Branson: Behind the Mask (32 page)

O’Toole, an experienced railway manager, suspected the Department for Transport’s vulnerability. Although there was both an implied obligation on all the bidders not to challenge the process and, FirstGroup believed, an unofficial agreement with Virgin not to utter outlandish claims, the known facts had become too capricious for Branson to ignore. He cleverly diverted attention from the real issue – namely, the integrity of the department’s process – to dispute the validity of FirstGroup’s bid. And in terms of the cash the government would receive, FirstGroup’s offer was superior to Virgin’s. But O’Toole found himself impotent against such a wily campaigner.

Threatening a judicial review of an unwelcome decision by any government had long been Branson’s natural reaction. Invariably, those threats had evaporated. But on this occasion, Branson approved the application. The government, announced Virgin, ‘has acted unlawfully and irrationally’. Just before the contract with FirstGroup was signed at the end of August, the government received the notification of a court battle. Relying
on her officials, Theresa Villiers responded that the government intended to ‘defend robustly’ its decision. Days later, Justine Greening, her successor, dismissed the legal challenge. ‘Had Virgin won the bid they would have been perfectly happy,’ she said, with her officials’ encouragement. The following day, in an interview with the
Daily
Mail,
Branson posed as the victim of a conspiracy. The department’s officials, he said, had given privileged information to FirstGroup, and the newspaper reported that internal emails had circulated within the department which could be characterised as ABB – ‘Anyone But Branson’. A sub sequent investigation would find no evidence either of prejudice in favour of FirstGroup or of any departmental bias against Branson or Virgin.

The following day, an online petition mysteriously appeared, urging the government to award the franchise to Virgin. Overnight, the customer-relations screens at all Virgin stations broadcast appeals to passengers to sign the petition, supported by messages relayed on the tannoys and on Virgin’s trains. Within a week, the petition had a list of over 120,000 names. The public had accepted Branson’s version that the improved services owed everything to his personal financial investment. Compared to O’Toole, a low-key American, Branson was the champion of the public’s interests, the buccaneering underdog. His few critics spoke about ‘a manipulative force’ – and were ignored.

On 10 September, Branson entered a House of Commons committee room. At his request, the MPs’ transport committee had agreed to hold a hearing. The colour of his unkempt hair was fading, his beard was bedraggled and his jeans and jacket looked as if they had not been taken off for a few days, but the suntan shone. Although the meeting was at his request, his surliness suggested a distrust of politicians, a breed he dismissed as hostile. Kwasi Kwarteng, a Conservative MP, reinforced his
suspicion. ‘Some would say these are the heavy-artillery tactics,’ said Kwarteng about Branson’s legal challenge. Virgin’s bid, said the politician, was ‘too low’ and, he continued, ‘You are using your prestige and fame to try and force the government to change the decision.’

‘I’m not in it for the money,’ replied Branson, with passion. ‘The profit motive is not that important to me. I am lucky. I can afford breakfast, lunch and dinner for the rest of my life.’ Unlike the Tory MP, Branson implied, his social conscience matched the public interest and his employees’ well-being. He had not flown from Necker to defend himself but to slay a devilish speculator. Awarding the franchise to FirstGroup, he continued, was ‘completely ridiculous’ because ‘FirstGroup’s bid is absolutely preposterous. It is taking the system for a ride.’ The company, he said, was ‘getting away with murder’, which was ‘bad for the country, bad for passengers’. His listless voice embroidered the venom against O’Toole. FirstGroup’s submission, said Branson, was like ‘renting out your house to the one who offers to pay twice the rent in ten years’ time despite being burnt three times already’. Accusations of dishonesty came easily from a man who sued his critics for much less. With that, he stalked out, and O’Toole moved into the chair Branson had vacated. The tension in the committee room collapsed. In the anticlimax, the soft-spoken executive could not compete with a global star who had recently boasted about taking cocaine, ecstasy and Viagra. ‘Those are histrionics by a self-publicist’, said O’Toole in a quiet voice, ‘who is peddling outrageous versions of history.’ He made little impression.

Days before that appearance, Patrick McLoughlin had replaced Justine Greening as transport minister, the third secretary of state in just over two years. In the same week, the department’s third permanent secretary since 2010 was appointed. The prime minister did not appreciate his own vulnerability. Virgin’s
publicists had restored their advantage, and the media were again describing FirstGroup’s reckless bidding. An ingredient added by the publicists was the new minister’s lack of awareness of his officials’ cover-up. Innocently, McLoughlin ignored the accusations and announced, ‘It is our intention to proceed with the bid that FirstGroup has made.’

