The War of Dirty Tricks: How Richard Branson Defeated British Airways

As the founder of more than 400 companies,
Sir Richard Branson is without question one of the most renowned entrepreneurs of our
time. And, as you’re probably aware, this knighted
businessman is no virgin to the skies. Perhaps you may recall his attempt to circle
the globe in a hot-air balloon. Or, one of his more recent ventures: Virgin
Galactic, the suborbital spaceflight company. But, of course, this video is not about hot
air balloons or multi-planetary travel. Rather, today’s episode focuses on the remarkable
story of Virgin Atlantic’s historic battle with British Airways: a corporate clash which
changed the course of the airline industry, This video was made possible by our friends
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end for a special announcementAnd a new giveaway! If you’re a frequent flier, odds are you’re
no stranger to arriving at an airport only to discover that your flight has been cancelled. And, in 1978, that’s precisely what happened
to 28-year-old Richard Branson, who found himself stranded in Puerto Rico after American
Airlines cancelled his evening flight to the British Virgin Islands. But Branson was determined to reach BVI that
night, anxious to see his girlfriend,a woman who would eventually become his wife. And so, he took matters into his own hands,
and did what all great entrepreneurs do;he turned his frustration into action. Branson decided to charter his own plane,
which was a freedom he owed to the success of Virgin Records. But instead of flying alone, he would split
the cost with other fellow passengers en route to BVI who were also bumped by American Airlines. In his typical eccentric-style, Branson
went around the airport advertising his flight with a borrowed blackboard, which read:
 “Virgin Airlines. One Way. $39 to BVI.” After a short while of recruiting, Branson
had officially sold-out his first plane. Upon landing, a fellow passenger sitting
next to Branson remarked: “Sharpen up your service a bit, Richard,
and you could be in the airline business.” Intrigued by the idea, he called Boeing
the very next day to inquire about any used Seven-Forty-Sevens they may have lying around. After speaking with Boeing, he shared the
audacious idea with his staff at Virgin Records, who failed to share his enthusiasm. Even Branson would have to admit that it
would be quite the career change. After all, it’s one thing to sell vinyl
records. It’s quite another to challenge the fiercely
competitive airline business — an industry with more than its fair share of bankruptcies. But it wasn’t mere curiosity that sparked
Branson’s interest in aviation. More than anything, it was his desire to
raise the bar in a business that was infamous for neglecting its passengers. Flying was widely viewed as a dreadful experience;
offering poor service, sub-standard food, and no entertainment. In other words, the industry was ripe for
disruption. Always one to go against the establishment,
Branson envisioned a different kind of airline; one that would prove that fun and business
can, and should, co-exist. But purchasing a Seven-Forty-Seven, even
a used one, was a risky endeavor — and out of his budget. If the business failed to take-off, he’d
be stuck with a depreciating plane,which he would likely be forced to sell for much less
than what he paid. Brilliantly, Branson persuaded Boeing to
accept a very different kind of deal;one that would completely cap his downside while providing
unlimited upside. Instead of buying the aircraft, Branson
would lease it for 12 months. And if things didn’t pan out the way he
had hoped after one year in business, Branson could return the plane to Boeing; no harm,
no foul. Fueled by a business plan designed around
having fun, Virgin Atlantic finally took to the sky on June 22nd, 1984. But with only a single plane, offering just
a single route, Branson was an underdog, flying in an increasingly crowded sky. For comparison, British Airways boasted
a fleet of over 300 planes. Lord John King, Chairman of British Airways,
was quick to dismiss 34-year-old Branson, remarking:
 “He’s too old to rock’n roll, and too young to fly.” But perhaps he spoke too soon. After Virgin’s first year in business,
Branson renewed his lease with Boeing, and added additional aircraft to his fleet just
a few years later. Much to Lord King’s dismay, his once-dismissed
competitor was appearing more and more like a formidable threat. If not for trouble-making Branson, British
Airways would have enjoyed a monopoly position at Heathrow, as the only long-distance airline
which flew from the UK to North America, and other popular destinations. But the final straw came when Virgin Atlantic
infringed on that monopoly and received permission to operate from London’s Heathrow airport,
with Branson dressing as a pirate to celebrate the event;
 In the eyes of British Airways, Heathrow wasn’t just a profitable airport:it was
their profitable airport. British Airways had had enough. Up until this point, Lord King was the undisputed
leader of Britain’s aviation industry. Prime Minister Margaret Thatcher even nicknamed
the magnate as her “Favorite businessman”. With his reputation on the line, it was
clear that Virgin had to go. Under no circumstance was the Lord King
going to risk bruising his prestigious image- especially to some long-haired hippie from
the record business. From Lord King’s perspective, the spacious
skies only had enough room for one airline. With Virgin Atlantic now in the crosshairs,
Lord King called an urgent and secret meeting with fellow executives, demanding that they
