← Business Movers
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- [00:00]
Lindsey Graham
Want to get more from business movers? Subscribe to Wondery for early access to new episodes, ad free listening and exclusive content you can't find anywhere else. Join Wondery in the Wondery app or on apple podcasts. It's January 1984 at Ila Verde Airport in Puerto Rico. 34 year old entrepreneur Richard Branson stares upward, counting the tiles on the departure lounge ceiling in a desperate attempt to pass the time. He's already finished his book, browsed the terminal's tiny store, and had several coffees and he's still waiting to board his plane. Richard landed in Puerto Rico earlier today on his way to join his girlfriend for a much needed vacation in the British Virgin Islands. But his connecting flight keeps getting delayed and what should have been a two hour layover has turned into a grueling six hours of boredom. The sound of grumbling passengers catches Richard's attention. A gray haired man shakes his head as he walks past. Richard waves to him. Excuse me, are you on the American Airlines flight to the Virgin Islands? Well, I was. It's just been canceled. What? You're kidding. And there are no other flights today either. I don't know what we're meant to do. My wife and I. We are supposed to be celebrating our 40th wedding anniversary. We've got our kids and our grandkids with us. It's gonna ruin everything. I didn't hear any announcement. No, they just put it up on the board like cowards. There's a rumor going around there's some problem with the plane, but I don't even know if that's true. Is there not someone we can ask? I haven't seen anyone. I guess we're stuck here then. Until tomorrow. At least it looks that way. I'm gonna have to find a hotel. Unless you know someone with a private jet. Richard smiles at the man's joke, but then a thought occurs to him. He's surrounded by dozens of passengers who all want to be in the same plane going to the same place and would probably be willing to pay to get there. So, getting to his feet, Richard picks up a blank chalkboard resting on the desk of the empty gate. He thinks for a moment and then writes, Virgin Airways $39 one way flight to the British Virgin Islands. Holding the board high in the air, he starts walking slowly through the departure lounge. The gray haired passenger squints as he reads the words on it. Is that some sort of joke? No, not at all. 39 bucks. What do you think? I'd pay twice that to get out of here tonight. But what's Virgin Airways? I didn't know the Virgin Islands had its own airline. Richard smiles. It doesn't. Virgin Airways is mine. Within an hour, Richard Branson had signed up enough passengers to fill a plane. Then he made a call to a local charter company to put things into motion. Later that afternoon, they were all in the air and on their way to the British Virgin Islands at last. Richard had only been joking about Virgin Airways, but during this short flight, he found himself imagining what it would actually take to start an airline. And he had no idea just how quickly that idle daydream would become a reality.
- [03:16]
Richard Branson
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- [03:47]
Lindsey Graham
Here is a true story. A few years ago, I needed to scale up my podcast production business. We were getting busy and I needed to find a sharp, reliable audio editor. So I went to Upwork and quickly found a freelancer who was not only good, but above and beyond good. You'll hear their name in the credits of this episode, even because their work deserves to be called out. So I know with Upwork you can find specialized freelancers in marketing, development, design, podcast editing. Who knows experts who are read to help you take your business to the next level. And posting my job on Upwork was easy with no cost. Just register, then browse freelancer profiles, get help drafting a job post, maybe even book a consultation. From there, find, connect and hire freelancers that get you. Upwork makes the entire process easier, simpler and more affordable with industry low fees. So post a job today and hire tomorrow with Upwork. Visit Upwork.com right now and post your job for free. That's Upwork.com to post your job for free and connect with top talent ready to help your business grow. W R K.com Upwork.com from Wondery I'm Lindsey Graham and this is Business members. During the 1970s, Richard Branson had transformed his small mail order music business into a chain of brick and mortar stores before going on to launch his own independent record label. But despite Virgin Records breakthrough success with the experimental Tubular Bells and the headline grabbing Antics of the Sex Pistols. The music industry had lost its appeal for Richard. By the end of