LOSING MY VIRGINITY

RICHARD BRANSON

This paperback edition published in Great Britain in 2000 by Virgin
Publishing Ltd Thames Wharf Studios Rainville Road London W6 9HA

First Virgin hardback edition published in Great Britain in 1998 First
paperback edition published in 1999

Reprinted 2000

Copyright Richard Branson 1998

The right of Richard Branson to be identified as the author of this
work has been asserted by him in accordance with the Copyright, Designs
and Patents Act, 1988.

This book is sold subject to the condition that it shall not, by way of
trade or otherwise, be lent, resold, hired out or otherwise circulated
without the publisher's prior written consent in any form of binding or
cover other than that in which it is published and without a similar
condition including this condition being imposed upon the subsequent
purchaser.

A catalogue record for this book is available from the British
Library.

ISBN 0 7535 0456 1

Designed by Roger Kohn Cover design by Button Design Company Picture
sections designed by SlatterAnderson Typeset by TW Typesetting,
Plymouth, Devon Printed and bound in Great Britain by Mackays of
Chatham pic

Dedicated to Alex Ritchie and his family

A special thank-you to Edward Whitley for helping me pull this project
together.

Edward spent two years in my company, practically lived in my house,
waded through 25 years of scribbled notebooks and helped bring them to
life.

Prologue

"Screw it.  Let's do it."

Tuesday 7 January 1997, Morocco

5.30 a.m.

I woke before Joan and sat up in bed.  From across Marrakech I heard
the wavering cry of the muezzins calling people to prayer over the
loudspeakers.  I still hadn't written to Holly and Sam, so I tore a
page out of my notebook and wrote them a letter in case I didn't
return.

Dear Holly and Sam,

Life can seem rather unreal at times.  Alive and well and loving one
day.  No longer there the next.

As you both know I always had an urge to live life to its full.  That
meant I was lucky enough to live the life of many people during my 46
years.  I loved every minute of it and I especially loved every second
of my time with both of you and Mum.

I know that many people thought us foolish for embarking on this latest
adventure.  I was convinced they were wrong.  I felt that everything we
had learnt from our Atlantic and Pacific adventures would mean that
we'd have a safe flight.  I thought that the risks were acceptable
Obviously I've been proved wrong.

However, I regret nothing about my life except not being with Joan to
finally help you grow up.  By the ages of twelve and fifteen your
characters have already developed.  We're both so proud of you.  Joan
and I couldn't have had two more delightful kids.

You are both kind, considerate, full of life (even witty!).  What more
could we both want?

Be strong.  I know it won't be easy.  But we've had a wonderful life
together and you'll never forget all the good times we've had.

Live life to its full yourselves.  Enjoy every minute of it.  Love and
look after Mum as if she's both of us.

I love you, Dad

I folded the letter into a small square and put it in my pocket.  Fully
clothed and ready, I lay down beside Joan and hugged her.  While I felt
wide awake and nervous, she felt warm and sleepy in my arms.  Holly and
Sam came into our room and cuddled into bed between us.

Then Sam slipped off with his cousins to go to the launch site and see
the balloon in which I hoped shortly to fly round the world.  Joan and
Holly stayed with me while I spoke to Martin, the meteorologist.  The
flight, he said, was definitely on -we had the best weather conditions
for five years.  I then called Tim Evans, our doctor.  He had just been
with Rory McCarthy, our third pilot, and had bad news: Rory couldn't
fly.  He had mild pneumonia, and if he was in a capsule for three weeks
it could get much worse.  I immediately called up Rory and commiserated
with him.

"See you in the dining room," I said.

"Let's have breakfast."

6.20 a.m.

By the time Rory and I met in the hotel dining room, it was deserted.
The journalists who had been following the preparations for the launch
over the previous 24 hours had already left for the launch site.

Rory and I met and hugged each other.  We both cried.  As well as
becoming a close friend as our third pilot on the balloon flight, Rory
and I had been joining forces recently on a number of business deals.
Just before we had come out to Morocco, he had bought a share in our
new record label, V2, and had invested in Virgin Clothes and Virgin
Vie, our new cosmetics company.

"I can't believe I'm letting you down," Rory said.

"I'm never ill -never, ever."

"Don't worry," I assured him.

"It happens.  We've got Alex, who weighs half what you do.  We'll fly
far further with him on board."

"Seriously, if you don't come back," Rory said, "I'll carry on where
you left off."

"Well, thanks!"  I said, laughing nervously.

Alex Ritchie was already out at the launch site supervising the mad
dash to get the capsule ready with Per Lindstrand, the veteran hot-air
balloonist who had introduced me to the sport.  Alex was the brilliant
engineer who had designed the capsule.  Until then, nobody had
succeeded in building a system that sustained balloon flights at
jet-stream levels.  Although it was he who had built both our Atlantic
and Pacific capsules, I didn't know him well, and it was too late to
find out much about him now.  Despite having no flight training, Alex
had bravely made the decision to come with us.  If all went well with
the flight, we'd have about three weeks to get to know each other.
About as intimately as any of us would want.

Unlike my crossings with Per of the Pacific and Atlantic oceans by
hot-air balloon, on this trip we would not heat air until we needed to:
the balloon had an inner core of helium which would take us up.  Per's
plan was to heat the air around that core during the night, which in
turn would heat the helium, which would otherwise contract, grow heavy
and sink.

Joan, Holly and I held hands and the three of us embraced.  It was time
to go.

8.30 a.m.

We all saw it at the same time.  As we drove along the dirt road out to
the Moroccan air base, it looked as if a new mosque had sprouted
overnight.  Above the bending, dusty palm trees, a stunning white orb
rose up like a mother-of-pearl dome.  It was the balloon.  Men on
horseback galloped along the side of the road, guns slung over their
shoulders, heading for the air base.  Everyone was drawn to this huge,
gleaming white balloon hanging in the air, tall and slender.

9.15 a.m.

The balloon was cordoned off, and round the perimeter railing was an
amazing collection of people.  The entire complement of the air base
stood off to one side in serried ranks, dressed in smart navy-blue
uniforms.  In front of them was the traditional Moroccan collection of
dancing women in white shawls, hollering, wailing and whooping.

Then a group of horsemen dressed in Berber costume and brandishing
antique muskets galloped into view and lined up in front of the
balloon.  For an awful moment, I thought they would fire a celebratory
salvo and puncture the balloon.  Per, Alex and I gathered in the
capsule and did a final check of all the systems.  The sun was rising
rapidly and the helium was beginning to expand.

10.15 a.m.

We had done all the checks, and were ready to go.  I hugged Joan, Holly
and Sam one last time.  I was amazed at Joan's strength.  Holly had
been by my side for the last four days, and she too appeared to be
totally in control of the situation.  I thought that Sam was as well,
but then he burst into tears and pulled me towards him, refusing to let
go.  I almost started crying with him.

I will never forget the anguished strength of his hug.

Then he kissed me, let go and hugged Joan.  I ran across to kiss Mum
and Dad goodbye.  Mum pressed a letter into my hand.

"Open it after six days," she said.  I silently hoped we would last
that long.

10.50 a.m.

There was nothing left to do except climb up the steel steps into the
capsule.  For a second I hesitated and wondered when and where I would
put my feet back on solid ground -or water.  There was no time to think
ahead.  I stepped in through the hatch.  Per was by the main controls;
I sat by the camera equipment and Alex sat in the seat by the trap
door.

11.19 a.m.

Ten, nine, eight, seven, six, five .. . Per counted down and I
concentrated on working the cameras.  My hand kept darting down to
check my parachute buckle.  I tried not to think about the huge balloon
above us, and the six vast fuel tanks strapped round our capsule. Four,
three, two, one ... and Per threw the lever which fired the bolts which
severed the anchor cables and we lifted silently and swiftly into the
sky.  There was no roar of the burners: our ascent was like that of a
child's party balloon.  We just rose up, up and away and then, as we
caught the morning breeze, we headed over Marrakech.

The emergency door was still open as we soared up, and we waved down at
the, by now, little people.  Every detail of Marrakech, its square
pink walls, the large town square, the green courtyards and fountains
hidden behind high walls, was laid out below us.  By 10,000 feet it
became cold and the air grew thin.  We shut the trap door.  From now on
we were on our own.  We were pressurised, and the pressure would
mount.

Our first fax came through the machine just after midday.

"Oh God!"  Per handed it over.

"Look at this."

"Please be aware that the connectors on the fuel tanks are locked on,"
I read.

This was our first mistake.  The connectors should have been locked off
so that, if we got into trouble and started falling, we could jettison
a one-ton fuel tank by way of ballast.

"If that's our only mistake, we're not doing badly," I said, in an
attempt to cheer Per up.

"We need to get down to 5,000 feet and then I'll climb out and unlock
them," Alex said.

"It's not a problem."

It was impossible to lose height during the day because the sun was
heating the helium.  The only immediate solution was to release helium,
which, once released, would be impossible to regain.  We couldn't
afford to lose any helium.  So we agreed to wait for nightfall to bring
the balloon down.  It was a nagging worry.  We didn't know how this
balloon would fly at night, and with our fuel tanks locked on our
ability to escape trouble was limited.

Although Alex and I tried to brush off the problem of the locked
canisters, it sent Per into a fierce depression.

He sat slumped by the controls in a furious silence, speaking only when
we asked him a direct question.

We flew serenely for the rest of the day.  The views over the Atlas
Mountains were exhilarating, their jagged peaks capped with snow
gleaming up at us in the glorious sunshine.  The capsule was cramped,
full of supplies to last us eighteen days.  It emerged that failing to
lock off the connectors was not the only thing we'd forgotten.  We'd
also neglected to pack any lavatory paper, so we had to wait to receive
faxes before we could go down the tiny spiral staircase to the loo. And
my Moroccan stomach was in need of a lot of faxes.  Per maintained his
glowering silence, but Alex and I were just grateful that we knew about
the canisters then rather than finding out the hard way.

As we approached the Algerian border we had a second shock when the
Algerians informed us that we were heading straight for B6char, their
top military base.  They told us that we could not fly over it: "You
are not, repeat not, authorised to enter this area," said the fax.

We had no choice.

I spent about two hours on the satellite phone to Mike Kendrick, our
flight controller, and tried various British ministers.  Eventually
Andre Azoulay, the Moroccan minister who had ironed out all our
problems for the launch in Morocco, came to the rescue again.  He
explained to the Algerians that we could not change our direction and
that we did not have powerful cameras on board.  They accepted this,
and relented.

As the good news came through, I scribbled down notes in my logbook. As
I turned over another page, there was a handwritten note from Sam, in
thick black ink and Sellotaped to the page: "To Dad, I hope you have a
great time.  Safe journey.  Lots and lots of love, your son Sam."  I
recalled that he'd slipped into the capsule without me the previous
night, and now I knew why.

By 5 p.m. we were still flying at 30,000 feet.  Per started firing the
burners to heat the air inside the envelope.  Although we burnt for an
hour, just after 6 p.m. the balloon started losing height steadily.

"Something's wrong with the theory here."  Per said.

"What's the matter?"  I asked.

"I don't know."

Per was firing the burners continuously, but the balloon was still
heading down.  We lost 1,000 feet, and then another 500 feet.  It was
getting colder all the time as the sun disappeared.  It was clear that
the helium was rapidly contracting, becoming a dead weight on top of
us.

"We've got to dump ballast," Per said.  He was frightened.  We all
were.

We pulled levers to dump the lead weights which were on the bottom of
the capsule.  These were meant to be held in reserve for about two
weeks.  They fell away from the capsule and I saw them on my video
screen dropping like bombs.  I had a horrible feeling that this was
just the start of a disaster.  The capsule was bigger than the Atlantic
and Pacific ones, but it was still a metal box hanging off a giant
balloon, at the mercy of the winds and weather.

It was now getting dark.  Without the lead weights, we steadied for a
while, but then the balloon started falling once more.  This time the
fall was faster.  We dropped 2,000 feet in one minute; 2,000 feet the
next.  My ears went numb and then popped, and I felt my stomach rising
up, pressing against my ribcage.  We were at only 15,000 feet.  I tried
to stay calm, focusing intently on the cameras and the altimeter,
rapidly going through the options available.  We needed to jettison the
fuel tanks.  But, as soon as we did so, the trip was over.  I bit my
lip.  We were somewhere over the Atlas Mountains in darkness, and we
were heading for a horrible crash-landing.  None of us spoke.  I made
some rapid calculations.

"At this rate of fall we've got seven minutes."  I said.

"OK," Per said.

"Open the hatch.  Depressurise."

We opened the trap door at 12,000 feet, dropping to 11,000 feet, and
with a breathtaking rush of freezing air the capsule depressurised.
Alex and I started throwing everything overboard: food, water, oil
cans, anything that wasn't built into the capsule.  Everything.  Even a
wodge of dollars.  For five minutes, this stalled our fall.

There was no question of continuing.  We just had to save our lives.

"It's not enough," I said, seeing the altimeter drop to 9,000 feet.

"We're still falling."

"OK, I'm going out on the roof," Alex said.

"The fuel tanks have got to go."

Since Alex practically built the capsule, he knew exactly how to undo
the locks.  In the panic I realised that, if Rory had been on board
instead, we'd have been stuck.  We would have had no choice but to
parachute.

Right now we'd be tumbling out into the night over the Atlas Mountains.
The burners roared overhead, casting a fierce orange light over us.

"Have you parachuted before?"  I shouted at Alex.

"Never," he said.

"That's your ripcord," I said, pushing his hand to it.

"It's 7,000 feet and falling," Per called out.  '6,600 feet now."

Alex climbed through the hatch, on to the top of the capsule.  It was
difficult to feel how fast we were dropping.  My ears had now blocked.
If the locks were frozen and Alex wasn't able to free the fuel cans,
we'd have to jump.  We had only a few minutes left.  I looked up at the
hatch and rehearsed what we would have to do: one hand to the rim, step
out, and jump into the darkness.  My hand instinctively felt for my
parachute.

I checked to see that Per was wearing his.  Per was watching the
altimeter.  The numbers were falling fast.

We had only 6,000 feet to play with and it was dark -no, 5,500 feet.
If Alex was up there for another minute, we'd have 3,500 feet.  I stood
with my head through the hatch, paying out the strap and watching Alex
as he worked his way round the top of the capsule.

It was pitch-dark below us and freezing cold.  We couldn't see the
ground.  The phone and fax were ringing incessantly.  Ground control
must have been wondering what the hell we were doing.

"One's off," Alex shouted through the hatch.

'3,700 feet," Per said.

"Another one," Alex said.

'3,400 feet."

"Another one."

'2,900 feet, 2,400."

It was too late to bale out.  By the time we'd jumped, we'd be smashing
into the mountains rushing up to meet us.

"Get back in," Per yelled.

"Now."

Alex fell back through the hatch.

We braced ourselves.  Per threw the lever to disconnect a fuel tank. If
this bolt failed, we'd be dead in about sixty seconds.  The tank
dropped away and the balloon jerked to an abrupt halt.  It felt like an
elevator hitting the ground.

We were flattened into our seats, my head crammed down into my
shoulders.  Then the balloon began to rise.

We watched the altimeter: 2,600, 2,700, 2,800 feet.  We were safe.  In
ten minutes we were up past 3,000 feet and the balloon was heading back
into the night sky.

I knelt on the floor beside Alex and hugged him.

"Thank God you're with us," I said.

"We'd be dead without you."

They say that a dying man reviews his life in the final seconds before
his death.  In my case this was not true.  As we hurtled down towards
becoming a fireball on the Atlas Mountains and I thought that we were
going to die, all I could think of was that, if I escaped with my life,
I would never do this again.  As we rose up towards safety, Alex told
us a story of a rich man who set out to swim the Channel: he went down
to the beach, set up his deck chair and a table laid with cucumber
sandwiches and strawberries, and then announced that his man would now
swim the Channel for him.  At that moment, it didn't sound like such a
bad idea.

Throughout that first night, we fought to keep control of the balloon.
At one point it started a continuous ascent, rising for no apparent
reason.  We finally realised that one of the remaining fuel tanks had
sprung a leak: we had been unwittingly jettisoning fuel.

As dawn approached, we made preparations to land.

Below was the Algerian desert, an inhospitable place at the best of
times, more so in a country in the middle of a civil war.

The desert was not the yellow sandy sweep of soft dunes which you
expect from watching Lawrence of Arabia.  The bare earth was red and
rocky, as barren as the surface of Mars, the rocks standing upright
like vast termites' nests.  Alex and I sat up on the roof of the
capsule, marvelling at the dawn as it broke over the desert.  We were
aware this was a day that we might not have survived to see.  The
rising sun and the growing warmth of the day seemed infinitely
precious.  Watching the balloon's shadow slip across the desert floor,
it was hard to believe it was the same contraption that had plummeted
towards the Atlas Mountains in the middle of the night.

The still-attached fuel tanks were blocking Per's view, so Alex talked
him in to land.  As we neared the ground Alex shouted out:

"Power line ahead!"

Per shouted back that we were in the middle of the Sahara and there
couldn't possibly be a power line.

"You must be seeing a mirage," he bawled.

Alex insisted that he come up and see for himself: we had managed to
find the only power line in the Sahara.

Despite the vast barren desert all around us, within minutes of our
landing there were signs of life.  A group of Berber tribesmen
materialised from the rocks.  At first they kept their distance.  We
were about to offer them some water and the few remaining supplies,
when we heard the clattering roar of gunship helicopters.  They must
have tracked us on their radar.  As quickly as they had appeared, the
Berber vanished.  Two helicopters landed close by, throwing up clouds
of dust, and soon we were surrounded by impassive soldiers holding
machine guns, apparently unsure where to point them.

"Allah," I said, encouragingly.

For a moment they stood still, but their curiosity got the better of
them and they came forward.  We showed their officer around the
capsule, and he marvelled at the remaining fuel tanks.

As we stood outside the capsule, I wondered what these Algerian
soldiers thought of it.  I looked back, and saw it for a moment through
their eyes.  The remaining fuel tanks were painted like vast cans of
Virgin Cola and Virgin Energy in bright red and yellow.  Among the many
slogans on the side of the capsule were ones for Virgin Atlantic,
Virgin Direct, Virgin Territory and Virgin Cola.  It was probably lucky
for us that the devoutly Muslim soldiers could not understand the
writing round the top of the Virgin Energy can: despite

WHAT YOU MAY HAVE HEARD THERE IS ABSOLUTELY NO EVIDENCE

THAT VIRGIN ENERGY IS AN APHRODISIAC.

As I looked at the capsule standing in the red sand, and relived the
harrowing drop towards the Atlas Mountains, I renewed my vow that I
would never attempt this again.  In perfect contradiction to this, at
the back of my mind I also knew that, as soon as I was home and had
talked to the other balloonists who were trying to fly round the world,
I would agree to have one last go.

It's an irresistible challenge and it's now buried too deeply inside
for me to give up.

The two questions I am most often asked are, Why do you risk your neck
ballooning?  and, Where is the Virgin Group going?  In some ways the
sight of the ballooning capsule standing in the middle of the Algerian
desert, with its cluster of Virgin names plastered over it, summed up
these prime questions.

I knew that I would attempt another balloon flight because it's one of
the few great challenges left.  As soon as I've banished the terrors of
each actual flight, I once again feel confident that we can learn from
our mistakes and achieve the next one safely.

The wider question of where the Virgin Group will end up is impossible
to answer.  Rather than be too academic about it all, which is not the
way I think, I have written this book to demonstrate how we made Virgin
what it is today.  If you read carefully between the lines you will, I
hope, understand what our vision for the Virgin Group is, and you will
see where I am going.  Some people say that my vision for Virgin breaks
all the rules and is too wildly kaleidoscopic; others say that Virgin
is set to become one of the leading brand names of the next century;
others analyse it down to

Since I wrote this, Breitling Orbiter 3 have successfully completed
their nonstop circumnavigation of the globe.  But there is still the
challenge of a solo flight and the important altitude record.  So who
knows -I may yet be stepping inside a record-breaking balloon again.

the last degree and then write academic papers on it.  As for me, I
just pick up the phone and get on with it.  Both the series of balloon
flights and the numerous Virgin companies I have set up form a seamless
series of challenges which I can date from my childhood.

This book is volume one of my autobiography.  It covers the first 43
years of my life.  Having come so close to dying over the Atlas
Mountains, I thought that I should write this book now in case my
guardian angel deserts me on our next attempt.  Rather like the balloon
flight, the first 43 years of my life and my business career were all
about survival.  This volume ends in January 1993the year after I was
forced to sell Virgin Music, which was the low point of my business
life -when

Virgin Atlantic had its extraordinary victory over British Airways.
This was the turning point for Virgin.  Against the odds, I had
survived for 43 years; for the first time in my life I had money at my
disposal; we had lots of dreams we wanted to fulfill and I was free to
see what we could create at Virgin.  How we set about putting these
dreams into practice will be the material for the next book.  This book
is about how we managed to cling on by our fingernails and survive to
get to that point.

When I was searching for titles, David Tait, who runs the American side
of Virgin Atlantic, suggested that I call it Virgin: The Art of
Business Strategy and Competitive Analysis "Not bad," I told him, 'but
I'm not sure it's catchy enough."

"Of course," he said, 'the subtitle would be Oh Screw It, Let's Do
It."

"A family that would have killed for each other."

1950-1963

My childhood is something of a blur to me now, but there are several
episodes that stand out.  I do remember that my parents continually set
us challenges.  My mother was determined to make us independent.  When
I was four years old, she stopped the car a few miles from our house
and made me find my own way home across the fields.  I got hopelessly
lost.  My youngest sister Vanessa's earliest memory is being woken up
in the dark one January morning because Mum had decided I should cycle
to Bournemouth that day.  Mum packed some sandwiches and an apple and
told me to find some water along the way.

Bournemouth was fifty miles away from our home in Shamley Green,
Surrey.  I was under twelve, but Mum thought that it would teach me the
importance of stamina and a sense of direction.  I remember setting off
in the dark, and I have a vague recollection of staying the night with
a relative.  I have no idea how I found their house, or how I got back
to Shamley Green the next day, but I do remember finally walking into
the kitchen like a conquering hero, feeling tremendously proud of my
marathon bike ride and expecting a huge welcome.

"Well done, Ricky."  Mum greeted me in the kitchen, where she was
chopping onions.

"Was that fun?  Now, could you run along to the vicar's?  He's got some
logs he wants chopping and I told him that you'd be back any minute."

Our challenges tended to be physical rather than academic, and soon we
were setting them for ourselves.

I have an early memory of learning how to swim.  I was either four or
five, and we had been on holiday in Devon with Dad's sisters, Auntie
Joyce and Aunt Wendy, and Wendy's husband, Uncle Joe.  I was
particularly fond of Auntie Joyce, and at the beginning of the holiday
she had bet me ten shillings that I couldn't learn to swim by the end
of the fortnight.  I spent hours in the sea trying to swim against the
freezing-cold waves, but by the last day I still couldn't do it.  I
just splashed along with one foot hopping on the bottom.  I'd lunge
forward and crash beneath the waves before spluttering up to the
surface trying not to swallow the seawater.

"Never mind, Ricky," Auntie Joyce said.

"There's always next year."

But I was determined not to wait that long.  Auntie Joyce had made me a
bet, and I doubted that she would remember it the next year.  On our
last day we got up early, packed the cars and set out on the
twelve-hour journey home.  The roads were narrow; the cars were slow;
and it was a hot day.  Everyone wanted to get home.  As we drove along
I saw a river.

"Daddy, can you stop the car, please?"  I said.

This river was my last chance: I was sure that I could swim and win
Auntie Joyce's ten shillings.

"Please stop!"  I shouted.

Dad looked in the rear-view mirror, slowed down and pulled up on the
grass verge.

"What's the matter?"  Aunt Wendy asked as we all piled out of the
car.

"Ricky's seen the river down there," Mum said.

"He wants to have a final go at swimming."

"Don't we want to get on and get home?"  Aunt Wendy complained.

"It's such a long drive."

"Come on, Wendy.  Let's give the lad a chance."

Auntie Joyce said.

"After all, it's my ten shillings."

I pulled off my clothes and ran down to the riverbank in my underpants.
I didn't dare stop in case anyone changed their mind.  By the time I
reached the water's edge I was rather frightened.  Out in the middle of
the river, the water was flowing fast with a stream of bubbles dancing
over the boulders.  I found a part of the bank that had been trodden
down by some cows, and waded out into the current.  The mud squeezed up
between my toes.  I looked back.  Uncle Joe and Aunt Wendy and Auntie
Joyce, my parents and sister Lindi stood watching me, the ladies in
floral dresses, the men in sports jackets and ties.  Dad was lighting
his pipe and looking utterly unconcerned; Mum was smiling her usual
encouragement.

I braced myself and jumped forward against the current, but I
immediately felt myself sinking, my legs slicing uselessly through the
water.  The current pushed me around, tore at my underpants and dragged
me downstream.  I couldn't breathe and I swallowed water.

I tried to reach up to the surface, but had nothing to push against.  I
kicked and writhed around but it was no help.

Then my foot found a stone and I pushed up hard.  I came back above the
surface and took a deep breath.

The breath steadied me, and I relaxed.  I had to win that ten
shillings.

I kicked slowly, spread my arms, and found myself swimming across the
surface.  I was still bobbing up and down, but I suddenly felt
released: I could swim.  I didn't care that the river was pulling me
downstream.  I swam triumphantly out into the middle of the current.
Above the roar and bubble of the water I heard my family clapping and
cheering.  As I swam in a lopsided circle and came back to the
riverbank some fifty yards below them, I saw Auntie Joyce fish in her
huge black handbag for her purse.  I crawled up out of the water,
brushed through a patch of stinging nettles and ran up the bank.  I may
have been cold, muddy and stung by the nettles, but I could swim.

"Here you are, Ricky," Auntie Joyce said.

"Well done."

I looked at the ten-shilling note in my hand.  It was large, brown and
crisp.  I had never held that amount of money before: it seemed a
fortune.

"All right, everyone," Dad said.

"On we go."

It was then that I realised he too was dripping wet.

He had lost his nerve and dived in after me.  He gave me a massive
hug.

I cannot remember a moment in my life when I have not felt the love of
my family.  We were a family that would have killed for each other -and
we still are.  My parents adored each other, and in my childhood there
was barely a cross word between them.  Eve, my mother, was always full
of life and galvanised us.  Ted, my father, was a rather quieter figure
who smoked his pipe and enjoyed his newspaper, but both my parents had
a love of adventure.  Ted had wanted to be an archaeologist, but his
father, a High Court judge, wanted him to follow Branson tradition and
enter the law.  Three generations of Bransons had been lawyers.  When
Ted was at school, my grandfather engaged a careers officer to talk to
him and discuss possible careers.  When it emerged that Ted wanted to
be an archaeologist, my grandfather refused to pay the careers
officer's bill on the grounds that he hadn't done his job properly.  So
Ted reluctantly went up to Cambridge to read law, and continued as a
hobby to build up his collection of ancient artefacts and fossils which
he called his 'museum'.

When the Second World War broke out in 1939, Ted volunteered for the
Staffordshire Yeomanry, a cavalry regiment organised around the Inns of
Court.  His regiment fought in Palestine and Ted fought in the Battle
of El Alamein in September 1942, and subsequent battles in the Libyan
desert.  He was then involved in the invasion of Italy and fought at
Salerno and Anzio.  Before Ted went to war, he devised a code to let my
grandparents know where he was: they agreed that, in letters home, the
cellar would be the world and certain drawers in the cupboards would
represent certain countries.  Ted would write and ask his mother to
pull out his old riding gloves from the top left-hand shelf of the
right-hand cupboard, which had been designated Palestine
-unsurprisingly, the censors never picked this up and my grandparents
could tell where he was.

When Ted joined up, his uncle, Jim Branson, had already become quite
notorious in the army because he advocated eating grass.  Great-uncle
Jim had owned an estate in Hampshire which he had finally split up
among the tenants and then gone to live in Balham, which in 1939 was a
distant suburb of London.  He was obsessed with eating grass, and
Picture Post ram.  a story with a picture of him in his bathroom in
Balham, where he grew tubs of grass which he made into hay.

Whenever Jim was invited out to eat -which was increasingly often as he
became a celebrity -he brought his nosebag with him and ate grass.  In
the army, everyone mocked my dad: "You must be Jim Branson's son! Here,
have some grass!  You're a sprightly looking colt.  When are they going
to geld you?"  and so on.

Ted hotly denied any involvement with Uncle Jim.  However, as the war
progressed, David Stirling set up the Special Air Service, a crack
regiment designed to operate behind enemy lines.  The SAS had to travel
light, and soon it became known that Jim Branson was advising David
Stirling and his elite troops on how to live off grass and nuts.

From then on, whenever Ted was asked, "Branson?

Are you anything to do with Jim Branson?"  he puffed out his chest with
pride: "Yes, actually he's my uncle.

Fascinating what he's doing with the SAS, isn't it?"

Ted actually enjoyed the five years away from home, and found it quite
difficult to knuckle down to the law again when he returned to
Cambridge.  A few years later, as a young barrister, he arrived rather
late at a cocktail party where he was greeted by a beautiful blonde
girl called Eve who swooped across the room towards him, picked up a
tray of honeyed sausages, and said, "The way to a man's heart is
through his stomach.

Here, have some of these!"

Eve Huntley-Flindt had picked up some of her dazzling energy from her
mother Dorothy, who holds two British records: aged 89 Granny became
the oldest person in Britain to pass the advanced Latin-American
ballroom-dancing examination, and aged 90 she became the oldest person
to hit a hole in one at golf.

Granny was 99 when she died.  Shortly before that, she had written to
me to say that the previous ten years had been the best of her life.
That same year, on her way round the world on a cruise ship, she had
been left behind in Jamaica with only her swimming costume on.

She had even read A Brief History of Time (something which I've never
been able to manage!).  She never stopped learning.  Her attitude was,
you've got one go in life, so make the most of it.

Mum had inherited Granny's love of sports and dancing, and aged twelve
she appeared in a West End revue written by Marie Stopes, who later
became famous for her work with women's health education.

Some time later Mum was almost obliged to strip for another stage job:
dancing for The Cochran Show at Her Majesty's Theatre in the West End.
Sir Charles Cochran's shows were notorious for having the most gorgeous
girls in town, and they took their clothes off.

It was wartime and work was scarce.  Eve decided to take the job on the
grounds that it was all a lot of harmless fun.  Predictably, my
grandfather violently objected and told her that he'd come storming up
to Her Majesty's and pull her out of the show.  Eve relayed this to Sir
Charles Cochran, who allowed her to dance without stripping.  Then, as
now, she was able to get away with pretty much anything.

Eve started looking for other, daytime, work, and went out to Heston
where a gliding club taught RAF recruits to glide before they became
pilots.  She asked for a job as a pilot, but was told that these jobs
were available only to men.  Undeterred, she chatted up one of the
instructors, who relented and secretly gave her the job so long as she
pretended to be a boy.  So, wearing a leather jacket, a leather helmet
to hide her hair, and adopting a deep voice, Eve learnt how to glide
and then began to teach the new pilots.  In the last year of the war
she joined the Wrens as a signaller and was posted to the Black Isle in
Scotland.

After the war Eve became an air hostess, at the time a most glamorous
job.  The qualifications were challenging:

you had to be very pretty and unmarried, aged between 23 and 27, speak
Spanish, and be trained as a nurse.  Undaunted that she couldn't speak
Spanish and wasn't a nurse, Mum chatted up the night porter at the
recruitment centre and found herself on the training course to be a
hostess with British South American Airways, BSAA.  BSAA operated two
kinds of plane between London and South America: Lancasters, which
carried 13 passengers; and Yorks, which carried 21.

They had wonderful names, Star Stream and Star Dale, and the air
hostesses were known as Star Girls.  When the plane taxied down the
runway, Mum's first job was to offer round chewing gum, barley sugar,
cotton wool and Penguin paperbacks, and explain to the passengers that
they had to blow their noses before taking off and landing.

The cabins were not pressurised, and the flights were marathons: five
hours to Lisbon, eight hours to Dakar, and then fourteen hours across
to Buenos Aires.  For the Buenos Aires to Santiago leg the York
aircraft was exchanged for the more robust Lancaster, and everyone had
to wear oxygen masks over the Andes.  After she had been with BSAA for
a year, it was taken over by BOAC, British Overseas Airways
Corporation, and Eve began working on Tudor aircraft.  Star Tiger, the
first plane to leave for Bermuda, exploded in midair.  Her plane was
next and arrived safely.  But the plane after hers, Star Ariel,
vanished without trace in the Bermuda Triangle and all Tudor aircraft
were grounded.  It was later discovered that their fuselages were too
weak to withstand the recently installed pressurisation.

By this time Ted probably thought that, if he didn't marry Eve and so
disqualify her from being an air hostess, she would be likely to
disappear somewhere over the Atlantic.  He proposed to her as they
roared along on his motorbike, and she shouted, "Yes!"  at the top of
her voice so that the wind wouldn't blow the word away.  They were
married on 14 October 1949, and I was conceived on their honeymoon in
Majorca.

My parents always treated my two sisters, Lindi and Vanessa, and me as
equals whose opinions were just as valid as theirs.  When we were
young, before Vanessa's arrival, if my parents went out to dinner they
took me and Lindi with them lying on blankets in the back of the car.
We slept in the car while they had dinner, but we always woke up when
they started the drive back home.  Lindi and I kept quiet and looked up
at the night sky, listening to my parents talk and joke about their
evening.  We grew up talking as friends to our parents.

As children we discussed Dad's legal cases, and argued about
pornography and whether drugs should be legalised long before any of us
knew what we were really talking about.  My parents always encouraged
us to have our own opinions and rarely gave us advice unless we asked
for it.

We lived in a village called Shamley Green in Surrey.

Before Vanessa was born, Lindi and I grew up in Easteds, a cottage
covered with ivy which had tiny white windows and a white wicket gate
which led out on to the village green.  I was three years older than
Lindi, and nine years older than Vanessa.  My parents had very little
money during our childhood and, perhaps because Mum wasn't greatly
interested in cooking, or perhaps because she was saving money, I
remember eating a good deal of bread and dripping.

Even so, traditions were still upheld and we were not allowed to leave
the table until we had finished all our food.  We were also given
onions which grew in the garden.  I always hated them and used to hide
them in a drawer in the table.  This drawer was never cleaned out, and
when we moved house ten years later it was opened and my pile of
fossilised onions was discovered.

Food was not as important at meals as company.  The house was always
full of people.  In order to make ends meet, Mum invited German and
French students over to learn English in a typical English household,
and we had to entertain them.  Mum always had us working in the
garden, helping her prepare meals and then clearing up afterward.  When
I wanted to escape, I ran off across the village green to see my friend
Nik Powell.

At first the best thing about Nik was that his mother made amazing
custard, so after a meal spent stuffing onions into the table drawer I
would slip away to Nik's house, leaving the Germans trying to speak
English with my family laughing and helping them out.  If I timed it
right, which I made sure I did, pudding and custard were already on the
table.  Nik and I were best friends.  He was a quiet boy with straight
black hair and black eyes.  Soon we started doing everything
together:

climbing trees, riding bikes, shooting rabbits and hiding under Lindi's
bed to grab her ankle when she turned out the light.  I can't remember
a time when Nik and I weren't friends.

At home Mum had two obsessions: she always generated work for us, and
she was always thinking of ways to make money.  We never had a
television and I don't think my parents ever listened to the radio. Mum
worked in a shed in the garden, making wooden tissue boxes and
wastepaper bins which she sold to shops.  Her shed smelt of paints and
glue and was stacked with little piles of painted boxes ready to be
sent off.  Dad was inventive and very good with his hands, and he
designed special pressing vices which held the boxes together while
they were being glued.  Eventually Mum began supplying Harrods with her
tissue boxes, and it became a proper little cottage industry.  As with
everything she did, Mum worked in a whirlwind of energy which was
difficult to resist.

There was a great sense of teamwork within our family.  Whenever we
were within Mum's orbit we had to be busy.  If we tried to escape by
saying that we had something else to do, we were firmly told we were
selfish.  As a result we grew up with a clear priority of putting
other people first.  Once a boy came for the weekend whom I didn't
particularly take to.  During the church service on Sunday I slipped
out of our pew and went across the aisle to sit with Nik.  Mum was
furious.

When we got home she told Dad to beat me, and we duly went into his
study and closed the door.  Rather than towering over me in a rage, Dad
just smiled.

"Now make sure you cry convincingly," he said, and clapped his hands
together six times to make great smacking noises.

I ran out of the room, bawling loudly.  Mum adopted a severe look to
imply that this was in my best interests, and resolutely carried on
chopping onions in the kitchen -my portion of which was duly stuffed
into the table drawer during lunch.

Great-uncle Jim wasn't the only maverick in the family:

irreverence for authority ran on both sides.  I remember that we
acquired an old gypsy caravan which we kept in the garden, and
sometimes gypsies came by and rang the doorbell.  Mum always gave them
something silver and let them rummage around in the barn for anything
they needed.  One year we were all taken to the Surrey County Show at
Guildford.  It was thronging with gleaming show-jumpers and men in
tweed coats and bowler hats.  As we walked past one of the stalls Mum
saw a group of gypsy children in tears and we went over to see what was
the matter.  They were all crowded around a magpie which was tied to a
piece of string.

"The RSPCA has ordered us to bring the bird in to be put down.  They
say it's illegal to own wild birds," they said.

Even as they told us what was happening, we saw an RSPCA official
walking towards us.

"Don't worry," Mum said.

"I'll save it."

She picked up the bird and wrapped it in her coat.

Then we smuggled it out of the show ground past the officials.  The
gypsy children met us outside and they told us to keep the magpie since
they would only be stopped again.  Mum was delighted, and we drove it
home.

The magpie loved Mum.  It sat on her shoulder when she was in the
kitchen or working in her shed, and would then swoop out to the paddock
and tease the ponies by sitting on their backs.  It dive-bombed Dad if
he sat down to read The Times after lunch, flapping the pages so that
they scattered over the floor.

"Damned bird!"  Dad would roar, waving his arms at it to shoo it
away.

"Ted, get up and do something useful," Mum said.

"That bird's telling you to do some gardening.  And, Ricky and Lindi,
run along to the vicar and ask him if there's anything you can do to
help."

Apart from spending summer holidays with Dad's family at Salcombe in
Devon, we also went to Norfolk to stay with Mum's sister, Clare Hoare.
I decided that when I grew up I wanted to be like Aunt Clare.  She was
a close friend of Douglas Bader, the Second World War fighter ace who
had lost both his legs in a plane crash.

Aunt Clare and Douglas owned an old biplane which they flew together.
Sometimes Aunt Clare would parachute out of the plane for fun.  She
smoked about twenty small cigars a day.

When we stayed with her, we swam in the millpond at the bottom of her
garden.  Douglas Bader would unstrap his legs and haul himself into the
water.  I used to run off with these tin legs and hide them in the
rushes by the water's edge.  Douglas would then pull himself out of the
water and come lunging after me: his arms and shoulders were immensely
powerful and he could walk on his hands.  When he had been held a
prisoner of war in Colditz, after two failed escapes the Nazis had
confiscated his legs.

"You're as bad as the Nazis," he'd roar, swinging himself after me on
his hands like an orangutan.

Aunt Clare was as much of an entrepreneur as Mum.

She was obsessed with Welsh Mountain sheep, which were then an
endangered species, and she bought a few of these black sheep in order
to save them from extinction.  She eventually bred up a large flock and
managed to bring them off the endangered list.  She then set up a
business which she called The Black Sheep Marketing Company and started
selling pottery decorated with pictures of black sheep.  The mugs with
the nursery rhyme "Baa Baa Black Sheep' written round the side began to
sell rather well.  Soon Aunt Clare had all the old ladies in the
village knitting her black wool into shawls and sweaters.  She worked
very hard to build up Black Sheep as a trade name, and she succeeded:
forty years later it's still going strong.

Some years later, in the early days of Virgin Music, I received a call
from Aunt Clare: "Ricky, you won't believe this.  One of my sheep has
started singing."

Initially my mind reeled, but it was the sort of thing I had come to
expect from her.

"What does it sing?"  I asked, imagining a sheep singing, "Come on,
baby, light my fire."

'"Baa Baa Black Sheep" of course," she snapped at me.

"Now I want to make a recording.  The sheep probably won't do it in a
studio so can you send some sound engineers out here?  And they'd
better hurry since it could stop at any time ' That afternoon a bunch
of sound engineers headed up to Norfolk with a 24-track mobile studio
and recorded Aunt Clare's singing sheep.  They also amassed an entire
choir of sheep, ducks and hens for the chorus, and we released the
single "Baa Baa Black Sheep'.  It reached number four in the charts.

My friendship with Nik was based on affection but also on a strong
element of competition.  I was determined to do everything better than
he did.  One summer Nik was given a brand-new bike for his birthday. We
immediately decided to take it down to do the River Run, a game in
which you raced straight downhill, braked at the last moment and
skidded to a halt as close to the edge of the riverbank as possible.
This was a highly competitive game and I hated losing.

Since it was his bike, Nik went first.  He did a very creditable skid,
curving round so that the back wheel came to within a foot of the
water's edge.  Nik generally tried to spur me on to do even more
outlandish things, but this time he tried to stop me "You can't do
better than that skid," he said.

"Mine was perfect."

I thought otherwise.  I was determined to do a better skid than Nik.  I
took his bike up the hill and launched myself towards the river,
pedalling madly.  As I approached the bank it became apparent that I
was out of control and had no chance of stopping In a fast-moving blur
I caught sight of Nik's open mouth and horrified expression as I
hurtled past him.  I tried to brake, but it was too late I somersaulted
head over heels into the water, and the bike sank beneath me.  I was
swept downstream by the current, but finally managed to clamber back
ashore.  Nik was waiting for me, enraged.

"You've lost my bike!  That's my birthday present!"

He was so furious that he was sobbing with rage.  He pushed me back in
the water.

"You'd damn well better find it."  he shouted.

"I'll find it," I spluttered.

"It'll be OK.  I'll fish it out."

"You bloody well better had."

I spent the next two hours diving down to the bottom of the river and
groping around the mud and weeds and stones trying to find his new
bike.  I couldn't find it anywhere.  Nik sat on the bank, hugging his
knees up to his chin, glaring at me.  Nik was epileptic, and I'd been
with him on a couple of occasions in the past when he'd experienced
fits.  Now he was furious, and I hoped his anger would not spur another
one.  But eventually, when I was so cold that I could barely talk and
my hands were white, numb and bleeding from bashing into rocks on the
riverbed, Nik relented.

"Let's go home."  he said.

"You'll never find it."

We walked back home and I tried to cheer him up:

"We'll buy you another one," I promised him.

My parents must have groaned because the bike cost over 20, pounds
nearly a month's supply of tissue boxes.

When we were eight years old, Nik and I were separated when I was sent
away to board at Scaitcliffe Preparatory School in Windsor Great
Park.

On my first night at Scaitcliffe, I lay awake in my bed, listening to
the snorings and snuff lings of the other boys in the dormitory,
feeling utterly lonely, unhappy and frightened.  At some point in the
middle of that first night, I knew I was going to be sick.  The feeling
came on so fast that I didn't have time to get out of bed and run to
the bathroom; instead I vomited all over the bedclothes.  The matron
was called.  Instead of being Sympathetic, as my mother would have
been, she scolded me and made me clear it up myself.  I can still
remember the humiliation I felt.  Obviously, my parents thought they
were doing the right thing in sending me there, but at that moment I
could feel only confusion and resentment towards them, and a terrible
fear of what lay in store for me.  Within a couple of days, an older
boy in my dormitory had taken a liking to me and got me into his bed to
play fee lies  On my first weekend home I matter of factly told my
parents what had happened under the sheets.  My dad calmly said, "It's
best not to do that sort of thing," and that was the first and last
time such an incident happened.

