would be taken; business class travellers would be carried; baggage, instead of being charged for, would be carried free up to thirty kilograms. To enable its passengers to enjoy the in-flight movie, British Atlantic would provide them with high-quality electrical headphones. (This was not quite the extravagance that it seemed, however. In the course of his researches, Fields had discovered that the acoustic headphones rented out by most airlines to economy class passengers, which worked on the same principle as an ear-trumpet, were in fact more expensive to provide. ‘I discovered that the airlines were intentionally selling discomfort,’ said Fields.)
Fields also began to consider a still more radical way to make his service stand out. Instead of offering a single feature film and a handful of music channels, he resolved to turn in-flight entertainment into the most important selling point of his airline. Flying was to be not merely glamorous, but also fun. If the American studio MGM could combine entertainment, hotel-keeping and gambling in the same Las Vegas establishment, why should he not perform similar alchemy 37,000 feet above the ground?
As he sat down to antipasti with Ray Colegate in the Italian restaurant where they had agreed to meet on 11 December, Fields therefore showed no surprise when Colegate announced that Gat-wick-Newark might be his for the asking. The barrister already knew that he would have to argue his case at – a public hearing if another carrier objected to the granting of his licence. He would also have to show that British Atlantic Airways had enough capital behind it to ensure that it would not leave passengers stranded on the wrong side of the ocean if it were to suffer the same fate as Laker. Confident that he could surmount both of these hurdles, Fields drew from his pocket an already completed application for the route, and handed it across the table to the astonished civil servant with a flourish.
Unfortunately, the profits of Fields’s California law practice, augmented by modest loans from his mother and his sister’s American husband, were not enough to turn the paper British Atlantic into an airline with craft, crew and reservations department. Fields knew that he had to find at least another £1m – and since the public hearing was called for 1 March, he needed it within three months. But with memories of the Laker collapse so fresh in bankers’ memories, raising the necessary funding was to be no easy task. One after another, potential backers looked at his business plan with polite interest, promised to call back, and never did.
Trying hard not to sound desperate, Fields telephoned Richard Branson on 13 February 1984, the day before Valentine’s Day. He explained his idea to Branson briefly, and sent around two copies of his business plan: one for Branson himself, the other for Terry Baughan, the nearest thing Virgin then had to a finance director. Two days later, after Branson and Baughan had been through the plan, the three men met on Branson’s houseboat Duende to talk it over.
Branson realized at once that this deal was different from the scores of strange suggestions that filled his postbag every month. Fields’s proposal was not only ambitious. It was also well researched, and supported with some analysis of the kind of traffic that the airline might hope to attract, how many seats it would have to fill to break even, and how its expected revenues would divide between business and economy class. And there was a second attraction: Virgin could afford to carry modest losses for a while, since they would help to reduce the tax bill on the fat profits that the record label was making at the time.
But it was hard to see what relevant experience Virgin had that qualified it to try its luck in the air travel industry. The group had certainly dipped its finger in many different pies: it had in its time published magazines, sold clothes and mail-order records, delivered sandwiches to offices, and dabbled in pubs and restaurants. But its diversifications had generally been modest, and had also generally been confined to businesses in which the company had some expertise that might be helpful. Nobody in the Virgin Group knew the first thing about airlines.
Branson’s most loyal lieutenants were flatly opposed to the idea. Simon Draper was characteristically forthright.
‘It’ll be a total disaster,’ he said to himself as Branson explained his plans over the telephone. But he tried to dissuade his friend diplomatically. He explained that although it might be a good idea, they should hold back nevertheless. ‘You’ll bankrupt the rest of Virgin,’ he said, and added for good measure that if Branson was serious about going ahead with the idea, he should realize that this would be the beginning of the end of their relationship.
Ken Berry, always more quietly spoken, contented himself with the dry observation that the similarities between this proposed new venture and Virgin’s existing businesses were ‘not exactly obvious’. But he left Branson in no doubt that he too believed it would be a mistake to go into business with Fields. If Virgin was looking for new ventures to start whose losses could be offset against the tax that the group would have to pay on the millions it was earning from Boy George and its other moneyspinners, why not stick to ventures in the record business?
Branson could see that there was money to be made in flying the Atlantic. After spending a weekend vainly trying to call the People Express reservations line in London, he had concluded that People was either badly managed or so popular that it could not keep up with customer demand – or both. Either way, there seemed to be an opportunity there. But air travel was still a highly regulated industry in which a newcomer might have to fight with any number of state-owned monoliths, with monopoly profits from their home markets, subsidies from their countries’ taxpayers, and suspiciously friendly relations with politicians and with the regulators who set the rules of the competitive game.
And yet … the world was changing. Laker might have gone bust, but he had not done so quietly. The $1bn legal action he had launched in the British and American courts against the airlines that he claimed had conspired to bring him down was still before the courts, so the big carriers would have to be more subtle in their tactics against any new entrants. The safety and technical issues that had obsessed airline managers and regulators until the 1970s were disappearing, as aircraft had become more reliable and easier to maintain to a high standard. People who had never before imagined that they would travel between continents had begun to do so. In the airline business of the 1980s and 1990s, the skills that would matter would be marketing, good service, and the use of computerized reservations systems to fill the highest possible proportion of the seats on each flight. If People Express could be run by a Wall Street analyst, and British Airways by a former executive of Avis Rent-A-Car, why couldn’t a pop tycoon start an airline?
It did not therefore take long for Branson and Fields to shake hands on an agreement that gave Virgin a 45 per cent stake in the new airline, with Fields himself retaining another 45 per cent through his holding company Fields Investments, and the rest divided between the company’s employees. The day-to-day management of the business was left in Fields’s hands.
One important question was left open.
‘British Atlantic? The name doesn’t really grab me,’ said Branson. Fields replied that it was the best name he could think of, but that if Branson could come up with something better he would be happy to consider it.
A few days later, an excited Branson called back with the news that he had just had a brainwave.
‘How about Virgin Airways?’ he asked.
Fields was no fool. He realized immediately that whatever their shareholding agreement said, it would be difficult to maintain the independence of the airline from the rest of the Virgin Group in the eyes of the outside world if it shared the same name. But Branson was not to be put off. In the end, they ‘compromised’ on Virgin Atlantic Airways. It was only later that they discovered that Branson’s original suggestion would have inadvertently made use of the name of a small Caribbean airline based in the British Virgin Islands. It was only by later paying off the aggrieved Caribbean carrier with tickets across the Atlantic that Branson was able to prevent the other Virgin airline from taking legal action against it.
Once