the decade, he was a millionaire. But he felt his career was stuck. So he tried to diversify and expand Virgin into new markets. In 1979, the first ever Virgin Megastore opened its doors. This new retail space was an evolution of the Virgin Records chain that sold VHS tapes, games and books, as well as music. Shortly after that, Richard launched a publishing house and a movie production company. But these new businesses didn't satisfy Richard. He still craved something completely new, a fresh challenge to reinvigorate his entrepreneurial spirit. He found what he was looking for in a crowded Puerto rican Airport in January 1984. As he walked around the terminal with a chalkboard signing up stranded passengers, Richard felt the excitement he remembered from his earliest days in business. And when he returned to London after his vacation, he began seriously thinking about what it would take to launch his own airline. Just as he had done in the music and retail industries, Richard began looking for a way to break into what seemed like a saturated market. But getting this new venture airborne would be just the start. And he would soon discover that the competition in the skies was just as fierce as it was on the ground. This is the final episode of our four part series on the origins of the Virgin Flightpath. It's February 1984 at Gatwick Airport near London, England, one month after Richard Branson's vacation in the British Virgin Islands. Richard stands with his nose almost touching the window of the terminal's viewing gallery As a Boeing 747 accelerates down the Runway and then lifts into the air. Richard's always had a casual interest in aviation, but now he's paying greater attention. Richard tears his gaze away as his cousin Simon Draper joins him by the class. Simon's an executive at Virgin with an encyclopedic knowledge of the music industry. But right now, he's just confused. Richard, when you said to me to Gatwick, I assumed you were flying off somewhere warm again. But you invited me here to what? Watch planes take off? Yeah, yeah, just watch. It's quite hypnotic. Richard looks down at the printed flight schedule. He's holding this. British Airways 737, just about to take off. I think it's the Madrid flight. And there it goes. But look, there's another plane on the end of the Runway already. Simon checks his watch. So what are we doing here? I wanted you to see the planes. Flights leaving and arriving every few minutes, people going on vacation, visiting family, businessmen jetting into London. For meetings. Well, Gatwick is near London. It took me over an hour to get here and yet walk around. It's still crowded. That's my point. Air travel is getting pretty big. I suppose it is. And I think we should get in on the action. Oh, Richard, you don't want to start an airline, do you? Have you come mad? Nah. I told you about chartering that flight in Puerto Rico, didn't I? Look, filling a charter with stranded passengers is one thing. Starting your own airline is completely different. Well, in scale, maybe. You know less about air travel than you did about music, and that's saying something. And I didn't know know anything about magazines either. But that didn't stop me. Look, Simon, I've done the research. Richard puts away the flight schedule and pulls out a notebook. This is every airline that runs a transatlantic Service. There are 18 companies on the list, but only one of them offers any kind of discounted rate. Just one. If we could undercut them, we'd make a fortune. This is not like mail order records, Richard. Oh, come on. Where's your sense of adventure? It's different. Look, if we release one disappointment album, it doesn't destroy the company. One store that has to close. Yeah, we can handle that. But one engine failure, one crash, Richard, the entire Virgin brand goes down with the plane. Over lunch, Richard Branson laid out his proposal for a Virgin airline in more detail. Richard wanted to target an underexploited gap in an otherwise crowded market. But Simon Draper didn't share Richard's enthusiasm for the new venture. And before long, these two men would be at loggerheads over the future direction of the entire company. At the start of 1984, transatlantic air travel was booming. Every year, more than 4 million people flew from the UK to the USA, a figure that had doubled in the previous decade. Most passengers traveled on one of two big airlines, British Airways and American Airlines. Sixteen other companies fought for the scraps that remained, and it was a cutthroat business. Two years earlier, one of the smaller competitors, Laker Airways, had folded up shop after 15 years in business. But one company's misfortune created an opening for another. The collapse of Laker Airways left a vacant route between Gatwick and