My father had been sent to boarding school at the same age, and his
father before him.  It was the traditional way for a boy from my
background to be educated, to cultivate independence, self-reliance -to
teach someone to stand on their own two feet.  But I loathed being sent
away from home at such an early age, and have always vowed to myself
that I would never send my children to boarding school until they were
of an age to make up their own minds about it.

In my third week at Scaitcliffe I was summoned to the headmaster's
study and told that I had broken some rule; I think I had walked on to
a patch of hallowed grass to retrieve a football.  I had to bend down
and I was caned across my bottom six times.

"Branson," the headmaster intoned.

"Say, "Thank you, sir."

I couldn't believe my ears.  Thank him for what?

"Branson."  The headmaster lifted up his cane.

"I'm warning you."

"Thank you .. . sir."

"You're going to be trouble, Branson."

"Yes, sir.  I mean, no, sir."

I was trouble -and always in trouble.  Aged eight I still couldn't
read.  In fact, I was dyslexic and short-sighted.  Despite sitting at
the front of the class, I couldn't read the blackboard.  Only after a
couple of terms did anyone think to have my eyes tested.  Even when I
could see, the letters and numbers made no sense at all.  Dyslexia
wasn't deemed a problem in those days, or, put more accurately, it was
only a problem if you were dyslexic yourself.  Since nobody had ever
heard of dyslexia, being unable to read, write or spell just meant to
the rest of the class and the teachers that you were either stupid or
lazy.  And at prep school you were beaten for both.  I was soon being
beaten once or twice a week for doing poor classwork or confusing the
date of the Battle of Hastings.

My dyslexia was a problem throughout my school life.  Now, although my
spelling is still sometimes poor, I have managed to overcome the worst
of my difficulties through training myself to concentrate.

Perhaps my early problems with dyslexia made me more intuitive: when
someone sends me a written proposal, rather than dwelling on detailed
facts and figures I find that my imagination grasps and expands on what
I read.

However, my saving grace was outside the classroom:

I was good at sports.  It is difficult to overestimate how important
sport is at English public schools.  If you axe good at sports, you are
a school hero: the older boys won't bully you and the masters won't
mind you failing all your exams.  I was intensely keen to succeed at
sports, possibly because it was my only opportunity to excel.  I became
captain of the football, rugby and cricket teams.  Every sports day I
won a series of cups for sprinting and hurdling.  Just before my
eleventh birthday, in 1961, I won all the races.  I even decided to go
in for the long jump.  I had never done a good long jump before, but
this time I decided to just have a go.  I sprinted down the track, took
off from the wooden plank and soared through the air.  After I landed
in the sand the master came up to me and shook me by the hand: it was
a new Scaitcliffe School record.  That summer day I couldn't put a foot
wrong, and my parents and Lindi sat and clapped in the white marquee
afterward as I went up to collect every cup.  I won the Victor Ludorum.
Who cared if I couldn't spell?  Not me.

The next autumn term I was playing in a football match against another
local school.  I was running rings round the defender and had already
scored one goal.  I put my hand up and yelled for the ball, which was
booted up field and bounced over both of us.  I turned and sprinted
after it, controlled it and was bearing down on the goal when the
defender caught up with me and floored me with a sliding tackle.  My
leg was caught beneath him as he fell across me I heard a ghastly
scream and for a split second I thought that he was hurt until I
realised that it was me.  He rolled off me and I saw my knee twisted at
a horrible angle.  My parents had always told us to laugh when we were
in pain, so half laughing but mainly screaming I was carried off the
field to the school matron, who drove me to hospital.  My agony stopped
only after they gave me an injection.  I had badly torn the cartilage
in my right knee and they were going to have to operate.

I was given a general anaesthetic and fell unconscious.

I awoke to find myself out in the street was still in my hospital bed,
and a nurse was holding a drip above my head, but my bed, together with
several others, was parked outside.  I thought I was dreaming, but the
nurse explained that there had been a fire in the hospital during my
operation and all the patients had been evacuated on to the street
outside.

I went home for a few days to recover Lying in bed, I looked at my
silver cups on the mantelpiece.  The doctor told me that I would not
play sports again for a very long time "Don't worry, Ricky," my mother
said as she swept into the room after the doctor had gone.

"Just think of Douglas Bader.  He hasn't got any legs at all.  He's
playing golf and flying planes and everything.  You don't want to be
lying there in bed doing nothing all day, do you?"

The worst aspect of this injury was that it immediately showed up how
bad I was in the classroom. I was bottom in every subject and would
clearly not pass the Common Entrance exam.

I was sent to another school, a crammer on the Sussex coast called
Cliff View House.  It had no sports to distract boys from the grim and
usually hopeless task of preparing for Common Entrance.  If you
couldn't spell, or couldn't add up, or couldn't remember that the area
of a circle is "Pi' R squared, then the solution was simple: you were
beaten until you did.  I learnt my facts in the face of unflinching
discipline and with a black and blue backside.  I may have been
dyslexic, but I had no excuse.  I just couldn't get it right.  When I
gave the inevitable wrong answer it was either more lines or a beating.
I grew almost to prefer the beatings since at least they were quick.

There were no games apart from an early-morning run, and, as well as
for any faults in class, we were also beaten for almost anything else,
such as not making our beds properly, running when we should be
walking, talking when we should be quiet, or having dirty shoes.

There were so many possible things to do wrong that, although we learnt
most of them, we accepted that we would be beaten for some obscure
misdemeanour almost every single week.

My only consolation was the headmaster's eighteen-year-old daughter,
Charlotte.  She seemed to take a fancy to me and I was delighted that
I, out of all the boys, should have caught her attention.  We soon
established a routine of nocturnal visits.  Every night I would climb
out of my dormitory window and creep over to her bedroom in the
headmaster's house.  One night, as I climbed back through the window, I
was horrified to see one of my teachers watching my progress.

The next morning I was summoned to the headmaster's study.

"What were you doing, Branson?"  he asked.

The only answer I could think of was the worst one I could possibly
have given: "I was on my way back from your daughter's room, sir."

Not surprisingly, I was promptly expelled and my parents were told to
come and collect me the following day.

That evening, unable to think of any other way to escape the wrath of
my parents, I wrote a suicide note saying that I was unable to cope
with the shame of my expulsion.  I wrote on the envelope that it was
not to be opened until the following day but then gave it to a boy who
I knew was far too nosy not to open it immediately.

Very, very slowly, I left the building and walked through the school
grounds towards the cliffs.  When I saw a crowd of teachers and boys
beginning to run after me, I slowed down enough for them to catch me up
They managed to drag me back from the cliff and the expulsion was
overturned.

My parents were surprisingly relaxed about the whole episode.  My
father even seemed quite impressed that Charlotte was 'a very pretty
girl'.

2 "You will either go to prison or become a millionaire."

1963-1967

After the crammer had served its purpose by beating me into shape, I
moved to Stowe, a big public school in Buckinghamshire for over 800
boys.  There I faced a daunting prospect.  Fagging was still in place:
this was an archaic practice in which the younger boys were expected to
run errands and do minor chores for the older ones; in effect, to be
their servants.  Bullying was rife.  Your reputation -and ability to
avoid being picked on -was helped enormously by being able to score a
goal or hit a six.  But I couldn't play any games as my knee buckled
whenever I tried to run.  Since I was also unable to cope with the
academic work, I was very quickly sidelined.

Being out of the sports teams and bottom of the class was an unenviable
position.  It seemed as if all the challenges my parents had set me
were now irrelevant.

I found refuge in the library, where I went every afternoon and started
writing a novel.  I sat in the most wonderful splendour, surrounded by
leather bound books and two globes, overlooking the ornamental lake
into which the last head boy had dived and never surfaced.  I wrote the
most lurid sexual fantasies I could conjure up, amazing erotic stories
all about a young boy who couldn't play sports due to a knee injury,
but who was befriended and then gloriously and expertly seduced by the
young Scandinavian school matron.  In my mind's eye she used to creep
up behind him when he was working in the library ... But, sadly for
me, no matter what incredible sexual encounters I dreamt up, there
wasn't a girl, let alone a Scandinavian, within miles of Stowe, and
matron was sixty years old.

As I sat in the library panting at my own prose and scribbling faster
and faster, I became aware of another regular visitor to the library:
Jonathan Holland-Gems.

In comparison with most of the boys at Stowe, Jonny was extremely
worldly and sophisticated, widely read and staggeringly knowledgeable
about the arts.  He came from London, where his parents knew
journalists and writers: when Jonny read Private Eye he knew half the
people mentioned in it.  His mother was a successful playwright.  It
was through Jonny that my interest in the world of newspapers began to
grow, and I began to think that I would like to be a journalist.

Halfway through the term I read a school announcement about an essay
competition called the Junior Gavin Maxwell Prize which had been set up
by the author, an old boy from Stowe.  I momentarily put aside my
pulsating pornography and wrote a short story which won the prize.  The
complete absence of competition must have helped.

Gavin Maxwell, the author of Ring of Bright Water, came to present the
prize at Stowe.  He arrived with Gavin Young, the Observer's war
correspondent and later the author of Slow Boat to China.  After the
ceremony they drove back to Surrey and dropped me off at Shamley Green.
I stayed in touch with them.  They were very supportive of me, partly,
I think, because they fancied me.  But once they realised I wasn't that
way inclined they still remained good and helpful friends.  After
winning the prize, my English began to improve and I soared up the
class to third out of twenty-one.  I was still eighteenth in Latin, and
bottom in maths, physics and chemistry.

"He tries hard but has very great difficulty in understanding even the
simplest mathematical process and in retaining any new topic covered,"
read one end-of-term report.

One Easter holiday, I decided to follow my mother's example and make
some money.  Undeterred by the school's lack of faith in my ability
with numbers, I saw an opportunity to grow Christmas trees.  We had
just moved house from one side of Shamley Green to the other, from
Easteds Cottage to Tanyards Farm, which was a rambling building with
many barns and sheds and some land.  I went round to talk Nik into the
plan.  He was also on holiday from his school, which was at Ampleforth
in Yorkshire.  We would plant 400 Christmas trees in the field at
Tanyards Farm.  By the Christmas after next, they would have grown to
at least four feet and we would be able to sell them.  Nik and I agreed
to do the work together, and share the profits equally.

That Easter we furrowed the ground and planted the 400 seeds in the
field above Tanyards Farm.  We worked out that, if they all grew to six
feet, we would make 2 a tree, creating a grand total of 800, compared
with our initial investment of just 5 for the seeds.  In the following
summer holiday, we went to investigate the trees.  There were one or
two tiny sprigs above ground, but the rest had been eaten by rabbits.
We exacted dire revenge and shot and skinned a lot of rabbits.  We sold
them to the local butcher for a shilling each, but it wasn't quite the
800 we had planned.

The following Christmas Nik's brother was given a budgerigar as a
present.  This gave me the idea for another great business opportunity:
breeding budgies!

For a start, I reasoned, I could sell them all year round rather than
just during the fortnight before Christmas.  I worked out the prices
and made some calculations about how fast they could breed and how
cheap their food was, and persuaded my father to build a huge aviary.
In my last week at school I wrote to Dad and explained the financial
implications:

So few days now until the holidays.  Have you ordered any material we
might want for our giant budgerigar cage?  I thought our best bet to
get the budgerigars at reduced rate would be from Julian Carlyon.  I
feel that if the shops sold them for 30sh., he would get say 17sh.  and
we could buy them off him for 18 or 19sh.  which would give him a
profit and save us the odd 10sh.  per bird.  How about it?

My father reluctantly built the aviary and the birds bred rapidly.
However, I had overestimated the local demand for budgies.  Even after
everyone in Shamley Green had bought at least two, we were still left
with an aviary full of them One day at school I got a letter from my
mother breaking the bad news that the aviary had been invaded by rats
which had eaten the budgies.  It was only many years later that she
confessed she had been fed up with cleaning out the aviary so one day
had left the cage door open and they all escaped.  She didn't try too
hard to recapture them.

But, while neither of these schemes had the effect of making money,
they did teach me something about maths.  I found that it was only when
I was using real numbers to solve real problems that maths made any
sense to me.  If I was calculating how much a Christmas tree would
grow, or how many budgies would breed, the numbers then became real and
I enjoyed using them Inside the classroom I was still a complete dunce
at maths.  I once did an IQ test in which the questions just seemed
absurd.  I couldn't focus on any of the mathematical problems, and I
think that I scored about zero I worry about all the people who have
been classified as stupid by these kinds of tests.  Little do they know
that often these IQ.  tests have been dreamt up by academics who are
absolutely useless at dealing with the practicalities of the outside
world.  I loved doing real business plans -even if the rabbits did get
the better of me.

I think my parents must have instilled a rebellious streak in me.  I
have always thought rules were there to be broken, and Stowe had as
many rules and regulations as the army -many of them, it seemed to
Jonny Gems and me, completely anachronistic and pointless There was the
outmoded practice of fagging, for one thing Then there was the CCF
(Combined Cadet Force), in which boys dressed up as soldiers and
paraded around with antiquated rifles; and compulsory church attendance
on Sundays.  I managed to dodge the latter by skipping the first
service of the new term: my name was left off the register, and I was
never missed from then on.

During January and February 1966, Jonny and I began to talk about how
to change the school rules.  We were fifteen years old, but we believed
that we could make a difference My parents had brought me up to think
that we could all change the world, so when I looked at how Stowe was
run I felt sure that I could do it better.  Stowe was actually
reasonably liberal in encouraging boys of all ages to contribute to the
running of the school.

Jonny and I were particularly incensed by the rule that anyone who
wasn't playing games had to go and watch the school team when they were
playing another school.  Although we were able to go to the library
during weekday afternoons, we were still forced to watch the school
teams play most Saturdays.  I knew that if I hadn't been ruled out by
my weak knee I would be in the teams, so I felt doubly frustrated.  I
wrote to the headmaster:

I am against the utter waste of time that is spent in compulsory
watching of matches.  If one is unable to play for the First XI one
should be able to spend one's time in better ways than that.  I know
this sounds a frightful break against tradition etc."  but I feel very
strongly about this.  If 450-odd people watching matches spent that
time in Buckingham cleaning windows, for instance, they would gain at
least something more than 'watching others achieving something'.

I also tried to reorganise the system of school meals:

I feel that to improve Stowe one has first got to do it socially, even
before religiously.  There are many boys who are thirsting for
knowledge through interesting conversations.  One of the best times to
talk is at meals, but at Stowe this is practically impossible.  One
goes into hall, sits down at one's allotted table next to the same boys
every day.  A canteen must be constructed in one of the dining rooms.
Then boys could choose their own food; they would be free to sit down
where they wish; and they could put their forks and plates in a box
when they go out.  The food waste at the moment is fantastic, and with
a canteen system you could cut down on at least half the Italian and
Spanish waiters.

I would be very interested in your views on this, and any money saved
could possibly be put towards my next plan ... And I went on to
explore the idea of a sixth-form bar.

The headmaster suggested that I air my views in the school magazine,
but Jonny and I wanted to set up an alternative magazine with a fresh
attitude.  We wanted to campaign against fagging, corporal punishment,
and compulsory chapel, games and Latin.  All these ideas were far too
'revolutionary' to be aired in the school magazine, The Stoic, a name
which seemed only too apt to its long-suffering readers.  We then
thought about linking up with other schools that had similar rules.

Gradually the idea of an inter school magazine was hatched.  We would
link up with other schools and swap ideas.  I jotted down a few titles
in a school notebook: Today, 1966, Focus!"  Modern Britain, and
Interview.  Then I wrote out what I wanted to publish and did some more
sums in which, once again, I enjoyed thinking about the implications of
the maths:

I wrote out a list of 250 MPs whom I found in Who's Who, and a list of
possible advertisers whom I found by going through the telephone book.
I also wrote to WH Smith asking whether they would be prepared to stock
the magazine.  Thus, with contributors, advertisers, distributors and
costs all in place -at least on paper -I

had written my first business plan.

The numbers looked too small to work, so Jonny and I decided to involve
more schools, and technical colleges and universities: it would open up
the magazine to more people, and encourage advertisers.  We thought
that if we aimed the magazine at university students then sixth-formers
would buy it; but if we published a magazine for sixth-formers then
students wouldn't be interested.

We settled on the name Student, which seemed a good one since at the
time there was a great deal of talk about 'student power'.  This was
the period of student sit-ins, occupations and demos at universities
and polytechnics.  It was an exciting time to be young.  My mother lent
me 4 pounds as a float against the cost of telephone calls and letters,
and Jonny's father arranged for headed notepaper with student -the
magazine for BRITAIN'S youth printed across the top with the symbol of
a rising sun.  We set to work writing to all the contributors and
possible advertisers.

Student was a perfect vehicle: it gave us a new lease of life.  There
was so much to organise.  I began to set up an office in my study at
school and asked the headmaster for a telephone in my room -he
unsurprisingly refused.  As a result I had to make telephone calls from
a call box, but I quickly discovered a useful trick: if I called up the
operator and told her that the machine had taken my money but my call
had been disconnected, I was able to get a free call.  As well as a
free call, I was able to avoid the telltale 'pip -pip

Today

FOCUS

A new political magazine with the aim of getting every Public School
boy more interested in politics and to know about the improvements and
goings on at every other public school in the country.

To be a 100 pages long 15x 9 wide and on the same sort of paper as The
Economist or Punch.

To be 1/6 in price and strongly advertised before first edition comes
out on Saturday June 4th (Stowes speech day).

To be bought out every 4 months with the aim of cutting that down after
a year.

4,000 copies to be published the first 3 months.

To have data ready for the next magazine as the first comes out.

To have three representatives from each Public School writing and
Headmasters and other Masters.

To have a large collection of M Ps writing.

To have famous Authors writing.

To have members of the public contributing.

pip' as the coins went in.  Better still, the operator sounded like a
secretary: "I have Mr.  Branson for you."

I drew up lists and lists of people to call, and slowly worked my way
down them.  Most of them rejected the idea of paying for advertising in
an unpublished magazine, but gradually I began to find ways of
attracting their attention.  I would call up National Westminster Bank
and tell them that Lloyds Bank had just taken out a full-page
advertisement; would they like to advertise alongside Lloyds Bank?
Student would be Britain's biggest magazine for young people, I added.
I called up Coca-Cola and told them that Pepsi had just booked a big
advertisement but that the back page was still free.  I called up the
Daily Telegraph and asked them whether they would prefer to advertise
before or after the Daily Express.  Another tack was to ask an
innocuous question that they couldn't easily deny: "Are you interested
in recruiting the highest-calibre school-leavers and university
graduates?"  No personnel manager would ever admit that they were
looking for mediocre recruits.

"Then we're publishing just the magazine for you .. ."

In order to avoid the operator coming back on the line to cut me off, I
learnt how to pack all this into five minutes.  I started speaking
faster and pushing harder.

My voice had broken early, and nobody guessed that they were talking to
a fifteen-year-old schoolboy standing in a public telephone box.  I
gave my address at Shamley Green, and when I sent out letters I wrote
them by the dozen and posted them to my parents, who in turn asked
Elizabeth, an old friend in the village, to type them.

My schoolwork was going from bad to worse, but I was giving myself a
wonderful lesson in confidence building.  Had I been five or six years
older, the sheer absurdity of trying to sell advertising to major
companies, in a magazine that did not yet exist, edited by two
fifteen-year-old schoolboys, would have prevented me from picking up
the phone at all.  But I was too young to contemplate failure.

During the holidays I told Nik all about Student.  He was equally
excited and agreed to help distribute it in Ampleforth.  He would also
try to find contributors for it.  Nik recognised that Student was
really my and Jonny's creation, so he stood back a little bit, but he
was as enthusiastic as we were about its potential.  We were fifteen
years old and felt we could do anything.

By April 1966 and the run-up to O levels, I was able to drop a number
of subjects that I had no chance of passing and put even more time into
Student.  To my relief and that of my Latin and science teachers we
went our separate ways: "He is a very weak candidate indeed at Latin
and he has now given it up' and "His interest in science was obviously
minimal.  Although I am far from convinced that he could not have done
better than he did, it was quite evident that he was never going to
make much progress."  I was doing better at history, French and
English, but not at maths, which was compulsory: "In spite of much
apparent effort he is finding difficulty in retaining methods of attack
on problems from one week to the next.  He will need a lot of luck with
the questions in July."

However, the main excitement in my life was writing the hundreds of
letters which I started sending out from Stowe, and waiting on
tenterhooks for the answers.  For all my enthusiasm and new-found
guile, it took a long time to find any advertisers willing to commit
themselves to taking space in Student.  Jonny and I sent letters out
all summer term, continued in the holidays and through the following
autumn term.  By April 1967, with my single ancient-history A level
looming in the summer (I was to take it after only one year in the
sixth form), we were still no nearer pulling a magazine together.
Jonny and I had been working on Student for over a year, and all we had
to show for it was dozens of letters of support from various
headmasters and teachers, and various vague promises to contribute from
politicians, but no advertisements or hard copy.  I refused to bow to
the inevitable.  My letter home dated 27 April 1967 apologised for the
small amount of time I had spent with my family over Easter:

It was a wonderful holiday these last four weeks and more was achieved
than ever before.  I only hope you do not feel too annoyed with me for
not being home longer and for not making the time to do more in the
garden.  I, possibly wrongly, see a divided duty: one to my home, and
one to Student.  It is a difficult decision.  Anything I do in life I
want to do well and not half-heartedly.  I feel I am doing my best in
Student -as well as the time allows.  Yet that leaves little time for
my other duty.  To me I saw a danger of falling between two stools and
still do.  Of being a failure in everything I had and having to search
for priorities if I am to get anywhere.  I am also still only sixteen.
Although it sounds a terrible thing to say, and I only say it in
defence, what do most sixteen-year-olds do?  No one I know here did
anything more last holidays than I used to do two or three years ago,
flicks in the evening, mucking about during the day.  What did you do
when you were a boy of sixteen?  Shoot, fish, swim, go out with girls
on one side and possibly your museum and helping around the garden on
the other side.  You had time to help around the garden.  You did not
see the world as it is today when you were sixteen.  Your career was
almost lined up.  Today it is one long struggle.

You say Student is selfish and self-centred of me.

"Possibly," I say.  But is it any more selfish than anything else one
does in life?  It is, in my opinion, a career like anything else.  It
could benefit many many more people than going to the films etc.  It is
a beginning to my life like university or your finals were to yours. It
might sound really foul of me bringing this up in my first letter, but
I've had little else on my mind over the last two weeks and felt it
made sense to get it down on paper.

I was lucky.  I always felt that I could speak to my parents as if they
were my closest friends.  Rather than closing down on me, they reacted
very well to this letter and we kept open our lines of communication.
At about this time I noticed that a good many of my friends stopped
confiding in their parents, but I never felt embarrassed or rebellious
towards mine.  They always encouraged me to go ahead and do whatever I
wanted to do, and if they did not always praise my projects they never
expressed less than sympathy and support.  The last thing my father
wanted to do was to spend his weekends building a cage for my
budgerigars, but he never told me.  My mother was extremely keen to
help me with Student, and wrote articles, gave me pocket money that she
could scarcely spare and thought of people whom I should approach. Once
when I told her that I wanted to get in touch with David Frost, she
spent weeks asking all her friends whether they knew anyone who knew
anyone who knew David Frost.

Then we had our first breakthroughs: we received our first hard copy, a
250 pounds cheque for an advertisement, and Gerald Scarfe agreed to
draw a cartoon for us and be interviewed.  Student was finally changing
from a gleam in my mind's eye to a real magazine.

The other thing that changed from a bright gleam to a reality was sex.
I had a number of girlfriends during the holidays and came
tantalisingly closer and closer to losing my virginity at parties, when
the lights went out and everyone lay around on cushions.

I finally found a girl who was reputed to go the whole way, and at one
party we slipped upstairs into a remote bedroom.  I was amazed when she
let me push up her skirt and take off her knickers.  As we began to
make love, she started to moan and groan.  She was clearly having a
very erotic time.  I was pretty pleased by how well I must be
performing since she was panting and tossing her head from side to side
as she fought to control her breathing.  I put up a great show and
finally came with equally impressive gusto, roaring and shouting and
huffing and puffing.  Then I rolled off her.

To my astonishment she carried on panting, apparently having what I
took to be ecstatic multiple orgasms.  Just as I was beginning to feel
a little bemused and somewhat redundant, I finally realised that she
was panting for a reason.

"Asthma!"  she wheezed in breathless panic.

"Inhaler!

Ambulance!"

Happily my first steady girlfriend was healthy and Dutch.  Rudi was a
Dutch 'revolutionary', and in my last term I invited her to Stowe: she
slipped into the school grounds and secretly pitched her tent in the
middle of the wood.  For one glorious week I crept out every night and
walked past the lake to the woods where Rudi would be smoking pot and
cooking over a tin stove.  We lay out under the stars and talked about
what we would do to change the world.  Rudi was passionately interested
in world politics.  She became Student's grandly titled "Dutch overseas
correspondent' and went on to write some powerful pieces about the
Baader Meinhof terrorist gang.

After dropping all subjects except ancient history, I had even more
time for Student magazine.  Soon Jonny and I were regularly taking the
train to London to interview people.  However, I had to take my A
level, and I was having difficulty remembering facts that struck me as
meaningless and abstract.  I had bought some fact-file cards on ancient
history which contained all the necessary information about Greece and
Rome.

In preparation for the exam I cut the edges off these and put them in
various pockets, even sliding one under my watch strap.  When I looked
at the questions in the exam, the most difficult thing was remembering
which pocket the relevant facts were in.  Then I pulled the card out of
my pocket and held it curled in the palm of my left hand as I wrote
with my right.  As it happened, I was too preoccupied with Student to
care about what grade I achieved.  I was just intent on leaving Stowe
as quickly as possible and starting life as a journalist in London.

When I left Stowe in 1967 aged almost seventeen, my headmaster's
parting words to me were: "Congratulations, Branson.  I predict that
you will either go to prison or become a millionaire."

The next and final time I heard from Stowe was six months later in a
letter from the headmaster dated 16 January 1968:

Dear Branson, I have been pleased to see that the press have given you
a good send-off and I was very interested to see a copy of your first
issue.  May I send you congratulations and all good wishes for the
future.

Yours, R Drayson

The first issue of Student was published in January 1968.

3 Virgins at business 1967-1970

At the end of the summer term 1967, Jonny Gems and I moved into the
basement of his parents' house in Connaught Square, just off the
Edgware Road in London.  We managed to persuade Vanessa Redgrave to
change her mind from merely sending us her best wishes for the success
of Student to giving us an interview.  The interview was a turning
point for us since we could now use her name as a magnet to attract
other contributors.  As the list of contributors grew to include people
like David Hockney and Jean-Paul Sartre, it became correspondingly
easier for me to persuade some of the possible advertisers that Student
would be a worthwhile place for them to appear.

Jonny and I lived in the basement all summer.  The room was dark, dank,
and sparsely furnished.  We slept on mattresses on the floor.  The
place quickly began to look a complete shambles, scattered with papers,
dirty coffee cups and fish-and-chip wrappers.  We were always hungry.
Sometimes we would slip upstairs to raid Jonny's parents' fridge.  Mum
would occasionally burst in through the door carrying a picnic
hamper.

"Red Cross delivery!"  she would shout.

"When did you two last wash?"

We would spread a counterpane on the floor and pile into her picnic.

One day she brought us 100 in cash.  Mum had found a necklace on the
road near Shamley Green and taken it into the police station.  When
nobody had claimed it after three months, the police told her she could
have it.  She knew we had no money, so she came up to London, sold it
and gave us the money.  Her 100 pounds paid off our telephone and
postage bills and kept us going for months.  Without it we could have
collapsed.

Peter Blake, who was famous for designing The Beatles' Sergeant Pepper
album cover, drew a picture of a student for our first edition.  It was
a plain white cover with only two splashes of red: on the title,
Student, and the red tie the student wore.  As well as giving us this
illustration, Peter Blake also gave us an interview.  He began in
arresting style: "A very pretty girl with no clothes on is a marvelous
subject, and one I'm particularly interested in.  It is one of those
things, along with perspective and anatomy, which teaches you how to
draw."

While I rapidly considered the advantages of becoming an artist, he
went on to point out the dangers of 'student power' which struck a
controversial note at the time:

I don't think the students should have any more power over the teachers
than they have already.  Just at the moment I don't really like
students as a group of people.  I think they rather overrate
themselves.

They seem to talk a lot and protest a lot, and have too many rights.  I
think one could get over involved in the activity of being a student.
After all, students are not so important -they are really only there to
learn how to be adults.  Students shouldn't feel that they have to
complain.

Perhaps because we were so young and not as aggressive as the usual
professional interviewers they faced, some of our contributors made
very revealing and graphic remarks.  Gerald Scarfe described his
work:

"I'll always draw -it's a matter of energy.  I could never stop.  It's
as much a part of me as eating.  When I get an idea it has to come out
-it is like being sick, a bodily function."  When I asked Dudley Moore
what he thought of students he answered: "The only thing I hate about
your generation is your age."  He had been an organ scholar at Magdalen
College, Oxford, but when I mentioned classical music he said: "I'd
much rather roll about in the mud with six women all day than sit down
at the piano."

Mick Jagger and John Lennon also agreed to be interviewed.  Both were
demigods to the student population.  Student gave a grandiose
introduction to the Jagger interview:

Recently Melody Maker wrote: "Jagger is rather like Dostoyevsky's
brother Karamazov who, when told by his venerable brother that pain
must exist so that we might learn of goodness, replied that, if it was
necessary that one small child should suffer in order that he should be
made more aware, he did not deny the existence of God, but merely
respectfully returned his ticket of admission to heaven.  That is Mick
Jagger's kind of rebellion."

I can't imagine what we were thinking of when we quoted that.  I
certainly didn't understand it.

I nervously went along to his house on Cheyne Walk, and was shown into
the living room by Marianne Faithfull, who then tantalisingly
disappeared upstairs.

Mick and I smiled at each other genially but were both equally at a
loss for words:

RB: Do you like giving interviews?

MJ: No.

RB: Why did you ask Student to interview you?

MJ: I don't know.  I've got no idea.  I don't usually give interviews.
I mean, hardly ever.

RB: You're not interested in politics?

MJ: No.

RB: Why not?

MJ: Because I've kind of thought about it for a long time and decided
that I haven't got time to do that and understand other things.  I
mean, if you get involved in politics you get really fucked up.

RB: Do you think people can be influenced by music?

MJ: Yeah, I think they probably can because it's one of those things
it's repetitive, the same thing over and over again.  It gets into your
brain and influences you.

Our interview with John Lennon was another 'classic'.  Jonny and I went
along together, and Jonny tried to make a literary allusion:

JG: A critic has written about "A Day In The Life' as a kind of
miniature Waste Land.

JL: Miniature what?

JG: TS Eliot's poem, The Waste Land.

JL: I don't know about that.  Not very hip on me culture, you know.

Ironically, the interview with John was almost the end of Student.
After Jonny and I had met him, I had the idea of asking whether John
and Yoko would provide the magazine with an original recording which we
could distribute with Student as a flexidisc.

I contacted Derek Taylor, The Beatles' press officer.

At that time, The Beatles had just set up the Apple Foundation for the
Arts, with the idea of funding struggling artists and musicians.  Most
of Derek's day was spent sitting in his office in Savile Row,
interviewing a long procession of supplicants, all with a hundred
different reasons why they thought The Beatles should give them money.
He was like a lord chamberlain at the court of the king.  A sweet man,
Derek would listen patiently to every request, no matter how
far-fetched or nonsensical.

When I told him what we wanted to do, Derek agreed without a moment's
hesitation.  John and Yoko would be delighted to provide something, he
said.  He introduced me to Ron Kass, the managing director of Apple,
and to a manufacturer of flexidiscs, and we arranged a delivery date.

I rushed back to Connaught Square with the good news.  Not only did we
have a John Lennon interview: we would soon have an original,
unreleased John Lennon song.  It was a fantastic promotional coup for
Student.  We contacted Alan Aldridge, the most fashionable illustrator
of the day, and commissioned him to design a special front cover,
leaving a white space where the flexidisc would be attached.  And we
made plans to print 100,000 copies of the magazine -our largest ever
print run.

The weeks went by, and still no record arrived.  In mounting anxiety I
called Derek.

"Don't worry, Richard," he said.

"We've had a few problems.  But I promise you'll get something."  In
fact, I could hardly have chosen a worse time to tax the Lennons'
goodwill.  Yoko had just lost the baby she was expecting; John had been
busted for possession of cannabis; and the couple were lying low at
their mansion in Weybridge.

I was in trouble myself.  Our plans for the special issue had put
Student on the brink of bankruptcy.  I was getting desperate.  For the
first time in my life, I contacted a lawyer, Charles Levison, who wrote
to Derek, threatening to sue Apple and the Lennons for breach of
promise.

A few days later, I received a telephone call from Derek.

"Come round to Apple, Richard," he said.

"We've got something for you."

That afternoon I sat in the basement studio at Apple, with Charles,
Derek, John and Yoko, listening to the recording they'd provided.  The
hiss of the tape recorder was followed by a steady, metronomic beat
-like the sound of a human heart.

"What is it?"  I asked.

"It's the heartbeat of our baby," said John.

No sooner had he spoken than the sound stopped.

Yoko burst into floods of tears and hugged John.  I didn't understand
what was going on, but before I could speak John looked over Yoko's
shoulder straight into my eyes.

"The baby died," he told me.

"That's the silence of our dead baby."

I went back to Student with no idea what I should do.

I felt unable to release this private moment as a record.

Perhaps I was wrong because, as Derek said, it was 'conceptual art' and
would have become a collector's piece.  We had to scrap the covers and
redesign the magazine.  It cost a lot of money, but somehow we managed
to scrape it together.  I considered taking legal action against the
Lennons, but they'd had enough problems and, anyway, they'd honoured
the agreement in their own particular way, even if I couldn't see the
value of it at the time.  After our dispute over the recording, Derek
wrote a note apologising for all the trouble I'd been caused.  His
sign-off was a phrase he put on all his correspondence: "All you need
is love .. ."

Jonny read extensively.  I hardly read at all.  I never seemed to have
the time.  I would spend the days on the telephone, trying to sell
advertising space, persuading people to write for Student for nothing,
or to be interviewed.  Throughout my life, I've always needed somebody
as a counterbalance, to compensate for my weaknesses, and work off my
strengths.  Jonny and I were a good team.  He knew who we should
interview, and why.  I had the ability to persuade them to say yes, and
the obstinacy never to accept no for an answer.

In many of the interviews I conducted for Student I just turned the
tape recorder on and let the interviewee say whatever they wanted.
Before meeting the Scottish psychiatrist RD Laing, I had tried to read
his bestseller, The Politics of Experience.  Like most people, I
suspect, I had understood hardly a word of it.  I aimed the microphone
at him and he spoke without stopping for an hour and a half, staring at
a corner of the ceiling behind my head.  I had no idea what he was
rabbiting on about; I was just grateful that there wasn't any room for
me to ask him a single question.  At the end, when it became apparent
that he had finished, I thanked him profusely, went back to the office
and transcribed it.  It turned out that he had just quoted pages from
The Politics of Experience, almost verbatim.

After a few issues, the number of people involved with Student began to
grow.  Jonny and I would sometimes go to nightclubs and chat up
girls.

Sometimes we could even persuade them to come back to the flat, 'for
coffee'.  If they stayed the night, the next morning we would try to
persuade them to help out.  For some reason, they often seemed to take
pity on us.

Word of mouth spread: old friends turned up from school; friends of
friends, or people who had read the magazine, wanted to be involved.
Increasingly, the basement resembled a squat.  We all worked for no
money, living off whatever was in the fridge and going out for cheap
curries.

All sorts of people helped to distribute the magazine.

The basic idea was that they would take away bundles of magazines and
sell them for 2/6d a copy, and then come back and give us half the
proceeds, 1/3d for each copy sold.  They were meant to pay us in
advance, but it rarely seemed to work like that.  But I never really
worried about how much profit Student made: I was just determined to
have enough cash in the kitty to produce the next issue and pay our
bills.  I thought that, the more copies we sold, the more word of mouth
would spread and ultimately the more advertising we would be able to
attract.

Although I hardly realised it at the time, my ambition to be a
journalist was beginning to be pushed to one side by the imperatives of
keeping the magazine afloat.

Jonny ran the editorial side while I ran the business and sold
advertising space and argued with the printers.  I was becoming an
entrepreneur almost by default, although if anybody had mentioned the
word to me then I would probably have had to ask Jonny what it meant. I
certainly didn't regard myself as a businessman.

Businessmen were middle-aged men in the City obsessed with making
money.  They wore pinstripe suits and had wives and 2.4 children in the
suburbs.  Of course, we wanted to make money on Student too we needed
money to survive.  But we saw it much more as a creative enterprise
than a money-making one.

Later, it became apparent to me that business could be a creative
enterprise in itself.  If you publish a magazine, you're trying to
create something that is original, that stands out from the crowd, that
will last and, hopefully, serve some useful purpose.  Above all, you
want to create something you are proud of.  That has always been my
philosophy of business.  I can honestly say that I have never gone into
any business purely to make money.  If that is the sole motive then I
believe you are better off not doing it.  A business has to be
involving; it has to be fun, and it has to exercise your creative
instincts.

Running Student was certainly fun.  Each day unfolded to the deafening
strains of Bob Dylan, The Beatles or The Stones blaring out of the
hi-fi system, shaking the walls of the basement.  When Jonny and I went
out to sell copies of the magazine, we would celebrate a single sale of
the magazine for 2/6dby going and buying two hamburgers for 1/3d each.
Every now and then I would look out of the grimy basement window and
see that it was a beautiful day.  I would turn off the music and tell
everyone we had to go out for a walk.  We would wander across Hyde Park
and then somehow someone would end up in the Serpentine and we'd all
have a swim.

Tony Mellor was one of the main assistant editors, and we all respected
him because he had been a trade-union official.  Tony was rather older
than the rest of us, and was extremely articulate about socialism.  As
everyone argued over the exact wording of some of the more political
pronouncements in the magazine, I was beginning to be aware of a wider
picture: the politics of survival.  In some ways I became an outsider
on the magazine.  While the others would be talking about the "LSD guru
Timothy Leary, Pink Floyd and the latest convolutions of student
politics, I would be worrying about paying the printers and telephone
bills.  As well as spending time on the telephone trying to persuade
leading figures of the day to write for Student, just for the love of
it, I also had to spend hours calling up companies such as British
Leyland or Lloyds Bank, trying to convince them to buy advertising
space.

Without their money, Student would collapse.

The responsibility made me grow up fast.  You might almost say that I
was old before my time.  While the others might happily sit around in
the evening getting stoned, unconcerned about waking up late the next
morning with a hangover, I was always aware of the need to keep a clear
head.

My parents and Lindi came up to help us sell copies of the magazine.
Mum took a bundle to Speaker's Corner in Hyde Park and pushed them into
the unsuspecting hands of tourists.  Lindi and I walked up and down
Oxford Street selling copies of Student to anybody we could stop.  I
was once with Lindi when a tramp came up and asked for money.  We had
no money -that's exactly what we were looking for too -but in a
histrionic fit of idealism I stripped off most of my clothes and gave
them to him.  I spent the rest of the day walking around in a
blanket.

"Poor old tramp!"  Dad chuckled when he heard the story.

"That'll teach him.  All he wanted was some loose change, and he got a
set of infested clothes from you!"

Student began to attract a high profile, and one day a German
television channel asked me whether I would make a speech at University
College, London, along with the activist Tariq Ali and the German
student leader Danny Cohn-Bendit.  The brief was to talk about people's
rights.  A vast crowd welcomed these two firebrand revolutionaries.  I
stood and listened as Danny Cohn-Bendit made a brilliant speech full of
intellectual depth and passion.  Everyone around him was cheering and
roaring their approval.  Then Tariq Ali stood up, and he too made a
passionate speech.  The crowd stamped and shouted at the tops of their
voices as if they were about to descend upon the Bastille.  I began to
feel a little queasy.

At Stowe there had been a very cruel tradition.  Each boy had to learn
a long poem and stand up in front of the entire school and recite it.
If you made the slightest mistake or paused for a moment, the master
hit a gong, and you had to leave the stage accompanied by great boos
and jeers all round: you were 'gonged' off.  Since I was mildly
dyslexic I found it extremely difficult to learn anything by heart, and
for several years was gonged off with relentless regularity.  As I
watched Danny Cohn-Bendit and Tariq Ali making their inspiring
speeches, surfing on the goodwill of the crowd and milking the
television camera for all it was worth, I felt the same sickening
feeling in my stomach as I had felt when I was waiting to recite my
Tennyson piece in the sure knowledge that I would be 'gonged' off stage
and loudly booed.

Finally Tariq Ali finished his speech.  There was pandemonium. Everyone
cheered; somebody hoisted him on their shoulders; pretty girls waved
admiringly up at him and the camera swivelled in his direction.

Then somebody beckoned to me: it was my turn.  I hopped up to the
podium and nervously took the microphone.  I had barely spoken in
public, let alone made a speech before, and I felt chronically nervous.
I had absolutely no idea what to say.  I had prepared a speech but,
under the scrutiny of a thousand expectant faces turned towards me like
sunflowers, my mind had gone completely blank.  Dry-mouthed, I mumbled
a few words, gave a sick smile, and realised with a mounting feeling of
panic that I could not do it.  There was nowhere to hide.  I gave a
final inarticulate mumble, somewhere between a cough and a vomit,
dropped the microphone, leapt off the podium and disappeared back into
the safety of the crowd.  It had been the most embarrassing moment of
my life.

Even now, whenever I am interviewed or have to give a speech, I feel
the same trepidation and I have to overcome the same sense of shyness.
If I'm talking on a subject that I know a little about, or that I feel
passionately about, then I can be reasonably fluent.  But, when I'm
asked to talk about something I know very little about, I become
extremely uncomfortable -and it shows.  I have come to accept that I
will never have all the smooth instant answers that a politician would
have.  I try not to fight my stutters or inability to leap to a perfect
answer.  Instead, I just try to give the truthful answer, and, if it
takes a little time to work out that answer, I hope that people will
trust a slow, hesitant response more than a rapid, glib one.

The wars in Vietnam and Biafra were the two leading issues of the late
1960s.  If Student was to be a credible publication we had to have our
own reporters in both countries.  We had no money to send any reporters
out there, let alone pay for them to stay in hotels and telex back
articles, so we had to think laterally.  We finally came up with the
idea that if we chose very young reporters then they might be a story
in themselves.  So I called up the Daily Mirror and asked whether they
would be interested in running an exclusive story about a
seventeen-year-old reporter going to Vietnam.  They bought the story
and paid for Julian Manyon, who was working with us at Student, to go
to Vietnam.  Julian went there, filed some great articles about the
Vietnam War, and subsequently went on to become a famous ITN reporter.
We managed to make the same arrangement with sending a sixteen-year-old
reporter to Biafra.  These two ventures were my first experience of
leveraging up the Student name: we put in the name and the people, and
the other side put up the money to fund it.

I felt very passionately about the campaign to end American involvement
in Vietnam.  In October 1968 all the Student staff joined Vanessa
Redgrave on the student march to Grosvenor Square, to protest outside
the American embassy.  I marched alongside Vanessa and Tariq Ali.  It
was tremendously exciting to be marching for something I believed in,
along with tens of thousands of others.  The mood of the crowd was
exhilarating, but at the same time slightly frightening.