Two weeks later, McLoughlin was poleaxed. Ernst &
Young, the accountants, reported that his department’s calculations suffered ‘significant technical flaws’. No single person, the minister was told, had been in charge of a flawed process executed by inexperienced officials. A subsequent review by Sam Laidlaw, the remarkable chief executive of Centrica, would discover worse mistakes: officials had altered the minutes of departmental meetings and they had lied to ministers. The cover-up was exposed. Evidence of the fractured personal relationships within the department came with Peter Strachan’s decision to publish unilaterally a ten-page version of events which exonerated himself and reprimanded FirstGroup. Pertinently, he complained about ‘stark inconsistencies between the different accounts of about ten officials in attendance’ at the meeting on 27 June to decide the winner, which he had missed. Soon after, Strachan resigned. Critically, Laidlaw had not questioned the financial aspect of FirstGroup’s bid. The weakness he exposed was Whitehall’s errors.

McLoughlin had a choice: he could award the franchise and allow his department’s errors to be examined during a trial, or he could abort the process and escape embarrassing scrutiny. He decided to avoid a court battle. On 2 October, he first telephoned Tim O’Toole. FirstGroup, he said, had submitted the better bid, but the department had made some unacceptable errors. Then, at 11.30 p.m., the minister spoke to Branson, who was waiting for the call in a New York hotel. There had been ‘deeply regrettable and unacceptable’ mistakes in assessing the proposals,
McLoughlin told him, and the fault lay ‘only and squarely with the Department for Transport’. After the call, Branson celebrated with two aides the success of their seven-week campaign. Virgin Trains had been resurrected. The media headlines, he was pleased to anticipate, would report Network Rail’s ‘biggest crisis’, Virgin’s vindication and Branson’s justified vilification of FirstGroup. A measure of his victory was reflected by the
Financial
Times
’
somersault. Two months earlier, the newspaper had criticised Branson for refusing to accept the result. The day after McLoughlin’s announcement, the newspaper criticised FirstGroup: ‘It would be terribly unfair if the people who gamed the system by putting in this completely outlandish bid ended up achieving what they wanted to achieve.’ Branson’s campaign had shifted the blame entirely on to FirstGroup. But, contrary to Branson’s allegations, FirstGroup’s bid had not been ‘outlandish’. The only transgression was the department’s arbitrary fixing of the SLF.

The process was now paralysed. Branson predicted chaos if Virgin was forced to stop operating. The government’s alternative was to transfer the West Coast line to Directly Operated Railways (DOR), the government’s agency running the East Coast line. That solution, Branson warned, ‘would be an absolute disaster. Without our team it would descend into absolute chaos.’ Virgin’s conduct after the loss of Cross Country to Arriva had demonstrated how a transfer could be frustrated. However, DOR had taken only four months to replace National Express on the East Coast line. No trains had been cancelled, no staff were fired and passengers had barely noticed the transition. But the obstacle to that choice was the public’s support for Branson. Fearful of the idol, McLoughlin decided to extend Virgin’s franchise for two years. Subsequently, it was extended until April 2017. None of the officials involved in the costly disaster was disciplined. Branson could feel triumphant. Drawing on decades
of experience, the supreme operator had humbled his commercial rivals – and the British government.

Victory fuelled Branson’s hyperbole. With the media eager to puff every assertion, he proclaimed that he was organising a series of fiftieth-anniversary concerts for the Rolling Stones. ‘Rumour has it we’ve landed quite a good catch,’ he told the
Financial
Times
about what turned out to be a dream. His publicists also briefed the newspaper that he was considering repurchasing Virgin Records from Universal, twenty years after the original sale. ‘Richard Branson and Virgin have been assessing how to get back into the recorded-music business for many years,’ said the Virgin spokesman, securing a whole page of publicity. ‘It would be a wonderful opportunity to recreate a dynamic independent label in the market.’ The idea that he had the money or expertise to revive Virgin Records was a delusion confirmed by the recent collapse of V2, which had cost investors over £100 million.

Coyly, Branson refused to discuss the accuracy of Bloomberg’s and
Forbes
’s
estimates of his wealth at ‘over $4 billion’, and he had no comment about the absence of Virgin in the rankings of the world’s top 100 brands collated by Inter brand and Millward Brown Optimor. Neither agency could value the Virgin label because Branson’s earnings were low – less than £40 million from revenues newly estimated at £13 billion. In the fog Branson had created around his finances, the financial truth was impossible to discern.

So much depended on his self-portrayal. He offered himself as the wise guru. ‘We are considered pioneers in many different industries based on our innovation,’ he said in 2013, ‘rather than the size of any of our companies.’ Virgin, he said, is not about size, ‘it’s an attitude and a way of life’. The company, he added, ‘embraces life and seeks to give the customers something new’.