New York, and Richard Branson wanted it. He had been alerted to the opportunity by an American lawyer named Randolph Fields. Shortly after returning from London from his vacation in the British Virgin Islands, Richard had received a letter from Randolph. As well as being a lawyer, Randolph was also an amateur poker player, and he was ready to make a Big gamble. He wanted to set up a new airline on the Gatwick to New York route. But he needed investors, so he reached out. Richard and Randolph hadn't had any dealings with each other before. Before. And Richard had soon found out that he wasn't Randolph's first choice. In fact, Randolph had been turned down by dozens before he approached Richard. But Richard saw an opportunity that no one else did. He agreed with Randolph that the time was right for a new airline to take to the skies over the Atlantic. But Randolph and Richard did not share the same grand vision. Randolph proposed setting up a business class only airline aimed at the minority of passengers who could afford to pay a premium. It was a high margin, low volume model, but Richard thought it had a fundamental There wasn't enough demand for business class only planes. Plenty of other airlines already offered a premium service. And Richard worried the business flights were also too reliant on the calendar to support an entire airline. They might fill a plane during the workweek, but they'd be empty at the weekend and during holidays when business travel all but shut down. Richard also didn't want to join the other small airlines fighting over scraps. Instead, he wanted to take on the giants of aviation, British Airways and American Airlines. He believed that by reducing costs, he could undercut both established companies and grab a slice of the mass market. Randolph eventually agreed with Richard, but he was less willing to give way on the name of the new company. Randolph was dead set on calling the new airline British Atlantic, but Richard objected. He thought he was too similar to British Airways, let alone the six other airlines with British in their name too. Instead, Richard wanted to stand out. So he proposed the name that he'd written on the chalkboard back in Puerto Rico. Virgin Airways. The two men argued back and forth before eventually settling on a compromise. The new airline would be named Virgin Atlantic. But before Richard could fully commit to the venture, he needed to win over the other decision makers at Virgin. Its co founder, Richard's old school friend Nick Powell, had left the business two years earlier, so Richard now ran the company with the help of his cousin, Simon Draper. Simon had been part of Virgin since the early days of Virgin Records stores. He'd managed the firm's music catalog, building Virgin's reputation as the place to source cool, undiscovered bands. Then he helped transform Virgin Music into the country's top independent label, signing big selling artists like the Human League, Culture Club and Phil Collins. Richard hoped that Simon's daring approach with Virgin Music would transfer to aviation. But Simon was adamantly Opposed to diversifying into air travel, he had poured his heart and soul into their music and retail businesses. And he thought that setting up Virgin Atlantic was too much of a risk. If it went wrong, it could destroy the entire company. The two cousins exchanged strong words. Richard accused Simon of lacking ambition and imagination. Simon thought Richard was gambling everything they'd built for no reason other than he was bored. Both men dug in. So Richard's only option to break the stalemate was to go it alone. He set up Virgin Atlantic as a separate entity to the Virgin music and media businesses, and he promised to run them independently of each other. But without easy access to Virgin's financial muscle, the task of setting up a new airline was made even more difficult. Still, Richard brought the same disruptive energy to his airline that he had to his earlier businesses. He rented a shabby warehouse near Gatwick Airport to act as headquarters. He recruited pilots and cabin crew on temporary contracts. And he piggybacked on a competitor's computer system rather than building his own. But Richard hoped to make even bigger savings with a more radical plan. In the 1980s, most airfares were purchased through brick and mortar travel agents. This cost the airlines millions of dollars because the agents took a commission on every ticket they sold. Richard wanted to remove that expense by encouraging passengers to buy direct. But to do that, he'd need an alternative booking platform. Richard turned to a theater ticketing agency that would charge only $5 a ticket, around a quarter of the fee that travel agents usually demanded. But Richard soon realized he was making a