You felt at any moment that things could get out of control.  And they
did.  When the police charged the crowd, I ran like hell.  A photograph
of the demonstration later appeared in Paris Match.  It shows me, back
arched, an inch away from the outstretched hand of a policeman who was
trying to catch me as I sprinted across the square.

While I opposed Vietnam, I didn't feel as passionately left-wing on
other issues as most of my fellow demonstrators.

"I suppose I am left-wing," I told a reporter from the Guardian.

"Well, only to the extent that I think left-wing views are sane and
rational."

Student was not a radical magazine in the political sense.  Nor were we
an 'underground' magazine, like Oz and IT.  We weren't advocating
putting LSD in the water supply, as they might have done from time to
time although I think there was just as much free love in our offices
as there was in theirs.

I tried to maintain a balance between the views of the left and the
right, but what I hoped was balance some people saw as prevarication.
The writer and poet Robert Graves wrote to me from Deia, Majorca, where
he lived:

Your hands seem tied tighter than students deserve.

In the Biafra story, for instance, you don't once mention what the war
is really about in the international context.  But that is because you
have to keep pals with the over thirties and the Big Business Boys, or
the journal couldn't survive.  Yes, you do your best.

In fact, the "Big Business Boys' weren't being as friendly as I'd
hoped.  The struggle to secure advertising had always been much more
difficult than finding contributors.  We were pleased to be able to
interview the actor Bryan Forbes or publish Gavin Maxwell's article,
but they didn't bring in money to help us run the magazine and
distribute it.  We charged 250 pounds for a whole-page advertisement,
down to 40 pounds for an eighth of a page.  For example, after
countless calls I had managed to get nine companies to take out
full-page ads in the first edition: J Walter Thompson, Metal Box, the
Sunday Times, the Daily Telegraph, The Gas Council (the forerunner to
British Gas), The Economist, Lloyds Bank, Rank Organisation, and John
Laing Builders.  These nine advertisements had brought in 2,250 pounds
and had been wrung out of a list that started off with over 300
possible companies.  But it had been enough to cover the cost of
printing the 30,000 copies of the first issue.  With these funds I had
opened an account at Courts, where my family had always banked, as our
clearing bank.  I must have been their only customer who walked in
barefoot and asked for a 1,000 pounds overdraft.  Throughout the life
of Student, selling advertising space was always an uphill struggle.

For all our efforts, it was clear that Student wasn't making money.  I
began to think of ways to develop the magazine, and the Student name,
in other directions: a Student conference, a Student travel company, a
Student accommodation agency.  I didn't just see Student as an end in
itself, a noun.  I saw it as the beginning of a whole range of
services, an adjective, a word that people would recognise as having
certain key values.  In 1970s language, Student magazine and everything
Student promoted should be 'hip'.  Student was a flexible concept and I
wanted to explore this flexibility to see how far I could push it and
where it would lead.  In this way I was a little removed from the rest
of my friends, who concentrated exclusively on the magazine and the
student politics they wanted to cover.

It seems Peter Blake was right in saying that student revolution would
go out of fashion -and students with it.  However, looking at the early
editions of Student thirty years later, I'm amazed by how little has
changed.

Student then had cartoons of Ted Heath by Nicholas Garland; today he's
still being caricatured by Nicholas Garland.  David Hockney, Dudley
Moore and John Le Carre still make good copy, and Bryan Forbes and
Vanessa Redgrave, or at least their daughters, are still in the news.

Life in the basement was the kind of all-embracing, glorious chaos in
which I thrived and have thrived ever since.  We never had any money;
we were incredibly busy; but we were a close-knit team.  We worked
together because it was fun, because we felt that what we were doing
was important, and because we had great lives together.

Soon a number of journalists from the national papers came to interview
me to see what all the buzz was about.  We developed a foolproof way of
impressing them.  I sat at my desk, the telephone at my elbow.

"Great to meet you.  Take a seat," I would say, waving the journalist
down into the beanbag opposite me.  As they shuffled around trying to
retain their dignity, get comfortable, and remove the drips of houmous
and piles of cigarette ash from the folds, the telephone would ring.

"Can someone take that, please?"  I would ask.

"Now ' I turned my attention to the journalist '-what do you want to
know about Student?"

"It's Ted Heath for you, Richard," Tony would call across.

"I'll call him back," I'd say over my shoulder.

"Now, what did you want to know about Student?"

By this time the journalist was craning round to watch Tony tell Ted
Heath that he was sorry but Richard was in a meeting and he'd call him
back.  Then the telephone would ring again, and Tony would pick it
up.

"David Bailey for you, Richard."

"I'll call him back, but will you ask if he can change that lunch date?
I've got to be in Paris.  OK' I'd flash an apologetic grin at the
journalist.  'now, how are we doing?"

"I just wanted to ask you ' The telephone rang again.

"I'm sorry to interrupt," Tony would apologise, "but it's Mick Jagger
for you and he says it's urgent."

"Please excuse me for a minute," I'd say, reluctantly picking up the
phone.

"Mick, hello.  Fine thanks, and you?  Really?  An exclusive?  Yes, that
sounds great ..."

And on I went until Jonny couldn't stop laughing in the call box
opposite or the pips went.

"I'm sorry," I'd say to the journalist.

"Something's cropped up and we've got to dash.  Are we finished?"

The journalist would be ushered out in a daze, passing Jonny on the
way, and the telephone would stop ringing.

Journalists swallowed our scam hook, line and sinker: "Photographers,
journalists, writers from papers throughout the world seem to have
fallen over themselves in assisting Student," wrote the Sunday
Telegraph, 'and a massive voluntary distribution organisation has grown
throughout schools and universities, allowing, perhaps, over half a
million students to read the magazine."

"An amazing number of top-class contributors.  Its scope is limitless,"
said the Observer.  While the Daily Telegraph said, "It seems probable
that Student, the glossy publication that has attracted a lot of
well-known writers, will become one of the largest circulated magazines
in the country."

By autumn 1968 Jonny's parents had understandably had enough of having
almost twenty teenagers squatting in their basement and asked us to
find somewhere else to live.  We moved to 44 Albion Street, just round
the corner from Connaught Square.  Jonny left to go back to school and
take his A levels.  He felt guilty about abandoning me, but he was
under pressure to continue his education, and his parents sensibly
worried that working on a small magazine from their basement was hardly
the perfect foundation on which to earn much of a living.

Without Jonny, Student almost fell to pieces.  There was too much for
me to do, and nobody else whom I could really trust to help me out.
After a few weeks, I asked Nik to come and help.  Nik had finished at
Ampleforth, but was due to go to Sussex University at Brighton.  He
agreed to delay going to university and come to Student's aid.

With Nik's arrival, Student was put back on the rails.

He started controlling the cash, and, rather than having

6 6 a large biscuit tin full of money which anyone could dip into to
buy food or drink or dope, Nik used our Courts account properly.  He
started writing cheques and then checking the stubs off against the
bank statements.  Nik had lost a front tooth, and with his long black
hair he looked rather terrifying.  I think he kept away a lot of debt
collectors.

The commune, which had been very cramped in Jonny's basement, now
spread up and down the new house.  People made dens and there were
mattresses and joss sticks everywhere.  By now most of the people
working with Student were nineteen or twenty, and there was lots of
talk about free love, and lots of practice of it.  I installed a large
brass bed on the top floor, with a telephone running off a long
extension lead which looped down through the banisters.  Some days I
did all my business from bed.

I'd put the house in my parents' name so that the owners -the Church
Commissioners -would not think we were running a business from it.  My
parents loved the excitement of journalism and, although Dad was a
barrister with short hair who wore a blazer and tie to church on
Sundays, he and Mum never had any problem talking to people who had
hair halfway down their backs and hadn't shaved or washed for a month.
Lindi came to stay in Albion Street every half term and during some of
her holidays.  She helped distribute Student and fell in love with a
series of men working on the magazine.

I had a short relationship with Debbie, one of the girls living at
Albion Street and working on the magazine.  One day she told me she was
pregnant.  We were both very shocked and realised that a baby was the
last thing we could cope with.  Debbie decided that she wanted to have
an abortion.  After a few telephone calls it became clear that this
would be very difficult to arrange.  Debbie could not have an abortion
on the National Health Service unless she had proven psychiatric or
medical problems.  We grew frantic phoning around all the National
Health hospitals trying to see if there was any way this could be
overcome.

When we tried to find a private doctor to help, we found it would cost
over 400money we didn't have.  I was at my wits' end when I finally
tracked down a kind doctor in Birmingham who told me that she would
arrange the operation for 50.

After the operation, Debbie and I realised that there must be a host of
young people who had faced the same problem and had nowhere to turn for
help.  It would surely be much better if there were one telephone
number you could ring to be referred to the right doctor.  It wasn't
just unwanted pregnancies that were the problem: what if you needed
psychological help, or had a venereal disease but were scared of
admitting it to your nice family doctor, or had run away from home and
had nowhere to live?  We drew up a long list of the sorts of problems
that students faced, and decided to do something about it.  We would
give out our telephone number, work out a list of all the best and most
helpful doctors, and see who called.

give us your headaches was the slogan for the Student Advisory Centre.
We handed out leaflets along Oxford Street and advertised in Student.
Soon the calls started coming in.  A number of doctors, both in the
National Health Service and the private sector, agreed to give their
services for free or a minimal charge, so we built up a network of
professionals to whom we could refer people.  Worries about pregnancy
and contraception formed many of the calls, but we also became quite a
centre for gay men and lesbians to hang around.  It soon became clear
that they were not as interested in asking our advice as in finding
ways of meeting each other, revealing how difficult it was for gay
people to lead a normal social life.

The Student Advisory Centre began to take up more time than Student
magazine.  I would be talking to possible suicides for an hour at three
in the morning, advising pregnant girls as to who was the nicest doctor
they could go and see, writing to someone who was terrified that he had
caught venereal disease but didn't dare tell his parents or go and see
a doctor -and in what little time was left, trying to run the magazine.
One of the biggest problems we found ourselves dealing with was that
teenagers were unable to confide in their parents.  Hearing others'
stories made me realise how lucky I was in my relationship with my own
parents.

They had never judged me, and always supported me, always praised the
good things rather than criticised the bad things: I had no qualms
about admitting my problems, worries and failures.  Our work was to try
to help out those who were in trouble but with nowhere to turn.

With both the Student Advisory Centre and Student magazine, life at
Albion Street remained frantic and the numbers of people coming in and
out of the house at all times of day and night continued to drive our
neighbours to distraction.  Due to complaints from the neighbours, we
were visited on a regular basis by the Church Commissioner inspectors
to check that we were not carrying out any kind of business.  These
visits had all the clockwork tension of a West End farce.  The
Commissioners had to give us 24 hours' notice before an inspection, and
as soon as we received it the whole Student staff and my mum
immediately wheeled into action.  All the telephones were piled into a
cupboard, and the desks and chairs and mattresses were covered by dust
sheets.  The Student staff would pull out paint pots and paintbrushes,
put on overalls and start painting the walls of the house.  Mum would
arrive from the country with Lindi, eight-year-old Vanessa and an
armful of toys.  By the time the Church Commissioners arrived they
would find a friendly crew of painters cheerfully decorating the house,
the furniture all swathed in dust sheets, while a mother and her family
huddled upstairs.

The little girl would be playing with some toys in a rather bemused
way, while Lindi and I were engrossed in Monopoly.  If Vanessa ever
looked as if she might ask us what was going on, Mum would rapidly shoo
everyone out of the room, saying it was time for Vanessa's bed.

The Church inspectors would look at this happy domestic scene and
wonder what all the fuss was about.

They would scratch their heads and say what a lovely girl little
Vanessa was, drink their tea and have a nice chat with my mum.  As soon
as they had disappeared down the street, Mum went back home; we put
away the Monopoly, yanked off the dust sheets, plugged in the
telephones and got back to work.

The end came on one fatal visit when we forgot to unplug the
telephones.  By then it was their fifth visit and the inspectors must
have suspected something.

They stayed for their ritual cup of tea and were just about to leave
when two of the telephones started ringing inside the cupboard.  A
shocked silence fell.

"And just listen to that," I improvised quickly.

"Can you hear that telephone?  The walls are so thin in these houses we
can hear everything that goes on next door!"

The inspector strode forward and pulled open the cupboard door.  Five
telephones, a switchboard and a tangle of wires all tumbled out on top
of him.  Not even a big family needed a switchboard.  That was the end
of 44 Albion Street.  Vanessa and her collection of dolls and toys were
taken down to Shamley Green for the last time, and Lindi and I packed
up the Monopoly set.  Student magazine had to find somewhere else to
use as an office.

We scoured the neighbourhood looking for somewhere to rent.  The best
deal was offered by the Reverend Cuthbert Scott.  He liked the work of
the Advisory Centre and offered us the use of the crypt at St.  John's
Church, just off the Bayswater Road, for no rent at all.  I put an old
slab of marble across two tombs to make my desk, and everyone found
themselves somewhere to sit.  We even charmed the local Post Office
engineer into connecting the telephone without our having to wait the
normal three months.  After a while none of us noticed that we were
working in the dim light of the crypt surrounded by marble effigies and
tombs.

In November 1969 I received a visit from two plain-clothes policemen
from Marylebone Police Station.

They had come to draw my attention to the 1889 Indecent Advertisements
Act and the 1917 Venereal Disease Act, in case I was unaware of them,
which, not surprisingly, I was.  They told me that it was illegal to
advertise any help or remedy for venereal disease.  These Acts had
originally been introduced to stop quack doctors from exploiting the
large numbers of people who came to them for expensive and ineffective
cures for venereal disease.  I argued that I was only offering a
counselling service and that I passed on anyone who had VD to qualified
doctors at St.  Mary's Hospital.  But the policemen were adamant: if
the Student Advisory Centre continued to mention the words 'venereal
disease' in public, I would be arrested with the prospect of two years'
imprisonment.

The week before, we had successfully prosecuted a policeman from
Marylebone Police Station for planting drugs on one of the Student
Advisory Centre's clients.

The policeman had been sent down, and so I suspected that this visit
was connected.  I was amazed that the police had trawled through this
old legislation to find some obscure law that we were breaking.

We duly changed the mention of venereal disease in the leaflets we
distributed around London and started describing it as 'social
disease'.  Then we got a huge number of inquiries from people who were
suffering from acne, and the number of people calling us for help over
VD dropped from sixty a week to ten.  We decided that the police were
bluffing and that helping the remaining fifty people a week was worth
risking the Metropolitan Police's threats: we reinserted the mention of
VD.  We were wrong.  The police came back to the crypt again, in
December 1969, and arrested me.

John Mortimer, a barrister who had established a reputation for his
support of libertarian causes after his defence of Oz magazine and his
role in the Lady Chatterley's Lover trial, offered to defend me.  He
agreed that the law was ridiculous and that the police were merely
being vindictive.  John reminded us that every public lavatory carried
a government notice on the inside of the door offering advice to those
suffering from venereal disease.  If I was guilty then so was the
government.  I was duly prosecuted on two counts:

under the Indecent Advertisements Act 1889, which prohibited
advertisements of an 'indecent or obscene nature' and deemed references
to syphilis and gonorrhoea to be indecent, and the Venereal Disease Act
1917, which banned advertisements offering treatment or advice or
mentioning the words 'venereal disease'.

At the first hearing on 8 May 1970 at the Marylebone Magistrates Court,
Tom Driberg, the flamboyant Labour MP, gave a dramatic plea on my
behalf.  Chad Varah, the founder of the Samaritans, also gave evidence
pointing out how many people the Student Advisory Centre had referred
to his charity.  John Mortimer made his argument that, if I was found
guilty, I would have no option but to prosecute the government and all
the local authorities, since they had also put up notices in public
lavatories.  The magistrate dismissed the charge under the Venereal
Disease Act on the grounds that the Student Advisory Centre did not
offer to cure people but referred them to qualified doctors.  He
adjourned the other charge until 22 May.

As the court case was proceeding, statistics were released revealing
that the number of people with venereal disease had risen dramatically
in the previous year to a post-war peak.  Lady Birk, the chairman of
the Health Education Council, used the statistics together with the
example of my prosecution to try to amend the 1889 Indecent
Advertisements Act in the House of Lords.

"It's ludicrous that outmoded laws should restrict responsible efforts
to stop the spread of these serious diseases," she said.

By the time of the second court case a number of newspapers had
declared how idiotic it was that I was being prosecuted.  There was a
strong movement to change the law.  The magistrate reluctantly found me
guilty under the strict letter of the law, but he made it clear that he
considered the law was absurd by fining me just 7, pounds some way
short of the two years' imprisonment with which the police had been
threatening me.  John

Mortimer made a statement to the press outside the court in which he
called for the law to be changed or we would have no alternative but to
prosecute the government for mentioning VD on the doors of public
lavatories.  The newspapers all joined forces behind us, and Lady
Birk's amendment to the law was incorporated into government
legislation at the next sitting of parliament.  Reginald Maudling, the
home secretary, sent me a personal letter apologising for the Crown
Prosecution.

That court case taught me that, although I was young, wore jeans and
had very little money behind me, I need not be afraid of being bullied
by the police or the Establishment.  Particularly if I had a good
barrister.

One day in 1970 I came back to my desk and found that Nik had been
sitting at it.  By mistake he had left a draft of a memo which he was
writing to the staff.  It was a plan to get rid of me as publisher and
editor, take editorial and financial control of Student and turn it
into a cooperative.  I would become just part of the team, and everyone
would share equally in the editorial direction of the magazine.  I was
shocked.  I felt that Nik -my closest friend -was betraying me.  After
all, Student had been my and Jonny's idea.  We had started it at Stowe
and against all odds we had managed to publish it.  I knew what I
wanted to do with Student, and it seemed to me that everyone was happy
working there.  We all drew equal salaries, but ultimately I was the
editor and publisher and it was up to me to make the decisions.

I looked around at everyone working.  They all had their heads bent
down studiously over their desks.  I wondered how many were part of
this.  I put the memo in my pocket.  When Nik came back I stood up.

"Nik," I said.

"Will you come outside for a quick chat?"

I decided to bluff my way through the crisis.  If Nik had already
whipped up support from the ten other people it would be difficult for
me to stop them.  But, if they were undecided, I could drive a wedge
between Nik and the rest of them and cut Nik out.  I had to put our
friendship to one side, and get rid of this challenge.

"Nik," I said, as we walked down the street, 'a number of people have
come up to me and said that they're unhappy with what you're planning.
They don't like the idea, but they're too scared to tell you to your
face."

Nik looked horrified.

"I don't think that it's a good idea for you to stay here," I went
on.

"You're trying to undermine me and the whole of Student.  I think that
we should remain friends, but I don't think you should stay here any
more."

I still don't know how I managed to say those words without blushing or
my voice cracking.  Nik looked down at his feet.

"I'm sorry, Ricky," he said.

"It just seemed a better way to organise ourselves .. ."  he trailed
off.

"I'm sorry too, Nik."  I folded my arms and looked straight at him.

"Let's see each other down in Shamley Green, but Student is my life."

Nik left that day.  I told everyone that Nik and I had disagreed over
how to run Student, and they were free to leave, or to carry on,
whatever they wished.  They all decided to stay with me, and life at
the crypt went on without Nik.

This was the first real disagreement I ever had.

Although I felt anguished, I knew I had to confront it.  I hate
criticising people who work with me, and I try to avoid doing so.  Ever
since then I have always tried to avoid the issue by asking someone
else to wield the axe.

I admit that this is a weakness, but I am simply unable to cope with
it.

Nik was my best friend and I deeply hoped that he would remain so. When
I was next down in Shamley Green I went round to see Nik and found him
eating one of his mum's puddings.  We sat down together and polished it
off.

Apart from the fact that he was my oldest friend, Nik had taken charge
of the distribution of the magazine and made sense of it.  I missed him
terribly.  Until Nik had arrived, the distribution had only ever been
casually handled, with bundles being sent out to volunteers in schools
and universities.  For over a year Student carried on without Nik and
we put out four more editions.  When Nik told me that he was standing
for a student election at Sussex University, I used Student's
purchasing power with the printers to run off some cheap campaign
posters.  Nik won the election but was later disqualified because he
had got outside support for his campaign.

One thing I knew from everyone who came in to chat or work for us was
that they spent a good deal of time listening to music, and a good deal
of money buying records.  We had the record player on constantly, and
everyone rushed out to buy the latest Rolling Stones, Bob Dylan, or
Jefferson Airplane album the day it was released.  There was tremendous
excitement about music: it was political; it was anarchic; it summed up
the young generation's dream of changing the world.

And I also noticed that people who would never dream of spending as
much as 40 shillings on a meal wouldn't hesitate to spend 40 shillings
buying the latest Bob Dylan album.  The more obscure the albums were,
the more they cost and the more they were treasured.

Up to this point I had been interested in making money only to ensure
Student's continuing success and to fund the Student Advisory Centre,
but it struck me as a very interesting business opportunity.  When I
heard that, despite the government's abolition of the Retail Price
Maintenance Agreement, none of the shops were offering discounted
records, I began to think about setting up a record distribution
business.  The number of people working on Student had grown to around
twenty and we all still lived together in 44 Albion Street and worked
in the crypt.

I thought about the high cost of records and the sort of people who
bought Student magazine, and wondered whether we could advertise and
sell cheap mail-order records through the magazine.  As it turned out,
the first advertisement for mail-order records appeared in the final
edition of Student.  Without Nik to manage Student's distribution, it
was floundering, but the offer of cheap records brought in a flood of
inquiries and more cash than we had ever seen before.

We decided to come up with another name for the mail-order business: a
name that would be eye-catching, that could stand alone and not appeal
just to students.

We sat around in the church crypt trying to choose a good one.

"Slipped Disc' was one of the favourite suggestions.

We toyed with it for a while, until one of the girls leant forward:

"I know," she said.

"What about "Virgin"?  We're complete virgins at business."

"And there aren't many virgins left around here," laughed one of the
other girls.

"It would be nice to have one here in name if nothing else."

"Great," I decided on the spot.

"It's Virgin."

4 "I am prepared to try anything once."

1970-1971

And so we became Virgin.  Looking back at the various uses to which
we've since put the Virgin name, I think we made the right decision.
I'm not sure that Slipped Disc Airways, Slipped Disc Brides or Slipped
Disc Condoms would have had quite the same appeal.

Our tiny sample of market research proved correct:

students spent a good deal of money on records and they didn't like
spending 39 shillings at WH Smith when they found out that they could
buy them from Virgin for 35 shillings.  We started giving out leaflets
about Virgin Mail Order records along Oxford Street and outside
concerts, and the daily post increased from a bundle of letters to a
sack.  One of the best things about mail order for us was that the
customers sent their money in first:

this provided the capital for us to buy the records.  Our bank account
at Courts started to build up a large cash balance.

As Virgin Mail Order grew, I tried to sell Student to another magazine
group.  IPC Magazines emerged as the only interested buyer, and we had
long negotiations which culminated in a meeting where they asked me to
stay on as editor.  I agreed to do so, but then made the mistake of
telling them all about my future plans.

Fantasising about the future is one of my favourite pastimes, and I
told the meeting that I had all sorts of other plans for Student: I
felt that students were given a raw deal by banks, and I wanted to set
up a cheap student bank; I wanted to set up a string of great
nightclubs and hotels where students could stay;

perhaps even offer them good travel, like student trains or even, who
knows, a student airline.  As I warmed to my theme, I saw that their
eyes had glazed over.  They thought I was a madman.  They decided they
did not want to keep such a lunatic on as editor of Student, and in the
end they decided they did not even want to buy it.  Student died a
quiet death, and my plans for the future had to be shelved for the time
being.

We switched all our attention to Virgin Mail Order.

One look at the huge numbers of orders coming in and the need to
organise where to buy the records from and how to send them out to the
customers persuaded me that I needed someone to help me.  Although we
all had great fun at Albion Street, I was increasingly aware that I was
the only one who had to worry about paying all the wages.  Even though
these were small amounts of money, it was difficult to make sufficient
profit even to cover that cost.  There was only one person I could turn
to: Nik.  I wanted my old friend back again.

I buried the episode when Nik had tried to throw me out, and offered
him 40 per cent of the newly formed Virgin Mail Order Records company
if he came to work with me.  He agreed immediately.  We never
negotiated over the 60-40 split.  I think we both felt that it was a
fair reflection of what we would each put into the

Although Nik was not a trained accountant, he was meticulous at
counting the pennies.  He also led by example: he never spent any
money, so why should any of us?  He never washed his clothes, so why
should anyone else?  He scrimped and saved every penny; he always
turned lights off when he left a room; he made only rapid phone calls,
and he handled our bills with great skill.

"It's fine to pay bills late," he said, 'so long as you pay them
regularly."

So we paid our bills on the nail, except that it was always the last
nail.  Apart from Nik and me, there were no other permanent employees
in the crypt.  A rotating band of casual workers came in and were paid
20 pounds a week, before drifting on.  Throughout 1970 Virgin Mail
Order Records thrived.

Then, in January 1971, we were almost ruined by something entirely out
of our control: the Post Office workers went on strike.  Led by Tom
Jackson, the general secretary of the Union of Post Office Workers, the
postmen went home and the Post Office taped up the letter boxes  Our
mail-order business was set to go bust: people couldn't send us
cheques; we couldn't send out records.  We had to do something.

Nik and I decided that we should open a shop to carry on selling the
records.  We had to find a shop within a week before we ran out of
money.  At the time we had no idea about how a shop works.  All we knew
was that we had to sell records somehow or the company would collapse.
We started looking for a site.

In 1971 music retailing was dominated by WH Smith and John Menzies,
both of which were dull and formal.

The record departments were generally downstairs and they were staffed
by people in drab brown or blue uniforms who appeared to have no
interest in music.

Customers chose their records from the shelves, bought them and left
within ten minutes.  The shops were unwelcoming; there was little
sympathetic service and prices were high.  Although rock music was very
exciting, none of that feeling of excitement or even vague interest
filtered through to the shops that sold the records.  The dowdy staff
registered no approval or interest if you bought the new Doors album:
they just rang it up on the till as if you had bought Mantovani or
Perry Como.  It was all the same to them.  Nor did they seem
particularly enthused about putting in a special order for the Van Der
Graaf Generator or Incredible String Band record that had been reviewed
in Melody Maker that week.  None of our friends felt at home in record
shops: they were just rather functional places where they had to go to
buy their favourite records.

Hence the appeal of a cheap mail-order business.

We wanted the Virgin Records shop to be an extension of Student; a
place where people could meet and listen to records together; somewhere
where they weren't simply encouraged to dash in, buy the record and
leave.  We wanted them to stay longer, chat to the staff, and really
get into which records they were going to buy.  People take music far
more seriously than many other things in life.  It is part of the way
they define themselves, like the cars they drive, the films they watch,
and the clothes they wear.  Teenagers spend more time listening to
music, talking about their favourite bands and choosing records than
almost anything else.

Virgin's first record shop had to incorporate all these aspects of how
music fitted into people's lives.  In exploring how to do this, I think
we created the conceptual framework of what Virgin later became.  We
wanted the Virgin Records shop to be an enjoyable place to go at a time
when record buyers were given short shrift.  We wanted to relate to the
customers, not patronise them; and we wanted to be cheaper than the
other shops.  To achieve all this was a tall order, but we hoped the
extra money which went on creating the atmosphere, and the profits we
forfeited by selling cheaply, would be more than made up for by people
buying more records.

Nik and I spent a morning counting people walking up and down Oxford
Street compared with people walking along Kensington High Street.
Eventually we decided that the cheaper end of Oxford Street would be
the best site.  We knew that we couldn't rely on people knowing about
the Virgin Records shop and making a special trip to buy a record, so
we had to be able to attract passers-by into the shop on impulse.  At
the exact point where we counted the most people walking along the
street, we started looking for an empty property.  We saw a shoe shop
with a stairway leading up to what looked like an empty first floor, so
we went upstairs to see what it was like.

"What are you doing?"  a voice called up to us.

"We're looking to set up a shop," we said.

"What kind of shop?"

Nik and I came back down the stairs and found the owner of the shoe
shop blocking our way.

"A record shop," we said.

The owner was a large, square Greek called Mr.  Alachouzos.

"You'll never pay the rent," he said.

"No, you're right," I said.

"We can't afford any rent.

But we'll attract lots of people past your window and they'll all buy
shoes."

"What kind of shoes?"  Mr.  Alachouzos's eyes narrowed.

"Jesus sandals are out," Nik said.

"Do you sell any Doc Martens?"

We agreed that we would fit out the record shop and that we could
occupy it for no rent until somebody else came along and wanted it.  It
was, after all, just an empty space.  Within five days we had built
shelves, put piles of cushions on the floor, carried a couple of old
sofas up the stairs and set up a till.  The first Virgin Records shop
was ready for business.

The day before opening, we handed out hundreds of leaflets along Oxford
Street offering cut-price records.

On the first day, a Monday, a queue over a hundred yards long formed
outside.  I was on the till when the customers started coming through.
The first customer bought a record by Tangerine Dream, a German band
which we had noticed selling very well through mail order.

"Funny bloke you've got downstairs," he said.

"He kept trying to sell me a pair of Doc Martens as I waited in the
queue."

At the end of the day I took the money to the bank.

I found Mr.  Alachouzos hovering outside the shop.

"How's business?"  I asked, trying to make light of the heavy bag of
cash I was carrying.

He looked at me and then back at his shop window, which was still piled
high with unsold Doc Martens.

"Fine," he said firmly.

"Couldn't be better."

During 1971 Nik was running the Oxford Street record shop; Debbie was
running the Student Advisory Centre from Piccadilly, and I was
generally looking to do anything I could to expand.  We were in the
process of changing from Student ideas to Virgin, and in due course we
renamed the Student Advisory Centre as a new charity called HELP!  It
continues to operate to this day.

I knew very little about the record industry, but from what I saw at
the record shop I could see that it was a wonderfully informal business
with no strict rules.  It had unlimited potential for growth: a new
band could suddenly sweep the nation and be a huge hit, as the sudden
crazes for The Bay City Rollers, Culture Club or The Spice Girls show.
The music business is a strange combination of having real and
intangible assets: pop bands are brand names in themselves, and at a
given stage in their careers their name alone can practically guarantee
hit records.  But it is also an industry in which the few successful
bands are very, very rich, and the bulk of bands remains obscure and
impoverished.  The rock business is a prime example of the most
ruthless kind of capitalism.

As a record retailer, Virgin was immune to the success or failure of an
individual band, just so long as there were bands whose records people
were keen to buy.  But we were restricted to living off our retail
margin, which was small, and I saw that the real potential for making
money in the record industry lay in the record companies.

For the time being Nik and I concentrated on building up the image of
our shop.  We continued to work on different ideas to make our
customers as welcome as possible.  We offered them headphones, sofas
and beanbags to sit on, free copies of New Musical Express and Melody
Maker to read, and free coffee to drink.  We allowed them to stay as
long as they liked and make themselves at home.

Word of mouth began to spread, and soon people began to choose to buy
records from us rather than from the big chains.  It was as if they
thought that the same album by Thin Lizzy or Bob Dylan somehow had a
greater value if bought at Virgin rather than at Boots.

I felt enormous pride whenever I saw people carrying Virgin paper bags
along Oxford Street.  Our staff began to report that the same people
were coming back every couple of weeks.  With a loyal customer base,
Virgin's reputation began to grow.

At the other end of the spectrum from buying records the recording
studios -I heard that conditions were extremely formal.  Bands had to
check in at an appointed time, bring all their own equipment and set it
up, and then leave according to the set timetable, taking all their
equipment with them.  Since the studios were so over booked bands would
often have to record straight after breakfast.  The idea of The Rolling
Stones having to record "Brown Sugar' straight after finishing their
bowls of cornflakes struck me as ridiculous.  I imagined that the best
environment for making records would be a big, comfortable house in the
country where a band could come and stay for weeks at a time and record
whenever they felt like it, probably in the evening.  So during 1971 I
started looking for a country house that I could convert into a
recording studio.  In one copy of Country Life I saw a fairytale castle
on sale in Wales for just 2,000 pounds pence.  It seemed a bargain.  I
drove off to see it with Tom Newman, one of the early recruits to the
Virgin Mail Order company.  He was a singer who had already released a
couple of records, but was more interested in setting up a recording
studio.  When we arrived at the castle we realised that the sales
details had inexplicably forgotten to point out that this castle was
actually in the middle of a housing estate.

Feeling tired and disappointed, Tom and I turned back and set off on
the five-hour drive back to London.

Thumbing through Country Life on the way home, I saw an advertisement
for another property, the old manor house at Shipton-on-Cherwell, some
five miles north of Oxford.  We turned off the road, followed the signs
to Shipton-on-Cherwell, drove through the village, and then turned down
a dead end which led to the Manor.

The gates to the Manor were locked, but Tom and climbed over the wall
and found ourselves in the grounds of a beautiful seventeenth-century
manor house built with yellow Cotswold stone which glowed in the
late-afternoon sunshine.  We walked round the outside of the house and
both realised that this would be perfect.

When we called the estate agent the next morning, we discovered that
the Manor had been on the market for a long time.  With over fifteen
bedrooms it was too big for a family house but too small to be
converted into a hotel.  The asking price was 35,000, pounds but he
agreed 30,000 pounds for a quick sale.  I went in to see Coutts, this
time wearing a suit and a pair of black shoes, and asked for a loan.  I
showed them the sales figures which Virgin Mail Order and the Virgin
shop on Oxford Street were achieving.  I don't know how impressed they
were by them, but they offered me a mortgage of 20,000 pounds pence.
Some years later Coutts told me that, if I ever came in to see them
looking remotely smart, they knew I was in trouble.

The Coutts loan was a breakthrough for me: it was the first time a bank
had trusted me with a large amount of debt and I could see that I was
almost in a position to buy the Manor.  Although I had no money myself,
my parents had put 2,500 pounds aside for me, Lindi and Vanessa
respectively for when we were thirty.  I asked them if I could draw on
it early and use it to buy the Manor.  They both agreed, even though
there was a risk that, if the recording studio went bust, the bank
would sell the Manor over my head at a knockdown price and the money
would be lost.  I was still looking at a shortfall of 7,500 pounds
pence We were talking about the Manor over Sunday lunch at Shamley
Green when my dad suggested that I go and see Auntie Joyce.  Auntie
Joyce had no children of her own, and had always been devoted to us.
Her fiance had been killed in the war and she had never fallen in love
again.  She lived in Hampshire and I drove over to see her that
afternoon.  As always she was both very straightforward and very
generous.  She had arranged everything.

"Ricky, I've heard about this Manor," she told me.

"And I gather that Coutts have lent you some money."

"Yes."

"But not quite enough."

"No."

"Well, I'll step in with the balance.  I want the same interest as
Coutts," she said.

"But you can delay paying it to me until you are able to."

I knew that Auntie Joyce was being extraordinarily kind to me and had
probably accepted that she would never see the money again.  What I
didn't know was that she had remortgaged her house to raise the 7,500
to pass on to me, and was having to pay interest on it herself.  When I
started thanking her she brushed me aside.

"Look," she said, "I wouldn't lend you the money if I didn't want to.
What's money for, anyway?  It's to make things happen.  And I'm sure
you'll make things happen with this recording studio just as you won
that ten shillings off me when you learnt to swim."

I promised to myself that, whatever happened, I would repay that money
to her, with interest on top.

I had only dealt with the estate agent over the telephone, but after
the money was transferred and I had bought the Manor I went to pick up
the key.  I wandered into his office.

"Can I help you?"  he said, no doubt wondering what a scruff like me
could possibly want in a smart estate agent's office.

"I've come to pick up the key to the Manor," I said.

"I'm Richard Branson."

He looked astonished.

"Yes, Mr.  Branson."  He pulled out a large iron key.

"Here you are.  The key to the Manor.  Please sign here."

And, with a flourish on his paper, I picked up the key and drove off to
take possession of the Manor.

Tom Newman together with his friend Phil Newell immediately set about
converting the Manor outhouse into a recording studio.  He wanted to
install a state-of-the-art sixteen-track Ampex tape machine together
with the best of everything else he could think of: a twenty-channel
desk, quadraphonic monitoring, phasing and echo facilities, and a grand
piano.  We both wanted to ensure that everything was as good as the
best studio in London.  The Manor gradually took shape.

Every weekend I drove up with Nik and we would camp on the floor and
knock out the partitions which had been put across the fireplaces,
strip off the lino to get down to the original flagstone floors, and
paint the walls.

Lindi also came up and helped, as did most of the people involved in
Virgin Records.  Mum arrived one day with a grandfather clock she had
just bought at Phillips.

"You'll need this," she said.

We put it in the hallway and kept our money in the casement.  It's now
standing in the Virgin Upper Class lounge at Heathrow, but without the
money stuffed inside.

When the lease on Albion Street expired I moved in with some friends
around Notting Hill for a while, as we carried on working in the crypt.
Soon we were too crowded to stay in the crypt, and we found an old
warehouse in South Wharf Road, near Paddington Station, which became
the base for Virgin Mail Order.

One day I found myself driving beneath the Westway and into Maida
Vale.  As I drove over a humpback bridge I saw a line of houseboats
moored along the canal.  With the water, lines of trees, boats brightly
painted in reds and blues with flowerpots on their rooftops, and
various ducks and swans nosing around, it felt as if I was suddenly in
the countryside.

Since I was brought up running wild in the country, I didn't really
like living in London and often felt that I never saw the sunshine or
breathed any fresh air.  Ever since our summer holidays in Salcombe I
had always loved the water and the smells of boats: oil, tar and ropes.
I drove round to the local council office.  They told me to go to the
Water Board, which was responsible for allocating houseboats.  They
warned me that there was a long waiting list.  If I applied now, I
might eventually be allocated one in about five years' time.  I didn't
bother to apply, but drove back to Little Venice, hoping to find
somebody on a houseboat who could tell me how to rent one.  I felt sure
that there must be a way round the system.

As I drove down Blomfield Road along the canal, my car broke down. This
was not unusual.  I got out and stared hopelessly at the bonnet.

"Do you want a hand with that?"  someone called out in an Irish
accent.

I turned round and saw an old man on top of a houseboat fiddling with
the stovepipe chimney.

"It'll be all right," I said, wandering towards him.

"What I'd really like a hand with is how to live on one of these
boats."

Brendan Fowley straightened up.

"Well now," he said.

"There's a thing."

He took out a pipe and lit it, obviously delighted to have an excuse to
stop work.

"You should go along to that boat over there," he said.

"I've just sold it to someone, and that young lady has moved in.  Now I
don't know, but there are two bedrooms and she might be looking for a
lodger.  You'll have to go through a little wooden gate and along the
towpath.  She's the last boat before the bridge, and she's called
Alberta."

I walked along the road, pushed open the leaning wooden door and walked
along the narrow towpath.  At the last boat, I peered into a round
porthole and saw a fair-haired girl bent over in the kitchen.

"Hello," I said.

"You must be Alberta."

"Don't be silly," she said, turning round.

"That's the name of the boat.  I'm called Mundy."

"Can I come in?"  I asked.

"My car's just broken down and I'm looking for somewhere to live."

Mundy was beautiful.  Not only was she beautiful but she had just moved
a bed on board.  We sat down and had some lunch, and before we knew
what we were doing we were lying on the bed making love.  Her name was
Mundy Ellis and I stayed the night with her that night, and moved my
suitcase on board the next morning.  She had a Labrador called Friday,
so with Mundy and Friday I had the week pretty well sewn up.

We had the most romantic affair on Alberta, having dinner out on the
roof in the summer nights, watching the ducks and other boats slip up
and down the canal.

Mundy and I lived together for almost a year.  She helped out with the
Student Advisory Centre, and then with the Manor.  At that time nearly
everyone was taking drugs, and soon Mundy had taken a couple of LSD
trips up at the Manor with Tom Newman.  She brought some LSD back to
London for me to try, and one evening we and two other friends, Rob and
Caroline Gold, settled down on Alberta to have a trip.

Rob decided that he wouldn't take any in case anything went wrong.  I
lived by the dangerous (and sometimes rather foolish) maxim that I was
prepared to try anything once, and I took the little paper square.
After a while my mind began to race.  At first everything was fine.  We
listened to some music and went outside to watch the evening sky.  But
when we went back inside everything started to go wrong: my vision
began to tilt and Mundy loomed in and out looking like a tiny
eight-year-old child.  I looked at the others smiling and chatting and
laughing.  But whenever I caught sight of Mundy all I saw was a wizened
creature rather like the red-coated dwarfish murderer in Don't Look
Now.

I hate being out of control, and I had no idea what to do.  Although
nearly everyone else at Student and then later at Virgin took lots of
drugs, I never really joined them.  I prefer to have a great time and
keep my wits about me.  I know that I've got to get up early the next
morning and so I've rarely been able to get smashed the night before.
Utterly unused to this kind of thing and with the LSD charging through
my system, I couldn't think straight.  I finally went back outside and
lay looking up at the sky.  Mundy came out and hauled me into bed. When
we started making love, I kept my eyes tightly closed, dreading what I
would see if I opened them.

By the time the LSD trip was over, it became clear that my relationship
with Mundy was also over.  Even though she stopped looking like a
murderous dwarf the next morning, I was never able to look at her in
the same way again.  Soon afterward Mundy left Alberta and went up to
the Manor to move in with Tom Newman.

5 Learning a lesson

Throughout the spring of 1971, Virgin Mail Order attracted many more
customers.  But, although the company was growing, we were losing
money.  We offered large discounts on all records and, by the time we
had spent money on the telephone calls to order them, paid for the
postage, and accounted for the staff and the shops, we weren't keeping
up.

Sometimes our customers pretended that they hadn't received the records
so we would have to send out a second copy, and often a third and a
fourth and so on.

All in all we were gradually losing money, and before long we were
15,000 pounds overdrawn.

In the spring I received an order from Belgium for a large number of
records.  I went to the record companies that published those records
and bought them without paying the purchase tax which we had to pay on
records sold in the UK.  I then borrowed a van and drove down to Dover
to take the ferry across to France and then drive on to Belgium.  Some
papers were stamped at Dover to confirm that so many records had been
exported, but when I arrived at Calais I was asked for another
document, a carnet which proved I wasn't going to sell them en route in
France.  The British and the French authorities both charged purchase
tax on records, while Belgium charged nothing, so the records in my van
were effectively bonded stock.  I did not have this carnet, and to my
disappointment was forced to go back to Dover on the ferry, with the
records still in my van.

However, as I drove back to London, it dawned on me that I was now
carrying a van load of records that had apparently been exported.  I
even had the customs stamp to prove it.  The fact that the French
customs had not allowed me through France was unknown.  I had paid no
purchase tax on these records, so I could sell them either by mail
order or at the Virgin shop and make about 5,000 more profit than I
could have done by the legal route.  Two or three more trips like this
and we would be out of debt.

As well as the 15,000 debt of Virgin Records, I had taken on the 20,000
mortgage on the Manor, and the cost of converting the outbuildings into
a recording studio.  It seemed like the perfect way out.  It was a
criminal plan, and I was breaking the law.  But I had always got away
with breaking rules before.  In those days I felt that I could do no
wrong and that, even if I did, I wouldn't be caught.  I had not yet
reached my 21st birthday, and somehow the normal everyday rules of life
didn't seem to apply.  On top of all this exuberance, I was about to
fall head over heels in love with a beautiful American girl called
Kristen Tomassi.