Branson concealed his weaknesses by steering every interview towards LanzaTech and Virgin Galactic. He needed cheap fuel to make his airlines profitable and space travel because that was the last throw of his dice – ‘the planet and the deep seas’, as he said.

‘I’d be very disappointed if we’re not up and away by next year,’ he said in July 2012. ‘It’s possible next year we might do both – go from the lowest part of the oceans into space.’

In April 2013, Branson was fizzing. The news from Mojave, he believed, was excellent, and his appearance at a conference in Las Vegas was the perfect occasion to unveil his success. Five thousand people in a giant auditorium witnessed Branson’s excitement. ‘Any day now,’ he told them, ‘it will be happening. A new era of space travel will begin.’ SpaceShipTwo, he revealed, was about to make its first supersonic flight. ‘In two months, SpaceShipTwo will be flying at 2,000 mph,’ he predicted, ‘and then it will be flying throughout the rest of 2013.’ Having won the audience’s rapt attention, he added that he would be travelling to space with his family in early 2014. And to spread the feel-good factor, he threw in, ‘Most people in this room will go into space in their lifetime.’

Giving good news was a relief. Since the beginning of the year, the space programme’s costs had risen. The construction of the spaceport terminals in New Mexico had been completed, and since 15 January Virgin was paying $1.63 million in annual rent. That payment was a pittance compared to the cost of developing a new motor for Virgin Galactic – a decision that had been taken reluctantly at the end of 2012.

Sticking to Burt Rutan’s choice of the hybrid, Branson had been told, was a mistake. Burning rubber with nitrous oxide was too primitive for Virgin Galactic’s big spaceship. It would be more sensible to power the craft with a conventional liquid-fuelled engine. Virgin could only regret their rejection of a partnership with Reaction Engines, the British rocket developer:
the company was about to receive a £60 million grant from the British government and sell its successful expertise for much more in America. By contrast, Virgin Galactic needed to start practically from scratch, and in January 2013 Scaled began recruiting propulsion-design engineers, not least to consider the replacement of the hybrid with a liquid-fuelled motor. Critics called the switch ‘the spaghetti strategy’ – keep throwing stuff at the wall and see what sticks. ‘Virgin Galactic’, read Scaled’s advertisement, ‘is on track to become the world’s first privately funded commercial space line [and] a world leader in sub-orbital commercial space tourism.’ Among the detailed specifications was Virgin’s requirement for potential employees to ‘check your ego at the door, be a self-starter and possess a sense of humility’.

Six days after his Las Vegas appearance, Branson was standing in the early-morning darkness on the tarmac at Mojave, ready for a new blast of publicity. Two hundred feet from the control tower, the man in charge of operations, Luke Colby, was supervising the pumping of 11,000 pounds of nitrous oxide into SpaceShipTwo, which was attached beneath WhiteKnightTwo.

At 7 a.m., the mother ship thundered down the runway and began climbing to 47,000 feet. Two small chaser jets were following, and after about forty-five minutes they recorded on video the rocket as it dropped from the fuselage. A gush of flames and soot shot out for sixteen seconds as the rocket disappeared up to 55,000 feet supersonically at Mach 1.2 – at 920 mph considerably slower than the 2,000 mph Branson had predicted in Las Vegas. Just after 8 a.m., WhiteKnightTwo and the rocket landed safely back at Mojave. Virgin’s staff rushed on to the tarmac, cheering their heroes. Branson was ecstatic. George Whitesides praised ‘the successful outcome of this test’ and predicted ‘a handful of similar powered tests’ over the following months, to be followed by ‘our first test flight to space’. His enthusiasm was matched by the chairman of Aabar, the Abu
Dhabi investor whose name was emblazoned on the rocket. Euphorically, Branson told Abu Dhabi radio, ‘I will be going up on the first flight, which I hope will be December 25th of this year. So maybe I’ll dress up as Father Christmas.’

The date was fixed. In eight months, Branson would personally fly into space on Virgin Galactic. His deadline was specific – Christmas Day 2013.

Branson’s optimism disguised an unexpected hiccup. Four days after the flight, a group of rocket engineers led by Geoff Daly, the Briton with particular expertise in rocket motors, complained to Eric Berg, a director of California’s Occupational Safety and Health Administration (OSHA), that he should investigate possible violations of safety orders on the tarmac before and after the flight. He was subsequently supported by Carolynne Campbell. ‘Virgin’s operating on the ragged edge,’ said Campbell. Both feared that an accident would paralyse the private space industry.