mistake. People were used to going to travel agents, and he couldn't change the habits of millions of consumers overnight. So Richard quickly reversed course. He pulled out of the deal with the theater ticketing agency and assured travel agents that Virgin Atlantic would continue to pay the standard commission. That left his new airline to cut costs elsewhere. And Richard quickly set his sights on the biggest expense of all. The airplanes themselves. On transatlantic routes, the gold standard aircraft was the bulk. Boeing 747, the world's first wide body jumbo jet, could carry more than 350 passengers in a single trip. And its four engines were among the most efficient in the air. That meant the running cost per seat on a 747 was substantially lower than on a smaller aircraft. But the initial investment was far larger. The cost of purchasing a 747 in the mid-1980s was $24 million, about 80 million today. Richard wanted the prestige of operating a 747, and he was attracted by the plane's low running costs, but he couldn't afford the sticker price. It was more than Virgin Atlantic's entire startup budget. So Richard asked if Boeing would agree to lease him one for a year. Boeing's bosses weren't enthusiastic about the idea. They preferred to earn bigger profits by selling the planes outright. But Richard continued to pester them and eventually, after two months of negotiation, Boeing agreed. They offered Richard an 8 year old 747 that had previously been operated by an Argentinian airline. Under the terms of the agreement, Virgin Atlantic would pay off the cost in manageable installments. But if Virgin Atlantic stopped operating after a year, Boeing committed to buying the plane back for at least the amount that Richard had paid. With this deal, Richard had sourced a 747 at a fraction of the corporation cost of buying one new. The plane was delivered to Gatwick Airport in June 1984, and Richard watched as the gleaming jet taxied into his airline's hangar, ready to be painted in Virgin's red and white livery. The past few months had been stressful for Richard, but they'd also been the most fun he'd had in years. Now, with a 747 in hand, Virgin Atlantic was ready to take to the skies. But before Richard could fulfill his dream of challenging the giants of aviation, a freak accident would ground his airline and threaten to drag Richard's other businesses down with him.
- [17:26]
Richard Branson
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- [17:45]
Lindsey Graham
Can I get you a refill?
- [17:46]
Richard Branson
You can stay fresh wherever your business travel takes you. That's the powerful backing of American Express. Terms apply. Learn more@americanexpress.com AmExBusiness Business Movers is sponsored by Prizepix.
- [17:59]
Lindsey Graham
The basketball playoffs are here and the action is heating up, but that doesn't mean too much to my most sports obsessed employee, James. This time of year for him, it's all hockey and prize picks. James is a Blackhawks fan, but they've been letting him down for the last several years. That hasn't dampened his luck on prize picks though. Knowing that Alex Ovechkin was chasing the all time goal scoring title, James predicted a lot of shots and that worked out for him. Prize picks is the best way to get action on sports in more than 30 states, including California, Texas and Georgia. The app is really easy to use. You just create a lineup, picking more or less on a few player stats for your shot to win up to a thousand times your money. And you can mix and match player projections from different sports. Not a hockey fan like James? No worries. Combine your favorite baseball players with players from basketball, football, esports, and more. Download the app today and use Code movers to get $50 instantly after you play your first $5 lineup. That's Code Movers in the prizepix app for $50 instantly after you play your 1st $5 lineup. Prize picks run your game foreign It's June 19, 1984, at London's Gatwick Airport, four months after Richard Branson and Randolph Fields agreed to form an airline. Richard leans back in his seat as the Boeing 747 he's sitting on accelerates down the Runway. The plane gains speed until Richard feels a slight lurch in his stomach. Wheels have left the ground. The cabin erupts into cheers. Virgin Atlantic's first flight has taken off, but there are no paying passengers on board. Almost every seat is taken up by the airline's engineers, administrative staff and cabin crew. But the most important passenger of all is sitting beside Richard at the back of the plane, an official from the British government's Civil Aviation Authority. Without a successful test flight, the caa, Walt crew, grant Virgin Atlantic a license to operate. Richard turns to the official and smiles. Well, that