MORE PHANTOMS, MORE FANTASIES
By Joe Brancatelli
June 25, 2009 -- Two and a half years ago, I started a Brancatelli File with these words: Life on the road has made skeptics and cynics of us all. Too many years of phony upgrades, broken service promises and flat-out lies have given us precious little patience for the phantoms and fantasies of business travel.
The phantoms and fantasies I was referring to in particular that week were the unsympathetic Steve Brill, who created the Clear program, and Virgin America, the brainchild of Richard Branson, the curious darling of the world's blinded-by-the-hype, celebrity-driven media.
The collapse of Clear you know about already. It shut down, not unexpectedly but certainly without advance warning, on Monday night. With it went perhaps $150 million worth of start-up funds and membership revenue and all but three of the nation's so-called registered-traveler line-cut stations. Your Clear card, for which you paid upwards of $199 a year, is now worthless unless you happen to use the airports in Reno; Jacksonville, Florida; or Louisville, Kentucky. Clear says that it doesn't have the money for refunds. Unless you can get your credit-card company to do a chargeback or give you a "good will" credit, you're out your membership dues.
While we focused on Clear's collapse, the current chief executive of Virgin America, David Cush, was in Washington. Besides burning through around $300 million since its launch in the summer of 2007, Virgin America is again embroiled in a "citizenship" flap with the Department of Transportation (DOT). In order to get around U.S. ownership rules--no foreigner can control, or own more than 25 percent of, a U.S. airline--Richard Branson created a bizarre financial structure: Virgin America's majority U.S. owners could cash out with a guaranteed return on their nearly $100 million in start-up capital. Earlier this year, the investors bailed and now Cush has been trying to explain how cashed-out investors, not Richard Branson, the founder, 25 percent owner and foreign citizen, still control Virgin America. He also had to prove to the DOT that he'll soon have new investors.
It goes without saying that the government is one of the villains of today's piece. The Transportation Security Administration, which hates private involvement in security programs even though a private "trusted traveler" plan was baked into the same post-9/11 bill that created the TSA, did everything it could to obliterate Clear. And the DOT should never have approved Virgin America's application to fly because it was clear that Branson's law-skirting ownership structure was never rational, supportable or financially sound.
But what's interesting here, as it was two and a half years ago, is how hucksters and publicity hounds like Brill and Branson always find their way into our lives on the road. They dominate the conversation, make absurd statements, do ludicrous things and, ultimately, make our lives more difficult.
Brill, of course, is gone already. He left, or was pushed out of, Clear back in March. He's now back on more familiar ground, flogging a new pie-in-the-sky venture called Journalism Online. That's Brill's thing: inventing stuff that fails financially.
A fine journalist by anyone's standards, Brill has always wanted more than a nice career as a reporter and writer. He wanted power, fame, money, control, who knows what. But he's a bully and, frankly, a lousy businessman. His journalism ventures just before Clear were disasters. He had modest successes with much earlier efforts: American Lawyer, a legal publication, and CourtTV, a venture created with TimeWarner. But he sold his share of both and CourtTV turned out to be something of a flash-in-the-cable pan. TimeWarner recently changed the channel's name and focus. Brill's big idea--live coverage of trials--is banished to the barely-watched daytime hours.
In fairness to Brill, his original concept for Clear was a good one: If flyers who posed no risk to the system (in other words, frequent flyers) could be identified and pre-qualified, they could be moved through airports quickly. That would give TSA screeners more time to watch for real terrorism threats.
But the TSA wanted no part of that, or Brill. And by the time Brill was forced to admit he couldn't muscle or bully the recalcitrant TSA, Clear had been reduced to a concierge program that allowed travelers to cut to the head of the security lines.
The problem with that idea was that most of us already had line-cut privileges via our frequent flyer program status or our business- or first-class tickets. Brill knew none of this, of course. He didn't understand who frequent flyers were and didn't know about the perks we already received. He wasn't interested in learning, either. And since he constantly made promises he couldn't keep, he was an easy target for critics. And the more he was criticized, the nastier he got, the more illogical his rhetoric became and the more enemies he made.
Over its woebegone life, Clear was ignored by most frequent flyers, who would have paid much more than $199 a year for a program that did what Brill originally promised. But most of the nation's airports couldn't find a reason to install Clear's watered-down, real estate-consuming lanes, the airlines were largely apathetic and, finally, investors pulled the plug.
Branson is a different story, of course. Unlike Brill, he's a guy with great press and a great reputation. As one of England's few honest-to-goodness entrepreneurs, he's even got himself a knighthood. He has famous friends and an adventuresome lifestyle. He says and does outrageous things.
But he's a serial failure as an airline executive. Virgin Express, his European carrier, was drowning in red ink until it was merged into SN Brussels, the successor carrier to Sabena. Just this week, in fact, regulators approved Lufthansa's bid to buy Brussels Airlines, the carrier created by the merger.
Virgin Blue, Branson's Australian carrier, has been in and out of his portfolio several times. He sells it, loses control of it, then fights to get it back. The transpacific offshoot, V Australia, finally launched in the last few months--smack into the headwinds of the worst decline in profitable Asia-Pacific flying in more than a decade.
It's gotten virtually no attention on this side of the Atlantic, but Branson's foray into Africa flying has collapsed. He promised to change the face of that continent's aviation scene when he took a 49 percent interest and launched Virgin Nigeria in June, 2005. By last fall, however, Virgin Nigeria had dropped all of its long-haul flights. Branson is desperately trying to dump his stake and the carrier will drop the Virgin branding next month.
Branson never seems to mention that he pulled out of a deal to help fund New Air and call it Virgin America. When Branson bailed, the carrier was named JetBlue Airways instead and its launch in 2000 changed the U.S. aviation market.
Branson talked about Virgin America for eight years before its tortured launch in the summer of 2007. By the time he cobbled together enough domestic investment, the market had changed on him and virtually everything Virgin America does looks like a JetBlue me-too or a goofy gimmick. Who, after all, will fly Virgin America because of funky mood lighting or touch-screen monitors to buy uninspired in-flight snacks?
But what of Virgin Atlantic, you say. It celebrates its 25th anniversary this year and remains a favorite of some critics. But as a business? Just ask Singapore Airlines, which took a 49 percent interest in the carrier a few years ago and has spent every moment since trying to peddle its stake. No one wants it, not even Branson.
And the Financial Times recently snorted at Virgin Atlantic's financial revelations and claim of a 2008 profit. The story noted that Virgin Atlantic is a private company and isn't required to disclose much data to support the profit claim. And it pointedly added that Singapore Airlines, a public company held to standard disclosure and accounting rules, pinned most of its own losses on the drag caused by its stake in Virgin.
Like I said two and a half years ago, phantoms and fantasies.
ABOUT JOE BRANCATELLI Joe Brancatelli is a publication consultant, which means that he helps media companies start, fix and reposition newspapers, magazines and Web sites. He's also the former executive editor of Frequent Flyer and has been a consultant to or columnist for more business-travel and leisure-travel publishing operations than he can remember. He started his career as a business journalist and created JoeSentMe in the dark days after 9/11 while he was stranded in a hotel room in San Francisco. He lives on the Hudson River in the tourist town of Cold Spring.
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