Their complaint was based on Virgin’s own video of the fuelling process. The staff clustered around SpaceShipTwo were not wearing special clothing, the fuelling was done in the open rather than in a bunker, and hundreds of spectators were standing unprotected just seventy feet away. ‘One gallon of nitrous oxide’, Daly wrote to Berg, ‘has the explosive force of five sticks of dynamite.’

‘I didn’t realise that,’ Berg told Daly in a subsequent conversation on Skype in which they discussed Daly’s catalogue of violations. The project, Daly wrote, had not provided a fail-safe in case of an elementary error and there was no safety shut-off valve. If the 11,000 lbs of nitrous oxide had exploded, he continued, the devastation would have extended over a kilometre of terrain. The spectators would have been either injured or killed. Finally, wrote Daly, after the rocket’s return safety procedures had been ignored by allowing employees to swarm on to the tarmac.

Notwithstanding what it had achieved, Virgin Galactic had been hoist by its own petard. The self-congratulatory video of
the rocket’s sixteen-second burn had been carefully scrutinised by Daly, Campbell and others. To the layman, the black flame discharged from the rocket seemed unexceptional, but the critics’ interpretation raised issues of real concern. Frame-by-frame examination, they claimed, showed that the motor came close to experiencing a ‘hard start’, which could be followed by a split-second shutdown. The soot and haze indicated that Virgin was using an ‘inconsistent’ fuel which in extreme circumstances could explode but was more likely, in the event of a malfunction, to cause the engine to stop. In summary, some rocketeers believed that after a partial ignition, Virgin Galactic’s motor had been vibrating. Virgin’s experts dismissed those concerns as ‘baseless’, even though earlier ground tests by Scaled’s engineers of the rocket’s potential instability had been verified during the flight. Scaled could by then even rely on Al Cebriain’s belief that the corporation had developed ‘much more refined systems since the 2007 explosion’. But, Cebriain added, ‘Scaled will still need to complete many safe firings on the ground, on at least five engines, to prove it’s all safe for commercial flights.’ Accordingly, on 7 May Scaled was required by Berg to respond to the dangers alleged by Daly.

Simultaneously, Geoff Daly wrote to the Federal Aviation Administration describing ‘the considerable concern’ expressed by the ‘rocket motor/engine arena worldwide’. After describing ‘a very serious situation’ caused by Virgin’s use of nitrous oxide in a hybrid, Daly concluded, ‘This is another accident waiting to happen.’ Among those concerned, he added, was the ‘gentleman [who] had Glenn May die in his arms’. He was referring to the fatal accident in 2007 witnessed by a Scaled consultant. ‘I still want to know’, the eyewitness had emailed Daly, referring to May’s death, ‘if every one of those 500 prepaid passengers know about the fatal accident that left my friend dead with a blown open chest and exposed beating heart in the last seconds of his life?’

Confident in the advice he was receiving from his experts, Branson was unwilling to let a cluster of self-appointed critics derail his ambitions. Convinced that the anticipated $900 million investment was on the eve of success, he urged George Whitesides to push ahead as fast as possible. Ostensibly, he was on a roll. The company had taken $80 million in deposits from 610 people, and his publicists had just secured worldwide publicity by revealing that Justin Bieber had signed up as a passenger. To his delight, NBC, the American TV network, had agreed soon after to sign an exclusive agreement to film Branson, Holly and Sam on Virgin Galactic’s first flight in 2014. The network hailed its coup as an exclusive which ‘will go down in history as one of the most remarkable events on television’.

The ecstasy Branson generated was tempered by his finances. Despite spending about $900 million to employ over 145 engineers, some technical problems remained unresolved.

On 17 May, less than three weeks after the flight, Scaled was testing a hybrid motor less than one mile from the Mojave control tower. Seemingly unexpectedly, the engine exploded, sending the nozzle and casing beyond the perimeter fence. The devastation resembled the scene in 2007, except this time there were no casualties. Scaled described the explosion as an intentional test of the rocket’s stability, but Daly was not persuaded. To stage destructive tests on the eve of commercial flights was unusually late. Given the apparent similarity with the May 2007 explosion and the fact that an explosion had happened so soon after their warning, Daly expected the FAA or the OSHA to conduct a full investigation and make a public ruling on these safety issues. Since the Wild West atmosphere at the airport did not encourage an independent investigation, Daly once again dispatched protests – to the State Department, the FAA, OSHA and to Grumman, Scaled’s owners. The response, he considered, was encouraging. Daly believed that Grumman accepted that Virgin Galactic could
not operate ‘in its current design configuration as there is no real safety allowances [
sic
]’.