went smoothly, I think. Ready for a half hour loop around London. I must say I'm impressed. I don't think I've ever come across an airline that's been set up so quickly and efficiently. Well, you know the clock's always ticking. We want to take full advantage of the summer high season for families heading to America. The official opens a folder and takes out a sheet of paper. He folds down the tray table and begins writing on the official looking form. The aircraft registration is G Virg. Is that correct? Yes, but we're calling her Maiden Voyager. Very apt. The official continues writing, but his pen shoots across the paper when the plane suddenly lurches to the side. Richard looks down the cabin. No one's cheering anymore. Hey, what the hell was that? The official looks out the window and as Richard follows his gaze, his blood runs cold. One of the engines is on fire. What is going on? Are we going down? The British aviation official next to Richard calmly pats him on the shoulder. Mr. Branson? It looks to me like a bird strike. Nothing to worry about the pilot will bring her around and we'll come straight back to land. A747 can easily fly on just three engines. Three inches. What'd you say he was? A bird strike? The official offers Richard a sympathetic smile. They happen more than you'd think. Get the engine repaired and we'll go back up another day. Richard feels another surge of panic as he realizes that the maiden Voyager hasn't passed its test flight. When can you get back here? Well, that depends on when you get the engine repair, of course, but anytime. Next month, I expect. Next month? The first flight's already fully booked. And when's that due to take off? I might be able to squeeze you in a few days earlier if the engineers give the all clear. The first flight's in three days. The official arches and eyebrow. Three days? Goodness, you're cutting it close. Can't you. Can't you grant the license anyway? I mean, you've flown on the plane now. If it weren't for the bird. The official's eyes drift to the window. The sky is obscured by thick black smoke pouring out of the engine. I'm afraid not. No. I'm not sure we can classify this as a successful flight. A bird strike could happen to any plane. But the timing of this one couldn't have been worse for Richard Branson and the maiden Voyager. Without authorization from the British government, Virgin Atlantic could not begin flying. And unless Richard acted fast, the damage from this bird strike could prove just as fatal to his airline as it had been to the Byrd. When the maiden Voyager landed back at Gatwick Airport after its aborted test flight, Richard Branson's bad day got even worse. He was confronted by a reporter who'd taken a picture of the Virgin Atlantic jet with smoke and flames billowing from its engine. For a moment, Richard had visions of the photograph splashed across the front page of every newspaper in the country. But thankfully, the journalist had no intention of writing up the story. He came from the Financial Times, a business paper, and he didn't think the emergency landing was the kind of news they should cover. It was a narrow escape. Richard knew that reporters from Britain's tabloids would have jumped all over the story if they'd gotten the same chance. But Richard wasn't out of the woods yet. Virgin Atlantic's inaugural flight with paying customers was still due to depart in just three days time, and he didn't have another 747 to depart. Take the place of the damaged plane. If they had to cancel this flight, even the Financial Times would be bound to cover it. The only option was to purchase a replacement engine. But since the bird strike occurred before Virgin Atlantic had been cleared by the Civil Aviation Authority, the incident wasn't covered by insurance. Richard would have to pay for the new engine out of his own pocket, at a cost of £600,000, the equivalent of 2 point million today. Richard had promised business partner Simon Draper that he wouldn't prop up his new airline with money borrowed from the other businesses in the Virgin Group. But Virgin Atlantic couldn't afford to buy the engine alone, so Richard went back on his word. He placed the order and then called the Virgin Group's bank manager to let him know that an unusually large payment would be going through. Unfortunately, it was then that Richard discovered his company had already maxed out its credit. Over the past few months, an expensive production by Virgin's film arm had temporarily plunged the business into the red. A large check was expected from the movie's American distributors, but it hadn't yet arrived. And when the cost of a new 747 engine was added to the balance, Virgin would be £300,000 over its limit. Richard asked for an extension, but the bank refused. Instead, they