One day at the Manor I was looking for Bootleg, our Irish wolfhound.  I
couldn't find her anywhere, and went upstairs and along one of the
corridors, opening all the bedroom doors and calling out, "Bootleg!
Bootleg!"  I flung open the door of one tiny bedroom and found a
lovely, tall girl getting changed.  Not only was she considerably more
attractive than Bootleg, with a rather quizzical, naughty face, but she
was by herself and wearing just an old pair of skintight jeans and a
black bra.

"You look great just as you are," I said.

"I wouldn't bother with any more clothes."

"Whatever are you shouting out about bootlegs for?"  she asked.

"Bootleg's my dog.  She's an Irish wolfhound," I said, adding rather
irrelevantly, 'and we've also got Beatrice."

Sadly, Kristen did put on a shirt, but I managed to keep her chatting
for almost an hour before someone started shouting for me.  She had
come to England for a summer holiday and met a musician who was doing
some backing work at the Manor.  She had come along with him for the
ride.

We drove back to London in different cars.  Kristen was with her
musician boyfriend; I was by myself.  As I followed her along the road
I wondered if we would ever see each other again.  I followed them all
the way up to London, and finally decided to write a note to her.

As I "drove along I scrawled a note on a scrap of paper asking her to
call me at seven o'clock.  I waited until we reached the traffic lights
at Acton, then jumped out of my car and ran up to theirs.  I tapped on
Kristen's window and she rolled it down.

"I just wanted to say goodbye," I said, leaning in to give her a kiss
on the cheek.

"Have a good trip back to the States."

As I said this I secretly slipped my hand inside the car, reached down,
and pushed my note into her left hand.  As Kristen's fingers closed
round mine, I let go of the note.  I smiled across at the boyfriend.

"Hope the recording went well," I said to him.

The lights changed and the cars in the traffic jam behind us started
hooting.  I tried to catch Kristen's eye, but she was staring straight
ahead.  My note was in her hand.  I hopped back into my car and drove
back to Alberta.

I sat by the telephone refusing to make any calls, which was most
unlike me, until seven o'clock.  Then the phone rang.  It was
Kristen.

"I'm calling from a payphone," she said.

"I didn't want John to overhear."

"Can you step out of the phone box and catch a taxi?"

I asked.

"Come on round and see me.  I live on a boat called Alberta.  Ask the
taxi driver to take you to Blomfield Road in Little Venice.  There's a
little wooden door in the fence which leads to the towpath."

There was a measured pause.

"It sounds like Alice in Wonderland," Kristen said.

"I'll see you in ten minutes."

And with that Kristen came round and I began my second whirlwind
romance on Alberta.

The next morning I was due to make what I hoped would be my final trip
down to Dover, pretending to export records.  By this time I had made
three trips and 12,000 profit.  This last trip would provide enough
money to pay off our overdraft.  I could then give up the scam and
concentrate on the business.  It is impossible to know whether we
really would have stopped since making such easy money is addictive,
but that was our intention.  That morning I loaded up the van with
records once again and set off for Dover.  This time I was even more
casual than normal and after my papers were stamped I didn't even
bother going on the ferry but simply drove around the dock and headed
back for London.  I was anxious to get back to Alberta to reassure
myself that Kristen was still there.  At Little Venice I walked along
the towpath to the boat.  It was the last week of May 1971, and the
apple trees along the towpath were all in blossom.

Kristen had gone.  In a panic I called her at her boyfriend's flat and
put on an American accent when he answered the telephone.

"I'm looking for a Miss Kristen Tomassi," I said.

"This is American Airlines."

9 5 "I'll just get her."

"Kristen," I hissed, 'it's Richard.  Pretend you're talking to a travel
agent.  And then call me back as soon as you can.  Go to a payphone."

"Thank you very much.  I'll do that," Kristen said, and rang off.

Fifteen minutes later the telephone rang.  It was Kristen.

"Just hold the line a minute," I told her.

"OK, Eddy," I said, holding my hand over the receiver.

"Time to go."

Eddy was the Virgin driver who picked up all our record deliveries.  He
set off for the boyfriend's flat.

"Kristen," I said.

"What's your number there?  This is going to take some time."

I called her back, and we had a long chat about what we were doing.  I
spun every yarn I could think of.

Twenty minutes later Eddy arrived back from the flat.

He had all Kristen's clothes in a suitcase.  He had told the boyfriend
that Kristen was moving in with me.

"Kristen," I said.

"You'd better come round here.  I've got something to show you.  It
belongs to you."

I refused to reveal what it was.  Her curiosity kindled, Kristen came
round to Alberta.  She was set upon saying goodbye to me and returning
to America.

When she arrived I held up her suitcase.  She tried to grab it from me,
but I opened it and threw her clothes all around the boat.  Then I
picked her up and carried her to the bedroom.

While Kristen and I spent the rest of the day in bed, the Customs and
Excise officials were planning to raid Virgin.  It had never occurred
to me that I wasn't the only person who had stumbled across this
tax-evasion scam.  Many much larger record shops were doing it, and
they were being much more sophisticated than I was.  I was simply
putting the records that should be exported in our Virgin Records shop
on Oxford Street, and stocking up the new shop in Liverpool, which was
due to open the next week.  The big operators were distributing their
illegally 'exported' records right across the country.

The telephone rang at around midnight.  The caller refused to give his
name, but what he had to say was terrifying.  He warned me that my
bogus trips to the Continent had been noticed and that I was about to
be raided by the Customs and Excise office.  He said that, if I bought
an ultraviolet sun lamp from a chemist's shop and shone it on the
records that I had bought from EMI, I would notice a fluorescent "E'
stamped on the vinyl of all the ones that were meant to have been
exported to Belgium.  He told me that I would be raided first thing
tomorrow morning.  When I thanked him, he told me he was helping me
because I had once stayed up late talking to a suicidal friend of his
who had called the Student Advisory Centre.  I suspected that he was a
customs officer.

I called Nik and Tony and rushed out to buy two sun lamps from a
late-night chemist on Westbourne Grove.

We met at South Wharf Road and started pulling records out of their
sleeves.  The ghastly truth was revealed: an "E' shone up at us from
all the records we had bought from EMI for export.  We began to run in
and out of the warehouse carrying piles of records into the van.  We
then made a terrible mistake: we assumed that the Customs and Excise
officers would just raid the South Wharf warehouse.  We therefore drove
all the records round to the Oxford Street shop and put them in the
racks to be sold.  We had no idea that Customs and Excise officers have
greater powers of immediate search than the police.  I had a similar
attitude to when the Church Commissioners used to come to Albion
Street:

it was all some great game and I found it difficult to take very
seriously.  By the early hours of the morning we had taken all the
"E'-stamped records to the Oxford Street shop, and substituted some
bona fide records for the warehouse stock.

Kristen and I set off early the next morning and walked from Alberta
along the Grand Union Canal to South Wharf Road.  I wondered when the
raid would be.

We crossed over the footbridge beside St.  Mary's Hospital and walked
along the path.  As we walked by the hospital there was a scream above
us.  A body fell out of the sky and hit the railings beside us.  I
caught a glimpse of an old man's grey, unshaven face as he hit the
railings.  It was horrific.  His body seemed to explode and a huge
amount of entrails fell on to the ground or hung dripping in red and
white shiny rings from the railing.  He was naked apart from his white
dressing gown, which quickly began to soak up the blood.

Kristen and I were too shocked to do anything other than stop and
stare.  He was clearly dead on impact.  His neck hung off from his body
and his back seemed to be broken in half.  As we stared at the corpse,
a hospital nurse came running over from the side door.  There was
nothing she could do.  Someone else came rushing out with a white sheet
and covered the body and the bits in the street.  Kristen and I stood
there, enveloped by silence, until we became aware of the noises of
everyday life: traffic, horns blowing, and birdsong.

"Are you all right?"  the nurse asked us.

"Do you want a cup of tea?"

We shook our heads and walked on, deeply shaken.

It was another surreal twist to the start of our relationship.  Two
days ago we had met for the first time and I had slipped a clandestine
note into her hand.  We had enjoyed a fabulous night together on the
boat.  I had then driven to Dover and back, and arranged for her
suitcase to be stolen.  I'd spent all last night scrabbling about with
the records.  Now somebody had killed himself right in front of us.
Like me, I think Kristen must have simply suspended her disbelief about
what was going on.  We were living off adrenaline and bewilderment.

At the South Wharf Road warehouse, we unlocked the doors and walked
upstairs.  But before we could reach my office there was a knock on the
door.  I opened it to find seven or eight men in brown macs.

"Are you Richard Branson?"  they said.

"We're Customs and Excise and we've got a warrant to inspect your
stock."

These men were rather different from the two dowdy little accountants I
had been expecting.  They were bulky, tough men, and very threatening.
Some of my cock sureness evaporated as I showed them into the
warehouse.

"You're meant to have gone to Belgium yesterday," one of them said.

"You can't get back this quickly."

I tried to laugh this off as I watched them begin to check all the
records with their ultraviolet lamp.  They grew increasingly worried
when they couldn't find any marked records.  I enjoyed their confusion,
trying to conceal my hope that we would get away with it.  We began
helping to check all the records, handing them the records from the
sleeves and restocking them on the shelves.

What I didn't realise until it was too late was that they were
simultaneously busting our shops in Oxford Street and Liverpool, and
finding hundreds of marked records.

"All right."  One of the officers put down the

9 9 telephone.

"They've found them.  You'd better come with me.  I'm arresting you.
Come down to Dover with us and make a statement."

I couldn't believe it.  I had always thought that only criminals were
arrested: it hadn't occurred to me that I had become one.  I had been
stealing money from Customs and Excise.  It wasn't some great game
about my getting one up on the Customs and Excise office and getting
off scot-free: I was guilty.

At Dover I was charged under Section 301 of the Customs and Excise Act
1952: "That on 28 May 1971 at Eastern Docks, Dover, you caused to be
delivered to an officer a ship's manifest, being a document produced
for the purpose of an assigned matter namely Customs, which was untrue
in a material particular in that it purported to show the exportation
of 10,000 gramophone records .. ."

And so on.  I spent that night in a cell lying on a bare, black plastic
mattress with one old blanket.  The first part of my Stowe headmaster's
prediction had come true: I was in prison.

That night was one of the best things that has ever happened to me.  As
I lay in the cell and stared at the ceiling I felt complete
claustrophobia.  I have never enjoyed being accountable to anyone else
or not being in control of my own destiny.  I have always enjoyed
breaking the rules, whether they were school rules or accepted
conventions, such as that no seventeen-year old can edit a national
magazine.  As a twenty-year-old I had lived life entirely on my own
terms, following my own instincts.  But to be in prison meant that all
that freedom was taken away.

I was locked in a cell and utterly dependent on somebody else to open
the door.  I vowed to myself that I would never again do anything that
would cause me to be imprisoned, or indeed do any kind of business
deal by which I would ever have cause to be embarrassed.

In the many different business worlds I have inhabited since that night
in prison, there have been times when I could have succumbed to some
form of bribe, or could have had my way by offering one.  But ever
since that night in Dover prison I have never been tempted to break my
vow.  My parents had always drummed into me that all you have in life
is your reputation: you may be very rich, but if you lose your good
name you'll never be happy.  The thought will always lurk at the back
of your mind that people don't trust you.  I had never really focused
on what a good name truly meant before, but that night in prison made
me understand.

The next morning Mum arrived to meet me at the court.  I applied for
legal aid since I had no money to pay for a lawyer.  The magistrate
told me that if I applied for legal aid I would have to stay in prison
as I obviously had no money for bail.  If I wanted to be released, I
would have to put up bail of 30,000 pounds pence.  Virgin itself had no
money that we could put up as security.  30,000 pounds was the price of
the Manor, but using it as security wasn't an option since it was
financed mainly by a mortgage.  I had a pile of debt and no real
money.

Mum told the magistrate that she would put up Tanyards Farm, her home,
as security.  I was overwhelmed by the trust she showed in me.  We
stared at each other across the court and both started crying.  The
trust that my family had in me had to be repaid.

"You don't have to apologise, Ricky," Mum said as we took the train
back up to London.

"I know that you've learnt a lesson.  Don't cry over spilt milk: we've
got to get on and deal with this head on."

Over the summer I confronted the problem with far less shame than I
would have done if my parents had added to the burden.  I kept a clear
head; I was sorry; I wouldn't do it again; and I negotiated an
out-of-court settlement with the Customs and Excise office.  The tax
authorities in the UK are more interested in extracting money than
going through expensive court cases.

On 18 August 1971 I agreed to pay 15,000 pounds as an immediate
payment, with 45,000 pounds to be paid in three instalments over the
next three years.  The total was calculated as being three times the
illegal profit which Virgin had made from avoiding the purchase tax. If
I paid off the sums agreed, I would avoid a criminal record.  But, if I
failed to pay it, I would be rearrested and tried.

After that night in prison and the subsequent negotiations with the
Customs and Excise office, I needed to work twice as hard to make
Virgin a success.

Nik, Tony Mellor, and my South African cousin Simon Draper and Chris
Stylianou, who had both just joined Virgin, resolved to help keep me
out of prison.  They knew it could have been them and were grateful to
me for carrying the can: we were all in it together and it made us even
closer.  In a desperate attempt to earn money to repay the settlement,
Nik started opening Virgin Records shops across the country; Simon
began to talk about a record label and Chris started exporting records
for real.  Incentives come in all shapes and sizes -usually ranging
from a pat on the back to share options -but avoiding prison was the
most persuasive incentive I've ever had.

Since there was limited growth left in the mail-order business, we
concentrated on expanding the record shops.  The next two years were a
crash course in how to manage cash.  From being a completely relaxed
company running on petty cash from the biscuit tin and a series of
unpaid IOU notes, we became obsessively focused.  We used every penny
of the cash generated from the shops towards opening up another shop,
which in turn was another pound towards paying off my Customs and
Excise debt.

Eventually I was able to pay everything and relieve Mum of the bail she
had put up.  Three years later I was also able to repay Auntie Joyce
her 7,500, pounds with 1,000 pounds on top for interest.  If I had been
unable to pay off Customs and Excise, the rest of my life could have
been ruined: it is unlikely, not to say impossible, that someone with a
criminal record would have been allowed to set up an airline, or would
have been taken seriously as a contender to run the National Lottery.

We knew we had to sell more records, through the shops, overseas and by
mail order; attract important artists like Cat Stevens or Paul
McCartney to come and record at the Manor, and set up a record label.
What we didn't know was that, even as we set out to do this, our first
fortune was quietly making its way up the gravel led drive to the Manor
in the form of another van.

This time it was not carrying illegal records but bringing a young
composer and his folk-singing sister from London to act as backing
musicians for a band.  He was the third reserve guitarist on the
musical Hair, and she was a folk singer who sang in pubs.  At the back
of their minds was the hope that they might be able to record some
esoteric instrumental music when the rest of the band wasn't using the
studio.  Their names were Mike and Sally Oldfield.

6 "Simon made Virgin the hippest place to be."

1971-1972

Before the postal strike nearly ruined us in January 1971, someone my
age with a South African accent walked into my office at South Wharf
Road and introduced himself as my cousin.

Simon Draper had graduated from Natal University and come over to
London with just 100 pounds and the idea of staying for a while.  He
was thinking of doing a postgraduate degree, perhaps following his
brother, who had been a Rhodes Scholar at Oxford, but in the meantime
he was looking for a job.

Simon had sat next to my mother at a family dinner party over Christmas
and she had told him to get in touch with me.  After Simon had
exhausted the hospitality of both sides of his family over Christmas
and New Year, he moved into a flat in London and tracked down the
Virgin Records shop in Oxford Street.

Sandy O'Connell, the manager, told him to go over and see me at South
Wharf Road.  He arrived just before lunch.

We went off to have something to eat at the Greek restaurant round the
corner in Praed Street.  There, over lukewarm meatballs, chips and
peas, Simon explained what he wanted to do.  While he had been at Natal
University he had also worked on the South African Sunday Times.  He
told me stories of sitting up through Saturday night until the first
edition was ready, and then leaving work to go to a jazz club with the
first edition tucked under his arm.  We swapped stories about
journalism and then moved on to music.

Simon was obsessed by music.  Because I had left school so young, and
had never been to university, I had missed out on those long evenings
spent lying around listening to music.  Even though music was playing
constantly in the Student basement, I was too busy calling up
advertisers and negotiating with printers to absorb it.  If I heard a
record, I knew whether I liked it or not, but I couldn't compare it
with some other band or recognise that it had been influenced by the
Velvet Underground.  It seemed to me that Simon had listened to every
record released by every band.  He didn't just casually enjoy the
latest Doors album: he thoroughly understood what they were doing, how
they had developed from their previous album and how this album
compared with a whole catalogue of music.  He had hosted his own
half-hour show on Natal Radio, and I soon realised that he knew more
about music than anyone I'd ever met.

We also talked about politics.  Although I had been involved in various
political demonstrations, such as the anti-Vietnam War march to
Grosvenor Square, this was nothing compared with the brutality of South
African politics.  Simon was steeped in both music and politics, and
saw music as one way to make a political protest.  One of Simon's
fellow students at Natal University had been Steve Biko, who was then
leading the all-black South African Students Organisation.

Simon's tutor, a Marxist, had been shot by government backed vigilantes
in front of his own children.  The South African Government then did
not tolerate any form of political dissent.  Simon was not allowed to
play any song with political or sexual connotations, such as those by
Jimi Hendrix or Bob Dylan.

By the time we were on our coffee I had persuaded Simon to come and
work at Virgin, to be the record buyer for the Virgin Records shop and
the Virgin mail-order list.  There was no awkward salary negotiation
since everyone at Virgin was paid the same, 20 per week.

Tony Mellor had moved from working on Student to compiling the
mail-order list.  We were still trying to sell Student to another
magazine company, and although it had not been published for over a
year Tony kept producing dummies of the next issue with which we tried
to impress potential buyers.  He was therefore happy to hand the record
buying to Simon and revert to the more political question of Student's
future.  Tony simply gave Simon the one golden, unbreakable rule,
"Virgin doesn't ever, ever stock Andy Williams!"  and handed over the
first joint of the morning.

"You don't need to worry," Simon said.

"I'd be the last person to break that one."

And from then on Simon was on his own.  I rather left him to it for the
first few months.  I was falling in love with Kristen and trying to
prevent her going back to finish her architectural course in America. I
offered her the job of further renovating the Manor:

"Come on!"  I said.

"You don't have to study for six years to qualify as an architect. Just
start doing it!"

After not too much persuading she eventually agreed with me and set to
work.  She was a natural, with perfect taste.  With her long blonde
hair and fine, almost elfin face, Kristen soon became a familiar figure
at all the auction rooms around London as she bid for large remarkable
pieces of furniture for the Manor.

While Nik managed the costs of both the mail-order business and the
Virgin Records shops, Simon began to define the mail-order list as well
as the Virgin Records shops themselves by choosing which records to
stock.

Simon's taste in music quickly became the single most critical element
of the Virgin ethos.  A record shop is not just a record shop: it is an
arbiter of taste.  I had no idea what music to promote, but Simon was
full of wonderful plans to bring in unknown foreign albums unavailable
elsewhere.  There was a thin dividing line between what was 'hip' and
what wasn't, and Simon made Virgin the 'hippest' place to be.  He
started importing records directly from America, flying them in to beat
the competition.  We only ever dealt in albums because singles were
mainly either crass or were loss leaders to promote albums.  In the
1970s serious bands such as Pink Floyd, Yes or Genesis rarely released
singles.  An album was seen as a combination of political statement,
art, and a way of life.  The serious bands didn't produce dance music:
theirs was music to savour while lying down.  There was a good deal of
discussion about different recordings of the same songs, something
which became especially interesting when the American albums arrived
with different covers from the British versions, sometimes even
different versions of the songs.  These days CDs have been standardised
to be mass marketed around the world.

As well as imports, notably from Germany, France and America, and a
furtive trade in live bootleg recordings, we also made a lot of money
by dealing in deletions -recordings which had gone out of stock and
were being sold off by the record company.  Since we operated a
mail-order business, we had hundreds of letters every day asking for
special recordings.  We thus knew which of these deletions actually had
some residual demand, and it was quite simple for us to pick up the
popular ones cheaply and sell them on.

Most people assume that a record shop's success lies in selling
records.  In fact, Virgin's success both in mail order and the record
shops lay in Simon's skill at buying records.  He was able to pick out
bands that did not sell through the mainstream shops and sell large
numbers of them through Virgin.  He knew so much about music that he
knew which bands would sell even before they were a proven success: he
was already using the antennae which enabled us to set up the record
label two years later.  Without Simon, such a move would have been a
step in the dark.  Our other genius was John Varnom, who did all the
promotion for the records and wrote the advertising slogans for the
shops.  Virgin began to gain a broader reputation.

With the best music playing in the shops and the warehouse all day,
both the staff and the customers lying around smoking dope and talking
about how to get hold of the highly prized American recording of
Aerosol Grey Machine by Van Der Graaf Generator, and everyone enjoying
plenty of sex, there was no better place for any self-respecting
21-year-old to be.

But beneath that there was a business to run.  At the Manor, building
work dragged on.  I dreaded every call from Tom Newman, who was fitting
all the equipment:

he always asked for more money to buy some other piece of recording
equipment.  At the same time I had the customs fine, the mortgage and
the thought of prison hanging over me.

The mail-order business was doing well but mainly seemed to attract the
serious music buyers who were looking for quite rare records.  It
seemed difficult to expand it further.  We realised that, if we were
going to make money, it would have to come from opening up more Virgin
Records shops.

Nik and I began a programme of serious expansion.

Towards the end of 1971 and throughout 1972 we aimed to open a shop
every month.  By Christmas 1972 we had fourteen record shops: several
in London and one in every big city across the country.  As well as
organising all the records that the shops would stock, advertising the
shops, choosing and training the staff to run them, and setting up the
accounting systems to keep control of the money, we found that the
timing of shop openings was crucial.  After negotiating the lease until
we were sure that the landlord would go no lower, we would push for a
rent-free period for the first three months.  This was the single most
crucial element.  We would not agree to open the shop unless this was
in place, and as a result we walked away from a great many
opportunities.  However, when we opened we knew that the record sales
in the first three months would help pay for the rent on the previous
shop that we had opened.  The sales also demonstrated, without
committing to a huge overhead, whether the site we had chosen attracted
enough people off the streets to make the shop viable.

As we opened these shops we learnt all sorts of lessons that stood us
in good stead for the future.  We always looked for the cheaper end of
the high street, where we might attract shoppers to come a few extra
yards off the beaten track without us having to pay an exorbitant rent.
We also chose areas where the teenagers hung out, such as near the
Clock Tower in Brighton or Bold Street in Liverpool.  We always asked
the local teenagers where the best place for a record shop would be.
There are many invisible lines in a town which people will not cross: a
street can change character in the space of twenty yards.

The other unique thing about record retailing is the speed with which
records move.  When a big release is out, like the latest David Bowie
record, you can measure its sales in hours.  You therefore need to keep
right on top of the shop to find out what's selling that day.  You can
then use that information to rearrange the record displays in the other
shops.  If you run out of the key record that's selling that day, then,
of course, the buyer will head off to the next shop to pick it up. Once
you've lost that chance to sell a copy of Hunky Dory, you never get it
back again.  There are no repeat sales of the same record. Although you
will always stock Hunky Dory, up to 70 per cent of your sales of it
will happen in the first two weeks of its release.

At first, Virgin promoted its image as a place where people could come
and spend time listening to and choosing their records, with a distinct
emphasis on elitist, 'hip' taste.  As well as the more mainstream
records, we wanted to show teenagers more interesting ones.  Our shops
flatly refused to sell the mass-market teenybopper records such as the
ones by The Osmonds and The Sweet that were storming the charts.
Despite Simon's persuasive arguments about style, our refusal to stock
Gary Glitter and all the glam-rock stars always slightly worried me
since I could see the short-term income we were turning away.  However,
Simon assured me that if we stuck to our image we would keep our
integrity and build up more customers: "It's the Andy Williams rule,"
he told me.

"We're not in that market."

The shop at 130 Notting Hill Gate became one of the best Virgin Records
shops.  Simon started working above it, and we laid our cushions on the
floor in the shop so that people could lie around there all day.  We
knew that we were successful when people started coming up to London
just to go to a Virgin Records shop.  If we could have sold marijuana,
we would have done.  In fact, I suspect that some of the staff did.
Selling records, chatting up the customers, recommending which music to
buy, reaching under the counter for the latest bootleg, heading off to
pubs and clubs to hear more bands play: it became a way of life.

When we opened our Virgin Records shop in Bold Street, Liverpool, in
March 1972, I proudly saw that we took 10,000 pounds in the first week.
A week later the figure was 7,000, pounds and then the following week
the takings were down to 3,000 pounds pence.  By the middle of the
summer they had dropped to 2,000 pounds and I went up there to see what
was going wrong.  The shop was packed.  There were rockers all jammed
into one corner, mods in another, and hippies draped all over the floor
near the till.  All kinds of music were playing.  But nobody was buying
anything.  Everyone was happily stoned and having a great time, but
nobody could get to the till and they were keeping other shoppers out
of the store.  The policy of treating our shops like clubs was out of
control.  For the next month we had someone at the door who gently
warned people as they went in that they were going into a shop, not a
nightclub; we put in brighter lights and moved the counter and the till
nearer the window.  It was a narrow line between maintaining the shop's
atmosphere and keeping it profitable.  The takings at last recovered.

Throughout this expansion, one of our main difficulties was getting
hold of the records to sell.

Some record companies, including Poly Gram refused to supply us because
we were discounting and therefore offending the main retailers.  Other
record companies refused to supply us since they doubted our ability to
pay.  Nik and Chris Stylianou ("Chris the Greek', who had joined as our
sales manager) called around all the possible suppliers, and eventually
found an extraordinary solution: a tiny record shop in Ealing called
Pop In, run by Raymond Laren.  Raymond was prepared to use his account
to buy records on our behalf.  It was good business for him since he
would order all our records on top of his own orders, charge a 5 per
cent margin and pass them on to us.

When we first struck this deal with Raymond, we would give him the list
of records to add on to his orders; Tony or Simon would drive round and
pick them up, and we'd drive them to the three or four Virgin shops.
Pop In was a tiny shop with matt black walls and peeling posters of
Sergeant Pepper and Neil Young.  It was difficult to squeeze in and out
with the boxes of records, but we managed to cope.  Over the next year,
as we opened more and more shops, the number of records passing through
Raymond's shop grew.  Soon Raymond was ordering thousands of records
from the record labels and we were sending a lorry to collect them.

We kept trying to deal with the record labels directly, but they
continued to ignore us.  Soon Virgin became one of the largest record
chains in the country and the scenes at Raymond's shop were farcical: a
line of vans unloaded hundreds of cases of records at the front door,
and people staggered through the shop to the back door, where they were
loaded on to another line of vans to take them around the Virgin shops.
Something had to give.  We were still having to pay an extra 5 per cent
to buy our records through Raymond.  Finally, Nik and I went back to
the record labels and pointed out what was happening.  They agreed to
sell records to us directly, and Raymond Laren's Ealing-comedy earner
was over.

His shop reverted to selling a few dozen records each week, and his
accountants were left to puzzle over what had gone wrong with his
amazing shop.

During 1972 Simon fell in love with a South American girl and told me
that he was going to leave Virgin and go to live in Chile with her. The
Manor was at last open for artists to record; there were twenty Virgin
Records shops, and the mail-order business was doing well. Simon had
been working with me for a year and, although neither of us had ever
expected him to stay for more than a few months, I suddenly realised
how vital he was to Virgin.  His choice in music had established the
Virgin Records shops as the place to go and buy records.  It was 'hip'
to go and spend an afternoon mooching around the Virgin Records shop,
whereas no self-respecting teenager would go and spend an afternoon
hanging around Woolies.

The credibility which Simon had always talked about, and the sales of
The Osmonds which we had foregone, had worked.  The music press now
discussed which artists Virgin was promoting.  When we put an eclectic
German band called Tangerine Dream in our shop windows, it became a
talking point.  Record labels started contacting us and asking whether
the Virgin Records shops could run special promotions on their bands.

I tried to persuade Simon to stay, but he was set on leaving.  His
girlfriend went to Chile first, with Simon poised to join her in a
month's time.  During that month he suddenly received the "Dear Simon'
letter from her which called everything off.  He was desperately
disappointed, but at the same time it became clear that his future lay
in London rather than either South America or even South Africa.  Since
Virgin now had the record shops and the recording studio, we started
talking about the third part of the grandiose dream we had discussed
over our first lunch at the Greek restaurant: the Virgin record
label.

If Virgin set up a record label, we could offer artists somewhere to
record (for which we could charge them);

we could publish and release their records (from which we could make
profit), and we had a large and growing chain of shops where we could
promote and sell their records (and make the retail profit margin). The
three businesses were mutually compatible and would also benefit the
bands we signed, since we could reduce prices at the Manor, the
manufacturing end, and increase promotion at the shops, the retail end,
while still making our own profit.

Simon and I drew up an agreement whereby he would set up and run the
new Virgin record label, Virgin Music.  He would own 20 per cent of the
company, which would henceforth be separate from the Virgin Records
shops.  And the first person Simon and I wanted to sign up was that
third reserve guitarist from Hair: Mike Oldfield.

Mike Oldfield had had a difficult childhood with an alcoholic mother.
He had often locked himself up in his room in the attic and taught
himself how to play all kinds of instruments.  At the age of fourteen
he had made his first recording with his sister Sally, singing folk
music.  He and his sister formed a folk duo called Sallyangie and
signed to Transatlantic Records.  By fifteen he had left home and
become a guitarist alongside Dave Bedford with Kevin Ayers' group The
Whole World.

For a couple of weeks in October 1971, Mike was signed as a session
guitarist to a singer called Arthur Louis who was recording at the
Manor.  Mike soon started chatting to Tom Newman and one day finally
screwed up the courage and gave him a tape of his own music.  Mike had
recorded this tape himself, laboriously over dubbing many different
instruments on to the same tape.  It lasted eighteen minutes, was
untitled and had no vocals.  Tom listened to it and described it as
'hyper-romantic, sad, poignant and brilliant'.  Tom then played it to
Simon when he was next up at the Manor.

Simon was astonished by it.  He tried to help Mike approach some record
companies, but they all turned him down.

A year later, Simon and I were sitting on the houseboat when we finally
decided to start a record company.  We called Mike up.  To our delight
he had still not signed up with anyone.  He felt completely rejected by
the record industry and was overwhelmed that we seriously wanted to
release his music.  He came straight over to the houseboat to see us. I
suggested that Mike should go back to the Manor and live there, and
then whenever the recording studio was free he and Tom Newman could get
together and work on his record.

"I'll need to rent some instruments, though," Mike warned me.

"Like what?"  I pulled out my diary and prepared a list.

"A good acoustic guitar, a Spanish guitar, a Farfisa organ, a Fender
precision bass, a good Fender amplifier, glockenspiel, a mandolin, a
mellotron ' "What's that?"  I drew a circle round it.

"It's not absolutely necessary," Mike conceded.

"A

triangle, a Gibson guitar .. . Oh, and some chimes, of course."

"What are chimes?"  I asked.

"Tubular bells."

I wrote down 'tubular bells' and set about finding all these
instruments in a music magazine.  The guitar cost 35, pounds the
Spanish guitar 25, pounds the Fender amplifier 45, pounds the mandolin
15, pounds and the triangle was a bargain at 1 pound pence The tubular
bells cost 20 pounds pence ' 20 for tubular bells?"  I said.

"They'd better be worth it."

7 "It's called Tubular Bells.  I've never heard anything like it."

1972-1973

Since mike old field was the first artist we signed, we had no idea
what sort of a contract to offer him.

Luckily, Sandy Denny, who originally sang with Fairport Convention but
had now gone solo, had recently recorded at the Manor.  She had become
a friend of mine and I asked her for a copy of her contract with Island
Records.  This was apparently a standard Island Records deal, and we
retyped it word for word, changing "Island Records' to "Virgin Music'
and "Sandy Denny' to "Mike Oldfield'.  It set out that Mike would make
ten albums for Virgin Music and receive a 5 per cent royalty on 90 per
cent of the wholesale value of the record (10 per cent was kept by the
record company to pay for packaging costs and breakages).  Since Mike
had no money, we put him on the standard Virgin salary which we all
received, 20 pounds a week.  We would then deduct it from any future
royalties, if they ever materialised.  Although Simon and I loved
Mike's music, we never thought that we'd make any money from it.

It took Mike well into 1973 to record what became known as Tubular
Bells.  It was a fantastically complicated sequence of recordings to
make, and he and Tom Newman went over it again and again in the
recording studio, mixing, dubbing, and fine-tuning all the different
layers of music.  Mike played over twenty different instruments and
made over 2,300 different recordings until he was happy.  In the
meantime we were still trying to rent out the Manor to any band we
could find, so Mike was often interrupted and had to clear his kit out
of the recording studio to make way for The Rolling Stones or Adam
Faith.

Frank Zappa had made his reputation as one of the most original,
innovative and irreverent performers in rock music.  His albums, like
We're Only In It For The Money and Weasels Ripped My Flesh, were filled
with biting satire, and when he came up to the Manor to investigate the
possibilities of recording there I felt sure he would appreciate a
joke.

I drove Frank up from London myself, enthusing about the wonderful
manor house in which the studio was situated.  But, instead of taking
the road to Shipton-on-Sherrwell I made a detour to nearby Woodstock. I
turned off the road, under a majestic arch, and drove down a long,
gravel driveway to the door of a magnificent house.

"I'll park the car," I told Frank.

"Just knock on the door and tell them who you are."

The door was opened by a uniformed footman.

Funnily enough, he didn't recognise Frank Zappa and was not amused to
be told the long-haired musician had come to stay.  Did Zappa know, the
footman asked, that he was knocking at the door of Blenheim Palace, the
ancestral seat of the Dukes of Marlborough?

Frank got back into the car, swearing that he could see the funny side
of it.  But he never did record at the Manor.

Throughout the summer of 1972 one of our neighbours tried to close the
Manor down.  Although we had planning permission to use the recording
studio during the day, we couldn't use it at night, which was when all
the artists really wanted to play.  By definition, a recording studio
is soundproof, but one of our neighbours reckoned that he could hear
the music and it kept him awake.  He kept appealing against our
application to record at night.  Unless we could record at night, the
Manor would have few advantages over the other recording studios, and
bands would stop coming out of London.

We engaged in clandestine warfare against this neighbour.  We rigged up
a pile of tin cans in the recording studio and looped a long piece of
string round them at the bottom of the pile.  The string then ran along
the drive and down to the road.  We took it in turns to sit in the
hedge and hold the string.  We sat there all night, and I remember the
smell of the cowslips and grass, and the heavy rustling of the badgers.
But it was the rubbery squeaking of our neighbour's shoes as he walked
along the road and came up our drive we were really listening out
for.

When we heard him coming, we yanked the string, which sent all the cans
in the recording studio clattering to the floor.  No matter what the
musicians were doing, they all had to run into the Manor and start
drinking cups of coffee.  By the time the neighbour arrived, all he
could see was a group of people sitting round the kitchen table.  When
he started calling the police, the same trick worked.  We pulled the
string as soon as the police car came round the corner.  After several
apparent false alarms, the police stopped coming.  But the neighbour
was still blocking our application to record at night.

We were still using this trick when Paul and Linda McCartney came to
the Manor to record "Band On The Run'.  It was June and the nights were
still and hot, heavy with the smell of jasmine coming across the
courtyard.  Linda McCartney kept opening the door to the recording
studio to let in some fresh air.  I was on watch in the hedge outside,
and every now and then I heard snatches of music so I ran back to shut
the door.

When I was settled back in the hedge I heard Linda McCartney throw open
the door and shout, "Who keeps shutting this damned door?"  Luckily,
our neighbour didn't come out that week, because I doubt whether the
McCartneys would have appreciated a pile of tins cascading on to them,
followed by a mad dash to the kitchen.

One day the front doorbell rang and I found an elderly couple standing
there.  They asked me whether I was having trouble with Mr.  Sawtell,
the neighbour.

When I told them that he was the only person who was appealing against
our planning permission, they told us that he had done the same to them
when he moved in.

They had wanted to convert a barn for their elderly mother to live next
to them, but Mr.  Sawtell had blocked it until one day he had asked for
some money.  When they gave him 500, pounds he withdrew his appeal.

"He's just after a backhander," the couple said.

"Somebody should stop him."

The next day I bought a small tape recorder with a microphone, which I
stuck to the inside of my shirt.  I went round to see Mr.  Sawtell and
asked him whether there was any way he would withdraw his appeal, since
it was in danger of putting me out of business.

"Well, I've incurred heavy costs while I've been doing this," he
said.

"If you pay them, then I'll consider withdrawing my complaint."

"How much would that be?"  I asked.

' 5,000."

"That's a vast figure," I said.

"You must have had a whole law firm working on the case."

"It's been expensive," Mr.  Sawtell said.

"Should I make the cheque payable to your lawyers?"

"No, no.  Just make it payable to me."

I promised to think about what he had told me, and that afternoon I
wrote to him enclosing a copy of the recording and suggesting that he
might like to withdraw his complaint.  I heard no more from him and the
Manor was granted the right to record at night.

On 22 July 1972, Kristen and I were married at the tiny church at
Shipton-on-Cherwell.  I had just turned 22, and Kristen was still 20.
We had known each other only since May of the previous year.  I still
have a copy of the invitation we sent out for the party before the
wedding.

It reads: "Kristen and I have decided to get married, and we thought
that this would be a good excuse for a party.

There will be a pig on a spit, so please come since the pig will not
last.  The Scaffold will be playing."  One of the best things about the
Manor was that it lent itself to having wonderful parties.  We had
bands who were happy to play, a river to swim in, huge rooms with
ancient fireplaces, and a cloistered courtyard which caught the sun.

I have always enjoyed parties, and I love throwing the Virgin staff
together.  It's an important part of life at Virgin.  After all, if the
receptionist gets to meet the A&R person face to face, they will help
each other out more if there's a problem.  Likewise if the shop staff
get to know the record staff and so on.  At Virgin we've always had
staff parties, and often get away for the weekend so people can really
let off steam.  Over the years the parties have got bigger and bigger,
but the theme is always the same: glorious irresponsibility for the
night.

In our early days, most of the hotels around Brighton and Bournemouth
banned us after one party where my staff handcuffed me naked to some
railings outside the hotel.  I managed to knock the handcuffs off with
a:

brick.  I then charged into the dining room with a firehose pumping
water at full volume.

Our wedding barbecue was a great feast, with all the villagers from
Shipton-on-Cherwell mixing with the Virgin staff and a great many of
the rock bands around at the time.  The wedding day was extraordinary
throughout.

As we were waiting at the church for Kristen to arrive, a huge
articulated lorry started to squeeze its way down the narrow lane
towards us.  Nobody could understand what it was doing, until a tiny
old lady in a blue suit with a blue hat jammed on to her head climbed
out.

"I'm not too late, am I?"  Granny called out.

The lorry had crashed into her car coming through Oxford, and she had
insisted that the driver take her to our wedding.

My parents gave us a beautiful old Bentley with red leather seats and a
walnut dashboard as a wedding present.  Although it tended to break
down as much as my Morris Minor, it was supremely comfortable to sit in
while we were towed along.

One of Kristen's bridesmaids was her sister Meryll, and Nik was my best
man.  At the reception afterward it became clear that there was a
certain chemistry between them, and late that night they headed off
towards a room in the Manor.  By the time Kristen and I returned from
honeymoon, Nik and Meryll had announced that they too were getting
married.

Nik and Meryll were married even faster than Kristen and I: their
wedding was in the winter of 1972, just five months after they had met.
Kristen and I found this marriage a little claustrophobic: I would
spend all day with Nik at South Wharf Road, and then I would also see
him and Meryll together in the evenings.

Unfortunately, one of the reasons why Kristen had come to England was
to escape from her family, and now she found that she and her sister
had married two men who practically lived in each other's pocket.

Incestuous wasn't the word for it.  On top of that, Nik and I, who had
run Virgin very much as a singles company, suddenly found ourselves
both married: it was something of a culture shock.

Throughout the winter of 1972 and the spring of 1973, Mike Oldfield was
living at the Manor and recording Tubular Bells.  I think this was the
happiest time of his life.  He was there with Tom Newman, who was
obsessed by the technology of recording, and they could endlessly
refine the recordings together.  Mundy was still living there.  When
Kristen and I drove up to the Manor on a Friday night, we would find
Mike, Tom and Mundy sitting on cushions on the floor, stoking up the
vast fire and listening to the latest tapes.  They were oblivious to
the outside world.  Tubular Bells was finally ready for release in May
1973.

We knew that we had something extraordinary on our hands when we
started selling Tubular Bells into the trade.  Simon took the recording
along to the sales conference at Island Records, who were going to
distribute the album.  They were all in a large conference room at a
hotel near Birmingham.  They had already had to listen to hours of
music.  These men had heard it all before literally.

Simon put on Tubular Bells and they listened to the first side in its
entirety.  When it finished there was an outburst of applause.  This
was Simon's first sales conference and so he had no idea that it was
unprecedented.  He never again heard a roomful of world-weary salesmen
applauding a new record.

On 25 May 1973 Virgin Music released its first four albums: Mike
Oldfield's Tubular Bells; Flying Teapot by Gong; Manor Live, a jam
session from the Manor led by Elkie Brooks; and The Faust Tapes by
Faust, a German band.

1973 was an extraordinary year for rock and pop music.  That summer saw
the singles chart dominated by the glam rock of Suzi Quatro, Wizzard,
Gary Glitter, and The Sweet.  But there was also a large Motown
contingent, with Stevie Wonder, Gladys Knight and the Pips, the Jackson
Five and Barry White.  At the other end of the spectrum from these
singers were Lou Reed with "Take A Walk On The Wild Side and 10cc with
"Rubber Bullets'.

The album charts were headed by David Bowie at number one with Aladdin
Sane, the first proof of how he could reinvent himself to stay at the
top.  Below him were The Beatles with their 1962-1966 and 1967-1970
double albums, Pink Floyd with Dark Side Of The Moon, Lou Reed's
Transformer, and Roxy Music's For Your Pleasure.

In the face of this competition, we had to fight hard to attract
attention for Virgin's first four releases.  Apart from Manor Live,
which was really just a regular jamming session, the other three did
very well.  Faust won great praise in the press: "Faust are probably
the most exciting and original band to emerge from Europe in a long
time," wrote Melody Maker.  New Musical Express picked out Faust as the
coolest band around.  We offered their album at the price of a single,
which immediately fired sales, and it went straight into the charts at
number 28.  This marketing ploy also won attention for the new Virgin
Music label, although probably more on the grounds of foolhardiness
than judgement.

At 48 pence a record, Faust sold 40,000 copies in the first week, and
100,000 copies after a month.  They made very esoteric music.  The fact
that they had previously been signed to the German classical-music
label Deutsche Grammophon gives some idea of their sophistication.  For
their album cover, Simon went to the Rowan Gallery in the West End with
Uwe Nettelbeck, their manager (a leading political writer for Der
Spiegel).  There they chose a Bridget Riley painting called Rise.  In
short, Faust carried a lot of intellectual clout: they were a band for
people who were serious about their music, about as far away as it was
possible to get on the musical spectrum from Donny Osmond or David
Cassidy.  At one of their concerts in London they stopped by the side
of the road and picked up a construction worker who was using a
pneumatic drill.

They took him along to the concert with them and set him up on stage,
where he drilled through lumps of concrete as they played.

