Virgin Hyperloop axes half its staff in focus on freight

Virgin Hyperloop has made almost half of its staff redundant as the company develops the high-speed transport system pivots from passenger travel to freight.

Contacted by the Financial Times, the company confirmed that 111 people had been laid off on Friday, in a move it said would allow it to focus on delivering a cargo version of the experimental transport, which propels pods through low-pressure tubes at speeds of up to 670mph.

Two of the people who lost their jobs said that the lay-offs were announced via video conference. One said the scale of the cuts was “definitely not expected”.

“It’s allowing the company to respond in a more agile and nimble way and in a more cost-efficient manner,” Virgin Hyperloop told the Financial Times. “These types of decision are never taken lightly.”

The company is “changing direction”, it added. “It really has more to do with global supply chain issues and all the changes due to Covid.”

It said the logistics market had changed “dramatically” and that it was responding to strong customer interest in a cargo-based service.

Backers of the company, which is developing technology first proposed by Elon Musk, include Dubai government logistics provider and ports operator DP World and Sir Richard Branson’s Virgin Group.

Virgin Hyperloop, which has raised more than $ 400mn in funding, is the only company to have completed a successful test run with passengers using the technology.

The system builds on existing technologies around vacuum tubes and magnetic railways with a view to cutting land-based travel times drastically and boosting the efficiency of freight transportation.

Government-owned DP World, which has a 76 per cent stake in Virgin Hyperloop, is working on a hyperloop-enabled cargo system to deliver freight at “the speed of flight and closer to the cost of trucking” by connecting with existing road, rail and air transport.

But since its inception, doubts have emerged over the cost of bringing the system to market given high costs, even if it wins regulatory approval.

And internal turmoil has followed the departure of Virgin Hyperloop co-founder Josh Giegel last year, triggering a “massive talent flight” as other executives also quit the company, according to one former senior employee. “Morale is low and there is no confidence in the new direction.”

Shunning passenger transport was triggering a “complete unraveling” at the group and would put its sole contract with the Saudi government in jeopardy, the person said.

But DP World said the Saudi government saw “great value” in the cargo option, eyeing a route linking the western port city of Jeddah with the capital Riyadh and beyond to the Gulf states on the east of the Arabian Peninsula.

Virgin Hyperloop is in discussions with 15 customers over delivering a pallet-bearing version of the new technology, DP World said.

Profits from successful sales of the cargo version, which it said could be ready in about four years, could be reinvested into a launch of the passenger version by the end of the decade.

“It’s abundantly clear that potential customers are interested in cargo, while passenger is somewhat farther away,” DP World said. “Focusing on pallets is easier to do – there is less risk for passengers and less of a regulatory process.”

The company is also considering a merger with a special purpose acquisition company, or Spac, two people briefed on its strategy said. Virgin Hyperloop, Virgin Group and DP World declined to comment on any plans.

Virgin Hyperloop said it “continues to invite long-term investors who share our vision for the future of transportation”.

The focus on cargo raises questions about the long-term involvement of Virgin Group. But two people familiar with the matter said its commitment remained unchanged, despite Branson previously citing his company’s experience in running passenger transport businesses as a reason for its interest.

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