threatened to freeze the company's accounts. It was just as Simon Draper had feared. Virgin Atlantic was threatening the future of the entire company. But it was too late to turn back now. The replacement engine was already on its way from the Boeing factory in Seattle, and it was due to be installed on the maiden Voyager overnight. If Virgin Atlantic's check to Boeing bounced now, it would damage the airline's reputation just as much as a cancelled flight. First flight. So Richard took to the phones. He called distributors for Virgin Music, Virgin Films and Virgin Books. He pleaded with them to settle their accounts early, otherwise Virgin Atlantic could fall apart and the entire Virgin Group could be forced into liquidation by the bank. Thankfully, Richard's distributors pulled through. They agreed to pay their invoices early and Virgin narrowly avoided disaster. The next day, Maiden Voyager went up for another test flight with a new engine. This time it passed without incident, and Virgin Atlantic's license to operate was granted by the caa. The airline's first paying passengers boarded the inaugural flight to America, and there was a triumphant atmosphere all around. But Richard couldn't enjoy the occasion. All the way across the Atlantic, he fumed over how close Virgin had come to collapse, and he knew exactly who to blame. As soon as he returned to Britain, Richard went back to his bank manager and told him that he was moving Virgin's accounts elsewhere. Richard had been using the Same bank since he launched Student magazine almost two decades earlier. He'd felt a sense of loyalty to them. But that loyalty clearly wasn't reciprocated. Richard thought it was absurd that the bank manager had been willing to push Virgin into insolvency over a temporary shortfall of £300,000. But he was sure other banks would be happy to take Virgin's business. And it wasn't long before he switched the company's accounts to a rival that offered a credit limit 10 times larger than their old bank. So, with the threat of immediate foreclosure gone, Virgin Atlantic could focus on earning back its startup costs. And it did so quicker than anyone in the industry predicted. During the company's first year of operations, it made a profit. And with proof that his business model worked, Richard set about expanding. Virgin chartered a smaller jet to fly from London Gatwick to the Netherlands, and then at least a second Boeing 747 to fly to Miami. And it may not have been a coincidence that Virgin Atlantic's growing success coincided with a major shakeup of the British aviation industry. In February 1987, less than three years after Virgin's inaugural flight, the state owned British Airways was privatized by the government. And once British Airways was privately owned, there were greater incentives to make a profit. And the airline's management set to the task with gusto. Within four months of going private, British Airways bought a struggling rival, British Caledonian, and announced its intention to merge the two airlines. But that news troubled Richard. British Airways and British Caledonian were the largest and second largest airlines in the United Kingdom. Together, they accounted for 80% of all British flights to North America. For Richard, this merger gave the already mighty British Airways an unfair advantage over the only other British airline operating a transatlantic route, Virgin. Sir Richard appealed to Britain's politicians to block the merger, but the government rejected his arguments. But Richard soon realized, though, that this development gave Virgin Atlantic an unexpected opportunity. British Caledonian operated transatlantic routes out of London Gatwick to several American cities. But some were redundant with routes already offered by British Airways. So rather than run two half full planes to the same destination, British Airways stopped the old Caledonian routes. And that meant their departure slots became available to other carriers. Virgin Atlantic was in prime position to take them on. Over the next three years, Virgin Atlantic added the defunct British Caledonian services to New York, Los Angeles and Boston to its list of destinations, making Virgin Atlantic a rising player in the aviation industry. And this was far from Virgin's only success story. During the late 1980s, the Virgin Group's total revenue ballooned from £100 million to £1 billion. Richard's dream of creating a multinational multi industry conglomerate had come true. But no matter how big Virgin got, Richard Branson kept his old small business mentality. He saw it as his mission to take on established companies and shake up the traditional way of doing things. But that approach could make him enemies. And soon Virgin Atlantic's biggest competitor would be out for blood.