However, he was mistaken. On 9 July, the FAA had reissued an order ‘in the public interest’ to encourage the space industry, waiving the requirements on Scaled to comply with laws to shield people from hazards caused by the rocket. Scaled was safe from any criticism by the government in Washington. Similarly, safety orders issued by OSHA had been rescinded. Space tourism was an officially protected industry, the view having been taken that the development of space travel was inherently risky and did not merit the safety regulations imposed elsewhere in the field of aviation, and that what had happened at Mojave fell within accepted tolerances. Daly’s complaint was therefore rejected.

In his search for allies, Daly turned to Professor Tommaso Sgobba, the president of the International Association for the Advancement of Space Safety. Previously employed by the European Space Agency, Sgobba had also been the safety manager for the Mir space station and the space shuttle. Based in Holland, he had become alarmed by Scaled’s self-certified operation and its lack of any independent regulatory supervision. But Branson’s boasts that the private space industry can ‘do things much better than government’ chilled Sgobba. Governments, in Sgobba’s opinion, were best placed to ensure safety.

Sgobba was a nightmare for Branson. The softly spoken Italian had only one agenda – protecting the space industry by monitoring its safety. He disliked Branson’s boastful description of Virgin Galactic as a trailblazer. ‘He’s not building new technologies but just copying very old ones,’ Sgobba told Daly. ‘No new principles of physics are involved. SpaceShipTwo is getting no higher than the high-altitude planes developed after 1945.’ Branson’s repeated mentions of ‘record-breaking’ were mere bluster. The big difference between Branson and the rest, continued Sgobba, was Scaled’s record. ‘The accident in 2007 was
a true scandal. Every young engineer knows about pressure systems and how to prevent that accident.’ The secrecy surrounding the work also caused Sgobba concern: his view was that all rockets, including SpaceShipTwo, required peer scrutiny to reduce the risk of a crash. ‘I cannot rule out the possibility that an accident could happen,’ he said. ‘If people do die, any prosecutor might go through the designs and would want to decide whether the rocket had been safe.’

In Branson’s cocooned world, he was only slowly becoming aware of the mounting criticism of Virgin Galactic’s progress thus far. ‘He’s built the world’s most expensive glider,’ carped Carolynne Campbell. As Branson’s deadline of firing into space on Christmas Day loomed – and its likelihood evaporated – he realised he was cornered. Not only was the deadline forever being extended but he would need to sell more assets to fund his troubled project. Some began to suspect that he refused to hear anything he didn’t want to hear.

The smokescreen was his airline business. The sight of Virgin planes in every continent reinforced the public’s conviction about the billionaire’s global empire. Any doubts were swept aside by his choreographed appearances. Like a rock star, he excited anticipation among the crowds invited to witness his arrivals.

Eight days after Virgin Galactic’s flight, Branson flew into Perth, Australia. The country had been a source of good profits since Virgin Blue’s first flight in 2000, although the experience had been a roller coaster. Australia was a tough market and Virgin’s competitors had successfully fought back. As part of his contribution to Virgin Galactic’s development costs, Branson had gradually sold his stake in Virgin Blue and its successor, Virgin Australia. Taking profits to fund new developments was normal for him. His most recent sale had come a week earlier, when he sold a 13 per cent stake to Singapore Airlines for A$123 million. And he refused to rule out selling his last 10 per cent as Virgin repositioned itself
as a branding rather than investment business. Pertinently, John Borghetti had not used Branson to promote Virgin Australia since 2O11. In his bid to recategorise the airline as an upmarket carrier, the chief executive had described Branson’s image as a hindrance, but in his latest battle for profits he changed his mind. In reality, he had little choice. The airline was about to announce an annual loss of £56.5 million, and he needed help. Branson had accepted a speaking engagement in Perth and would be addressing 1,700 people who had paid $250 for a ‘business breakfast ticket’ to hear about
Screw
Business
as
Usual
and Virgin Galactic’s recent glory.

Although Branson had arrived in the city at 2 a.m., nine hours later he was leaning out of the cockpit window of a Virgin plane and waving at journalists as if he had just landed. Borghetti was grateful for the enormous interest Branson generated, and as he faced his large audience in a marquee, Branson was glad to repeat the mantra about Virgin Galactic. ‘We had an incredibly historic trip last week with Virgin Galactic breaking the sound barrier,’ he said, ‘and by the end of this year Virgin Galactic will be up, up and away into space. It’s literally the start of commercial space travel.’ In a short time, he said, ‘Virgin Galactic could put 3,200 satellites into space per month.’