The other three albums we released were at the normal retail price of
2.19.  Gong's Flying Teapot did quite well.  Melody Maker wrote, "Once
they stop chanting about Radio Gnome and cups of tea it's really
excellent: flowing rock themes, punctuated by weird effects.  It's a
great pity that much of the music is hidden behind the silly lyrics."
Gong's guitarist was Steve Hillage, one of the best guitarists in the
world, who some people thought was somewhat wasted within Gong.  It was
clear that Gong would never threaten Pink Floyd in the charts.

But of Virgin's first four albums it was Tubular Bells that really
captured people's imagination: it was completely original and
immediately spellbinding.

People found it addictive and played it again and again, both to listen
to the music and to marvel at how Mike had woven it all together.  I
remember a review in TIME that I had to reread several times before I
realised that, although I would never understand what the critic was
actually saying, he was clearly raving about it.  TIME was the single
most influential music paper.  With it praising Tubular Bells, everyone
would look out for it.

Aside from the reviews, I knew that, as soon as we could get people to
listen to Tubular Bells once, it would take off.  As one critic
correctly said, "One hearing should provide sufficient proof."  The
problem was getting that hearing.  I called up every radio producer I
could, trying to persuade them to play Tubular Bells.  But at that time
3-minute singles dominated radio music: there was no room for a
45-minute piece of music without words.

Radio 3 turned it down because it wasn't Mozart and Radio 1 turned it
down because it wasn't Gary Glitter.

For the first two weeks, sales of Tubular Bells were stillborn.  Then I
invited John Peel over to Alberta for lunch.  We had known each other
since I had interviewed him for Student.  He had also started his own
record label, Dandelion.  He was the only person who played serious
rock music on the radio, and his show was our only chance of winning
air time for Tubular Bells.  We all had lunch on Alberta and then
settled down on the sofas.  I put on Tubular Bells.  He was amazed.

"I've never heard anything like it," John finally said.

Later that week we listened to John Peel's laconic voice coming out of
the radio.  I was sitting on the deck of the houseboat with Mike
Oldfield and everyone from Virgin.

"Tonight I'm not going to play a whole lot of records.

I'm just going to play you one by a young composer called Mike
Oldfield.  It's his first record and it's called Tubular Bells.  I've
never heard anything like it in my life.  It's released by Virgin, a
brand-new record label, and it was recorded at Virgin's own studios in
Oxfordshire.  You'll never forget this."

With that, Tubular Bells started.  I was lying on the sofa.  Everyone
was lounging around in deep armchairs or on the rug, and we passed
round beer and wine, cigarettes and joints.  I tried to relax.  I could
see everyone else lying there totally spellbound by the music.  But I
kept worrying.  I find it impossible to stop my brain from churning
through all the ideas and possibilities facing me at any given moment.
I wondered how many people were listening to The John Peel Show, how
many of those would go out and buy Tubular Bells the next day; whether
they would wait until Saturday or would have forgotten about it by
then.

Would they come to the Virgin shops or order it from Smith's?  How fast
would we receive the royalties?  How many copies would we have to
reprint?  How should we break it in America?  On one level I was
absorbed in the music, but I felt like an outsider.  I couldn't lose
myself in it like Simon or Nik, or my lovely new assistant Penni, who
was a real beauty with long, black wavy hair and a generous smile.  I
was too aware that Virgin needed to sell a lot of copies to make money
for next month's tax repayment.  I knew that Flying Teapot and The
Faust Tapes were hardly going to knock The Rolling Stones or Bob Dylan
off the charts.  But Tubular Bells was extraordinary: something must
happen from tonight's broadcast.  Virgin would never be able to afford
to buy such a length of radio time to advertise it.

Mike Oldfield sat in silence.  He leant against Penni and stared
straight at the radio.  I wondered what was going through his head.  I
had wedged a sleeve of Tubular Bells -which showed a giant tubular bell
suspended over the sea with a wave breaking in the foreground -above
one of the picture frames.  Mike stared at it as if he was staring out
to sea.  A greedy thought swam in the murky depths of my mind:

perhaps he was already dreaming up another album?

All the next day the phones rang with orders from record shops for
Tubular Bells.  As well as choosing to break all tradition by playing
it in its entirety, John Peel reviewed Tubular Bells for the
Listener:

On the all too frequent occasions when I'm told that a record by a
contemporary rock musician is a work of 'lasting importance' I tend to
reach for my hat and head for the wide open spaces.  Today these
experts would probably tell you that in twenty years' time collectors
will still be enthusing over the records of such weighty bands as Yes
and Emerson, Lake and Palmer.  I'm ready to bet you a few shillings
that Yes and ELO will have vanished from the memory of all but the most
stubborn and that the Gary Glitters and Sweets of no lasting value will
be regarded as representing the true sound of the 1970s.

Having said that, I'm going to tell you about a new recording of such
strength, energy and real beauty that to me it represents the first
breakthrough into history that any musician regarded primarily as a
rock musician has made.  Mike Oldfield .. .

John Peel had an enormous following, and what he said was picked up by
thousands of people across the country.

We arranged for both Gong and Faust to tour the country, but it was the
grand Tubular Bells concert planned for 25 June which I hoped would
bring the national press to witness the music celebrity of the moment.
We made the Tubular Bells concert into an unmissable event.  We managed
to have Mick Taylor, then The Rolling Stones' guitarist, Steve Hillage
and Hatfield and the North all agree to play various instruments.  Viv
Stanshall from The Bonzo Dog Doo-Dah Band agreed to be on stage and
announce the instruments as he did on the record.

On the day of the concert Mike came round to see me on the houseboat.

"Richard," he said quietly.

"I can't go through with this concert tonight."

"But it's all arranged," I said.

"I simply can't go ahead," he repeated in a deathly whisper.

I felt a wave of despair.  I knew Mike could be as stubborn as me when
he wanted to be.  I tried to forget that the whole concert was
arranged, the tickets sold and even television coverage agreed.  I
couldn't use any of that as leverage since it would only strengthen
Mike's resolve.  I had to be cunning.

"Let's go for a drive," I said innocuously, and led the way along the
towpath and to my old Bentley parked outside.  I knew that Mike had
always admired this battleship-grey car with its faded red-leather
seats.  I hoped that a soothing drive past the Queen Elizabeth Hall
would put Mike in a different frame of mind.  We drove off with Mike
sitting bolt upright.  After a monosyllabic drive we reached the Queen
Elizabeth Hall and I slowed down.  There were Mike Oldfield posters
everywhere.  Already a crowd of people were making their way to the
concert.

"I can't go on to the stage," Mike repeated.

I couldn't tell him that it was in his best interests, that this
concert might catapult him into a different league and put him up
alongside Pink Floyd.  I stopped the car.

"Do you want to drive?"

"All right," Mike said cautiously.

We drove on, over Westminster Bridge, past Victoria.

I watched Hyde Park flash past the passenger window.

Mike turned down Bayswater Road and drove near to the church where I
had edited Student magazine.

"Mike," I said.

"Would you like to have this car?  As a present?"

"A present?"

"Yes.  I'll get out here and walk home.  You just keep on driving and
the car's yours."

"Come off it!  It was your wedding present."

"All you have to do is then drive it round to the Queen Elizabeth Hall
and go up on stage tonight.  It's yours."

A silence fell between us.  I watched Mike as he held the steering
wheel and imagined himself driving this car.  I knew he was tempted.  I
hoped he would agree.

"It's a deal," Mike said.

I would have to tell Kristen and then my parents what I had done with
our Bentley, but I knew they wouldn't mind too much.  For all its charm
and sentimental value, the Bentley was just a car.  It was vital to get
Mike up on stage and sell copies of Tubular Bells.  If he was
successful, I would be able to pick up any car I wanted.  My mother
would have approved.

As the last bars of Tubular Bells died away at the Queen Elizabeth
Hall, there was a momentary silence as people digested what they had
just heard.  They seemed mesmerised and nobody wanted to break the
spell.

Then they leapt to their feet in a standing ovation.  I was sitting
between Kristen and Simon and we stood up and cheered and applauded.
Tears ran down my cheeks.

Mike stood up in front of the organ, a tiny figure, and just bowed and
said thank you.  Even the band applauded him.  He was a new star.

That night we sold hundreds of copies of Tubular Bells.  Mike was too
shattered to speak to the press.

Looking at all the people cheering and crowding round to buy his
record, he said, "I feel as if I've been raped," and disappeared off in
his new Bentley.  Mike refused to go back on stage for many years
afterward.  Kristen and I walked home.  From that night onward, Mike
Oldfield's Tubular Bells was set to become the most celebrated album of
the year.  Virgin Music was on the map, and the money started rolling
in.

Word of mouth spread and on 14 July Tubular Bells entered the album
charts at number twenty-three.  By August it was number one.  For the
next fifteen years, whenever Mike Oldfield released an album it reached
the top ten.  Tubular Bells eventually sold over thirteen million
copies, making it the eleventh-best selling album ever released in
Britain.  The sacrifice of my Bentley was worth it.  I never got round
to buying another one.

Although overnight Virgin was an established record label, we were a
tiny company with a staff of seven and no ability to distribute records
to all the record shops across the country.  We had two options open to
us.  The first was to license our records to another, larger, record
label.  This would work only for fairly successful bands.  The other
company would give us an up front payment for the right to promote the
record, distribute it and keep the bulk of the profits.  If the record
recouped its advance, the record company would pay us a royalty,
typically around 16 per cent.  This was the traditional arrangement for
a fledgling record company like Virgin.

The second option was more risky.  Virgin would forego the up front
payment and the royalties, and simply pay another record label to
manufacture and distribute the records as and when they were ordered by
shops around the country.  Virgin would be responsible for all the
promotion of its records, and carry all the risk if the record failed.
Correspondingly, we would have all the upside if the record sold
well.

Most small record labels licensed their records since it was easy
money: they received 16 per cent royalties from the other company and
paid out whatever they had agreed to the artist, say 5 or 10 per cent.
But Simon and I decided that we would go for a manufacture and
distribution deal (called "Pressing and Distribution' or "PD').  It was
a bold move but even then I knew that it is only by being bold that you
get anywhere.  If you are a risk-taker, then the art is to protect the
downside.  It seemed to us that Tubular Bells was so good that we could
promote it ourselves.  I felt sure that it would sell enough copies to
pay back our investment.  With the idea of asking for a PD deal rather
than a straight licensing agreement, we went to see Island Records.

I had first come across Island Records when I was editing Student
magazine.  It had been set up by Chris Blackwell, who was brought up in
Jamaica and had almost single-handedly introduced reggae into
Britain.

Island released Bob Marley, who became the first reggae superstar, and
among others they also produced Cat Stevens and Free.

Predictably, at first Island refused to do a PD deal.

They already licensed Chrysalis and Charisma (which had Genesis), and
they wanted Virgin too.  So they offered us a highly attractive
licensing deal with royalties of 18 per cent.  We were paying Mike 5
per cent, which meant that if we accepted Island's offer we could
collect 13 per cent of the sales of Tubular Bells for ourselves.  At 2
pounds 19 pence, this was 28.5 pence a record, which would mean a total
profit to us of around 171,000 pounds if Tubular Bells did astoundingly
well and sold, say, 600,000 copies -that is to say reached double
platinum.

A record goes gold at 200,000 copies and platinum at 300,000 copies.
If it reached a million copies, then Virgin would make 285,000 without
having to pay for any of the costs of promoting and marketing the
record.

To a seasoned eye Island were far better placed than Virgin to promote
this record to all the shops across the country.  Most small record
companies in our place would have accepted it, and certainly both
Island and our lawyers urged us to do so.

But Simon and I felt differently.  We had fourteen Virgin shops across
the country which could promote Tubular Bells in Liverpool, Manchester,
Leeds, Newcastle, Sheffield, Edinburgh, Glasgow, Birmingham, and across
the south of England down to Bristol, Bath and Southampton.  We also
felt that we could do the promotion in the national and music press
ourselves.

The experience of selling 100,000 copies of Student across the country
had given me confidence that we could get this record out in quantity.
Of course, our job was made much easier because Tubular Bells was so
good that people wanted to buy it as soon as they heard it.

To an outsider this looked like an enormous gamble.

If sales of Tubular Bells had faded, Virgin Music would have been dead
in the water.  But, if we managed to sell 600,000 copies, worth about
1.3 million, Virgin would receive around 920,000 after the shops'
retail margin.

Of this, we would pay 65,700 to Mike Oldfield as the artist, and
197,100 to Island Records for pressing and distributing the record,
leaving us with around 658,000 to divide between promoting the record
and keeping as profit to reinvest in other artists.  This was the
upside.

The intellectual copyright of Tubular Bells was our birthright, and we
were determined to build on it.  So we turned down Island's offer and
insisted that we stick to a PD deal.  They would press and distribute
the record and we would pay them between 10 and 15 per cent for this.
They still held out for a licensing deal until we threatened to go to a
rival record company, CBS.  So we signed a PD deal and sacrificed an
immediate cash payment which would have been welcomed by Courts, since
the Manor was still in debt.  We committed ourselves to selling Tubular
Bells with our own resources.

Island unwittingly fostered a cuckoo which grew up in their nest:
Virgin Music.  We became rich beyond our dreams as the sales of Tubular
Bells shot through silver, gold, platinum, double platinum and then up
over a million copies.  We grew into a major force in the record
industry and eventually became the rival to Island Records.  Although
the royalty rates we paid Mike Oldfield and Island changed over time,
as did the price of the record, Tubular Bells went on to sell millions
of copies and still sells around the world today.  Our gamble that we
could promote it ourselves made us our first fortune.

The next step was to try to sell our records overseas.

I flew over to New York to see Ahmet Ertegun, the head of Atlantic
Records and one of the most influential men in the entertainment
business.

Ahmet was the grand old man of the American music industry, and I was
23 years old.  I was shown up into his office, which had a stunning
view of the Manhattan skyline.  Ahmet rose up from behind a huge desk
and shook my hand.  He was a tremendously suave man, Turkish by origin,
and a very smooth talker.  He made it clear to me that he was very
busy, that he had a long list of other pressing engagements, but that
he could definitely set aside fifteen minutes to agree the Mike
Oldfield deal.  He told me that he was interested in Mike Oldfield
because he was so original, but he rather viewed the deal as a
one-off.  He made me an offer of $180,000 and smiled at me
encouragingly.  I knew that he expected me to ask for more, and that we
could agree on $200,000 within fifteen minutes.  I shook my head. Ahmet
smiled again and admitted that he too would have refused such an offer,
but now his real offer was $200,000.  That had to be his final offer. 
I was expected to sign without question.  I allowed a silence to fall
between us.

"What do you have in mind?"  Ahmet asked.

"I'm not going to tell you," I said.

"But considerably higher."

By the evening we had still not agreed a deal.  His diary had been
extensively rearranged and he now offered to take me out to a nightclub
where we would have to agree a deal before we went home.  As his long
limousine drew up at my seedy hotel, my spirits soared when I saw that
Ahmet was sitting in the back of the limo with two stunningly beautiful
black girls.  I thought that, if he had gone so far as to provide such
lovely company, then he must want Tubular Bells pretty badly.

I was on cloud nine: not only was I going to have a great night with
one of these girls, but Ahmet must surely be about to offer over
$500,000 for Tubular Bells.

As we drove along, we chatted away in the back of the limo and Ahmet
opened a bottle of champagne from the fridge.  We pulled up at the
nightclub and a couple of flashbulbs went off in Ahmet's face as he
stepped out of the limo.  I followed him and the girls into the club.

"Can I have a word in your ear?"  Ahmet took me to one side as we stood
waiting for our table.

"Of course."  I smiled.  This was the moment.  He was going to offer me
$1 million for Tubular Bells with a massive royalty.  I could then
accept without further ado and we could enjoy the rest of the night.

"Can you hear me?"  Ahmet raised his voice above the music.

"Yes," I told him, grinning across at one of the girls.

"I'd just like to make one thing clear.  I don't mind whether I sign
Mike Oldfield or not," he said, patting my arm.

"But I don't want any misunderstanding: both these girls are for me."

 "To be second choice means nothing."

1974-1976

When mike old field drove away in my old Bentley after the concert at
the Queen Elizabeth Hall, he was already spinning out of orbit.  During
all the months in which he had been incarcerated at the Manor with Tom
Newman, working in complete privacy and achieving his perfect album, he
had been dreaming about everyone buying Tubular Bells.  But, when he
stood up at the Queen Elizabeth Hall and saw the audience giving him a
standing ovation, something inside him gave way.  He found that,
although this adulation was something he had yearned for, now that he
had it he couldn't cope with it.

The music industry can make people rich beyond their dreams in a matter
of months.  Whether he liked it or not, Mike was now caught in that
spiral which would make him one of Britain's wealthiest men.  The
success was devastating to him, and I had to learn to live with that
responsibility.  I found it impossible to answer the question as to
whether I should have pushed him into doing that concert.  Mike went to
live in a remote part of Wales with a girlfriend, and refused to talk
to anyone else except me.

When I first drove down to visit him, I could hardly find the house. It
was a tiny stone cottage built on a range of hills called Hergest
Ridge.  The house had its back to the prevailing winds but it was so
remote it was like Wuthering Heights.  The whole of the front room was
taken up with a grand piano.  He took me up on to Hergest Ridge with a
six-foot balsa wood glider he had made.  I watched him as he ran
carefully down the hill and then gently launched the huge plane.  It
hardly seemed to move at first, and appeared suspended above Mike's
head, but then the wind caught it and it banked, soaring up and flying
away from us down the ridge towards the fields below.  Mike watched it,
the wind blowing his hair back from his eyes, and for the first time I
saw him smile.

I drove back to London and left Mike living on Hergest Ridge.  In a sad
reversal of my having Kristen's clothes brought round to Alberta so
that she would have to move in with me, Mike went to the local pub one
night and asked a friend to pack up his girlfriend's clothes and take
her to the station.  For the next ten years, Mike Oldfield lived as a
recluse and did no promotion for any of his albums.  Fortunately, we
had made a film of Mike playing Tubular Bells.  We made it into a
documentary and inter cut it with pictures of abstract William Pye
sculptures.  The BBC showed it three times.  Each time this film was
broadcast, the sales of Tubular Bells and Mike's other records soared.
Had Mike spent the next ten years touring, like Pink Floyd, I am sure
that he would have become one of the biggest rock stars in the world
and John Peel's prediction would have come true.  As it was, Tubular
Bells became more famous than Mike Oldfield, and, although he recorded
many other beautiful albums, such as Ommadawn, my own favourite, none
of them matched the success of Tubular Bells.

The other record companies were mystified by Mike's reticence to
perform.  Ahmet Ertegun, whom I had left with his two beautiful black
girls but who had eventually, after much negotiation, licensed Tubular
Bells in America, couldn't understand it:

"You're telling me that you have a film of sculptures for the promo?"
he snarled at me.

"I don't get it.  I'm not sure anyone over here will get it either.  We
can all visit the Met if we want to."

As usual, Ahmet managed to come up with a solution: he sold Tubular
Bells as the soundtrack for the film The Exorcist.  As the film became
a hit in America, so did the album.  It finally reached the top of the
American charts a year after it had done so in Britain.

One of the things every record company aims for is to transform its
bands into household names.  When a band has reached a certain stature
it is more like a brand name, and people start buying its new albums on
faith.

Although two bad albums will dent almost any star's career, once you
have built up a following it is quite easy to predict how many copies
the next record will sell.  New artists have a high failure rate, but
once they have crossed a threshold they have far greater potential for
growth than books or films, or indeed almost anything else that I can
think of.  If a record takes off it can go through the roof: one week
nobody has heard of "Karma Chameleon'; the next week everyone across
the world is humming it.

Alongside this astonishing potential for growth, music is more
international than almost any other business.  Some countries, such as
France and Japan, remain quite parochial, but the big stars, such as
Stevie Wonder, Paul McCartney or Fleetwood Mac, sell globally in a way
that most industrial companies can only dream about.  Pushing exports
is difficult for any company, but music is one business that soars over
most boundaries: it is carried on the airwaves and by word of mouth,
and when a band starts being successful there is no limit.  It is also
easier for an English-language song to sell around the world: German
and Scandinavian audiences are quite happy listening to The Beatles,
whereas, with the dubious exceptions of "Je T'Aime' or "Viva Espana',
we rarely tolerate listening to a pop song sung in a foreign
language.

With all this in mind, Simon and I developed three key aims when
negotiating with bands.  We never formally articulated them to each
other, but our negotiations over Mike Oldfield taught us these general
principles.

First, we set out to own copyright for as long as possible.  We tried
our hardest never to agree a deal where the copyright reverted to the
artist, because the only assets a record company has are its
copyrights.  We also tried to incorporate as much as possible of an
artist's back catalogue into our contract, although often this was tied
up with other record labels.  Beneath all the glamour of dealing with
the rock stars, the only value lay in the intellectual copyright in
their songs.  We would thus offer high initial sums, but try to tie the
artist in for eight albums.  Over the life of Virgin Music, we prided
ourselves that we had never lost a band.  We never lost a band because
we always renegotiated their contracts after a few albums, although,
ironically, Mike Oldfield was one case where I was too slow to
renegotiate and I almost lost him.  The vital thing with a new band
was, if you built them up, it would often be their third or fourth
album that would be the most valuable.  One good example of this was
The Human League, who had made two albums on Virgin, each of which sold
progressively better, but who then broke into the big time with their
third album, Dare, which sold over 2 million copies.  The last thing we
wanted was to lose them after a couple of albums only to see them
become successful with another record label.  After we signed the
artist up, we would soon try to extend the contract and, although we
might give away 2 or 3 percentage points in royalties, it was a small
concession in comparison with the potential of adding another two
albums on to the end of the contract.

Right from the start Simon and I tried to position Virgin as an
international company, and the second thing we always insisted on was
incorporating worldwide copyright to the artist's work in our
contracts.  We would argue that there was less incentive for us to
promote them in Britain if they then used their success here to sell
well overseas with someone else.

Our last negotiating point was to ensure that Virgin owned the
copyright in the individual members of the band as well as the band
itself.  It was sometimes difficult to define a band: for example, The
Rolling Stones clearly comprised Mick Jagger, Keith Richards, Bill
Wyman and Charlie Watts, but a number of other people came and went.
The record industry finally defined The Rolling Stones as "Mick Jagger
plus three others'.  Some bands split up and became individually
successful.  Genesis is perhaps the prime example, as Peter Gabriel and
Phil Collins both became bigger stars outside Genesis than they had
been within the band.  We had to ensure that Virgin didn't sign a band
only to be left with an empty shell while the lead guitarist went on to
succeed as a solo artist on another label.

The only other great truth we found was that, if we wanted a band
enough, we had to sign them almost no matter how high the bidding went.
An artist on another label remains just that: nothing to do with us.
Part of the secret of running a record label was to build up momentum,
to keep signing new bands and to keep breaking them into the big time.
Even if a high-profile band lost us money, there would be other,
intangible, benefits, such as attracting others to sign with us, or
opening doors to radio stations for our newer bands.

With these principles in our minds, Virgin began to sign up new bands
on the back of Mike Oldfield's success.  The bulk of these would
inevitably fail.  We still paid ourselves tiny wages; we still all
lived in each other's pocket, and we reinvested all the money we earned
from Tubular Bells in new artists and building up the company.

Kristen and I had been married for two years when we went on holiday to
Mexico.  We were having some difficulties together.  After our
marriage, Kristen had insisted that we sell my boat and move into a
house.

She wanted more space to paint and she found Alberta too cramped.  At
first we tried to compromise: I bought another, larger, houseboat just
along the towpath called Duende.  But that was still no good, so I sold
Duende to the singer Kevin Ayers.  Kristen found a small house on
Denbigh Terrace, which was directly off the Portobello Road and just
two streets away from our offices at Vernon Yard.  We moved on to dry
land.

We both found that life at Denbigh Terrace was rather claustrophobic.
Kristen never had any peace from the constant stream of Virgin staff
and bands, who came in and out of the house every evening.  I have
always given out my home telephone number and address to everyone at
Virgin.  I want them to tell me any problems they might have before
they escalate into something more damaging.  Ever since my time with
the Student Advisory Centre I have spent a great deal of time on the
telephone, and, since as far as I was concerned the Virgin staff were
the most important thing about Virgin, I wanted them to be as happy as
possible.  But Kristen rightly argued that we never had any privacy.
She grew increasingly frustrated that I spent all my life working and
saw no distinction between our private lives and my business life.
Whenever I came home, the telephone would ring as soon as I shut the
front door behind me.  Wherever I am, I always pick up the phone.  I've
seen other businessmen say, "I'll call them back, "but I've never been
able to do that.  In many ways I wish I could, but I always feel that I
have to talk to people: one call leads to another, which leads to the
next opportunity.  As I was continually struggling to make ends meet, I
was always fighting to win the next contract.

My life has been a constant stream of telephone calls.

Kristen and I also had a bizarre sexual allergy to each other. Whenever
we made love, a painful rash spread across me which would take about
three weeks to heal.

We went to a number of doctors, but we never resolved the problem.  I
even had a circumcision to try to stop the reaction.  Being circumcised
aged 24 is not a good idea, particularly if the night after your
operation you find yourself watching Jane Fonda's erotic film
Barbarella.  Before I could stop myself, I had burst my stitches!

Hearing my screaming, Kristen came running to see what the matter was.
When she found out what had happened, she was in stitches.  I no longer
was.

Our love life was incredibly frustrating and difficult, and as a result
the rest of our relationship began to flounder.  We took a weekend trip
to Paris to get away from Virgin, and stayed in a poky little hotel
near the Place des Vosges.  That night Kristen refused to make love
with me.  I felt like a leper and never forgot the rejection.

By 1974 our marriage was falling apart and we were both having a number
of affairs.  I was happy living this nomadic life, but Kristen wanted a
more secure relationship.  It is strange looking back on those years
because I think that I loved Kristen more than she loved me.  I would
not spend more than a night with another woman, but once Kristen
started having affairs they turned into relationships.  I remember
driving her to the house of one man she was having an affair with, and
begging her not to go inside.  Then I went to pick her up the next
morning and pleaded desperately for her not to go back.

In the summer of 1974 we decided to go on holiday to get away from it
all and try to patch up our marriage.

Kristen chose Cozumel off the coast of Mexico on the grounds that the
telephones wouldn't work there and nobody at Virgin would be able to
get hold of me.  We spent two wonderful weeks there and ended up on the
Yucatan peninsula.  I had never done any deep-sea fishing, and one
night in the bar of a small port we started talking to some other
tourists who told us that this was the best place in the world for
marlin and sailfish.  We agreed that we would ask a fisherman to take
us out the next day.

Although the next day seemed bright and clear to us, the fishermen were
wary about going out.  In bad English and with the help of Kristen's
broken Spanish, they explained that there was the possibility of a
storm.

"Come on," I pleaded.

"We've only got a couple more days here.  We'll pay you double."

They accepted the incentive, and together with the two other tourists
from the bar, who also paid the double fare, we set out.  We started
fishing and took turns at manning the rods.  Soon Kristen caught a
large sailfish, which jumped about eight feet out of the water and took
almost forty minutes to wind in.  We released it, and started fishing
again.  Both the other tourists caught marlin before one came for my
bait.  Marlin often knock the fish up out of the water with their
spikes and then catch them in the air.  We watched the fin come up
behind my bait and then the bait spun up in the air and the huge black
and silver side of the marlin rose above the water to take it.

As I played the marlin, we suddenly noticed that it was growing dark
and cold.  Behind us the clouds were gathering and it soon became clear
that we were going to be caught up in the predicted storm.  Large drops
of rain hit the deck.  Without warning one of the fishermen pulled out
his knife and cut my line.  The abrupt loss of my fish and the thought
of it swimming around trailing two hundred yards of nylon from its
gullet sickened me.

We had released the other fish we had caught, but this marlin was being
consigned to certain death attached to the length of line.

The fishermen started up the engine to head home, but rather than
heading back to the shore the boat started drifting around in circles.
The rudder had jammed.  The sea rose around us, and the waves started
breaking over the stern.  Kristen was shaking uncontrollably.

We were soaked through, and freezing cold.  The storm clouds completely
blocked out the sun and it became dark, so dark that it might have been
night.  We went down into the tiny cabin, which was full of smoke from
the engine.  One of the tourists was sick.  I opened the window, but
the smell of vomit and diesel remained.  The boat was being so badly
smashed up that we were sure she would sink.

After an hour of the worst storm any of us had ever experienced, the
wind and rain abruptly stopped.  The sea was still running very high,
with the waves towering over ten feet above us.  It was eerily still.
We must have been in the eye of the storm.  For a while there was
bright sunlight.  Then we saw the other side of the storm coming, a
solid black line above the horizon, growing more threatening as it came
nearer.

"Richard, I think we should swim for it," Kristen said.

"This boat won't take another storm."

"You're mad," the other tourists said.

"Stay on board."

Kristen and I agreed that the boat wouldn't survive another pounding.
We argued with the fishermen and the tourists, who disagreed.  The
shore was about two miles away.  The sea around us was an ugly, matt
black colour, swelling high and boiling, with white foam flecked across
the surface.  I was terrified but I decided that Kristen was right. She
had been a good long-distance swimmer at school, and she gave me the
only pair of flippers on board.  We stripped off to our underwear, and
the fishermen gave us a plank of wood.

We all wished each other the best of luck and then Kristen and I jumped
overboard.  Almost immediately the current swept us past the boat and
up the coast.  We lost sight of the boat and concentrated on kicking
out for the coast, which we could see only from the tops of the waves.
Kristen led the way and I tried to keep up with her.  As well as
fishing for marlin, we had also been on the lookout for sharks, and as
we swam I started imagining that the first thing I would feel would be
a vast fish rearing up beneath me, knocking me sideways just as the
marlin had dealt with my bait, and ripping into my stomach and legs.

"Don't kick too hard," Kristen shouted in my ear.

"You don't want to get cramp."

We swam across the current, not worrying that we were being carried up
the coast just as long as we weren't being taken out to sea.  Slowly we
came closer.

We had been in the water for almost two hours before I knew that we
would definitely make land.  The coast was at first just a smudged
green line, then we could see the trees, and finally a mud beach.  Even
after we could see the beach it took us another hour to get there.  We
hauled our way up through the surf and collapsed on to the sand.  We
had swum in the stormy sea for almost three hours.  We were freezing
cold, and our hands and feet were white and wrinkled.  We clung on to
each other, and told ourselves that after that we would always be
together.

"We've got to get back down to the port," she said.

"We've got to get a rescue party out to save the boat.

They might have a lifeboat."

We started running down the peninsula.  We had to fight our way through
some mangrove swamps and finally arrived in the tiny port after an
hour, half-naked, trembling with shock and exhaustion, and with our
feet bleeding.

At the port we found the captain of the local car ferry and Kristen
explained to him that there was a boat out at sea in trouble with a
jammed rudder.  He agreed to go out to try to rescue the fishing boat.
He lent us some clothes and at once we set out to sea.  Within fifteen
minutes the second storm hit.  It was far worse than the first one and
it picked up the car ferry, which was a big heavy boat, and tossed it
around like flotsam.  We couldn't believe that, after our first escape,
we were back at sea in the storm.  After ten minutes the captain told
us that he was turning back.  It was hopeless.

Although we wanted to go on, we could see that the ferry was in danger
of capsizing.

The fishing boat was never found.  Kristen and I left Mexico two days
later.  I had to learn to live with the question of whether the
fishermen would have gone out to sea that day if it hadn't been for us.
Two fishermen and two tourists had drowned, and a fishing boat was
lost.  I wondered if we and the other two tourists should have waved a
handful of dollars in front of them.

Although when we had been washed up on the beach Rristen and I swore
that we would stay together for ever, our marriage rapidly unravelled
once we were back in London.  It ended where it had started: on board a
houseboat.

One night we both went round to have dinner with Kevin Ayers and his
wife on board Duende.  In the course of the evening it became clear
that Kevin rather fancied Kristen, and I rather fancied Kevin's wife.
We soon found ourselves chatting on two separate sofas, then kissing,
and then Kevin and Kristen went off to his bedroom while his wife and I
stayed on the sofa.

Rather like the Roald Dahl story in which the two neighbours slip into
each other's bedroom and make love to each other's wife, it was clear
that something pretty amazing happened between Kristen and Kevin that
night.  What had started as a harmless bit of fun resulted in Kristen
leaving me and moving in with Kevin on board Duende.  I knew that she
must be serious if she went back to live on the boat.  After a few
weeks they started travelling around Europe.  I tried to persuade her
to come back to me, but she refused.  I was desperate to make her
change her mind.  I followed them to Paris, and then to Majorca, each
time having ghastly pleading conversations with Kristen, trying to talk
her into coming home with me.  When I heard that they had moved to
Hydra, I couldn't stop myself.  I knew I was going to get hurt, but I
had to try one last time.

I flew to Athens, and then found my way to Hydra.

I arrived on the island, where there are no cars, and sent a mule up
the hill carrying a basketful of roses with a message saying I was in
the port.  Kristen came down to see me.  I looked at her and saw her
face was set.  We had a wretched conversation in a bar by the quay
side

We both cried so much that the barkeeper refused to take payment for
the ouzo we drank.  Kristen felt hopelessly torn between the two of us,
but she finally told me that she couldn't see how we could live
together.

I watched her walk up the steps away from me, and forced myself to
accept that I had lost her.  I went back into the bar and the barkeeper
poured me another glass of ouzo and put his arms round me.  I resolved
to leave Kristen alone and get on with my own life.

As well as my marriage breaking up in 1974, Virgin Music was beginning
to have some problems.  In August 1974 Mike Oldfield's next album,
Hergest Ridge, went straight to number one.  Since Tubular Bells was
still at number two, money kept coming in.  But Virgin was in danger of
being seen as just Mike Oldfield's label.  In spite of refusing to do
any promotion himself, Mike's sales were so large that he eclipsed
anyone else.

Simon and I were anxious to sign up more acts.  In order to balance
Mike Oldfield's success, we needed a big breakthrough.  Any new band
still had to meet Simon's exacting standards.  In January 1975 Simon
showed me an article in Sounds.  10cc were leaving their recording
company and they were on the market for a new contract.

10cc, named after the average amount of sperm in the human ejaculation,
fitted Simon's criteria.  They were highly commercial but without
appealing to the lowest common denominator.  They were witty, clever,
catchy and successful.  Songs like "Rubber Bullets' had sold over
750,000 copies.  We realised that 10cc would want a large up front
payment in order to buy them out of their previous record contract.  We
called up their manager, Harvey Lisberg, in Manchester and took the
train to meet him and the band on 18 January 1975.

10cc comprised four players, Eric Stewart, Graham Gouldman, Lol Creme
and Kevin Godley, but Harvey Lisberg did most of the talking.  He
explained that 10cc were under contract to a small record firm, and
they would need, as Simon had already guessed, a large up front
payment. They were sure that their next album, Original Soundtrack,
would be big enough to cover this risk.  Harvey Lisberg also told us
that they were negotiating with Phonogram.

Simon and I had a quick chat in one corner, and then offered 100,000
pounds as an up front payment.  We told the band that we would like to
have a longterm commitment to them, and we proposed a deal which would
take us around six years to fulfill.  The band said that they would
like to sign with Virgin, although 100,000 pounds was less than
Phonogram had offered.  As January dragged on, the bidding increased. 
On the last day of January, Harvey Lisberg asked for 200,000 pounds
rather than 100,000 pounds as up front money.  Simon and I agreed to go
along with this.  Simon was so sure about Original Soundtrack that he
didn't flinch when the bidding reached 300,000 pounds and then 350,000
pounds for the down payment.  We rang around the Virgin licensees in
France, Germany and Holland, and they agreed to support us.  We also
managed to get Ahmet Ertegun at Atlantic Records to pledge 200,000
pounds pence. This was our first big signing in the marketplace against
the major international record companies, and for the first time we
were dealing in vast sums of money.

Simon and I got on very well with Lol and Eric, but it was clear that
there was a split in the group.  The day before the contract was due to
be signed, Eric and Lol flew off to St.  Lucia for a holiday.  The
timing could have been better but they left a power of attorney with
Harvey Lisberg.  The day they left, I wrote a letter to all the Virgin
shop managers telling them about the signing and telling them each to
go out and buy a bottle of champagne on Virgin to celebrate.  Then I
called Harvey Lisberg to talk about the cutting process on the new
album.  To my amazement, he was suddenly very frosty.

"We'll look after the cutting."  he said.

"We haven't signed with you yet.  Stop bugging us ' I couldn't
understand his attitude, and pointed out that we had a deal completed
bar the signature.  That evening the deal fell apart.  Tom Dixon,
10cc's other manager, rang me and told me not to come to the signing
since he had a meeting with Phonogram 10cc was eventually signed to
Phonogram One of the things this episode taught me was not to count our
chickens.

Simon was right about Original Soundtrack: it went on to sell several
million copies.

During that rather awkward patch between 1974 and 1976 when Mike
Oldfield was our only superstar, Virgin also failed to sign The Who and
Pink Floyd.  It seemed that we were destined to be forever the second
choice, and in music as in so many other things the second choice means
nothing.  At the end of 1975 I pitched for "The Rolling Stones.  Word
had got about that we had been prepared to pay 350,000 pounds for 10cc:
it astonished our rival record labels like Island.  When I called up
The Stones' manager, Prince Rupert Loewenstein, he was prepared to
listen to me seriously, having heard about our 10cc offer.

"How much are you asking for?"  I asked him.

"You'll never be able to afford it," Prince Rupert told me
sympathetically.

"It'll be at least $3 million.  And, anyway, Virgin is just too
small."

I knew that the only way to get his attention was to considerably
better that offer.

"I'll offer $4 million," I said.

"As long as there is some back catalogue available."

Buying the back catalogue would enable Virgin to release a
greatest-hits album and would be a good insurance policy if the new
record failed.

"I'll send you round the list of the back catalogue that's available,"
Prince Rupert said.

"If you can bring a bank guarantee for $4 million to my office by
Monday then I'll look at it very seriously.  Best of luck."

It was Friday.  Prince Rupert assumed that he had set me an impossible
task.

That weekend I travelled around the chain of Virgin distributors we had
set up across Europe in France, Germany, Italy, Holland, Sweden and
Norway.  As I travelled I was constantly on the telephone to those in
the rest of the world.  I was looking to raise about 250,000 pounds
from each distributor.  By the end of the weekend I had tracked them
all down and asked them to send telegrams to Coutts in London
confirming that they would provide the money.  By Monday morning I was
back in London but still some way short of the $4 million I had
promised Prince Rupert.  After adding up all the different commitments
from the distributors, Coutts promised to make up the difference.  I
drove round to Prince Rupert's house in Petersham just before eleven
o'clock with a bank guarantee for $4 million.

Prince Rupert was dumbfounded.  I had caught him completely off guard.
He fingered the $4 million cheque but then gave it back.

"You'll have a chance to match the highest offer," he promised.

"But you've started an auction."

In the end EMI won the auction with a bid of $5 million and signed The
Rolling Stones.  I couldn't raise any more than the $4 million.
Although I was disappointed to have failed, I knew that I had done The
Stones a good turn by increasing the asking price from the $3 million
Prince Rupert would have been happy to accept.

By 1976 the necessity of signing the really big bands was beyond
frustration.  Virgin had two albums in the top ten: Gong, and Mike
Oldfield's Ommadawn.  These were the days of Genesis's Trick Of The
Tail and Bob Dylan's Desire.  Our trouble was that we had spent most of
Mike Oldfield's royalties on signing up new bands and, with the
exception of Tangerine Dream, had had no major breakthroughs. Tangerine
Dream's had become a top-selling album across Europe, and greatly
enhanced Virgin's reputation.  Our catalogue was full of wonderful,
credible music, but we did not have enough really big sellers.  More
immediately, we were running out of cash.

On top of that, Mike Oldfield wanted to renegotiate his contract.  We
were happy to renegotiate but, after we agreed a second version with an
increased royalty to him, he instructed another lawyer who began to
push for an even higher royalty.  Simon and I decided that Virgin
couldn't go any higher.  We pointed out that Virgin Music as a company
was making less money than he was personally.  When he asked how this
was possible, I made the mistake of being completely honest with him. I
told him that we needed successful artists like him to pay for our
unsuccessful ones.  His sympathy evaporated.

"I'm not giving money away for you to blow on a whole load of rubbish,"
he said.

"I'm going back to my lawyer."

Eventually we agreed another contract and Mike stayed with us.  But it
was a close-run thing.

In the summer of 1976 we had a crisis meeting with Simon, Nik and Ken
Berry.  Ken had started in the Notting Hill record shop as a clerk.  It
was his job to check the shop's takings, but soon he took over a whole
range of other jobs.  We all found that whenever we needed to know
anything -the sales of Pink Floyd that week, the staff wages due, the
depreciation on the old Saabs we ran -Ken knew all the answers.  Ken
became indispensable.

He was quiet and unassuming but, as well as dealing with the numbers,
his great skill was dealing with people: he was utterly unfazed by
negotiating with top rock stars and their lawyers, and soon he became
involved in working through the contract negotiations.

Simon and I watched him and, as we realised that he would never lose a
deal by throwing his ego around and trying to score points off the
other side, so we gave him more and more responsibility.  The original
trio -me,

Nik and Simon -made room for Ken, and in many ways he became the link
that held us all together.

At that crisis meeting, we went through the figures of the shops, which
were trading well but not very profitably.  I knew that Nik was pushing
them for all he was worth, and we were loath to criticise anything he
was doing.  Then we started going through the Virgin roster.  One by
one we debated whether we could afford to keep acts like Hatfield and
the North or Dave Bedford that cost us money to promote and looked
unlikely ever to break into the big time.

"It's clear to me," Ken Berry said, adding up a column of figures.

"We have to seriously consider scrapping all our bands apart from Mike
Oldfield."

We looked at him in amazement.

"All our other bands are losing us money," he went on.

"If we sacked at least half our staff, then we could cope very well,
but at the moment Mike Oldfield is bankrolling the entire company."

I have always believed that the only way to cope with a cash crisis is
not to contract but to try to expand out of it.

"What about if we found ten more Mike Oldfields?"  I asked, teasing
him.

"How would that do?"

Ultimately, we had two options: either tuck away a little money and eke
out a living without taking any more risks, or use our last few pounds
to try to sign up another band that could break us back into the big
time.

If we chose the first option, we could get by: we would be running a
tiny company, but we could survive and make a living without any risks
attached.  If we chose the second, Virgin could be bust within a few
months, but at least we would have one last chance to break out.

Simon and I wanted to have one last go at breaking a new band.  Nik and
Ken eventually agreed with us, although I could see that they were
reluctant to bet the entire company on a breakthrough.  From that
night, we were on an emergency footing, desperately searching for The
Next Big Thing.

In the meantime we cut back on whatever we could:

we sold our cars; we closed down the swimming pool at the Manor; we cut
down on the stock in the record shops; we didn't pay ourselves; we
dropped a few artists from the record label and made nine staff
redundant.

This was the most difficult of all, and I shied away from the emotional
confrontation and let Nik do it.

One of the artists we reluctantly dropped was Dave Bedford, who was a
brilliantly gifted classical composer.

Dave reacted very well to the bad news: he wrote a long letter to me
saying how much he understood the decision, that he appreciated his
records had not sold, that he would have done the same if he had been
in my shoes, that he bore Virgin no grudges and wished us all the best
for the future.  At the same time he wrote a letter to Mike Oldfield
in which he described me as a complete shit, an utter bastard, and a
vile, tone deaf, money-grabbing parasite on musical talent.

Unfortunately for Dave, he then put the letters in the wrong
envelopes.