- [29:34]
Ronnie Thomas
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- [30:09]
Narrator
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- [31:11]
Lindsey Graham
It's February 1991 at Newark Liberty Airport in New Jersey, seven years after Virgin Atlantic's first flight. Richard Branson, now 41 years old, walks out of the terminal and past the taxi stand. As he reaches the the private pickup zone, he sees Ronnie Thomas waving at him from the curb. Ronnie has been running Virgin Atlantic's limousine service in New York for the past five years, and he always picks up Richard when he's in town. Hey. Oh, hi, Ronnie. Hey, let me get that for you, Richard. Ronnie holds the door open and Richard climbs in the back. Then Ronnie gets into the front and starts the engine. You have a pleasant flight, Richard, as always, great news about Heathrow. Absolutely long overdue. British Airways act like they own the place. Ever since it first began flying, Virgin Atlantics had to operate out of London Gatwick Airport. But last month, the British government ruled that Virgin should be allowed to fly from London Heathrow as well, that means that Virgin would get a foothold in British Airways main hub, the busiest airport in the country. Ronnie looks at Richard in the rearview mirror. Hey, so speaking of British Airways, I've got a story you'd be interested in. We were a bit short handed last week, so I helped out and drove a fare to the airport. I'm dropping off the guy at the spot for Virgin departures, but as I'm pulling away, I see two guys in British Airways uniforms. Walking up to him gives me kind of a weird feeling, so I park and walk over to see what's going on. It turns out these suits are trying to get the passenger to fly with them instead of Virgin promising free upgrades, champagne, all kinds of frequent flyer bonuses. You're kidding me. No, I wish I was. They were trying to poach your customers right there in the open. I mean, they probably didn't realize I worked for you, otherwise they might have been more subtle about it. Ronnie pulls the limo out of the busy arrivals area and glances back at Richard again. Anyways, funny story. I thought you should know. Well, thank you very much, Ronnie. I guess we. We must be rattling their cages, huh? Well, you know, it's what we do best. You're not going to let them get away with it though, are you? Oh, no, certainly not. I think I'm going to take some advice a friend gave me some years ago. Oh yeah, what was that? Don't turn the other cheek, not with them. Fight like your company depends on it. Because when it comes to British Airways, it probably does. When Richard Branson was first exploring the idea of a new airline, he had met with the owner of the defunct Lakers Airways, Sir Freddie. Laker blamed the failure of his airline on only one thing. British Airways. In his opinion, it had used its size to force a smaller rival out of business. Sir Freddy told Richard that British Airways would try to do the same to Virgin. And he was right. British Airways had beaten Laker Airways. It had taken over British Caledonian, and now it was coming for Virgin Atlantic. Ever since 1977, strict rules had governed the distribution of air traffic over London. The British capital was served by two major airports, Gatwick and Heathrow. Heathrow was the bigger of the two, but it had only a small list of approved operators. And when it started flying, Virgin wasn't one of them. Richard Branson had always been convinced that this gave British Airways an un unfair advantage. Many passengers preferred Heathrow. It had quicker transport links into central London and offered a greater choice of destinations. So no matter how good Virgin Atlantic was it couldn't really compete while it was based at gatwick. But in 1991, things were changing. The expansion of a third London airport at Stansted meant that the Civil Aviation Authority revisited its regulations. Richard used this opportunity to campaign for Virgin Atlantic to be able to fly out of Heathrow. And the CAA agreed. In August 1991, Virgin Atlantic began operating some of its transatlantic services from Heathrow. British Airways chairman Lord John King was outraged and he told his chief executive to do something about Richard Branson. So over the next few months, British Airways launched a systematic attempt to undermine Virgin, something that became known as the dirty tricks campaign. It began with newspaper reports quoting anonymous sources that claimed Virgin Atlantic was operating at a loss. But Richard was able to brush off the stories by opening up his airline's accounts to scrutiny. They showed that Virgin Atlantic was profitable. After that failed approach, British Airways escalated its tactics. Virgin Atlantic paid British Airways to use its ticketing software, but the information on the system was supposed to be kept private. But unknown to Richard, British Airways employees were able to access