Virgin King (Text Only). Tim Jackson

climbing aboard an aircraft with a suitcase full of cassettes and carrying it exhaustedly from one office block in New York to the other, trying to sell the work of Virgin artists in Britain for distribution in the United States. Draper managed the company by means of informal weekly meetings, first at Branson’s house, then in the coffee shop of the Hilton hotel at Shepherd’s Bush, then at his own house. Steve Lewis, who had become deputy MD of the record company in 1979 after Virgin had withdrawn from the business of managing artists, was responsible for the weekly meetings at which the pop charts would be analysed and strategies for sales and marketing decided.

      Simon Draper, taking advantage of Nik Powell’s departure, had raised with Branson the question of his shareholding in Virgin. Pointing out that the record company was overwhelmingly the most profitable business in the Virgin Group, and that its profits were for years being reallocated to other areas for expansion, Draper suggested to Branson that his shareholding in the subsidiary record company should be converted into an identical shareholding in the parent. For until he owned part of the Virgin Group, Draper knew that he would never be financially secure. ‘I used to get terribly anxious about the profits,’ he remembered, ‘because they were always massaging them. I remember having secreted away in a drawer a note from the auditors saying, “For the purposes of valuing your shares, the profits should have been x.”’

      Branson immediately saw the justice of Draper’s case. But he was far too practised a negotiator to agree immediately to such a suggestion. In return for Draper’s 20 per cent shareholding in the record company, he at first offered only 10 per cent of the group. It required a number of painful meetings between the lawyers for Branson to raise his offer to 15 per cent, and to accept Draper’s demand for a payment of £100,000 in cash and for a watertight agreement on profits which guaranteed Draper’s share of the money that the music group would make, but protected him from losses presided over by Branson elsewhere in the group. Draper’s lawyer, who appeared not to recognize that it was the record company that was making the vast majority of the group’s profits, was horrified. After all, Draper seemed to be parlaying a fifth of the record business for an only slightly smaller share of what seemed to be a much larger business – including retailing, films, clubs and a number of other interests. ‘He didn’t realize what a strong position I was in,’ recalled Draper. ‘He didn’t realize how valuable the record company was in relation to the record shops … I should have asked for £300,000.’

      Given Branson’s normal business methods, the negotiation was conducted in a strange way. Branson felt that the sums of money were so vast that he did not want to deal directly; his cousin, however, saw things differently. ‘We hardly ever spoke face to face,’ said Draper. ‘Neither of us enjoy it. [When we did meet] I’d just say that’s what I want, and he, very tightlipped, would always agree.’ For Branson knew that Draper had too often seen behind the facade that worked so well with outsiders. His cousin, his most trusted business partner, preferred to negotiate with Branson by letter and through lawyers.

      Perhaps for this reason, the deal turned out to be satisfactory to both sides. Draper no longer felt so anxious about the precariousness of his financial position. Part of the agreement was that Branson, as before, would have the obligation to buy Draper’s shares in the event that he decided to sell them. But since Draper now owned almost a sixth of the whole Virgin group, it no longer made sense for the price at which Branson would buy him out to be based on profits. Instead, the two cousins agreed that the price would be set at ‘fair value’ – a phrase whose meaning would be determined by a firm of independent auditors, with an appeals process written into the agreement in case Branson and Draper could not agree on the auditors’ conclusions.

SIX

       Dear Randolph

      THE FOUNDER OF Virgin Atlantic Airways, the company that was to change Richard Branson’s life, was a barrister named Randolph Fields. Three years younger than Branson, he had been born in the United States to English parents, but moved to Britain at the age of nine. Like Branson, he had a chequered school career and showed early signs of entrepreneurial and negotiating flair. The two shared a taste for teenage politics, too: but by the time Branson was marching on the US embassy, Fields had already become more conventional. He took up the study of law at a London polytechnic, where he stood out from the majority of student activists. A newspaper later described him as having been a ‘political leper’. Fields sued for libel but was awarded only nominal damages.

      While Branson was as energetic and unkempt as ever in his beard and woolly jumpers, Fields favoured sober double-breasted suits and was beginning to run to fat. And while Branson had acquired a dubious reputation with Her Majesty’s Customs and Excise, Fields had taken the bar examinations that entitled him to argue cases in both English and Californian courts. His growing practice in Los Angeles specialized in defending American insurance companies against asbestos claims. In less than two years, Fields had amassed savings of more than £200,000.

      But life in California was dull, and the devil of adventure still gnawed at his soul. So Fields was in a receptive frame of mind when he heard on his kitchen radio during breakfast on 5 February 1982 that Sir Freddie Laker, the entrepreneur whose Skytrain service had brought the cost of flying across the Atlantic down to £49, had gone bust. Where the radio commentators saw only failure, Fields saw a business opportunity.

      Four months later he was sitting in an armchair at the Gatwick Airport Hilton Hotel, where Sir Freddie had sat up until the early hours of the morning trying to save part of his business from the receivers. Facing Fields, a handful of men who had been Laker’s most senior employees listened with growing astonishment as he outlined a scheme for a new airline. It must have made an extraordinary scene: a handful of grizzled veterans, their cynicism of the airline business intensified by the Laker collapse that they had just witnessed, being lectured on the lessons of their own failure by a self-confident barrister of 29 whose experience of aircraft was limited to a few dozen flights back and forth across the Atlantic. Yet, miraculously, they were convinced. Within a few weeks, Fields had firm commitments from two valuable Laker managers: David Tait, who ran Sir Freddie’s US sales operation; and Roy Gardner, an engineer trained by the Royal Air Force and British Caledonian Airways, who had been the entrepreneur’s technical manager. Soon after that, Fields bought an off-the-shelf public company called Ritter PLC, and agreed with Tait and Gardner that the new airline would trade as British Atlantic Airways.

      The young barrister had realized that Laker’s demise left a gap in the lucrative but highly regulated market for air travel between London and New York. His idea was to scoop up Laker’s licence, and to use it to fly a single jet between Heathrow and John F. Kennedy – either a McDonnell-Douglas DC-10 or a larger Boeing 747 – exclusively for business class travellers. He would offer the commercial customer a more comfortable, pampered passage than the existing airlines did. ‘At the time, business class consisted of putting a curtain across the front of the economy cabin, and giving out free drinks,’ Fields recalled. ‘It was a joke.’

      In most other industries, anyone who wished to set up in business was free to do so. But the Civil Aviation Authority, set up in 1971 by Edward Heath’s Conservative government, saw itself as the guardian not of competition between carriers, but of safety standards – which might be put at risk if existing airlines were undercut by a newcomer. British civil servants had concluded that the best way to achieve this objective without ignoring the interests of the consumer altogether was for Britain to have two international airlines, British Airways and British Caledonian. The arrival of Laker had upset this careful planning, and it was therefore with little regret that some civil servants mourned his passing.

      President Jimmy Carter’s decision to deregulate the American airline industry made this policy harder to sustain. He appointed to the Federal Aviation Authority an economics professor from Cornell University who thought the purpose of the free market was ‘to let people do crazy things’, and who saw a succession of airline start-ups and bankruptcies as proof that the market was working. For the CAA, by contrast, an airline collapse of the Laker kind was evidence of a policy failure – since an airline that