9 Never mind the bollocks

1976-1977

The first major band we went after was called Dire Straits.  Arthur
Frolows, who helped Simon with spotting new bands, was in the bath one
Sunday lunchtime when he heard a new band called Dire Straits singing
"Sultans Of Swing' on the radio.  He was so excited by it that he leapt
out of the bath and called the station to find out how to get hold of
the band.  He discovered that the band had not yet recorded their music
in a studio, but that this song was a live recording specially
commissioned by Charlie Gillett, the radio show host.

Virgin was not the only record label interested in signing Dire
Straits, but since we were there quickly we had a very good chance.
Simon and Ken found them rather precious: they and their lawyers
continued to argue over every tiny point of the contract.

On the evening before we were due to sign, we took the band out to our
favourite Greek restaurant off Westbourne Grove to celebrate.  It was
an enjoyable meal.  Since all the negotiation was out of the way, we
could relax and look forward to producing the record.

At the end of the meal, the Greek owner came out carrying two saucers,
one upturned on top of the other.

With a conjurer's flourish he lifted off the top one to reveal ten
marijuana joints.  I rarely took drugs after my LSD experience, but
this seemed a nice way to end the evening and, in order not to offend
the restaurant manager, who clearly thought he was doing us all a
great favour, I took one.  Everyone smoked a joint and the evening
wound down.

The next morning Dire Straits called us up and said they were going to
sign with Poly Gram  No reason was given.  Simon and I were horrified.
We couldn't believe it.

"What's the matter?"  Simon asked.

"We've got everything in place.  There's nothing more to agree."

"No reason," they said, and cut off all communication with us.

There was nothing Simon and I could do to persuade them to change their
minds.  It was only ten years later, when I read a book about Dire
Straits, that a sentence explained it: "The band did not sign with
Virgin since they thought that Virgin had plied them with drugs before
the signing to befuddle them."

That well-meaning, spontaneous gesture by the Greek manager, which Dire
Straits had seemed to enjoy at the time, cost Virgin Music over 500
pounds million -they became one of the world's top bands, with their
album Brothers In Arms selling 18 million copies.

By August of 1976 Virgin was in real trouble.  We were trying to sign
some of the aggressive punk bands which were coming on the scene, but
we seemed to keep missing out.  For instance, we missed getting the
Boomtown Rats because I insisted on including the music publishing
rights, which they wanted to sell elsewhere.  We were unable to find a
new band that could lift us out of our rut or dispel our image as a
rather hippie label.

Among our other worries we were in the middle of a dispute with Gong
over some recording rights.  Some of their followers came into the
Vernon Yard offices to stage a protest.  Our offices were invaded by a
host of benign, bearded, long-haired and very peaceful activists
wearing kaftans and sandals and smoking joints.  They had the
appearance of a wandering band of druids and wizards.  After an
enjoyable afternoon spent slouched on the sofas listening to Gong,
Henry Cow and Mike Oldfield, and trying to talk me into signing some
petition, they decided to leave.  We stood by the front door and
thanked them for coming.  As they left we gently relieved them of their
pickings -mainly records they were trying to conceal in the flowing
folds of their kaftans, but one or two of them were making off with
posters, tapes, staplers, and even a telephone.  They all smiled when
they were caught and left in the best of spirits.  I followed them out
into Portobello Road and watched them wander away through the fruit
stalls.

One of them stopped to buy some dates.  As the stall holder sold him
the fruit a man with his hair shaved into a mohican and dyed pink and
green walked by.

The kaftaned followers of Gong looked uncomprehendingly at the punk,
picked up their dates and walked off, munching slowly.

"I'm going to be out for ten minutes," I told Penni, my assistant.

I went up Portobello Road and found somewhere to have a haircut.

"How much off?"  asked the barber.

"I think it's about time I got some value for money," I said.

"Take about a foot and half off and let's see what I look like
underneath."

In place of names like Hatfield and the North and Tangerine Dream, a
string of new bands had taken over the poster sites.  They were called
names like The Damned, The Clash, The Stranglers and, most notorious of
all, The Sex Pistols.

In the last week of November I was working in my office when I heard
this extraordinary song being played in Simon's office directly below
me.  I had never heard anything like it.  I ran downstairs to see
him.

"What was that?"  I asked.

"It's The Sex Pistols' single.  It's called "Anarchy In The UK"."

"How's it doing?"

"Very well," Simon admitted.

"Very well indeed."

"Who's signed them up?"

"EMI.  I turned them down a couple of months ago.  I could have made a
mistake."

There was something so raw and powerful about the song that I was
determined to see whether we could win them back.  A few days later, I
called up Leslie Hill, the managing director of EMI.  He was far too
busy and important to take my call, so I left a message with his
secretary saying that if he ever wanted to get rid of his
'embarrassment', then he should contact me.  Half an hour later she
called me back to say that EMI were quite happy with The Sex Pistols,
thank you.

That very evening, 1 December, at 5.30 p.m."  The Sex Pistols caused a
national furore.  They were being interviewed on Today, an afternoon
television show hosted by Bill Grundy.  Bill Grundy had rolled back
from a good lunch at Punch and.  realised that the four lads in his
studio were fairly drunk as well.  He started to mock them, talking
about other great composers, Mozart, Bach and Beethoven.  It was all a
bit silly, until Johnny Rotten spilt his drink in one corner and
quietly swore:

"Shit."

"What did you say?"  Grundy asked.

"What was that?

Didn't I hear you say a rude word?"

"It was nothing," Rotten said.

"Come on, what was it?"

Grundy got what he asked for.

"I said, "Shit"," Rotten told him.

"Really?"  Grundy said.

"Good heavens, you frighten me to death."

Then Grundy turned to Siouxsie Sioux, who was the other guest, and
asked her whether she would meet him afterward.  Steve Jones, one of
The Sex Pistols, laughed and called him a dirty old sod.  Grundy then
turned to him and goaded him into saying more swear words.

Jones called him a 'dirty fucker' and a 'fucking rotter', and that was
the end of the show.

The next day the national press were once again outraged by The Sex
Pistols' behaviour.  Nobody criticised Bill Grundy for baiting them
into swearing.  As I was having my breakfast and reading an article
about how someone had kicked in their television in disgust at the
show, the telephone rang.  It was not yet 7.00 a.m.

In a wonderful role reversal, the managing director of EMI was now
personally calling me "Please come and see me immediately," he said.

"I

gather that you're interested in signing The Sex Pistols."

I went straight round to EMI's offices.  Leslie Hill and I agreed that
EMI would transfer The Sex Pistols to Virgin, conditional upon Malcolm
McLaren, the group's manager, agreeing.  We shook hands.  Then Malcolm
McLaren was ushered in from the next-door room.

"Virgin have offered to take The Sex Pistols on," Hill said, trying
unsuccessfully to keep the relief out of his voice.

"Excellent," McLaren said, offering me his hand.

"I'll come to your offices later this afternoon."

I normally make up my mind about whether I can trust somebody within
sixty seconds of meeting them.

As I watched Malcolm McLaren, with his tight black trousers and pointed
boots, I wondered how easy it would be to do business with him.  He
never showed up at Vernon Yard that afternoon, and never returned my
phone calls the next day.  I stopped ringing him after four attempts.
He knew how to get hold of me, but he didn't call.

On 9 March 1977 McLaren signed The Sex Pistols to AM records.  The
ceremony was staged outside Buckingham Palace, where the four punks
lined up and screamed abuse at the royal family.  The band were just
four regular lads, but they were being whipped up by Malcolm McLaren.

I sat at my desk and wondered about Malcolm McLaren.  I knew that he
had a bestseller on his hands, a band which would transform Virgin's
image.  If Virgin could sign The Sex Pistols, it would, at a stroke,
remove the hippie image which was hanging over us.  EMI sneered at
Virgin and called us "The Earl's Court Hippies'.  Never mind that we
lived nowhere near Earl's Court: the name stuck and I didn't like it.
We were stuck with the image of Gong and Mike Oldfield.  The royalty
cheques were impressive, but I feared that none of the new punk bands
would take us seriously if we only had a number of hippie bands. Virgin
Music needed to change and to change quickly, and The Sex Pistols could
do it for us.

"Every band is a risk," Derek Green, managing director of AM, airily
told the press.

"But in my opinion The Sex Pistols are less of a risk than most."

AM hosted a party to celebrate the signing of The Sex Pistols.  Since
AM were 'capitalists' making money out of bands by 'exploiting' them,
The Sex Pistols hated them as they hated all record companies -or at
least they pretended to.  Sid Vicious, then the band's bassist,
excelled himself immediately after the signing by wrecking Derek
Green's office and being sick all over his desk.  As soon as I heard
this I reached for my telephone to try one last shot.  To my delight,
Derek Green told me he was dropping them.

"Can we sign them?"  I asked.

"If you can cope with them," he said.

"We certainly can't."

The Sex Pistols were given 75,000 pounds by AM as compensation for the
cancelled contract.  Together with the 50,000 pounds they had been
given from EMI, they had earned 125,000 pounds for doing nothing more
than a bit of swearing and vomiting and one single.  Once again, The
Sex Pistols were looking for a record label.

I began to marvel at how Malcolm McLaren had played his cards so well.
The Sex Pistols were now the most shocking band in the country.  Among
all the punk bands which now rapidly materialised, The Sex Pistols were
still the most notorious.  They had a single called "God Save The
Queen' which I knew they wanted to release in time for the Queen's
Silver Jubilee Day in July 1977.

I watched and waited, knowing that Malcolm McLaren didn't like me.  He
sneered at me as a hippie who had become a businessman.  But, as the
weeks passed and Jubilee Day came closer, nobody else came forward to
sign The Sex Pistols.  I knew that Virgin was perhaps the only record
label who could do it.  We had no shareholders to protest, no parent
company or boss to tell me not to.  On 12 May 1977 Malcolm McLaren
finally came to see us.  The tables had turned.  Virgin signed the
British rights for The Sex Pistols' first album for 15,000, pounds with
a further 50,000 pounds payable for rights for the rest of the world.

"Do you realise what you're getting into?"  McLaren asked me.

"I do," I assured him.

"The question is, do you?"

From the moment we signed The Sex Pistols, McLaren was looking for
ways to alienate us so that we'd be sufficiently embarrassed to want to
get rid of them.  To McLaren's horror and bemusement we refused to be
outraged.  We released "God Save The Queen', which was banned by BBC
radio and soared to number two in the charts.  It would have been
number one, but record shops like Virgin and HMV, which would be likely
to be selling large quantities of the record, were excluded from the
sample taken in order to compile the charts.

On Jubilee Day 1977, Malcolm McLaren rented a Thames pleasure cruiser
and steamed upriver towards the House of Commons.  The police knew that
something was up, and as we set off from Westminster Pier two police
launches shadowed us.  The band waited until they were right alongside
the House of Commons and then they picked up their guitars and
drumsticks and roared out their own version of the national anthem:

God save the Queen, A fascist regime, Made you a moron, A potential
Hbomb.

God save the Queen.

She ain't no human being, There ain't no future in England's dream,

NO FUTURE!  NO FUTURE!

The police pulled up alongside and insisted that the band stop playing.
This was unwarranted since the boat had a licence for bands to play. It
brought back memories of The Beatles' last ever live performance on the
rooftop of the Apple studios when the police pulled the plug on them. 
If it had been Frank Sinatra on board there would have been no problem.
The police boarded our boat and steered us back to the pier, where
they arrested Malcolm McLaren, mainly because he put up such a spirited
fight and started yelling, "Fascist pigs!"

That week we sold over 100,000 copies of "God Save The Queen'.  It was
clearly the number-one record, but Top of the Pops and the BBC claimed
that Rod Stewart was really the number one.

"God Save The Queen' was banned from the television and radio.  From
our point of view it was good business: the more it was banned, the
better it sold.

The Sex Pistols were a turning point for us, the band we had been
looking for.  They put Virgin back on the map, as a record company that
could generate a huge amount of publicity, and that could cope with
punk rock.  The Sex Pistols were a national event: every shopper up and
down the high street, every farmer, everyone on every bus, every
grandmother, had heard of The Sex Pistols.  And living close to that
kind of public outcry was fascinating.  As Oscar Wilde pointed out,
"The only thing worse than being talked about is not being talked
about."  The Sex Pistols generated more newspaper cuttings than
anything else in 1977 apart from the Silver Jubilee itself.  Their
notoriety was practically a tangible asset.  Most of the press was
negative, but so had it been for The Rolling Stones when they had set
out fifteen years earlier.

In November 1977 Virgin released Never Mind The Bollocks, Here's The
Sex Pistols The lettering on the album sleeve was a brilliant design by
Jamie Reid, crudely cut out from newspaper headlines in the same way as
kidnappers' notes and hate mail were delivered.

Virgin shops put large yellow posters in their windows advertising the
record.  Not surprisingly, there would always be someone who was
offended by this.  One day the manager of our shop in Nottingham was
arrested under the same Indecent Advertisements Act of 1889 for which I
had been arrested nearly ten years previously, when the Student
Advisory Centre had advertised help for people suffering from venereal
disease.  I called John Mortimer, who had defended me then.

"I'm afraid we've fallen foul of the Indecent Advertisements Act
again," I told him.

"The police are saying that we can't use the word "bollocks"."

"Bollocks?"  he asked.

"What on earth's wrong with bollocks?  It's one of my favourite
words."

"They're making us take down The Sex Pistols' posters saying "Never
mind the bollocks, here's The Sex Pistols", and they're threatening to
injun ct the album."

He told me that we needed a linguistic adviser, a professor of English
who could define the exact meaning of 'bollocks' for us.  Since the
case had been brought in Nottingham, I called up Nottingham
University.

"Please can I speak to your professor of linguistics?"  I asked.

"That would be Professor James Kinsley."  said the lady on reception.

I was put through and explained the situation.

"So one of your staff has been arrested for displaying the word
"bollocks"?"  said Professor Kinsley.

"What a load of bollocks!  Actually, the word "bollocks" is an
eighteenth-century nickname for priests.  And then, because priests
generally seemed to speak such a lot of nonsense in their sermons,
"bollocks" gradually came to mean "rubbish"."

"So "bollocks" actually means either "priest" or "rubbish"?"  I
checked, making sure I hadn't missed anything.

"That is correct."  he said.

"Would you be prepared to be a witness in court?"  I asked.

"I'd be delighted."  he said.

I enjoyed the court case.  The police prosecutor was determined to win
what was clearly a case of national importance.  Our shop manager was
cross-examined and admitted that he had prominently displayed The Sex
Pistols' poster in the shop window.  The police officer recited how he
had arrested him since he was displaying this offensive poster.  The
policeman had the smug look of someone who was doing the public a great
service and expected to be praised for it.

"No questions."  John Mortimer said when he was invited to
cross-examine the policeman.

Rather disappointed, the policeman stood down.

"I would like to call my witness."  John Mortimer said when he stood
up.

"Professor James Kinsley, professor of linguistics at Nottingham
University."

As Professor James Kinsley explained that 'bollocks' was nothing to do
with testicles but actually meant 'priests' and then -due to priests'
sermons being full of it' rubbish John Mortimer peered at him
myopically and appeared to be struggling to straighten out his
thoughts.

"So, Professor Kinsley, are you saying that this expression "Never mind
the bollocks, here's The Sex Pistols", which is the basis of this
prosecution, should more accurately be translated as "Never mind the
priests, here's The Sex Pistols"?"  asked John Mortimer.

"I am.  Or it could mean "Never mind the rubbish, here's The Sex
Pistols"."

John Mortimer allowed a silence to develop in the court.  '"Never mind
the priests, here's The Sex Pistols"," he mused.

"That is the meaning of this expression.  Well, I have nothing further
to add.  It sounds like a strange title for a record, but I doubt
whether the Church would mind."

"I doubt they would either," Professor Kinsley agreed.

The prosecutor then pressed Professor Kinsley on this point, asking him
how he could be sure that no clergyman would be offended.

Professor Kinsley then played his trump card by folding down his polo
neck to reveal a dog collar.

Professor Kinsley was also known as Reverend Kinsley.

"That's enough," snapped the magistrate.  He straightened his back,
squared his shoulders and, adopting as much magisterial solemnity as he
could muster, announced:

"The case is dismissed."

10 "I thought I'd move in," Joan said."

1976-1978

One weekend in early 1976 I met my future wife, Joan Templeman, at the
Manor.  I make up my mind about someone within thirty seconds of
meeting them, and I fell for Joan almost from the moment I saw her. The
problem was that she was already married to someone else, a record
producer and keyboard player who was producing a Virgin band called
Wigwam.

Joan was a down-to-earth Scots lady, and I immediately saw that she did
not suffer fools gladly.  I knew that I couldn't attract her attention
in the same way as I had attracted Kristen.  Most of my past
relationships with women had been based on great public showmanship,
but for the first time I felt that here was a woman who didn't want me
to get up to my usual antics.

Joan worked in an antiques shop called Dodo on Westbourne Grove, close
to our offices at Vernon Yard.

On Monday morning I hovered uncertainly outside the shop, then screwed
up my courage and walked in.  The shop sold old signs and
advertisements.  When I asked the lady who owned the shop whether Joan
was there, she looked at me suspiciously.

"Are you a customer?"  she asked, glowering.

"Yes, I'm fascinated by old signs," I said, looking uncertainly around
the shop.

Joan came through from the back.

"I see you've met Liz," she said.

"Liz, this is Richard."

"So what would you like to buy?"  Liz pressed me.

There was no way out.  Over the next few weeks, my visits to Joan
amassed me an impressive collection of old hand painted tin signs which
advertised anything from Hovis bread to Woodbine cigarettes.  One tin
sign read dive in here for tea!  I also bought a large pig which played
the cymbals and had once stood in a butcher's shop.  One of my
favourite signs was an old picture advertising Danish bacon and eggs
which showed a pig leaning casually against a wall listening to a
chicken singing.  The chicken was celebrating her freshly laid egg and
the caption to the scene was now, that's what I call music!  I gave
this to Simon Draper, since he was always terribly grumpy in the
mornings until he had eaten a decent breakfast.  He hung it over his
desk, where it later inspired the title for our annual greatest-hits
compilations, Now That's What I Call Music, which have reached number
one every year since.  By the time I had bought all my Christmas
presents from Dodo, Liz told Joan that she was the best shop assistant
she had ever had.

Joan had been married to her husband, Ronnie Leahy, for almost eight
years, but they had no children.

Ronnie travelled a good deal, and it seemed to me, perhaps
conveniently, that he and Joan had begun to drift apart.  Whenever
Ronnie was away, I called up Joan's friends and asked whether they were
seeing Joan.

"Mind if I tag along?"  I asked casually.

They soon called me "Tag-along', which I really didn't mind as long as
by tagging along I had the chance to sit somewhere near Joan and talk
with her.  Our courtship was unlike the other romances I'd had, which
I'd been able to control.  Joan is an intensely private person, and it
was extremely difficult to find out the state of her marriage.  While I
knew what I felt about her, I had very little idea what Joan made of
me.  I thought that she might be intrigued by my persistence, but
beyond that I was in the dark.

Eventually, Joan agreed to come with me to the Isle of Wight, and we
spent the weekend in a tiny hotel in Bembridge.  It was the start of
our affair.  Since Joan was married we both carried on living double
lives.  She could not see me during the week, when Ronnie was at home,
but early one morning she decided to surprise me by dropping round to
my house in Denbigh Terrace, where I was still living.  As she let
herself in, she saw my cleaning lady Martha going up the stairs to my
bedroom carrying a tray with two cups of tea on it.  Joan knew that I
was in bed with another woman -which I was so she stopped Martha and
put a flower on the tray.

"Just say to Richard that Joan says hello," she said, and then turned
on her heel and went back to the shop.

I was mortified.  I dashed round to see her at Dodo and persuaded her
to have lunch with me.

"So what's all this about undying love?"  Joan asked sarcastically.

"Well, I was lonely," I said lamely.

"I couldn't wait until the weekend."

"That's a pathetic excuse!"  Joan said.

I tried to look ashamed of myself and contrite, but we caught each
other's eye and then both burst out laughing.

Our affair continued for almost a year.  We were desperate to be with
each other, and would call each other up whenever we had five minutes
to spare.  Joan would slip away from Dodo and I would leave Vernon
Yard, and we would meet at Denbigh Terrace, which was right between us.
The geography of our affair was very tight-knit: Vernon Yard,
Westbourne Grove and Denbigh Terrace all cross Portobello Road within
twenty yards of each other, and so Joan and I lived out our affair
within a tiny intense triangle.

When we stole twenty precious minutes at lunch, quarter of an hour
before a meeting, or a few moments after Dodo shut up shop, we tried to
shut the outside world away But, along with the passion, we were also
intensely aware that Joan was married (indeed, on paper, I was in the
same situation myself), and that we were in danger of causing pain to
Ronnie.  In some ways Joan and Ronnie had a similar relationship to
Kristen's and mine: Ronnie had wanted to experiment with sleeping with
other women and had told Joan that she needed to broaden her horizons,
too.  Joan had been at a loss because she wasn't able to cope with a
series of one-night stands, and so she gradually began to fall in love
with me.

Our affair was further complicated when Kristen heard that I was in
love with Joan and arrived back in London.  By this time I had managed
to buy Duende back from Kevin Ayers At more or less the same time,
Kristen had left him.  She now told me that she wanted to get back
together with me.  We were, after all, still married.  My family has
always maintained that you stick with your marriage through thick and
thin, and so I felt a great responsibility to agree to Kristen.  But I
was in love with Joan.  It was a nightmarish situation for each of us:
Joan felt torn between me and Ronnie;

Kristen had been torn between me and Kevin; and I now felt torn between
Kristen and Joan.  What had started off as a dream affair with Joan in
the tiny bedroom in the house at Denbigh Terrace was now beginning to
destroy five people's lives.

The tangle of these four relationships finally resolved itself when I
was at a party with both Joan and Kristen.

Joan's best friend Linda cornered me:

"So who are you actually in love with?"  she demanded.

"This can't go on.  You're all killing yourselves and you need to sort
it out."

I saw Joan talking to someone else.

"I'm in love with one woman," I said, looking across at Joan.

"But she's not in love with me."

"I'm telling you that she is," said Linda, following my look.

We left it at that.

The next night I was alone on Duende.  It was a dark February night and
raining hard.  I was on the telephone so I didn't hear the sound of
knocking.  Then the door opened and I swung round.  It was Joan.

"I'll call you back later," I said to the phone, and moved across to
hug her.

"Well, I thought I'd move in," Joan said.

That spring of 1977, I was approached by a man called Richard Ellis who
claimed to have made a startling invention which he called a
'pterodactyl flying machine'.  He sent me a photograph which showed a
man on a tricycle soaring over the treetops beneath two large wings.
Richard Ellis wanted me to try the pterodactyl flying machine, and then
buy the licence to distribute it.  I invited him up to the Manor so
that I could have a look at it.  The flying machine looked like a cross
between a Leonardo da Vinci and a Heath Robinson invention.  The
tricycle had a small outboard engine with rotors suspended above the
pilot's head.

Ellis told me that, if I pedalled like mad along the road or an
airstrip, the engine would cut in and power me along until I took off.
The engine would then power the rotors, which would keep me airborne.

I was rather flattered that Richard Ellis had chosen me to be the
second person to fly this machine.  He had heard about the hot-air
balloons I had arranged for the Virgin summer party that year and
thought that, if I liked this machine, I would be able to promote it.
Once again, my willingness to try anything landed me in serious
trouble.

"It'll take a couple of weekends to get the hang of it," Ellis said.

"So you won't take off this time."

He joined the engine to some cable with a rubber switch at the end,
which he gave to me to put in my mouth.

"When the engine is going well and you are bowling along the runway,
bite on this and it will cut the engine."

Joan and a few friends stood at the end of the runway of the local
airfield to get a good view.  I was strapped into the harness and put
the rubber bung in my mouth.  It all seemed as if it would be a lot of
fun.

"OK!  Go!"  Ellis shouted.

I started to pedal as fast as I could down the runway.

The engine kicked into life and the bike started to whizz along.  I
couldn't hear anybody above the noise of the engine, but I could see
their faces.  I decided that I was going fast enough and that the
experiment was over, so I bit hard into the bung.  Nothing happened.
The engine roared even faster.  I bit again.  Nothing.  I was skimming
along at over thirty miles an hour -it felt incredibly fast -when
suddenly the tricycle lurched up into the air and the whole contraption
took off.  I bit again, but the engine just roared on.  I looked down
and saw the faces turned up to watch me.  Only Joan seemed rather
uninterested.  I rose up in the air in great lolloping movements, like
the men who take off from Brighton Pier.  In a few seconds I had
cleared the beech trees in the wood next to the airfield.  I had no
idea what to do.

I was a hundred feet up in the air and nobody had told me how to fly
it.

With my free hand I reached up into the engine and started to pull at
any wires I could feel.  The engine was boiling hot and I burnt my
hand, but one after the other I yanked out wires and pulled away
anything that would come.  I had to stop the engine.  I was well past
the trees and over the next field when the engine finally cut out.

It was quiet.  I tried to balance the bike, but the wings above me were
very heavy.  I spun down and headed towards the ground.  At the last
moment I caught some kind of wind which flipped the machine over the
other way, and it crashed down sideways.  I lay on the ground paralysed
with shock.

"We thought that you got the hang of it rather well," I heard Joan
say.

"I wasn't meant to take off," I said.

"That was terrifying."

As I had soared above her head, frantically wrestling with the engine
and narrowly escaping death, Joan had only been marginally impressed
that I had got the hang of it.  The next week Richard Ellis took off in
the same flying machine and crashed back down to the ground.

He died on impact.

"We've had another Nigerian order," Chris Stylianou told me.

"They love this guy U-Roy."

Chris Stylianou was now Virgin's export manager, and throughout the
last few months of 1977 had picked up thousands of pounds' worth of
business from, of all bizarre places, Nigeria.  The Nigerians loved
reggae music.  At the time, virtually the only British record label
that sold reggae was Chris Blackwell's Island Records.

In 1976 I had followed Chris Blackwell's footsteps to Jamaica with a
view to signing some reggae acts.  After sitting on his veranda for
days on end I had finally managed to sign up Peter Tosh, who had sung
with Bob Marley, and a performer called U-Roy.  Legalize It, Peter
Tosh's first album with Virgin, had sold well in 1977.

But now there was a different sound: Jamaican DJs and radio jocks were
cutting their own records and chanting a whole lot of rhyming slang and
political slogans to a background beat.  It was an early form of rap
music.

They were called 'toasters' and it was U-Roy, a bejewelled hipster, who
was doing so well in Nigeria.  I knew that there must be more toasters
out in Jamaica and I decided we should go out there and corner the
market.

I always like to get away from London in the middle of winter.  I've
found that sunshine and long-distance travel always gives me a clearer
perspective on London life.  And this time I had two extra reasons to
get away from the city: I wanted to take Johnny Rotten with me because
he was having some difficulties with The Sex Pistols and Malcolm
McLaren; I also hoped to meet up with Joan, who was going to Los
Angeles with Ronnie to give their marriage one last chance.  Johnny
Rotten was delighted to come since he loved reggae, and Joan and I
agreed not to speak until she had resolved her marriage one way or
another.

At the last minute, Simon was unable to come with me and I went with
Ken.  And so, at the start of 1978, a punk rocker, an accountant and a
reformed Earl's Court hippie flew together to Kingston, Jamaica, to
sign up some reggae bands and look for toasters.  Knowing that
Jamaicans didn't trust written contracts, we flew in with a briefcase
containing $30,000 in cash and set up shop in the Kingston Sheraton.
Word soon went around that three gringos were in town looking to
audition musicians, and a stream of bands started coming round to the
hotel room.  Ken sat on the bed with his briefcase;

Johnny and I listened to the bands' tapes and chatted to them.  Johnny
decided which artists we should sign, and then Ken would open up the
briefcase and take out the money.  American dollars were hard currency
in Jamaica, where imports were banned and everything was bought on the
black market.  Some of the bands were so keen to impress us that they
brought their drums and guitars with them.  Our room was soon full of
tall Rastafarians wearing massive bobble hats in red, yellow and green
stripes.  One tall singer towered over us and sang lovingly about his
spiritual homeland of Ethiopia.

I watched Johnny as he sat on the sofa and nodded his head gently to
the music.  It was difficult to believe that this was the same man,
gaunt and thin as a lightning conductor, who had screeched abuse at
everyone, spat at pictures of the Queen, and galvanised a generation of
anger.  Thinking about the Emperor Haile Selassie, who inspired the
Rastafarians, I wondered whether the British royal family hadn't missed
a trick.

Over the course of a week we signed almost twenty reggae bands and
found a couple more toasters, called Prince Far I and Tappa Zukie, into
the bargain.  I tried to persuade Johnny Lydon to stay with The Sex
Pistols but to no avail.  He told me that the group had fallen out
among themselves and with Malcolm McLaren; that Sid Vicious was in a
tailspin, taking all kinds of drugs and growing violent with Nancy, his
girlfriend.  Johnny wanted to go solo, and he had a couple of musicians
in mind to form a new band called PiL, Public Image Limited.  I was
sorry since I wanted to build The Sex Pistols as the next classic rock
band to follow The Rolling Stones.  After all, The Rolling Stones had
started off as the most shocking band in the world, with Mick Jagger
being arrested for possessing drugs and scandal ising public opinion.
By 1978 The Stones had been going for more than fifteen years and they
had become part of the rock and roll Establishment.  And they didn't
look like stopping.

Coping with success obviously brings its own difficulties for a rock
band, but getting your name into people's minds is almost the hardest
thing to achieve.

The Sex Pistols had certainly entered the world's vocabulary -if only
as a byword for all that most people found revolting -and I felt that
they were crazy to throw away that advantage.  I tried to persuade
Johnny that The Sex Pistols could use their name in slightly different
ways, and perhaps move away from the extreme punk image they had made
their own.  I also wanted to push them overseas: Never Mind The
Bollocks had sold only 300,000 records overseas, about the same number
as it had sold in Britain, and I felt sure that they could do much
better with successive albums.  After Mike Oldfield's instant success
and then his withdrawal from public life, I was determined that The Sex
Pistols would not collapse as well.  They were Virgin's top band and
they had been the catalyst both for Virgin Music's wider success and a
whole new wave of rock music.  But Johnny was in no mood to listen.

On our final evening we found a Rasta bar up along the coast from
Kingston which sold fish in strong jerk sauce.  We sat outside watching
the sea.  A flock of pelicans were dive-bombing in formation, and we
watched them methodically work their way through shoals of fish, each
one peeling off and diving down, tucking in their wings before plunging
into the water.

We drank Red Stripe beer and listened to Bob Marley.

Although I kept turning the conversation back to what The Sex Pistols
could do, Johnny was not really listening.

There was a world of difference between Mike Oldfield and The Sex
Pistols.  But both of them had found that they could not cope with the
pressures of fame.  From my point of view, as the head of their record
company, there was a further difference: Mike Oldfield had made Virgin
Music a tremendous amount of money that we had spent building up the
company and signing new acts.  We would not be in business without him.
Although The Sex Pistols had been number one with "God Save The Queen',
and their album, Never Mind The Bollocks, had also been number one,
Virgin had not made very much money from the group.

As I sat there with Johnny Rotten on the Jamaican beach, I was forced
to accept that Virgin would never make much more money from The Sex
Pistols.  Malcolm McLaren had arranged for The Sex Pistols to be in a
film called The Great Rock And Roll Swindle, and I wondered whether
there might be a soundtrack which we could release from that, but,
otherwise, Simon, Ken and I were going to have to accept that from now
on The Sex Pistols were not a going concern.

Although it was highly frustrating to see them falling apart -and in a
far worse way than Mike Oldfield, who continued to produce records
which sold well there was some consolation in that, after we had signed
The Sex Pistols, Virgin had become the smart record label for punk and
new-wave bands to sign with.  The music world had seen the promotion
which we had put behind The Sex Pistols, and a whole new generation of
exciting bands was approaching us.  Simon had picked up bands such as
The Motors, XTC, The Skids, Magazine, Penetration and The Members which
were all selling well, and another band called The Human League were
building up a following.  Virgin Music Publishing had signed a
schoolteacher from Newcastle called Gordon Sumner who used the stage
name "Sting' and sang with a band called Last Exit who were thought to
have some promise.

I returned to the Kingston Sheraton, mulling over Virgin's prospects
without The Sex Pistols.  There was a message from Joan, asking me to
call her.

"Shall we meet in New York?"  she asked.

I left Jamaica the next morning.

11 Living on the edge 1978-1980

I met Joan in New York.  Her attempt to patch up her marriage with
Ronnie had failed.  We spent a week in Manhattan and felt like
refugees.  My divorce from Kristen had yet to come through, and Joan
had only days previously separated from Ronnie.  We were thinking of
escaping from New York to spend some time together alone, out of reach
from any telephone, when somebody asked me if I had named Virgin Music
after the Virgin Islands.  The answer was no -but they sounded like
just the romantic haven that Joan and I needed.

On impulse, Joan and I decided to fly down to the Virgin Islands.  We
had nowhere to stay and not very much money, but I heard that if you
expressed a serious interest in buying an island the local estate agent
would put you up for nothing in a grand villa and fly you all around
the Virgin Islands by helicopter.  This sounded rather fun.  I cheekily
made a few calls, and, sure enough, when I introduced myself and
mentioned The Sex Pistols and Mike Oldfield and that Virgin Music was
really expanding and we wanted to buy an island where our rock stars
could come and get away from it all, and perhaps put a recording studio
there, the estate agent began to get very excited.

Joan and I flew down to the Virgin Islands, where we were greeted like
royalty and ushered into a sumptuous villa.  The next day we were flown
by helicopter all over The Virgin Islands as the estate agent showed
us the islands that were for sale.  We pretended we quite liked the
first two islands we saw, but we asked him whether there were any
more.

"There's one more which is a real little jewel."  he said.

"It's being sold by a British lord who's never been here.

"Its called Necker Island, but I don't think it's a wise idea because
it's miles from anywhere."

That did it.

"All right," I said.

"Please can we see it?"

As we flew to Necker Island, I looked down from the helicopter window
and marvelled at the clear pale-blue sea.  We landed on a white sandy
beach.

"There's no water on the island," said the estate agent.

The last known inhabitants were two journalists who came here on a
survival course.  They radioed for help before the week was out.  It's
the most beautiful island in the whole archipelago, but it needs a lot
of money spent on it."

There was a hill above the beach.  Joan and I set off for the top, to
get a view over the whole island.  There were no paths, so by the time
we reached the top our legs were scratched and bleeding from squeezing
through the cacti.  But the view from the top was worth it: we saw the
reef all around the island and noticed that the beach ran most of the
way round the shoreline.  The estate agent had told me that
leather-backed turtles came up to lay their eggs on the beaches of
Necker.  The water was so clear that we spotted a giant ray flapping
its way serenely along the sandy bottom inside the reef.

There were thousands of nesting gulls and terns, and a small flock of
pelicans fishing in formation.  Higher up, a frigate bird came gliding
past on an air current, its vast wings spread wide as it carved its way
over the thermals.  Looking inland, we saw two saltwater lakes and a
small tropical forest.  A flock of black parrots flew over the forest
canopy.  Looking across at the other islands, we could see only their
green coastlines: there was not a single house in sight.  We walked
back down the hill to find the estate agent.

"How much does he want for it?"  I asked.

' 3 million."

Our visions of watching the sunset from the top of the hill faded
away.

"Nice thought," Joan said, and we trudged back to the helicopter.

"How much were you thinking of spending?"  the estate agent asked,
suddenly smelling a rat.

"We could offer 150,000, pounds I said brightly.  '$200,000."  I added,
trying to make it sound more.

"I see."

As we flew back to the villa, it was clear that we were no longer
welcome.  Talk of $200,000 wasn't enough to secure us a night at the
villa.  Our bags were left at the door, and Joan and I hauled them
across the village to a bed-and-breakfast.  It was clear that there
were going to be no more helicopter flights over the islands.  Yet Joan
and I were determined to buy Necker.  We felt that it could be our
secret hideaway island, somewhere we could always retreat to.  So,
although we were practically driven off the Virgin Islands as if we
were cattle rustlers, we vowed to return.

Back in London, later, I found out that the owner of Necker Island
wanted to sell in a hurry.  He wanted to construct a building somewhere
in Scotland which would cost him around 200,000 pounds pence.  I upped
my offer to 175,000 pounds and held on for three months.  Finally I got
a call.

"If you offer 180,000 pounds it's yours."

There was never a hint that 180,000 pounds was only a fraction of the 3
pounds million asking price.  So I agreed on the spot, and Necker
Island was ours.  Even at such a low price, there was a snag: the
Virgin Islands' government had decreed that whoever bought Necker
Island would have to develop it within five years or its ownership
would pass to them.  It would cost a good deal to build a house and
pipe the water across from the neighbouring island, but I wanted to go
back there with Joan.  I was determined to make enough money to afford
it.

Joan and I stayed on Beef Island for the rest of that holiday, and it
was there that I set up Virgin Airways.

We were trying to catch a flight to Puerto Rico, but the local Puerto
Rican scheduled flight was cancelled.  The airport terminal was full of
stranded passengers.  I made a few calls to charter companies, and
agreed to charter a plane for $2,000 to Puerto Rico.  I divided the
price by the number of seats, borrowed a blackboard, and wrote VIRGIN
AIRWAYS $39 SINGLE FLIGHT TO PUERTO RICO.  I walked around the airport
terminal and soon filled every seat on the charter plane.  As we landed
at Puerto Rico, a passenger turned to me and said:

"Virgin Airways isn't too bad -smarten up the service a little and you
could be in business."

"I might just do that," I laughed.

"Richard, I want to get married and I want you to be my best man," said
Mike Oldfield.

"That's wonderful," I said.

"Who is she?"

"She's the daughter of my therapy teacher."

Mike Oldfield had been a lifelong introvert.  In September 1976 he went
on a therapy course in Wales;

this seemed to involve being alternately humiliated and praised in
front of a group of people.  To me, it sounded rather like a crash
course in surviving public school or the army.  But Mike emerged with
his introversion banished.  Within days he was posing for some nude
photographs in the music press as Rodin's Le Penseur.  And now he
wanted to get married.

"How long have you known her?"  I asked.

"Three days."

"Don't you want to wait?"

"I can't wait," he said.

"She won't sleep with me until we're married.  It's tomorrow at Chelsea
Register Office."

Having failed to persuade him out of it, Joan and I went along to the
register office and waited for Mike and his bride.  We brought two
carved African stools with us as wedding presents.  We put them down on
the pavement outside and sat on them before Mike's arrival.

A stream of men and women passed us and emerged as man and wife.  As we
sat and waited I could feel the whole idea of marriage becoming less
and less appealing.  Both Joan and I had suffered failed marriages, and
the sight of this production line of wedded couples coming out every
six and a half minutes from the register office and, in our jaundiced
view, heading for the divorce lawyers put us off saying the vows to
each other again.  They seemed to ring hollow.  I knew that I loved
Joan, but I felt we didn't need to say the cliched words to confirm
it.

Mike and Sarah were married and we gave them the two African stools. We
had dinner together that night, but the evening ended early since Mike
was so clearly intent on getting Sarah into bed.  The next morning the
phone rang.

"Richard, I want a divorce."  It was Mike.

"What's wrong?"

"We're not compatible," Mike said, in a voice which brooked no further
questions.

Mike and Sarah went more or less straight from the register office to
the lawyers, and he ended up paying her over 200,000 pounds in
alimony.  My mind boggles at what went on that night, but whatever
happened it must go down as one of the most expensive one-night stands
in history.

In 1977 Virgin as a whole made a pre-tax profit of 400,000 pounds in
1978 the figure increased to 500,000 pounds pence.  After the collapse
of The Sex Pistols, we were left with a handful of our original
artists, the most important being Mike Oldfield, whose albums sold
consistently right the way through the advent of punk and new wave.  We
also had a couple of new signings, both of whom seemed rather esoteric
and played synthesiser music: Orchestral Manoeuvres in the Dark and The
Human League.

While these two bands had yet to sell well, XTC, The Skids and Magazine
kept their sales going.  We also continued to sell well in France and
Germany, particularly with Tangerine Dream.

By 1979, an outsider might have looked at Virgin and come to the
conclusion that it was a motley collection of different companies. From
our tiny mews house in Vernon Yard, we operated the record shops, which
Nik ran; the record company, which was run by Simon and Ken; and the
music publishing company, which was run by Carol Wilson.  The Manor was
going well, and we had expanded our recording business with the
purchase of a London recording studio.  The original plan to set up
everything that a rock star needed, recording, publishing,
distribution, and retailing, was beginning to work On top of this we
had also set up Virgin Book Publishing, which was primarily to publish
books about music, and biographies and autobiographies of the rock
stars.

In lieu of The Sex Pistols' future albums, which would now never be
made, we had acquired the rights to the film which Malcolm McLaren was
producing, The Great Rock And Roll Swindle This guaranteed one last
album, the film soundtrack.  In order to pull this film together, we
set up Virgin Films, which Nik started to manage.

Another venture that Nik had set up was The Venue, a nightclub where
our bands could play and people could eat and socialise while watching
them.  As the world of rock music grew increasingly sophisticated, it
became clear that bands no longer wanted simply to record their songs
and then release them.  Pop videos were becoming the most effective way
of promoting songs, and some cynics observed that pop videos were as
important as the music itself.  In order to accommodate this, Nik also
set up a film-editing studio where our bands could make and edit their
own videos.

The other service that Virgin should offer our artists was the ability
to sell their records overseas.  Although we were a tiny company based
in a mews house in Notting Hill, I knew that, if we had no overseas
companies, we stood no chance of signing the international bands.  One
of the beauties of rock music is that at the top end of the market it
is a purely international commodity.  The best measure of a group's
success is how many records they sell overseas.  The large
multinational companies had a huge advantage over Virgin or Island
since, during the negotiation to sign a band, they could point to their
sales forces in France and Germany.

One option open to Virgin was not to compete with the multinationals
overseas, but purely to concentrate on the domestic UK market and
license our bands overseas in the same way in which we had licensed
Mike Oldfield when we first set up.  Although this was a tempting
option in that it saved overheads, I wasn't happy with it.  Island and
Chrysalis adopted this approach and I felt that it restricted their
growth because they were at the mercy of the overseas licensees.  Once
you have licensed a band away to another record company, you lose all
control of their promotion.  As well as wanting to control the
prospects of our British bands overseas, we also wanted to be able to
attract overseas bands to Virgin.  We wanted French, German and
American bands to feel that they could sign with us for worldwide
rights rather than with the large international record labels.

With a skeleton staff at Vernon Yard it was difficult to imagine that
we could really take on the multinationals on their own terms.  But we
decided to give it a go.  In 1978, Ken set off to New York to establish
the Virgin label in America.  Rather as Virgin had grown in London,
proliferating itself in a number of small houses around Notting Hill,
so I imagined that Virgin America would start off with a house in
Greenwich Village, and then move slowly around the country buying
houses in Chicago, Los Angeles, San Francisco and other regional
centres, so that we didn't build up one monolithic head office.

In 1979 I went to France to meet with Jacques Kerner, the French head
of Poly Gram  I did not know anybody in the French music industry and,
although I was ostensibly seeing him with the idea of asking Poly Gram
to distribute Virgin records, I was really on the lookout for somebody
who could set up Virgin in France.  Jacques Kerner introduced me to an
intriguing looking man called Patrick Zelnick who ran Poly Gram record
side.  Patrick had a vaguely distracted look about him rather like
Woody Allen, with thick, wiry, unruly hair and heavy black-framed
glasses.  Patrick not only looked like Woody Allen, he behaved like
him: when we first went out for lunch together, we spent four hours
afterward trying to find out where he had parked his car.  Patrick told
me he had watched Virgin's progress;

with interest.  He had first tried to meet us when we had a stall at
the Cannes Music Festival in 1974, but had only been able to find a
sign saying gone skiing.  Patrick had then started coming over to buy
records at the Virgin Records shop on Oxford Street, and he loved Mike
Oldfield and Tangerine Dream.