access Virgin Atlantic's bookings. And using this information, British Airways staff telephoned Virgin passengers and encouraged them to switch their flights. Sometimes they offered incentives like free upgrades or bonus frequent flyer miles. Other times they posed as Virgin employees and falsely claimed that Virgin flights had been canceled, offering to book them on alternative British Airways flights instead. Eventually, rumors about this dirty trixie campaign began to leak and Virgin Atlantic began compiling evidence in a secret dossier. When they went public in a complaint to the government, British Airways chairman Lord King dismissed the claims as baseless and suggested that Virgin Atlantic was just seeking publicity. But those comments gave Richard a legal opening. In March 1992, he sued British Airways for libel. Lord King opted for an aggressive defense and countersued Virgin Atlantic. So, not for the first time in his business career, Richard Branson found himself threatened with a potentially catastrophic court appearance. But compared to his earlier run ins with the law, this case was between two billion dollar corporations. Richard decided he had two walk away and let British Airways win or keep fighting what could be a disastrously expensive legal battle. He chose to fight, but to guarantee that the Virgin Group survived any potential loss in the courtroom, Richard decided to sell the Virgin Music record label to EMI for $1 billion, equivalent of around 2.5 billion today. In the end, Richard didn't need the money, though. As the dispute dragged on, British Airways lawyers stepped in. They judged that the evidence Virgin Atlantic had gathered was overwhelming and they had little chance of winning. So on the first day of the hearing, Richard British Airways backed down and agreed to settle out of court. The dirty tricks campaign was over, but the two airlines would continue their rivalry in the skies for years to come. But the battle with British Airways had shined a spotlight on things that set Virgin apart. The company that began with a student magazine was now a giant conglomerate. Still, through the decades, as Richard Branson had expanded into new markets and experimented with new ventures, Virgin had always retained the spirit of its founder in its boldness, its embrace of innovation, and its healthy disregard for the status quo. From Wonder E this is Episode four Richard Branson and the Birth of Virgin for Businessmen on the next episode, former Virgin Mobile USA executive Stacey Schwartz explores Richard Branson's spectacular journey from small music retailer to multibillion dollar business icon. If you like business movers, you can unlock exclusive episodes found nowhere else on Wondery plus and access new episodes early and ad free. Join Wondery in the Wondery app or on Apple Podcasts. Prime members can listen ad free on Amazon Music. And before you go, tell us about yourself by filling out a survey@wondery.com survey if you'd like to learn more about the early days of Virgin, we recommend Losing My Virginity by Richard Branson Virgin Inside Richard Branson's Business Empire by Tim Jackson and Dirty British Airways Secret War Against Virgin Atlantic by Martin Gregory A quick note about our dramatizations in most cases we can't know everything that happened, but all our reenactments are based on historical research. Business Movers is hosted, edited and executive produced by me, Lindsey Graham for Airship. Audio editing by Mohamed Shazi Sound design by Molly Boss. Our supervising Sound designer is Matthew Filler. Music by Thrum. This episode is written and researched by Emma Dipton, Senior Producer Scott Reeves. Executive producers are William Simpson for Airship and Aaron o' Flaherty, Jenny Lauer Beckman and Marshall Louie for wondering.
- [39:41]
Kristen Thorne
Last year long crime brought you the trial that captivated the nation. She's accused of hitting her boyfriend, Boston police officer John o' Keefe, with her car. Karen Reed is arrested and charged with second degree murder. The six week trial resulted in anything but resolution.
- [39:57]
Richard Branson
We continue to find ourselves at an impasse.
- [40:00]
Kristen Thorne
I'm declaring a mistrial in this case. But now the case is back in the spotlight and one question still lingers. Did Karen Reed kill John o' Keefe?
- [40:10]
Lindsey Graham
The evidence is overwhelming that Karen Reed is innocent. How does it feel to be a cop killer?
- [40:15]
Kristen Thorne
Karen I'm Kristen Thorne, Investigative Report Porter with Law and Crime and host of the podcast Karen the Retrial this isn't just a retrial. It's a second chance at the truth. I have nothing to hide. My life is in the balance, and it shouldn't be.
- [40:32]
Lindsey Graham
I just want people to go back to who the victim is in this. It's not her.
- [40:36]
Kristen Thorne
Listen to episodes of Karen the Retrial exclusively and ad free on Wondery Plus.