“Do something about that Branson fellow.”, and orchestrated a plan to take down Virgin,
by any means necessary. With all ethics tossed aside, British Airways
formed a secret undercover unit to pursue what would infamously become known as “The
Dirty Tricks Campaign”. Rogue telephone helpline agents used the
same booking system as Virgin, which allowed them to intercept Virgin’s reservations
and call the competition’s passengers. The covert team, pretending to be Virgin
employees, informed passengers that their flight had “unfortunately” been canceled,
but of course, they would be happy to reaccommodate them with British Airways. Lord King’s office also hired private
investigators to spy on Branson and even dig through his trash, scavenging for anything
they could find to attack Virgin Atlantic and his other ventures. Most damning of all, the covert team allegedly
leaked rumors to the press about Virgin’s finances, calling its solvency into question. Everything up to this point was underhanded
and sneaky, but this act could annihilate an airline. If rumours spread that Virgin was broke,
paying for fuel upfront, and flying empty planes, then Virgin’s days in the sky were
numbered. Branson already knew of British Airways’
Dirty Tricks when embarrassed agents from the unit broke down and told Branson what
they had been ordered to do. But when journalists began asking why every
Virgin flight was late when departing from Heathrow airport, and to comment on the company’s
desperate cash position, Branson could prove the libelous attack. It was finally an offense that provided the
necessary ammo that he needed to shoot down the Dirty Tricks Campaign once and for all. Before he could take his case to court,
he needed the financial muscle to battle the legal team at British Airways. Branson’s Virgin Atlantic was feeling
the pain from British Airways’ dirty tricks, posting an operating loss of nearly 10 million
euros in October of 1993, only heightening his money troubles. With a heavy heart, Branson faced the most
difficult choice of his entire career: He could either sell his beloved record
company to fund his legal battle, or, roll the dice in court: potentially bankrupting
both Virgin Atlantic and Virgin Records. With tears flowing, Branson sold his most
prized jewel in the Virgin portfolio:Virgin Records, in June of 1992. His record company was acquired by EMI for
nearly a billion dollars. And now with the money to go to war, Branson
took British Airways to court for libel in 1993; where it was proven that the CEO of
British Airways, Sir Colin Marshall, had clearly directed the smear campaign. Virgin’s lawsuit also exposed British
Airways for conducting the exact same “dirty tricks” against Air Europe, an airline which
had gone bankrupt just the year before. Finally, in December of 1993, Branson emerged
victorious. Lord King and British Airways would settle
out of court and pay a collective sum of nearly a million dollars, in addition to over 3 million
more for legal fees. The landmark victory was the largest libel
damages ever awarded in UK history. Since the win came around the holidays,
Branson decided to distribute the proceeds equally amongst all of Virgin’s staff, dubbing
it the “BA Christmas Bonus”. As part of the settlement, British Airways
was also ordered to give a public apology. Which they did, offering sympathies to Virgin
for: “Regrettable incidents involving a very small number of employees in unrelated
incidents.”. After the scandal was made public, British
Airways had no choice but to reshuffle its top leadership with Lord King and David Burnside
stepping down in disgrace. Richard Branson’s success story shows
what can happen when you’re not afraid to go against the establishment and fearlessly
challenge the status quo with an audacious idea. The story of Virgin Atlantic also proves
that integrity is a winning formula, and that the underdog can, and often does, emerge victorious. We hope that after watching this video,
you too will incorporate “fun” into your business plan. But, if there’s one more lesson that we
can offer, it’s too learn from Virgin’s cyber-security errors. If British Airways hadn’t had access to
Virgin’s booking system, they wouldn’t have been able to call upon Branson’s customers. So, don’t make the mistake as Branson. Keep your confidential data safe, and keep
the bad guys out, by using Dashlane — the sponsor of today’s video! Dashlane is your ultimate all-in-one password
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Casual, where you can save 10% on your subscription. The link is on screen, and, in the video description
below. Before we get to today’s giveaway, we’re
excited to announce that Business Casual is starting an intern program! If you’re interested in learning more about
YouTube and business, and would like to rub-shoulders with the Business Casual team to help create
future videos, be sure to check out the link in the video description below. And lastly, but not least: today’s giveaway! In this episode, one lucky Business Casual
fan will be receiving an authentic autographed photo from, you guessed it, Richard Branson. All you have to do is follow us on Instagram
at Business Casual Dot IO and like the Instagram post which is also linked in the video description
below. And don’t worry if you don’t win, as we’ll
also be giving away to 10 other lucky fans, free Business Casual merchandise. Thank you for watching. If you enjoyed, be sure to click the like
button and subscribe to see more videos just like this. And until next time, stay smart.

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