Jacques Kerner was offering me 300,000 pounds to license the entire
Virgin catalogue in France, with a percentage of royalties on top.
Since Virgin had little money at the time, and we had just taken on
another loan to pay for Necker Island, the easy option would have been
to accept it.  But, instead of dutifully taking down the details in my
notebook, I wrote down "Patrick Zelnick:

Virgin France'.  I surprised Jacques Kerner by asking for some time to
think it over.

After the meeting I thanked both men, and asked them to drop by and see
me on the houseboat when they were next in London.  The next month
Patrick came to London and called me up.  We had lunch on Duende, and I
asked him whether he would leave Poly Gram and set up Virgin as an
independent subsidiary in France.  I would give him complete
independence to sign whichever French bands he liked.

We worked out some rough figures on a piece of paper, and Patrick
agreed to do it.  He set up Virgin France with a friend of his,
Philippe Constantine, who was a wild, ragged individual, on and off
heroin but with excellent musical taste.  While Patrick did the
business, Philippe spent his time with all the bands.

"When you're invited for dinner," Jacques Kerner said in a reproachful
phone call to me when Patrick resigned, 'you're not meant to walk away
with the cutlery."

I apologised for poaching Patrick, but told Jacques that Patrick had
made his own decision to set up Virgin.

It was only after Patrick had left Poly Gram that we looked through the
figures again and realised we had miscalculated: we had forgotten to
include VAT in our estimations; we had used the wrong retail margin; we
had hopelessly overestimated the numbers of records that were sold in
Paris.  But by then it was too late:

Patrick and Philippe were working for Virgin.  One of the first bands
they signed was called Telephone, who became the best selling band of
the year in France.  In later years, Patrick would shake his head in
disbelief that he had left the security of Poly Gram and joined a
virtually bust English record company.

While the negotiations with Patrick were going on, I went back to
France to meet the managing director of Arista Records.  We were unable
to agree a distribution deal, but I pricked up my ears when he started
boasting about how Arista was about to sign Julien Clerc, France's
biggest pop star.  I had no idea who Julien Clerc was, but I excused
myself and slipped into the lavatory.

I scribbled "Julien Claire' on my wrist and then carefully pulled down
the sleeve of my sweater to hide it.  After the meeting was over I
rushed to a call box and telephoned Patrick.

"Have you heard of a singer called Julien Claire?"  I asked.

"Of course I have."  Patrick said.

"He's the biggest star in France."

"Well he's free to sign.  Let's try to sign him.  Can we meet him for
lunch tomorrow?"

At the lunch the next day, Patrick and I managed to persuade Julien
Clerc to sign with Virgin from under Arista's nose.  Within a fortnight
I had succeeded in having my name struck off two record companies'
lunch lists, but both Patrick and Julien Clerc went on to make
fortunes for Virgin France and themselves.

With Ken in New York, Patrick in Paris, Udo in Germany and our own
operation in London, we could properly market Virgin as an
international record label.

Our trouble was that we had no cash reserves, and so any setback could
prove fatal.  When I visited Coutts Bank in the Strand I now wore shoes
and my hair was in no danger of getting caught in the revolving door,
but they still treated me like a schoolboy prodigy rather than a
businessman.  Even looking at Virgin's sales of 10 pounds million, they
would shake their heads and smile.

"It's all good pop music, isn't it?"  the Coutts manager would say
genially.

"My son loves Mike Oldfield.  I just wish my other one didn't play all
this loud punk stuff.  I keep having to yell up at him to turn it
down."

I tried to point out that Virgin was growing into a large company.  We
had very good sales, and were making as good and steady money as any
regular business.  But the bankers never saw it like that: "You're
doing jolly well," the bank manager said.

"But of course the quality of your earnings is so poor.  We can't see
what they're going to be more than a month in advance."

In spite of this cheerless analysis, at the end of 1978 we felt quite
confident: in the UK we had enjoyed a good year, with a string of
top-ten hits and good sales through the record shops.  But in 1979
Margaret Thatcher was elected prime minister; interest rates soared,
and we were hit by a severe recession.  Record sales in Britain dropped
for the first time in twenty years, and our chain of shops lost a lot
of money.  Ken had had no luck in New York: Virgin's first single there
cost $50,000 to promote and completely bombed.

Reluctantly, we decided to close the office and called Ken back home.

Everything seemed to be going wrong, even at home.

In November 1979 Joan called me to say that the houseboat was in danger
of sinking.  I had left the water pump on and, rather than pumping
water out, it had backfired and started siphoning water in.  We met at
Duende and waded around in the water trying to salvage furniture and
boxes of files.  After we had retrieved all we could, we stood on the
towpath chatting to our neighbours about the best way to pull the boat
up.  One of the neighbours shifted a box, and to our embarrassment a
large vibrator fell out.  When it hit the ground, it turned itself on
and started to vibrate.  As we all watched it, it buzzed around and
finally fell into the canal, where it zipped through the water like a
torpedo before finally vanishing from view.

"Anything to do with you, Richard?"  Joan asked caustically.

"No.  You?"

"Of course not."

That box had (of course!) been on Duende for years.

The circle of ripples where the vibrator had sunk seemed a fitting end
to the 1970s.

In 1980 I travelled to Los Angeles to try to interest American record
companies in English artists.  The trip was a disaster.  I took a
collection of demo tapes but nobody was interested in anything new.
Mike Oldfield was as popular as ever -someone even misspelt his name
"Oldfield', which was certainly closer to the truth for Virgin -but the
other bands I was trying to license, such as The Skids, The Motors,
XTC, Japan, Orchestral Manoeuvres in the Dark ("Hang on, Richard," said
the buyer at CBS.

"We haven't got all day.  Can't we just call them OMD?"), and The
Flying Lizards, were listened to with polite interest but few bids.

As I saw that Virgin's income was drying up, I made continual lists of
savings we could make.  I sold Denbigh Terrace, and put the money into
Virgin; we sold two flats we owned in Vernon Yard; we cut back on
everything we could think of.  I recently came across a list of
immediate priorities of the time in my notebook.

It brings back the sense of desperation:

1. Remortgage the Manor 2. Turn off the swimming-pool heater 3. Sign
Japan [the band] 4. Sell the houses in Vernon Yard 5. Ask Mike Oldfield
if we can hold back his cash 6. Sell the houseboat 7. Sell my car 8.
Lease all the recording equipment 9. Nik could sell his shares to a
merchant bank or Warner Bros

10.  Sell The Venue

I wrote to the Virgin staff and told them that we had to tighten our
belts urgently:

The good news is that Ian Gillan's new record has gone straight in at
number three in the charts.  But the bad news is that it's only sold
70,000 copies, which is just a half of what a number-three record would
have been last year.  Our profits have been reduced by more than half
since we have the same overheads.

By Nik's calculations Virgin was heading for a 1 million loss in
1980.

"I can't sell my shares to a merchant bank," he told me.

"Virgin is losing 1 million this year.  The shares are worthless."

"But what about the brand name?"  I asked.

' "Virgin"?  It's worth minus 1 pound million," he said.  They won't
recognise any value in the brand name.  What's the worth of British
Leyland as a brand name?"

Virgin was suddenly in desperate trouble.  The 1980 recession caught us
with all the unexpected ferocity of a squall at sea.  For the second
time we had to make some staff redundant: nine people, who represented
a sixth of the worldwide staff of Virgin Music.  This was
proportionately less than the cuts being made by other record companies
at the time, but it was a gut wrenching blow for us.  Nik, Simon, Ken
and I spent hours arguing over what we should do.  With no major rock
star on the roster to release a hit record, Virgin had no predictable
future income.  We found ourselves desperately fighting to try to prove
Coutts Bank wrong.

Once again we went through our catalogue of bands and made several
cuts.  We had to abandon most of the reggae bands we had signed in
Jamaica since a military coup in Nigeria had banned all imports and
destroyed our sales.

Tension rose between Nik and Simon as they argued over which bands
Virgin should keep.  Nik argued that Virgin should drop The Human
League, a young band from Sheffield who played synthesisers.

"Over my dead body," Simon told him.

"But they're so marginal," Nik argued.

"We can't afford to keep supporting them."

"The Human League is exactly why I'm in this business," Simon said,
fighting to keep his temper.

"You just spend all the money I save in the shops," Nik said, wagging
his finger in Simon's face.

"Look here," Simon snapped, rising to his feet.

"Never, ever, wag that fucking finger in my face again.  And The Human
League are staying."

I watched Simon and Nik fight it out, knowing that something would
have to be done.  Nik had been my main partner, my closest childhood
friend, and we had worked together since Student, when we were
sixteen.

But he was obsessed with cutting back and saving money, though,
admittedly, at a time when we were in deep trouble.  But once again I
felt that unless we did something dramatic, which meant spending money,
we would never get out of trouble.

Nik and Simon reached an angry stalemate and turned to me to arbitrate
between them.  To Nik's fury, I backed Simon.  This was a turning point
in the triangular relationship which had worked so well up to this
point.  I felt that Simon's taste in music was the only thing that
could pull Virgin out of the hole we were in.

Without Simon's new generation of bands, we would be stuck treading
water.  Nik thought that we were throwing good money after bad, and he
went back to the record shops determined to squeeze even more savings
out of them.

At another meeting we argued over a new signing, the drummer from
Genesis.  In September 1980, Simon wanted to spend 65,000 pounds to
sign up Phil Collins as a solo artist.  Once again Simon was supremely
confident that this was the right move, and he stood up to all the
doubts and criticisms Nik threw at him.  The reason we even had the
chance to sign Phil Collins was our expansion into the recording-studio
business.  As well as the Manor, we had acquired a studio in West
London which we called the Town House.  At the back of the Town House
we had built a second studio, which was hired out at a lower rate.
Rather than having the normal padded walls to kill all acoustic
reverberations, we had built it with stone walls.  When Phil Collins
wanted to record some solo material he decided that he couldn't afford
the top-of-the-range studio, so he booked the Stone Wall studio
instead.  There he found he managed to get the most extraordinary
recordings of his drumming for "In The Air Tonight'.  It sounded
fantastic.

And Phil got on so well with the sound engineers that soon he found
himself talking to Simon, and before we knew what had happened he was
ready to sign up with us.

Nik made Simon do all kinds of sales analysis to try to work out how
many copies of a solo album by Phil we could sell.  Nik was worried
that Genesis fans would not buy him, but Simon proved that, even if
just 10 per cent of known Genesis fans bought Phil's debut solo album,
we would make money.  As we stared with dismay at our overdraft and the
wretchedly low sales figures of our other bands, we knew the gamble we
were making.  To his credit, Nik agreed that we should sign Phil
Collins, even taking money from the shop tills to make up enough for
the advance.  Phil proved to be an extraordinarily gifted musician and
singer.  His voice was haunting and his lyrics poignant: he was
destined to become more successful than Genesis itself.

In the meantime, New Musical Express mentioned that Virgin Music was in
financial trouble.  If Courts read TIME, which I doubted, they might
think twice about extending the loan I wanted.  I immediately tried to
squash the idea with a letter to the editor: "Since in your last issue
you speculate that I am in deep financial trouble you will appreciate
my need to sue you in order to acquire some interest-free money rather
than approach the merchant banks .. ."  Although New Musical Express
was hardly the Financial Times, I recognised that if rumours like that
are not hit hard on the head they have a horrible habit of becoming
self-perpetuating.  Worse still, they were true.

A couple of months after the arguments over The Human League and Phil
Collins, I came across two deals that I thought were irresistible. They
both involved nightclubs.  The first one was The Roof Garden in
Kensington, which was being offered for sale at 400,000 pounds pence.
Virgin of course had no money, but the brewer who supplied beer to The
Roof Garden was prepared to offer us an interest-free loan if we
continued to stock their wines, beers and spirits.  The other nightclub
was Heaven, a large gay nightclub under Charing Cross Station.  The
owner was a friend of my sister Vanessa and he wanted to sell it to
someone who would respect it and keep it as a gay club.  Through my
work at the Advisory Centre, he knew that he could trust me to do this.
His asking price was 500,000 pounds and once again the brewer was
prepared to give us an interest-free loan to cover the entire purchase
price, in return for stocking their beers.  I had no idea why the
brewers did not want to acquire these clubs outright, and I jumped at
the chance to buy them.

I knew that Nik would oppose these purchases, so I signed the contracts
without telling him.  He was furious.  He thought that I was
squandering money.  He looked at the 1 pound million extra liability
which the purchase of these clubs represented and thought that I was
ruining Virgin.

"It'll sink us," he argued.

"But we don't have to pay any interest," I said.

"It's free money.  When someone offers you a Rolls-Royce for the price
of a Mini you have to take it."

"There's no such thing as a free lunch and there's no such thing as
free money," Nik told me.

"It's still debt.  We can't possibly pay it off.  We're practically
bust as it is."

"This money is free," I said.

"And I think there is such a thing as a free lunch.  We'll trade out of
trouble."

Nik disagreed with me so vehemently that it became clear we had to go
our separate ways.  He thought that I was leading Virgin headlong into
bankruptcy.  He wanted to protect the remaining value of his 40 per
cent share of the business before it was too late.  For my part, in
spite of our history, I had been unhappy with our professional
relationship for two or three years.  Nik and I had always been best
friends but, as Virgin had grown bigger and moved from being a record
retailer to a music label, I felt that he had become out of his
depth.

Nik thought that we were all out of our depths, which we may well have
been.  There was no room for him in the record label, and in any event
he wasn't comfortable doing all the social ising with the musicians
which Simon, Ken and I did.  I rather suspected that Nik's puritanical
outlook made him resent every pound that was thrown away on ordering
another bottle of champagne, even if by charming and so winning the
band on to Virgin Music we would reap vast benefits.  I felt that Nik
was always trying to stop me doing the things I wanted to do, most of
which, admittedly, involved risking money on new bands.  It is probably
an interesting litmus test of our relationship that I don't think Nik
came on staff skiing holidays after about 1977.

I have always wanted the Virgin staff to have a great time, and I'll be
the first one to make a fool of myself in any way if I think that it'll
help the party go with a swing.  Nik found all that side of life
difficult to enjoy.

We knew each other so well we could write pages about each other's good
and bad points.  In the end we both realised that it was best to
separate while we were still friends.  That way we could remain
friends, rather than waiting until we had grown into implacable
enemies.

I raised another loan from another bank, and bought out Nik's
shareholding in Virgin.  As well as this cash, Nik also took with him
some of his favourite parts of the Virgin Group: the Scala cinema and
the film-and video-editing studios.  Nik's real interest lay in the
film world, and when he left he set up Palace Pictures with a view to
making movies.  With his talent he soon started making wonderful films
such as The Company of Wolves, Mona Lisa and the Oscar-winning The
Crying Game.

With our separation settled, Nik and I hugged each other and made up.
We had both got what we wanted, and to celebrate our 'divorce' we threw
a leaving party at The Roof Garden.  In many ways we managed to get the
best of both worlds: we remained great friends, saw a lot of each
other, and both managed to thrive without the other.  Although I had
acquired Nik's 40 per cent of Virgin, I was well aware that there was
no difference between owning 100 per cent and 60 per cent of a busted
company.  Nik was right about Virgin's trading losses for 1980: we lost
900,000 pounds pence 12 "Success can take off without warning."

1980-1982

As well as parting from Nik, I came dangerously close to splitting up
with Joan in 1980.  I was working frantically to keep Virgin afloat and
I knew that Joan was growing increasingly frustrated.  No matter how
late I got home, the telephone rang.  Every time we woke up on a
Saturday morning it rang again.

One night I returned home to the houseboat to find it empty.  Joan had
gone and left me a note: "I am pregnant.  I am afraid to tell you.  I
have run away from home.  If you miss me, call me at Rose's."

As I looked at the note, I realised that my life had changed.  I sat
down and thought about what to do.  After Kristen had left me, I had
had a number of affairs.  I loved the variety and the freedom.  Ever
since she had moved in with me, I feared I had taken Joan too much for
granted.  My marriage to Kristen had made me sceptical about long-term
relationships, and at that time I had not made the same commitment as
Joan.  I was also under pressure from my parents to get back together
with Kristen or, if not, then to marry some kind of
university-educated, tennis-playing girl from Surrey -which Joan
emphatically was not.

I remember telling my parents that Joan had moved in with me.  Dad was
fishing on the shore of a lake, and Mum was pointing out a rising
trout.

In the ensuing silence Dad flunked his cast, which landed in a
tangle.

"That's torn it," he said.

But when I sat in the houseboat holding Joan's scribbled note and
thinking about our unborn baby, I realised that I really loved her.
Until that moment I had been guilty of wanting to have my cake and eat
it:

having a great relationship without making a commitment to it.  I had
enjoyed a number of different relationships, and had never thought
about the consequences.  I think lots of men would happily drift
through life without having children unless their partners forced the
issue.  I called Rose, Joan's sister, and dashed round to be with
Joan.

About six months into Joan's pregnancy I was in France while Joan was
on holiday in Scotland.  She had an attack of appendicitis in Fort
William.  I flew to Scotland to be with her while she was having the
operation.  In fact, she did not have appendicitis but an ovarian cyst
which had burst, but the doctors decided to go ahead and remove her
appendix as well a dangerous operation at the best of times but more so
on a six-months-pregnant woman.  The operation triggered Joan into
labour.  She was put on a drip to try to reduce the contractions, and
we immediately set off in an ambulance to try to reach a more modern
hospital at Inverness.  The drive across Scotland in the snow was a
nightmare.  Every jolt of the road set Joan into further contractions.
By the time we arrived she was in agony with the pain of the operation,
the pain of the contractions, and desperately trying to keep the baby
in.

At Inverness Hospital it became clear that Joan would have to give
birth to the baby.  There was going to be little chance of the baby
surviving as it was three months premature.  A baby girl was born who
weighed just four pounds, and we called her Clare after my aunt.

Clare could scarcely feed and the hospital did not have the necessary
equipment to keep her alive.

Although Clare did open her lovely, deep milky-blue eyes, she died
after four days.  All I can remember of her now is her tiny size.
Neither of us was allowed to hold or touch her.  Her brief home was in
an incubator.  She was so small she would have fitted into the palm of
my hand.  We pored over her face, and marvelled at her tiny hands and
the determined set to her face as she slept.

But now that memory has faded.  When I try to remember Clare, my mind
is cluttered by the antiseptic smell of the hospital, the metal chairs
in our room scraping over the lino, and the look on the nurse's face as
she came to tell us that Clare had died.

Clare inhabited a world of her own, and came in and out of our lives
leaving only despair and emptiness and love behind her.  She was so
small and lived for so little time that she was almost never here at
all, but in that heartbreaking time she brought Joan and me intensely
close together.  Until I had seen Clare's tiny fragile body, dwarfed by
the tiniest nappy, and seen how beautiful she was, and known that she
was our baby, I had never thought I would want to have a child.

After Clare's death, Joan and I were determined to have another baby,
and to our delight Joan became pregnant again within a year.

Once again Joan went into labour early, this time by six weeks.  Both
of us were taken by surprise.  I was at a party at The Venue and
arrived home at three in the morning, roaring drunk.  I fell into a
deep sleep, and only reluctantly woke when I felt Joan slapping me
about the face and shouting that she was having contractions.  I fell
out of bed and managed to drive her to hospital.  The doctors examined
Joan and led her to the maternity ward.

"You look fine," they reassured her.

Then they looked at me.

"You look terrible.  You'd better take these aspirins and go to bed."

Some time later that morning, I was woken up to find four doctors
peering at me through their masks.  I assumed that I had had a terrible
accident and was in a casualty ward somewhere.

"Joan is well into labour," they said.

"You'd better come with us."

Holly was born, under six pounds in weight.  It was the most incredible
experience I had ever been through.

By the end of it (I believe!) I was even more exhausted than Joan.  I
pledged to myself that I'd never miss the birth of one of our children.
However, after what had happened to Clare, our immediate concern was
keeping Holly alive.

We drove back to the houseboat on a freezing-cold November morning in
1981, and Joan wrapped Holly up with her in bed.  For the rest of the
winter they stayed more or less in the bedroom the whole time while I
worked in the room next door.  Penni used to walk through the bedroom
to her desk, which was tucked between the bilge pump and the stairs.

In 1981 Virgin Music finally began to earn some money.

Japan had had hit albums with Gentlemen Take Polaroids and Tin Drum.
Some of our recent hit singles were XTC's "Generals And Majors' and
"Sgt Rock', and Ian Gillan's "Trouble' and "New Orleans'.  The
Professionals and The Skids were also successes.  We still didn't know
what Phil Collins would come up with, and twenty-fourth in my list of
things to do that month -I

arranged to go up to Scotland to a concert by one of our new bands,
Simple Minds.  Simple Minds' album, New Gold Dream, was a bestseller.

The best news of 1981 was that Simon's prediction about The Human
League was proved right.  Their first two albums were quite
experimental and built up a loyal cult following.  When we noticed that
their sales kept steadily rising we knew that we had every chance of
breaking through.  Their third album, Dare, powered into the top ten
and then went to number one.  Dare sold over 1 million copies in
Britain and 3 million around the world.  The hit single "Don't You Want
Me, Baby?"  was played over and over again and became ingrained on
everyone's mind.

Almost as quickly as they had run out, Virgin's cash balances were now
restored.  Whenever Virgin has money I always renew my search for new
opportunities.

I am continually trying to broaden the Group so we are not dependent on
a narrow source of income, but I suspect this is more down to
inquisitiveness and restlessness than sound financial sense.  This time
I thought I saw a perfect opportunity.

Londoners traditionally read a listings magazine called Time Out to
find out what's going on in the city.  In those days Time Out was
extremely left-wing.  The standing joke was that, after reading a Time
Out review, you did the opposite of what they recommended since they
brought such an extreme political slant to everything.  Mick Jagger
once remarked that getting through to the listings section in Time Out
was like trying to cross a picket line.  I had spoken to the owner of
Time Out, Tony Elliott, a number of times about buying the magazine,
because it seemed to me that there was room for a pure entertainment
guide without the politics.

In the spring of 1981 Tony Elliott had a dispute with his staff that
led to a strike.  Since Virgin was an entertainment company, I thought
we could seize the opportunity and publish our own magazine.

Joan and I had bought a house in the country, close to the Manor
studios, called Mill End.  We used it as a weekend retreat.  I invited
Tony Elliott up for lunch one weekend, and suggested that we join
forces to produce a new entertainment magazine while his staff were out
on strike.  Tony decided against the idea.  I therefore decided to
bring out our own rival magazine, to be called Event.

With the staff of Time Out on strike there was no listings magazine on
the market.  I hoped that, if we could bring out Event quickly, even
when Time Out resurfaced we should be able to keep some of our readers.
We hired Pearce Marchbank, who had designed Time Out, as the designer
for Event, and he persuaded me that he should be the editor as well.
This may have been a mistake, but even as we set about pulling Event
together we were suddenly outflanked by developments at Time Out.

Knowing that Event was waiting in the wings, Tony Elliott rapidly gave
his staff an ultimatum and broke the strike.  His highly political,
left-wing staff split away from Time Out to form their own magazine,
City Limits, and without them Time Out was free to reappear.  We
realised that we would not be able to beat Time Outback on to the
streets, but worse than that we realised that, without its forty
left-wing staff, Time Out could become the pure listings and
entertainment magazine that we had intended Event to be -but with a
well-established brand name.

The new Time Out was published on 18 September and it met our worst
fears: it was a very good, all-round entertainment magazine.  The
following week the first edition of the splinter publication, City
Limits, came out together with our magazine, Event.  With three
listings magazines available, the London market was saturated.

At the time Virgin did not have the extensive cash resources to
support a new venture.  When Event failed to win a high circulation, I
stepped in to try to help.  But it was a lost cause: Time Out was
winning the circulation war, and I decided to cut our losses and close
down the magazine.

After I closed down Event, City Limits and Time Out fought over the
London market.  Eventually City Limits lost and went bust, leaving Time
Out supreme.

It is always difficult to admit to a failure, but the one positive
thing about the Event episode was that I realised how important it was
to separate the various Virgin companies so that, if one failed, it
would not threaten the rest of the Virgin Group.  Event was a disaster,
but it was a contained disaster.  Every successful businessman has
failed at some ventures, and most entrepreneurs who run their own
companies have been declared bankrupt at least once.  Rather than
defaulting on our debts, we paid them up and shut down the magazine.

The money that Event magazine lost Virgin was rapidly repaid to us by
The Human League, Simple Minds, Phil Collins' enormously successful
debut solo album, Face Value, and then, most spectacularly, by a young
singer who called himself Boy George.

I first heard of Boy George and Culture Club after Simon went to see
them perform at a recording studio in Stoke Newington in 1981.  The
music publishing rights had already been signed by Virgin, and Simon
was intrigued by the startling appearance of their lead singer, a
beautiful young drag queen, and the soft, easy-going white reggae they
played.  Simon invited the band back to Vernon Yard, where they agreed
a recording contract.

When Simon introduced me to George O'Dowd, I found myself shaking
hands with somebody who looked utterly unlike anyone I had ever met
before.  His long hair was braided like a Rastafarian; he had a pale
white face, huge arched eyebrows, and wore the ornate robes of a geisha
girl.

Although we knew that Culture Club was an extraordinary creation, their
first single, "White Boy', was stillborn.  Virgin released it on 30
April 1982 but nothing much happened: it sold around 8,000 copies and
reached 114 in the charts.  We didn't mind.  We really felt that, as
soon as Boy George was properly photographed or if we could get him on
to Top of the Pops, his records would take off.  People just had to see
Boy George and they would want to buy his music.

Teenagers would go mad for him.  As well as looking astonishing, George
had a fabulous voice and was very witty and charming: he was a rebel in
a totally different way from The Sex Pistols or James Dean, but a rebel
nonetheless.  Virgin brought out Culture Club's second single, "I'm
Afraid Of Me', in June, and although it sold better than "White Boy' it
still only reached 100 in the charts.  Culture Club carried on
recording their album, Kissing To Be Clever, which they had largely
written before they signed with us.

When we released Culture Club's third single, "Do You Really Want To
Hurt Me?"  on 3 September 1982 it was our final attempt to launch the
band.  Funnily enough, Radio 2 played the song before Radio 1, and
general reviews of the single were poor: "Watered-down fourth-division
reggae," wrote Smash Hits.

"Awful."  But with the Radio 2 exposure it crept up the charts, up to
number 85 in its first week, and number 38 in its second week.  We
plugged him as hard as we could, but the BBC refused to interview Boy
George, calling him a 'transvestite'.  Then we heard about a
cancellation on Top of the Pops.  We did everything we could to get
Boy George into that slot, and when Top of the Pops finally agreed, we
suspected we had a sensation in the making.

With his white face, his swaying robes, his felt hat and impossible
arched eyebrows, Boy George beat every other sophisticated romantic
band, such as Spandau Ballet, at their own game.  He appealed to all
teenagers, both male and female, as well as to children as young as
eight or nine and their grandmothers to boot.  It was impossible to
define why he was so popular:

parents wanted to mother him; girls wanted to be as beautiful; boys
wanted their girlfriends to be as beautiful; it's impossible to
quantify.  The next day the telephones rang off the desks and the
orders for the single came pouring in.

"Do You Really Want To Hurt Me?"  rose to number three.  George then
appeared on Noel Edmonds' Late Late Breakfast Show and Noel asked him
whether he was a great fan of Liberace.

"Not any more," George said, implying that the roles had now been
reversed.  The single reached number one.  When George announced that
he preferred a cup of tea to sex, he became an international icon.

For Christmas 1982, we released Culture Club's first album, Kissing To
Be Clever, which sold 4 million copies around the world.  And then came
another amazing breakthrough: their sixth single, "Karma Chameleon',
was the top-selling single of 1983, selling over 1.4 million copies in
the UK and reaching number one in every country around the world that
had a chart, over thirty countries to our knowledge.  Culture Club was
a worldwide pop phenomenon, and their second album, Colour By Numbers,
sold almost 10 million copies.

Virgin's finances were thrown upside down: from the 900,000 pounds loss
in 1980, we made a profit of 2 pounds million in 1982 on sales of 50
pounds million.  In 1983 our sales shot up to 94 pounds million and
our profits soared to 11 pounds million.

Once we had started the Boy George fan club, it was impossible to
control it, and in 1983 40 per cent of our profits came from Boy
George.  For the first two years the Culture Club story was the perfect
model.  The extraordinary thing about the record industry is how
success can take off without warning.  One minute nobody had heard of
Boy George; the next minute every person around the world from Ireland
to Korea and Japan to Ghana was humming "Karma Chameleon'.  Boy
George's success was measured literally by the speed of sound.  Many
people find such a vertical run frightening, and they would be right in
thinking it creates havoc in a company.  Happily, I have always thrived
on havoc and adrenaline, and so I felt perfectly at home as we fanned
the flames of Culture Club's success.

13 "You go ahead with this over my dead body."

1983-1984

It is always easier to live with the benefit of hindsight.  People
often point out that Nik sold his 40 per cent stake in Virgin at the
wrong time.  But when Nik and I split up he was as aware of the sales
figures and profit forecast as I was and things were in bad shape.  At
the time Nik and I were both happy: Nik was happy to leave a company
that looked as if it was heading into trouble, and I was happy to have
virtually full control of my destiny, even if I knew that Virgin was on
a knife edge.  Soon after Nik left, two things happened that could not
have been foreseen.  Firstly, compact discs became widespread and so we
were able to resell our back catalogue on CD.  Many people replicated
their entire record collection on compact disc, and certainly an artist
like Mike Oldfield sold tremendously well on CD; The Sex Pistols less
so.

The second change was that Virgin itself became the undisputed leading
independent record label.  Simon's taste in music finally triumphed:
Virgin Music started to dominate the top-ten singles and albums charts.
From being seen as a one-band record label that had made an incongruous
leap from Mike Oldfield to The Sex Pistols, Virgin Music was now the
envy of the record industry.

All Simon's signings of the last couple of years took off at once: we
had The Human League as well as their spin-off, Heaven 17; Simple
Minds; Boy George; Phil Collins; China Crisis and Japan.  The wonderful
thing about these artists was that we had broken them all ourselves. I
was still determined to sign a classic act of the calibre of Bryan
Ferry or The Rolling Stones, but the beauty of our roster was that it
was all homegrown, and was finally beginning to sell well overseas.

As I watched the money pouring into the bank, I began to think of other
ways to use it.  Although I was closely involved in signing bands, I
felt that I knew as much as I wanted to about negotiating record
contracts.  I needed another challenge.  I had the opportunity to use
our cash to set up more Virgin companies and widen the basis of the
Group so that all our eggs would not be in one basket if we were hit by
another recession.  I also wanted to expand the Virgin name to stand
for more than a record label, and become more involved in all kinds of
media.  It was only three years since Virgin had almost gone bust, and
two years since Nik had left.  From having had very little money with
which to play over the last three years, I now had cash mounting up in
the bank and I wanted to reinvest it as fast as possible.

When I began looking for other businesses to start up, I thought about
expanding our tiny book-publishing business.  I knew that the
music-publishing side of Virgin Music made a very good living from
publishing the music and collecting royalties, and I wondered whether a
properly managed book-publishing division would be as successful.  At
the back of my mind was the thought that, if a rock star is famous,
there should be all sorts of other activities that they could explore,
including books and videos, appearances in films, and soundtracks.

Vanessa, my younger sister, had been going out with Robert Devereux
since he was at Cambridge University.

Robert had become part of the family.  Although Virgin is not a family
company in the traditional sense, in that it has not been passed down
vertically from generation to generation, it is a family company in a
horizontal sense, in that I always involve my wider family in whatever
I do, and I listen to their opinions as closely as anyone else's.  I
know that a number of businessmen shut their families off from their
work: they hardly ever invite their children into their office, and
when they are at home they never discuss what they do at work.  It is a
British characteristic not to discuss money over a meal, but when this
boils over into never discussing business then I think it represents a
lost opportunity.

Business is a way of life.  It is small wonder that there are so few
business entrepreneurs when business is excluded from the family
circle.

When I was wondering what to do about Virgin Books, Vanessa suggested
that I talk to Robert, who had been working at Macmillan Publishers for
three years.

Robert came around to Duende with his boss Rob Shreeve, and I asked
them whether they would come and work at Virgin Books.  I had no clear
idea what Virgin Books should do, apart from somehow exploit the
growing success of the Virgin rock stars.  Robert suggested that books
and videos could be sold through the same outlets, and he had the idea
that Virgin Books could form part of a wider Virgin interest in the
media, which could involve television, radio, films and videos as well
as books.  Undaunted by the reality that he was actually joining a tiny
little publisher, Robert left his job and came to join us at Virgin.
Rob Shreeve decided to stay at Macmillan for the time being.

When Robert arrived at Virgin Books he immediately put a stop to the
line of novels we were selling.  He recast Virgin Books as a nonfiction
specialist in books about rock music and sport.  A few years later he
decided to buy another publishing house, WH Allen, which he put
together with Virgin Books.  With hindsight, this was a mistake: we
tried to do too much, and in 1989 the publishing business ran into
difficulties and had to be radically cut back.  It was one of our early
acquisitions, and it gave us first-hand experience of all the pain that
comes with laying off staff in order to turn a company round.  It also
demonstrated the benefits of growing a company from scratch, when you
employ exactly those people you want, and really establish the kind of
atmosphere you want.

A year later, Rob Shreeve joined Virgin Books as managing director,
with Robert as chairman.  Together they relaunched the business as
Virgin Publishing, concentrating on our core strengths of music and
entertainment.  Within a few years the company had become a highly
successful publisher of books on entertainment, and probably the
world's leading publisher of books on popular music.

As Virgin Music grew into one of the leading record companies, Robert
began to push for more funds to invest in what we called Virgin Vision.
As a first diversification from publishing books, Robert wanted Virgin
Vision to be involved in the British film industry.

Although I was keen to make films, I was also particularly attracted by
the tax incentives which would enable us to write off the investment
against Virgin Music's profits.  We produced a number of films such as
Secret Places and Loose Connections, and then made a film called
Electric Dreams.  Electric Dreams cross pollinated with Virgin Music in
that the theme song was sung by a Virgin artist, Phil Oakey of The
Human League, and became a top-ten hit.  The next film Virgin produced
was George Orwell's 1984.  The original budget for this film was 2
pounds million: Simon Perry and Mike Radford, who had produced and
directed Loose Connections, were signed up to produce and direct 1984,
and John Hurt and Richard Burton were signed up as the stars.  As the
film was shot, the budget ran out of control.  Robert and I were
reluctant to compromise the quality of the film, but by the time the
budget had soared to 5 pounds 5 pence.  million we decided that we had
to take some control.  The debt we had to take on to fund 1984 almost
brought the whole Virgin Group down, and the banks only lent us the
money because the record sales of Virgin Music were so successful.
Simon and Ken were deeply sceptical about film-making, and I had to
lean on them heavily to continue backing 1984.

Rather than sacking Simon Perry and Mike Radford and replacing them
with people who could bring the film in at some kind of sensible
budget, we let them carry on to the end, but decided to change the
soundtrack which Mike Radford had wanted to commission.  Mike's choice
was an unknown composer called Dominic Muldownie.  We preferred to use
The Eurythmics, who would do an excellent job as well as providing us
with a hit album to recoup some of the disastrous overspend.

After 1984 was released, Simon Perry had a great row with us over the
soundtrack and publicly accused us of interfering with his artistic
integrity.  However, The Eurythmics' soundtrack enabled us to salvage
some of the money lost by the film.  1984 was an outstanding film and
won the Best British Film of the Year award.

After that we made only one more film, Absolute Beginners, before the
tax incentives for making films in Britain were cut, and we decided,
for the time being, to leave the risky business of making films to
other people.

Most outsiders bracket films and music together as 'entertainment',
but we quickly learnt that there is a vast difference.  When we sign a
contract with a rock star, the headline figure may appear huge -the
press may call it a 5 million signing' but our financial exposure is
rolled out slowly.  Our initial commitment would cover the advance and
the promotional costs of the first single and album.  That might be
around 300,000.  If the first album is successful, then we would go on
to the next album, and so on.  Thus we could always predict the future
by knowing the sales figures of the previous album, before making the
next stage of the investment.  And we always had the back catalogue to
support us as we went along.  With films, our 5 million would be just
that: a straight one-off payment which was spent virtually all at once
on making the film and gave us no guarantees for the film's success or
for any future films.  It was all or nothing.  Even to my instinctive
mind, this looked like a precarious way of making money.

Rather than making films, Robert changed direction and began to push
Virgin into distributing videos and films instead.  This aspect of the
business was far less risky than making the films themselves.  In order
to build a large market share, Robert started off distributing pop
videos for all record companies.  He also bought back catalogues of old
movies and distributed those as videos.  Whenever I bumped into him,
Robert was always working on some new deal.  He once made a fortune
distributing old Hollywood movies dubbed over with Cantonese in Hong
Kong.  Virgin Vision grew into a large distributor of films and videos,
with sales passing 50 million by the late 1980s.

Eventually, Virgin Vision began to absorb too much cash for us to fund
it.  We had to spend large amounts on buying the rights to distribute
films such as Robocop 2, and then set about earning our profits.  We
decided we couldn't afford this cash drain, and asked Robert to sell
the business.  Robert sold Virgin Vision to an American company called
MCEG.  Just as the acquisition of WH Allen taught us a lot about buying
companies, so the sale of Virgin Vision taught us a lot about selling
them:

although the headline price was $83 million, we took our payment in
MCEG shares, which were listed on the American stock exchange.  It all
looked respectable enough and our MCEG shares gave us 22 per cent of
the company.  But within six months MCEG had gone bust and our $83
million consideration22 per cent of MCEG -was worthless.  We never made
that mistake again.

The growth of Virgin Vision had complemented Virgin Music in that it
dealt in intellectual property, and it also broadened our base from
being an exclusively music-based Group.  A number of people started
suggesting ideas to us that would have increased Virgin's.exposure in
entertainment, but my imagination was really captured by a proposal
that came entirely out of the blue, and could only remotely be defined
as 'entertainment'.  In February 1984 a young American lawyer called
Randolph Fields asked me whether I was interested in operating an
airline.

Randolph Fields was looking for investors to finance a new airline that
would use the Gatwick to New York route, which had become vacant
following the collapse of Sir Freddie Laker's airline in 1982.  He sent
me a proposal which I took up to read at Mill End.  It was obvious that
he had contacted lots of other investors before mea record-label owner
is hardly going to be his first call -so as I skimmed through the
proposal I kept saying to myself, "Don't get tempted; don't even think
about it."

In the same way that I tend to make up my mind about people within
thirty seconds of meeting them, I also make up my mind about whether a
business proposal excites me within about thirty seconds of looking at
it.  I rely far more on gut instinct than researching huge amounts of
statistics.  This might be because, due to my dyslexia, I distrust
numbers, which I feel can be twisted to prove anything.  The idea of
operating a Virgin airline grabbed my imagination, but I had to work
out in my own mind what the potential risks were.

Throughout that weekend I mulled over the proposal.  Randolph's idea
was to offer an all-business class airline, but this didn't appeal.  I
worried about what would happen on the days when businessmen don't
fly:

Christmas, Easter, Bank holidays, the entire Thanksgiving week.  I
thought that we would have to have holiday-makers to fill the plane in
those weeks.  If we were going to be different from other airlines,
with their first, business and economy classes, perhaps we could offer
just two classes: business and economy?  I wondered what the
implications of that would be.  We'd get both businessmen and tourists
-who would we miss?  I wrote out a list of things I wanted to
understand about how the aircraft leasing would work.  If I could lease
the plane for one year and then have the chance to return the plane, we
would have a clear escape route if it all failed.  It would be
embarrassing, but we would limit the amount of money we lost.  By the
end of the weekend I had made up my mind: if we could limit everything
to one year -the employment contracts, the leasing of the aircraft, the
exchange exposure, and anything else that starting up a New York route
involved -then I wanted to have a shot at it.

The only airline that was offering cheap fares across the Atlantic in
1984 was People Express.  I picked up the phone and tried to call them.
Their number was engaged.  It was impossible to get through on their
reservations line all morning.  I reasoned that either People Express
was very poorly managed, in which case they would be an easy target for
new competition, or that they were so much in demand that there was
room for new competition.  It was that continual engaged tone on my
telephone throughout Saturday more than anything else which triggered
my belief that we could set up and run an airline.

I called up Simon on Sunday evening.

"What do you think about starting an airline?"  I jauntily asked him.

"I've got a proposal here ' "For God's sake!"  he cut across me.

"You're crazy.

Come off it."

"I'm serious."

"You're not," he said.

"You're mad."

"OK," I said.

"I won't go into it now.  But I think we should have lunch."

On Monday morning I called up international directory inquiries and
asked for the number for Boeing.  Boeing is based in Seattle, and due
to the time difference I couldn't speak to them until late that
afternoon.  They were rather bemused to hear an Englishman asking what
kinds of deals were available on a jumbo.  I spent all afternoon and
all evening on the phone to Boeing, and eventually I spoke to someone
who could help me.  They told me that Boeing did lease aircraft, and
that they had a second-hand jumbo that they would seriously consider
taking back after a year if things didn't work out.  With this
extremely basic, not to say sketchy, information I prepared to face
Simon and Ken.

The lunch the next day was not a success.  After I told them about how
impossible it had been to get through to People Express and that Boeing
had planes to lease, they looked shocked.  I think they realised I had
done all the market research I felt I needed to do and had made up my
mind.  They were right: I had worked myself up into a state about it.

"You're a megalomaniac, Richard," Simon said.

"We've been friends since we were teenagers, but if you do this I'm not
sure that we can carry on working together.

What I'm telling you is that you go ahead with this over my dead
body."

Ken was less outspoken, but he too thought that the idea of combining a
record company with an airline was anathema.

"I can't see the connection," he said.

"And, if you're looking for losses to offset against our profits, we
could always invest in new bands."

"All right, then," I said.

"We won't combine it.  We'll keep the two companies separate.  We can
arrange the financing so that Virgin Music is scarcely at risk.  I've
spoken to Boeing, and they can offer a lease whereby they take the
plane back after a year if it doesn't work.

The most Virgin would lose would be 2 pounds million."

Simon and Ken remained resolutely opposed.

"Come on," I ploughed on.

"Virgin can afford to make this step.  The risk is less than a third of
this year's profits.  Money from Culture Club is pouring in.  And it'll
be fun."

Simon and Ken both winced when I said 'fun', which is a particularly
loaded word for me -it's one of my prime business criteria.  Since I
had made up my mind, I knew I had to convince them.  I carried on
arguing that we would only have one plane, that we could just dip our
toe into the water, and that if the water was too hot we could cut our
losses.  I explained that the beauty of starting up from scratch
rather than buying an existing airline was that we could easily retreat
if it didn't work.

In my mind it was that simple.  Simon was most worried that I was
risking the value of his shareholding in the Virgin Group, and I think
Ken thought I had gone way over the top.

In the same way that the argument over The Human League had been a
turning point in Simon's and my relationship with Nik, the argument
that lunchtime was a turning point in my relationship with Simon.  Over
the years I had unnerved him several times, but this time he felt that
I was prepared to bet the company and all our accumulated wealth on a
scheme that he thought was totally harebrained.  Simon's interest and
love for life comes from the arts, from music, books, his collection of
paintings and beautiful cars.  My interest in life comes from setting
myself huge, apparently unachievable, challenges and trying to rise
above them.

