after that moment that he received a proposal for an all business class airline. Flights would go between London and New York. By the time a business plan involving a 747 jumbo jet reached the desk of a music business executive, it was a clue. It was a clue that it other executives turned it down at least 3,000 times before. Of those executives, he was the least knowledgable about operating an airline.

Existing players underserved the sector, according to that business plan he was given. That weekend when Richard received the proposal, he made some phone calls. No discount airlines flying that route answered the phone. His conclusion was that they were either lousy managers or overwhelmed by demand. That meant there was an opportunity to compete against them. After thinking about it, he decided it would be better to offer a unique dual class service. On Monday, he went to his partners in the music business about this great idea for an airline. They thought he was out of his mind.

Richard says he makes up his mind about people within thirty seconds of meeting them. In the same way, he makes up his mind in thirty seconds about whether a business proposal excites him. “I rely far more on instinct than researching large amounts of statistics.” He says, “This might be because, due to my dyslexia, I distrust numbers.” He believes someone can twist numbers to prove anything.

He persisted. All he needed was a 747 jumbo jet. No problem. He called Seattle, Boeing headquarters, to lease a 747. After some effort, he got a hold of someone who could help him. He asked if they had a 747 that wasn’t in use and found out that they did. He asked if they would consider giving him a one year lease. The guy he talked to said they might consider that for one of their more established customers. Branson kept digging. Boeing gave him some numbers. Branson figured out that $2 million would be his total liability. Virgin was on track to earn $12 million in profit that year, and $20 million the next year.

In the airline business with one 747, he would pay for the fuel 30 days after it landed. He would pay staff wages 15 to 20 days after it landed. He would get paid for all the tickets 20 days before the plane took off. Working capital was actually low, considering that there would be no need to buy a 747. Not with favorable short-term lease from Boeing. All he had to do was hire a small ground staff and take out a few ads in the newspaper and start taking reservations.

To boost morale of the early Virgin Atlantic employees, he brought Boy George to meet them. The cargo hangar at Gatwick Airport served as Virgin Atlantic headquarters. They loved it. The chaos at the facility stunned Boy George. He later told Branson, “I’m glad my feet are on firmly the ground.”

In conclusion, Richard Branson never wrote a business plan. He had no expertise. Sequoia Capital never funded any of his businesses. He found a way to lease a 747, hire employees, and get paid upfront to cover costs. This is in a regulated industry. His competition was British Airways, the national airline of the United Kingdom. Richard Branson sold Virgin Records to Thorn EMI in June 1992 for $1 billion (around £560 million at the time). The sale was a difficult decision. Virgin Atlantic was facing intense competition from British Airways at the time. They tried to destroy Virgin Atlantic.

Today, Virgin Group is a British multinational conglomerate. Virgin has expand into many sectors. Virgin partnered with T-Mobile and Sprint to create Virgin Mobile. Virgin Media was the biggest Virgin company in the world. Virgin Trains, venture capital, real estate, financial services and space, Virgin is everywhere. Cruise ships are also branded with Virgin. Going from a record label to an airline proved that anything is possible. Virgin Galactic was the next logical step. It’s the world’s first and only public spaceflight company.

Virgin Group is the primary source of Richard Branson’s net worth. Branson dislikes the billionaire label. He finds it “very sad” when people define themselves by their financial worth. Recognizing him as the co-founder of Virgin Group is what he prefers instead. Richard Branson's net worth is currently estimated at £2.4 billion ($3 billion).

I like you,

– Sean Allen Fenn