From a purely commercial perspective, Simon was absolutely right; but
from the viewpoint of wanting to live life to the full, I felt I had to
attempt it.  From that lunchtime onward a tension sprang up in our
relationship which has never fully dissolved.

Randolph was proposing to call the airline British Atlantic, but if I
was going to be involved I wanted to bring "Virgin' into the title.  We
agreed to differ on that until the airline was a little closer to
reality.  There was a lot to learn, so I asked Sir Freddie Laker, a man
I've always admired, whether he could help me.  Sir Freddie came to
have lunch on Duende and explained the mechanics of an airline.  He
quickly confirmed my suspicions about the limitations of starting an
airline that was exclusively business class.

"And you don't want to be all no-frills economy service either," he
pointed out.

"That was my mistake.

You'll be vulnerable to the simple cost-cutting attack which put me
out of business."

We began a discussion on the philosophy of the business-class service
at that lunch.  We talked about offering a first-class service at
business-class fares, and building in all kinds of extra services for
the cost.  Two of the best ideas that came out of our lunch were to
offer a limousine pick-up as part of the service and offer a free
economy ticket to anyone who flew business.

Freddie also warned me to expect some fierce competition from British
Airways.

"Do all you can to stop BA," he said.

"Complain as loudly as possible, use the Civil Aviation Authority to
stop them, and don't hesitate to take them to court.

They're utterly ruthless.  My mistake was that I never complained
loudly enough.  They destroyed my financing and it's too late for me
now.  I sued them and won millions of dollars, but I lost my airline.
If you ever get into trouble, sue them before it's too late.  Another
thing, Richard, is the stress.  I'm not kidding, but you should have
regular medical checkups.  It is very stressful."

Freddie told me that he was just recovering from cancer of the
pancreas.

"You need to go to a doctor and ask him to stick his finger up your
bum.  He'll be able to tell you what's what," Freddie said.

I was inspired to see that, despite all his problems, Freddie was still
so ebullient.  He was unbowed by the experience, and he saw me as his
successor, picking up the flag where he had left off.  I asked Freddie
whether he would object if I called Virgin Atlantic's first aircraft
Spirit of Sir Freddie, but he laughed it off:

"Not the first one," he said.

"My name's a liability now and you'd send out the wrong signals.  But
I'd be honoured when you've got a larger fleet."

As Freddie left Duende he turned round and shouted back at me, "One
last word of advice, Richard.  When you're bent over and the doctor's
got his finger up your bum, make sure that he hasn't got both his hands
on your shoulders!"

Roaring with laughter, he made his way along the towpath.

The first arrangement I made with Randolph was that we would have an
equal partnership.  I would invest the funds; he would run the airline.
Randolph had already recruited two key people from Laker Airways: Roy
Gardner, who had run the engineering side of Laker, and David Tait, who
had run the American side of the operation.

"What do you think of the name?"  I asked David Tait.

"British Atlantic?"  He snorted.

"Just what the world needs: another BAl"

Using David's reaction, I managed to get Randolph to agree to change
the name to Virgin Atlantic Airways, and then we formed our joint
partnership.

"What do you think of the new name?"  I asked David Tait.

"Virgin Atlantic?"  He snorted.

"Nobody will ever set foot inside a plane called "Virgin".  It's
ridiculous.  Who'd fly an airline that's not prepared to go the full
distance?"

Within a couple of weeks it became clear that the arrangement between
Randolph and me would not work.  At our first meeting in front of the
Civil Aviation Authority, who monitor the safety of airlines, Randolph
went in to talk about his plans for the new airline.  Colin Howes, my
lawyer from Harbottle and Lewis, was there.  After watching Randolph
blustering for a few minutes, Colin slipped out of the hearing to call
me and advise me to get across to Kingsway in Holborn:

"It's not going very well," Colin said.

"I think that Randolph is digging a hole for himself."

I came into the hearing and saw that Randolph was being fiercely
cross-examined by British Caledonian, who were objecting to our licence
application.  Our airline was purely an idea, a paper airline, so it
was easy for them to run rings round us, asking what we intended to do
about safety drills, how we were going to maintain our plane, how we
could guarantee our passengers' safety.  Randolph was an impatient man,
and I could see that he was growing angry and confused in the face of
this sustained questioning.  Equally, the CAA were looking rather
sceptical about Randolph's ability to get an airline off the ground.
When the CAA came on to the question of finances, the British
Caledonian lawyer looked across the room at me and said:

"You'll have to have a lot of hits on Top of the Pops to keep the
airline going."

"Actually," I pointed out tartly, "Virgin made profits of 11 million
last year -more than twice those of your client, British Caledonian." I
decided not to mention that we were having to pay out large sums of
money to continue making 1984.

The CAA specified that the new airline would have to have working
capital of 3 million and gave their permission for us to fly in theory.
This was the official blessing.  Of course, the CAA could withdraw
their permission at any time if we failed to meet safety requirements.
We would have to have another CAA test once we had leased the aircraft,
but for now we had the go-ahead to establish the airline.  We rented a
warehouse near Gatwick Airport, where we based Roy Gardner and his
engineering team, and started recruiting pilots and cabin staff.  We
rented office space in the Air Florida office on Woodstock Street,
just off Oxford Street, where we piggybacked on their
computer-reservations system and created a dummy file for the Virgin
Atlantic flights.

David Tait moved his family up from Miami back to their home in Toronto
and started living at Virgin Music's office in New York.  A team of
lawyers representing Boeing came over to London to start negotiating
over the lease of the aircraft, and soon they were spending most of
their days with me on the upper deck of Duende, while Joan and Holly
lived on the lower floor.

The houseboat was becoming increasingly crowded with the addition of
Holly, and the comings-and-goings to do with the airline.  Joan and I
decided to look for a home on land for the family, and settled on a
large, comfortable house off Ladbroke Grove.

The first casualty of Virgin Atlantic Airways was my relationship with
Randolph Fields.  Two things became clear.  The first was that, since
Virgin Group was being asked to guarantee the entire finances of Virgin
Atlantic, Courts Bank would only countenance extending credit to us if
we had control of Virgin Atlantic.

They would not lend us money if we controlled only half the new
airline.  Since Randolph was not putting up any money, he saw the sense
of this and reluctantly agreed that Virgin should have a controlling
share of the airline.

A far more difficult problem with Randolph came about in his relations
with the new Virgin Atlantic staff.

Perhaps if we had had a longer time than the four months we gave
ourselves it would have been different.

But we felt that, if we were to survive the first year, we had to
launch in June in order to take advantage of the heavy summer traffic
and build up reserves and cash flow to keep us going through the lean
winter months.

It was a virtually impossible timetable, and demanded that we work
flat out.  One moment we might be choosing the design of the air
hostesses' uniform or working out the menu; the next we were arguing
over some legal clause in the 96-page document about the lease of the
aircraft we were negotiating with Boeing.

I first got wind of serious trouble from David Tait, whom Randolph had
employed in America and who was going to be crucial to our chances of
succeeding.

"I've resigned," he told me.

"I'm sorry, but Randolph is impossible to work with."

"What's the matter?"  I asked.  I knew that, without David selling
tickets in America, Virgin Atlantic would be stillborn.

"I can't tell you everything," David said.

"It's just impossible.  I'm sorry, but I wish you all the best and hope
that it's a great success."

I could tell that David was about to ring off, so I begged him to come
over to London to see me.  He had no money to buy a ticket, so I sent
him one and he came two days later.  When he arrived at Duende he found
me holding Holly, who was feverish and screaming.  Joan had gone off to
buy more Calpol.  We smiled at each other above the noise as I cuddled
Holly.

"You may think that's loud," David said.

"But I can tell you that Randolph can scream louder.  I can't work for
him."

David's experience confirmed the growing realisation that we had to
move Randolph to one side if we were going to get the airline started.
David had taken a great gamble in joining Virgin Atlantic.  He had
moved his young family away from Miami back to Toronto, and was living
by himself on the top floor of the Greenwich Village house that Ken
Berry had bought.  All he had was a desk, a telephone and a tiny
bedroom, and he had to try to sell tickets to Americans for a start-up
airline.

Since he was unable to advertise Virgin Atlantic without an American
licence (which was to come only the day before we took off), David had
tried to alert New Yorkers by advertising in the sky above Manhattan.
On a cloudless spring afternoon, a formation of five small planes had
planned to squirt out white and red smoke printing wait for the English
virgin across the sky.

Unfortunately, just as they were finishing, a single cloud blew over
and obliterated the final letter, so New Yorkers craned their necks and
wondered what the cryptic message wait for the English vir gi meant.

David's falling-out with Randolph had been over the ticketing system.
Randolph wanted to avoid all travel agents, who charged 10 per cent of
the fare for their services, and instead sell every ticket through a
theatre booking agency called Ticketron.  David had looked at
Ticketron, who charged only $5 for issuing a ticket, but had refused to
deal with them.  He argued to Randolph that since the 30,000 travel
agents across America sell 90 per cent of all airline tickets, if
Virgin Atlantic tried to cut them out by using a theatre ticket
company, they would retaliate by cutting us out.  On top of that,
Ticketron had just six New York offices, which was not enough to sell
200 tickets for each flight to the UK.  Back at home, the London
ticketing system, run by a reservations manager who had been appointed
by Randolph, was in chaos.

An airline's ticketing system is its lifeblood, and in order to sort
out a workable system David had single-handedly come to an agreement
with an airline ticketing system, owned by the American businessman and
politician Ross Perot, called Electronic Data Systems, the industry
standard.  He had done so because, if he had gone ahead with Ticketron,
he could see that we would be left without a proper reservations
system and the airline would fall apart.  When Randolph heard about
this, he was furious and shouted down the telephone at David.
Eventually, David had decided that he didn't need to be shouted at by a
29-year-old lawyer who didn't know how the airline industry worked.

The staff from the Woodstock Street ticketing office had also
complained about Randolph's behaviour.  They told me that he kept
bursting into the room and asking everyone to leave it so that he could
make telephone calls in private.  I realised that Randolph was not the
right person to run the new airline.  I promised David Tait that, if he
stayed, he would soon have no more trouble from Randolph.

"He won't be here much longer," I said.

"You can deal with me directly."

As we worked through April and May, more and more of the airline staff
dealt with me directly.

Randolph was cut out of the operation.  He became increasingly
difficult to cope with.  Eventually my lawyers advised me to change the
locks on the ticketing office to keep him out.  As the inaugural flight
fixed for June drew nearer, Randolph and I were on a war footing.

I still wonder how we packed everything into those last few days.  The
newly trained cabin crew came up to the Woodstock Street office to man
the telephones, which were ringing off the hook.  The lease with Boeing
was finally wrapped up, including a complete maze of legal conditions,
but basically allowing us to return the aircraft to them after a year
and be reimbursed for at least the original cost.  If the aircraft had
risen in value then we would receive the increased price.  After two
months of negotiation I think Boeing were rather surprised at our
tenacity: "It's easier to sell a fleet of jumbos to an American
airline than just one to Virgin," admitted their negotiator after we
had finished.  The continual negotiation of music recording contracts
had stood me in good stead.  As a side agreement to the lease contract,
we had a currency agreement to protect us if the pound fell in value
against the dollar (our exposure was in dollars).

At one point I took Boy George in to meet all the staff in the
Woodstock Street office.  He was dressed in his usual bizarre
collection of robes, with his hair plaited and braided and tied with
ribbons and his gloves festooned with huge diamond rings.  For a minute
he stood watching the complete chaos as everyone answered the phones,
made out tickets, told passengers about our timetable, invited
celebrities and journalists for the inaugural flight, and worked on
dummy copies of the in-flight magazine.  Then he said:

"I'm pleased that I've got my feet squarely on the ground."

14 Laker's children

On 19 June 1984, three days before we were due to launch, I went down
to Gatwick for our final CAA approval, a test flight.  Maiden Voyager
stood by a departure gate and I marvelled again at her size.  I also
wondered at the size of the Virgin logo on her tail fin.  It was huge
-the largest version that I had seen.  I remembered back to the early
1970s when Simon and I asked Trevor Key to come up with some ideas for
a new logo.  Having drawn a blank, Trevor briefed graphic designer Ray
Kyte, of design consultants Kyte & Company, who created the concept and
supplied the visual styling for a signature-style logo which can be
interpreted as my personal endorsement, the "V forming an expressive
tick.  Some marketing experts once analysed the logo and wrote about
the upbeat way it rises from left to right.  This, of course, might
have been going through Ray's head when he developed the original idea.
Seeing it up on the tail fin made me begin to realise what we had
started.  This thing was going to happen: we had a jumbo.  The entire
cabin crew came on board for the ride, as did over a hundred Virgin
staff, and I sat at the back with the CAA official.  The plane had
arrived only the previous day, flown over from Seattle, and until we
had received our formal CAA licence to fly, the engines were uninsured.
We took off and the crew all burst out clapping and cheering.  I could
hardly stop myself from shedding a tear: I felt so proud of everyone.

Then there was a loud bang from outside.  The plane lurched to the
left and a massive flash of flame then a long trail of black smoke
poured out from one of the engines.

In that horrible stunned silence, the CAA official put his arm round my
shoulders.

"Don't worry, Richard,"he said.

"These things happen."

We had flown into a flock of birds, and one of the engines had sucked
in some of them and exploded.  We needed a new engine overnight in
order to do the CAA test flight again.  Our inaugural flight to New
York was due to take off the day after tomorrow with 250 journalists
and cameramen on board.

Roy Gardner was with me and he radioed through to the team at British
Caledonian who carried out our maintenance.  When Maiden Voyager had
arrived the previous day, Roy had rejected two of the engines on
financial grounds and asked for two others to be fitted.

Now he recalled one of the engines, which had been taken to Heathrow
and was about to be flown back to Seattle.

When we landed I was standing beside the plane trying to think of how
to overcome this problem, when a press photographer came up to me
smiling broadly.

Tm sorry," I apologised.

"I'm not up to it now."

"I'm sorry too," he said.

"I saw the flames and smoke pouring out of your engine.  I actually got
a great shot of it."

He looked at my dumbstruck face and then said, "Don't worry though. I'm
from the Financial Times; we're not that kind of paper."  He opened up
his camera, pulled out the film and gave it to me.  I couldn't find
words to thank him.  If that photograph had appeared in the press, it
would have been the end of Virgin Atlantic before we'd even begun.

2 29 Unfortunately, because Virgin Atlantic did not have a CAA
licence, we were uninsured for the engine.  We had to pay 600,000 for a
new one.  After several desperate calls, I realised that there was no
alternative.

With a sinking feeling, I called up Coutts to let them know that a
payment of 600,000 would have to go through.

"You're very close to your limit," Chris Rashbrook, the manager of our
account, said.

Our overdraft limit with Coutts for the entire Virgin Group was set at
3 million.

"It's a terrible freak accident," I said.

"One of the engines blew up and we can't get our insurance until we get
our licence.  Without a new engine, we won't be able to get our
licence.  It's a catch-22 situation."

"Well, I'm just warning you," Rashbrook told me.

"You spent a fortune on filming Electric Dreams and we're still waiting
for the MGM cheque."

The MGM cheque was the 6 million which MGM had agreed to pay for the
American distribution rights to Electric Dreams.

"Please can you wait until I get this inaugural flight out of the way?"
I asked.

"Let's sort it out when I get home.  I'm back on Friday.  We'll only be
300,000 over our limit.  When the MGM cheque comes through we'll have
no overdraft and around 3 million on deposit."

He said that he'd think about it.

The day before the inaugural flight, Maiden Voyager was fitted with
another engine and ready to fly again.

The CAA official came on board and we took off.  This time there was no
explosion and we were given our licence.  I dashed back up to London to
sort out another Randolph Fields crisis.  We had offered Randolph 1
million, but he thought that wasn't enough.  He had gone to a judge in
America and applied for an injunction to stop Maiden Voyager from
taking off.  All through the night we had a damage-limitation meeting
with David Tait, Roy Gardner and my lawyers, to try to work out an
arrangement whereby we could prevent Randolph from ruining the airline.
The judge eventually threw the request out, but not before we had
battled all night to keep on top of what he was up to.  By dawn we felt
that we would win, and at 6 a.m. I ran a bath and lay in it.  I felt
exhausted.  I tried to wash my face, but my eyes felt sore and itchy as
if a blast of sand had blown into them.  David Tait came in and sat on
the lavatory and we ran through the final list of things we had to do.
David then left to catch Concorde so that he would arrive in New York
before us in order to organise the welcoming reception for the
flight.

On board for the inaugural flight, I was surrounded by family and
friends, the people who had been most important to me, and to Virgin,
over the last ten years.

I sat next to Joan, with Holly on her lap.  Behind us was pretty much
everyone from the entire Virgin Group.

The aircraft was full of journalists and photographers, along with a
collection of conjurors, entertainers and Uri Geller.  As Maiden
Voyager taxied down the runway, the screen at the front of the cabin
flickered into life and showed the backs of the pilots and the flight
engineer as they sat in the flight deck and manned the controls.  Over
their shoulders we could see the view through the windscreen.  An
announcement came over the loudspeakers:

"Since this is our first flight, we thought you might like to share our
view from the flight deck, and see what really happens when we take
off."

We could see the view of the runway stretching out in front.  Then we
started speeding along: the tarmac rushing beneath the windscreen
gathered pace until the white lines were just a blur.  But the pilots
seemed rather relaxed: rather than staring intently ahead and flying
the plane, they started looking sideways at each other and smiling. One
of them had very long hair beneath his cap; the other was a West
Indian.  We were now hurtling down the runway, and these two pilots
were doing nothing about it.  They were simply paying no attention.
Everyone watching the screen held their breath: this was all some mad
suicide flight by that lunatic Branson.  There was a deathly hush.
Then, just as the plane's nose rose up and the runway began to
disappear from view, the West Indian reached behind his ear, pulled out
a joint, and offered it to his copilot.

Before anyone was entirely sure that this was a joke, the plane took
off and the two pilots took off their caps and turned round to face the
camera: they were Ian Botham and Viv Richards.  The bearded flight
engineer

"They must be good- getting suitable stewardesses can't be easy!"

was me.  The whole plane rocked with laughter.  We had filmed it the
previous day on a flight simulator.

We had loaded seventy cases of champagne on board.

This number proved to be just about right for what turned into an
eight-hour party.  People danced in the aisles as we played Madonna's
new hit "Like A Virgin' and Culture Club and Phil Collins.  For a quiet
interval we showed the movie Airplane, and the cabin crew started a
Virgin tradition by giving out choc ices in the middle of the film.

At New York's Newark Airport I realised that, in the excitement of
going, I had forgotten my passport.  I was almost refused entrance to
the reception party in the terminal.  By some mistake, the cabin crew
had thrown away all the cutlery, so they had to scrabble around up to
their elbows in all the rubbish bins retrieving the cutlery to wash it
up and then get it back on board the plane.  I embarrassed everyone
except the Mayor of Newark when I was talking to him as I thought, for
some bizarre reason, that he had organised the catering.

I took the return flight back to Gatwick and fell into my first long
sleep for many weeks.  I dreamt about exploding engines, cabin crew
offering meals on plates straight from the rubbish bins, and pilots
smoking marijuana.  When I woke up, I felt sure that nothing else could
go wrong.  A bad mistake.

A taxi carried me back to London.  As we pulled up at my house I saw a
rather uncomfortable-looking man sitting on the steps.  At first I
thought he was a journalist, but then I realised that it was
Christopher Rashbrook, my account manager at Courts.  I invited him in,
and he sat down in the sitting room.  I was exhausted and he was
fidgety.  I was rather slow to understand what he was saying.  But then
I suddenly heard him say that Courts were unable to extend

2 33 Virgin's overdraft as requested and would therefore regrettably
bounce any cheques that took our overdraft over 3 million.  I rarely
lose my temper -in fact I can count the times I have lost my temper on
the fingers of one hand -but as I looked across at this man in his blue
pinstripe suit with his neat little black leather briefcase I felt my
blood boil.  He was standing there in his highly polished black Oxford
brogues and calmly telling me that he was going to put the whole of
Virgin out of business.  I thought of the numerous times since March
when I and the Virgin Atlantic staff had worked through the night to
solve a problem; I thought about how proud the new cabin crew were to
be flying with a startup airline; and I thought about the protracted
negotiation we had fought with Boeing.  If this bank manager bounced
our cheques, then Virgin would be out of business within days: nobody
would supply an airline with anything such as fuel or food or
maintenance if word went about that the cheques were bouncing.  And no
passengers would fly with us.

"Excuse me," I said as he was still making excuses.

"You are not welcome in my house.  Please get out."  I took him by the
arm, led him to the front door and pushed him outside.  I shut the door
in his bewildered face, walked back into the sitting room and collapsed
on a sofa in tears of exhaustion, frustration and worry.

Then I had a shower upstairs and called Ken:

"We've got to get as much money in from overseas as possible today. And
then we've got to find new bankers."

Our overseas record subsidiaries saved us that week.

We managed to pull in enough money on Friday to keep us just below the
3 million overdraft limit.  We gave Coutts no reason to bounce our
cheques, and so we stopped them from pushing the various Virgin
companies, together with the new airline, into instant insolvency.  It
was a surreal situation: Virgin Music was set to make 12 million
profit that year, and was forecast to make 20 million the following
one.  We were already one of Britain's largest private companies, but
Coutts were prepared to push us into insolvency -and make 3,000 people
lose their jobs for the sake of going 300,000 over our limit, with a
cheque for 6 million due to arrive any day from the States.

The Coutts crisis made me realise that we needed a tough financier to
replace Nik.  We needed someone who could cope with the finances of
both Virgin Atlantic and Virgin Music and act as a bridge between the
two.

By surviving on cash flow and debt, the entire Virgin Group was living
too dangerously.  The mid-1980s were boom years in the City, and every
company seemed able to sell its shares to the public and raise millions
of pounds to invest.  Perhaps, I began to think, that was the way
forward for Virgin.

Apart from the four main operations, Virgin Music, Virgin Records
shops, Virgin Vision and the new airline, Virgin Atlantic, there were
now a host of new little companies operating under the Virgin umbrella.
There was Top Nosh food, which delivered food around industrial
estates; Virgin Rags, a line of clothes; Virgin Pubs and Vanson
Property, a property-development company which looked after our growing
collection of properties and as a sideline was making a lot of money by
buying, developing and then selling property.  This disparate selection
of businesses needed someone to put them in order.

Don Cruickshank was recommended to us by David Puttnam, the English
film-maker.  He was a chartered accountant who had worked at the
management consultants McKinsey for five years before moving to be
general manager of the Sunday Times and then on to Pearson, where he
had been managing director of the Financial Times.  Robert Devereux,
who by now was married to my sister Vanessa, had come across him when
dealing with Goldcrest Films, part of Pearson, but Simon knew nothing
about him.  Don started work in the cramped offices at Ladbroke Grove
and was the first person at Virgin who had ever worn a suit and tie.

Everyone marvelled at him.  With Don as managing director, Virgin began
to be organised into a company that could attract outside investors.

Soon Don brought in Trevor Abbott as finance director.  Trevor had been
with MAM, Management Agency & Music, an entertainment company which had
managed the careers of Tom Jones and Engelbert Humperdinck, and had set
up its own record label to launch Gilbert O'Sullivan.  MAM had then
diversified into music publishing, had a chain of hotels, operated a
fleet of corporate jets, had nightclubs, and leased out fruit machines
and jukeboxes.  MAM had a great deal in common with Virgin, but as
Trevor left he was already working on the merger between MAM and
Chrysalis.

Don and Trevor were soon holding meetings with banks and rearranging
both our finances and the internal structure of the Group.  As a whole,
Virgin's turnover in 1984 was going to exceed 100 pounds million, and
each time Don and Trevor saw me they expressed amazement at how things
were run.  They were aghast at the lack of computers in the Group, the
lack of stock control, and the apparently rather casual way Simon, Ken,
Robert and I decided on how to invest our money.

They came to see us on Duende and set out how they proposed to
reorganise Virgin with a view to inviting in some outside investors.

The first thing they did was sort out our overdraft facilities.  Courts
and their parent company, National Westminster Bank, had been willing
to close us down for exceeding a 3 pounds million overdraft.  Taking
the same balance sheet to a different consortium of banks, Don and
Trevor arranged an overdraft facility of 30 pounds million.

They then looked at the structure of the Virgin Group and decided to
close down a number of our smaller companies, such as Top Nosh food and
the pubs.  They divided the Virgin Group into Music, Retail and Vision,
and then hived off Virgin Atlantic, together with Virgin Holidays,
Heaven, The Roof Garden and Necker Island, into a separate private
company.  Simon and I were both 33 years old, as were Trevor and Ken.
Don was a little older; Robert a little younger.  We felt that we could
take on anybody, and we now set our minds to take the Virgin Group
public.  We were going from the rock market to the stock market.

15 "It was like being strapped to the blade of a vast pneumatic
drill."

1984-1986

I am often asked why I go in for record-breaking challenges with either
powerboats or hot-air balloons.  People point out that, with success,
money, and a happy family, I should stop putting myself and them at
risk and enjoy what I am so lucky to have.  This is an obvious truth,
and part of me wholeheartedly agrees with it.  I love life; I love my
family; and I am horrified by the idea of being killed and leaving Joan
without a husband, and Holly and Sam without a father.  But another
part of me is driven to try new adventures, and I still find that I
want to push myself to my limits.

If I were to think about it more carefully, I would say that I love to
experience as much as I can of life.  The physical adventures I have
been involved in have added a special dimension to my life that has
reinforced the pleasure I take in my business.  If I had refused to
contemplate skydiving, hot-air ballooning or crossing the Atlantic in a
boat, I think that my life would have been the duller for it.  I never
think that I am going to die by accident, but if I were to die then all
I can say is that I was wrong, and the hardened realists who kept their
feet on the ground were right.  But at least I tried.

Apart from the thrill of the actual event, I love the preparation for
it.  A tremendous sense of camaraderie builds up within the team when
we are preparing for a challenge, and if we are going after a record
there is not only the technological challenge but also a great feeling
of patriotism as the public cheers us on.  There used to be a great
many British explorers, all in the best tradition of Scott of the
Antarctic, and I feel proud to follow in their footsteps.

The first challenge I was involved in was to try to recapture the Blue
Riband for Britain.  In the Victorian age of steamships, the Blue
Riband was awarded to the fastest ship across the Atlantic.  In 1893
the Blue Riband was held by the British Cunard Line.  Then it went to
three German ships, before Cunard won it back again in 1906 with RMS
Lusitania, later sunk in 1915 by a German U-boat.  After the First
World War the Germans won it back, and then the Italian ship Rex won it
in 1933 with an average crossing speed of 29 knots.  In order to
celebrate this achievement, and to celebrate the whole Blue Riband
competition, an English shipowner and member of parliament called
Harold Hales commissioned a monumental trophy.  From then on, the Hales
Trophy was awarded along with the Blue Riband.

In the small print of the conditions of the award, Hales offered it to
the fastest boat that crossed the Atlantic, and he defined the Atlantic
as the stretch of sea between Ambrose Lightship on the American coast
and the Bishop Rock Lighthouse, off the Scilly Isles.

Hales made no mention of the size of boat as long as it carried
passengers; indeed nobody in those days ever considered that a small
boat would have any chance of competing safely with the big ships.

The next ship to win the Hales Trophy was SS Normandie, a French liner
which crossed the Atlantic on her maiden voyage at an average speed of
30 knots.  In 1952, before the age of the big passenger ships came to
an end, the SS United States won the Hales Trophy with a crossing that
took 3 days, 10 hours and 40 minutes.

The Hales Trophy was then put away in the American Merchant Marine
Museum.  Unfortunately, Harold Hales did not live to witness the SS
United States: with horrible irony he had drowned in a boating accident
on the River Thames.  The glorious days of passenger liners faded as
people began to use the new form of transport, aeroplanes, and everyone
forgot about the Hales Trophy.

In 1980 a powerboat builder called Ted Toleman decided to resurrect the
Blue Riband competition and attempt to win the Hales Trophy back for
Britain.  In order to do so, he would have to build a boat that could
cross the Atlantic in less than 3 days, 10 hours and 40 minutes.  The
SS United States was a truly impressive ship: she weighed 52,000 tons
and needed 240,000 horsepower to shift her.  The speed record she set
was impressive: an average of 35.6 knots (equivalent to 40 miles an
hour).  In contrast to this huge 52,000-ton liner with its swimming
pool and grand piano, Ted planned a lightweight catamaran.

Sailing a small, fast boat across an ocean is extremely dangerous.  For
one, you are very vulnerable to waves.

In this respect, a larger steamer finds heavy seas much easier: it just
slices through them.  The passengers may use the excuse of a slight
roll to lurch into one another's arms on the dance floor, but the
boat's speed is unimpaired.  With a small boat, an ill-judged steering
move at 30 knots can plunge the prow into the side of the wave and
cause the whole boat to go under or break apart.

Ted Toleman designed a 65-foot catamaran, and launched it in 1984.
Rather than the SS United States' 240,000-horsepower engines, which
were the size of small cathedrals, Ted used two 2,000horsepower
engines, which could propel his catamaran at almost 50 knots on calm
water.  Of course, it is one thing to be able to race across a calm
lake at 50 knots; quite another to reach those speeds on the choppy
surface of the Atlantic Ocean, where the waves swell to 20 feet or
higher.  Ted knew that he would be lucky to reach speeds of 35 knots.
It would still be a three-to four-day crossing.  The challenge was
whether it would be three days and nine hours or three days and eleven
hours.

During 1984, Ted's budget for the boat overran and he approached me to
sponsor the cost of the trip, in return for my being able to name the
boat and join him in the challenge.  He had already asked Chay Blyth,
the round-the-world yachtsman, to help him.  Virgin Atlantic had just
started flying, and although I was immediately attracted by the idea of
winning a trophy back for Britain -Britain doesn't have that many
trophies -I also relished the chance to promote our new airline.  A
successful Atlantic crossing would attract publicity in both New York
and London, our sole destinations.

"How fit are you?"  Chay asked me.

"Not bad," I ventured.

"That's not good enough," Chay said.

"There's no room for passengers.  You need to get into shape."

And so I started the most gruelling fitness programme of my life.

"You're going to be pounded for three solid days," Ted said as we
killed ourselves in the gym.

"You've got to be able to take it."

We asked Esso to sponsor the trip by providing the fuel, and when they
kindly agreed to do so we all went along to a celebratory lunch with
their whole board of directors.

"I want to thank you all very much," I said sincerely.

"It's going to be a great trip, and we're really going to advertise BP
as much as we can."  I thought that I heard a collective intake of
breath, but I ploughed on regardless.

"We're going to plaster BP all over the refuelling ships, have your
logo on the boat, really put BP on the map.  Nobody will ever confuse
you with that old rival of yours .. ."

At this point I looked up at the wall opposite me and noticed the huge
Esso logo.  I realised my mistake.  The Esso executives looked at me
with horror, as if I were a ghost.  I fell down on the floor and
crawled under the table.

"I am sorry," I said, and started to spit and polish their shoes.

Remarkably, Esso were as good as their word and went ahead with
sponsoring the trip.

The boat and the crew were put through their paces for two months until
we were finally ready.

Joan was nearly eight months pregnant with our second child, and I was
desperately hoping to do the crossing in time to be back for the birth.
But we were stuck in New York for three weeks waiting for the stormy
weather to clear.  In those three weeks I kept flying back to London to
be with Joan, and then flying back to New York when they told me we
were about to set sail.  By the time I had crossed the Atlantic eight
times, I felt as though I knew it as well as I wanted to at 30,000
feet.

The storms cleared and we got the green light.  Joan told me that she
was feeling fine and that I should go.

She still had two weeks before the baby was due.  We roared out of
Manhattan and headed north.

The other crucial difference between Virgin Atlantic Challenger and the
great liners was comfort: while the passengers in the 1930s danced to
jazz bands and played deck quoits, we were strapped in airline seats
and pounded relentlessly up and down.  With the deafening noise of the
engines and the constant reverberation, it was like being strapped to
the blade of a vast pneumatic drill.  We could hardly talk, let alone
move; we just had to stomach an unending sequence of banging, shaking
and clattering.

Towards the end of the first day I got a radio message.

"Richard."  It was Penni, who was at the control centre.

"Joan's in hospital and she's just had a baby boy.

Rose was with her and it all went fine."

I'd broken my pledge, but most importantly we'd had a healthy child. We
all whooped with joy and Steve Ridgway, another member of the crew,
rustled up a bottle of champagne to toast Joan and my new son.

Without any extra shaking from me, the bottle exploded and fizzed
everywhere.  It was impossible to drink.  The champagne foamed between
our teeth and foamed up and down our throats.  Holding on to a
lifeline, I staggered to the side and threw the bottle overboard, where
it bobbed in the wake.  Now I had to power on to see Joan, Holly and
our baby boy.

The crossing would have won the record comfortably.

We endured three hellish days of mental pile-driving over 3,000 miles.
We had three refuelling stops lined up at 800-mile intervals.  These
fuel boats were enormous ships which loomed over us like skyscrapers.
Even with a small swell, the approach to them was terrifying: we drew
up about 30 yards away, and they fired a harpoon towards us with a buoy
on the end of the line.  We hauled this on board and then pulled out
from the ship the great hose with the fuel.  When this was clamped on,
we gave the go-ahead and the fuel was pumped on board.  The smell of
petrol and the rolling swell made us all sick.  And as we staggered to
the edge and retched we seemed in danger of smashing into the vast
black and rusted cliff face of the fuel boat's side.

As we approached Ireland with only a few hundred miles to go, we hit a
ferocious storm.  We had been battered solidly for three days, but this
was the worst yet.  The boat smashed up and down.  We held on to our
seats and could see nothing.  As we approached the Scilly Isles, with
only 60 miles left and the Hales Trophy nearly in our hands, we hit a
massive wave.  A second later there was a shout from Pete Downie, our
engineer.

"We're going down.  The hull's split right open.  Get out fast."

"Mayday!  Mayday!  Mayday!"  Chay was on the radio in a flash.

"Virgin Challenger is sinking.  We are abandoning ship.  Repeat: we are
abandoning ship.  Hey, Ted!"  Chay swung round.

"You're the skipper: you're meant to be the last off!"

Within seconds the boat started to go down.  The first life raft we
inflated snagged on something and ripped open.  We had a backup raft
which we threw overboard and pulled the ripcord to inflate.

"Nobody panic!"  Chay shouted.

"There's no hurry!

Everyone take their time!"

As we edged along the rail to get into the life raft, Chay shouted out,
"Panic!  Panic!  We're going down.

Move it!"

The life raft was like a tiny inflatable coracle with a hooded tent. We
huddled together, rocking up and down in the sea like we were on a
crazy fun fair ride.  I was sitting next to the radio, and I picked up
the mike.

An RAF Nimrod picked up our Mayday.  I gave the pilot our position, and
he rapidly radioed any ships in the area.

"OK, there are three vessels in the area that are heading towards
you," the pilot came back to me.

"In no particular order, there is the QE2, which is heading for New
York; an RAF helicopter from the Scilly Isles has been mobilised, and a
Geest boat heading to Jamaica is also on its way.  Please take the
first one that arrives."

"Tell him I'm not going in a fucking banana boat to Jamaica," Chay
said.

"Neither am I going back to New York.  I want the bloody helicopter."

"That'll be fine," I said over the radio, deciding not to pass on
Chay's comment, since for once I thought we were in no position to
negotiate.

Ted was gutted He sat there in silence, his dream shattered.

From the tiny hatch door we could see the stern of Virgin Challenger
sticking out above the water.  The rest of the boat was underwater. All
you could see was the word "Virgin'.

"Well, Richard," Chay said, pointing at the logo, 'as usual you got the
last word in."

As we waited, I started a chorus of "We're all going on a summer
holiday .. ."  Everyone sang along, even Ted.

Eventually we were picked up by the Geest banana boat on its way to the
Caribbean.  We were winched up in turn and left the life raft spinning
by itself.

"Handy in case anyone else capsizes," said Chay.

It was dinnertime and the guests were gathering in the captain's
quarters.  Rather like in the great days of ocean steamers, they were
all wearing dinner jackets and evening gowns.  We were a bedraggled lot
in our damp nylon survival suits.

"My poor boy," one elderly lady said to me.

"And you haven't even seen your newborn son yet, have you?"

"No," I said.

"I'm afraid we're heading off to Jamaica so I won't see him for a
while."

"Well, I've got this photograph of him for you."

To my astonishment, she pulled out that day's edition of the London
Evening Standard.  And there on the front page was a picture of our
tiny son wrapped up in a shawl.  I have to admit to a tear in my eye as
I looked at it.

A salvage team radioed us to ask permission to salvage the boat.

"Of course," I said, looking out of the porthole to where we could
still see the stern sticking up like a tombstone.

"You bloody idiot!"  Chay snapped at me.

"You never want to see that boat again.  Just a lot of waterlogged
electronics which will never work again.  You'll never get a penny from
the insurers."

"On second thoughts," I said, 'perhaps I can call you back?"

"Right you are," they said.

I put down the phone and Chay and I looked across the sea at Virgin
Challenger.  As we did so, it silently plunged below the surface.

It took a month for the ringing in my ears to stop.  I was beginning to
think I had permanent brain damage.

However, winning the Blue Riband and the Hales Trophy became unfinished
business.  We were determined to succeed.  Chay and I felt that, after
what had happened to Challenger, we should build a single-hulled boat
rather than a catamaran, because it would be stronger.  Since Ted
Toleman speciali sed in catamarans, he refused to change the design and
dropped out.  We formed a new team with three key members of Ted
Toleman's original crew, Chris Witty, Steve Ridgway, and Chris Moss,
who asked me whether they could come to work for Virgin.  Chay Blyth
stayed with the project as the presiding sailing expert, and together
we designed a new boat.

On 15 May 1986, Virgin Atlantic Challenger II was launched by Princess
Michael of Kent.  The boat was 75-feet long, with a single hull.  We
were confident that she could cope with the heavy seas much better than
her predecessor.  But as we sailed her around the south coast on her
maiden voyage towards Salcombe, we cannoned off a vast wave which
almost spun the boat over.  Everyone was hurled across the deck and one
of our crew, Pete Downie, broke his leg.  The agony on his face was
more to do with the realisation that he wouldn't be with us than the
pain from his leg.  Chay fractured a toe and Steve was almost swept
overboard.

We arrived at Salcombe like a hospital boat.

We shipped the boat over to New York, and once again waited for good
weather.  When we left New York Harbour on a bright June morning in
1986 and headed up towards Nova Scotia, we braced ourselves once more
for the pounding.  It was not as bad as the first time, and the trip up
the east seaboard of America was much faster than we hoped.  We sped
along and after eighteen hours met the first refuelling ship off the
coast of Newfoundland.

We refuelled and headed off into the gathering darkness.  The summer
night was short, and we were travelling northeast, which made it
shorter still, so we had just five hours of darkness to cope with.  We
relied on the radar and trying to squint ahead through the night-vision
goggles, but still had no idea what was ahead.  Motoring at that speed
through the night was like driving blindfold, and we narrowly missed a
surfacing whale.

By the second day the adrenaline rush which had kept us going had worn
off.  It was now just horrible, relentless banging.  Each wave smashed
us up and down, up and down, until we could no longer grin and bear it:
we had to just clench our teeth and bear it.

As we approached RV2, the refuelling boat, off the coast of Canada, we
also had to keep an intense lookout for icebergs.  Large icebergs show
up on the radar and can be avoided; it is the 'small' ones, tiny blips
above the surface which actually weigh 100 tons and could smash the
hull, that are dangerous.  Indeed, even an iceberg the size of a
beanbag could seriously damage the hull.  The difficulty was that, as
hour after hour passed and we were deafened by the roar of the engines,
it was impossible to keep our concentration going.  We still had over
2,000 miles to travel.  Each minute of every hour was a battering. This
was where the strength of the team came through: we all rallied round
to help each other get through it.

As we waved goodbye and revved up the engines to speed away from the
second refuelling boat, our engines coughed, choked, and conked out.
Eckie Rastig, our new engineer, went below decks to investigate.  He
came back up horrified: the fuel filters were full of water.  This was
a disaster.  He took a dipstick sample and reckoned that for every 12
tonnes of fuel taken on board we had also taken on about 4 tonnes of
water.  It was a complete mystery as to how the water had got in with
the fuel, but we had no time to worry about that.

Maybe it was the Esso directors' revenge for my blunder over BP!  The
diesel and the water had emulsified together, which meant it was
impossible to split the water off from the diesel: we had to drain the
entire four fuel tanks and start again.  The Esso boat came back
alongside and we filled up again, taking another precious three
hours.

We restarted the engines but they conked out again.

It was now 11 p.m. and we had spent seven hours bobbing up and down
next to the refuelling boat in the middle of the freezing ocean.  The
race was slipping away.  The swell grew progressively worse.

"The storm's catching up with us."  Chay said.

"This isn't funny."

The storm, which was following the wonderful weather we had enjoyed on
the first day, was not an abrupt, fierce storm, but just a big spell of
filthy weather, our worst nightmare.  Soon the boat was riding waves
which had grown to 50 feet.  We hardly dared stand on deck because one
moment we were well beneath the vast Esso ship so that it looked as if
it must topple over on top of us; the next moment we were thrown up way
above it and we couldn't believe that we wouldn't skate down the edge
of the wave and crash into it.  By now the suffocating petrol fumes
made us all sick.  Everyone was retching and puking and doubled up in
pain.  Our survival suits were soaked with seawater and flecked with
vomit; our faces were white and green;

our hair was frozen.

"It's not worth going on," Chay shouted in my ear.

"We've all spoken and we're all gutted.  It's over.  I'm sorry,
Richard."

I knew that if we failed on this attempt there would be no third time.
We had to go for it.  I had to persuade them.

"Let's just try to get the engines going and see how far we can get," I
said.

"Come on.  We've got to make a stab at this."

There was an engine specialist called Steve Lawes on board the Esso
boat whom I knew.  I asked him to come aboard and help us.  They set up
their winch and swung him out over the side.  With the two boats
swinging up and down on the giant waves, it was astonishingly brave of
him to try.  With perfect timing they dropped him on our deck and he
snapped off the belt before he could be swept back into the air as
another wave drove us down and the Esso boat up.  Steve went down to
join Eckie in the engine room.  There was a tiny space beside the
engines, and together they drained the fuel tanks and took on more
fuel.  I went down to see them, but there was no room for anyone
else.

I didn't have to beg Steve to stay with us.

"I'll stay just for the pleasure of the ride," he said, oil stains
already covering his face.

I suddenly felt that we had a chance.

"There's still water in the fuel," Eckie said.

"But we can filter it out as we go.  We're going to have to do it every
few hours."

I hauled myself back upstairs and found Chay of all people throwing up
over the side.  I pulled him by the shoulder.

"Steve's going to stay," I shouted in his ear.

"We can go on."

"It's over, Richard," Chay shouted at me.

"It's fucking well over.  This boat's knackered."

"We've got to go on," I yelled.

For a moment we stood there, eyeball to eyeball, clutching on to each
other like two old drunks.  We had flecks of vomit in our beards; our
eyes were red and bloodshot from the salt and the fumes; our faces were
drained of colour; and our hands were raw and bleeding.

With another lurch of the sea, we staggered against each other, utterly
exhausted.  We hated this boat; we hated this trip; we hated the sea;
we hated the weather; and right now we certainly hated each other.

"We've got to go on and do it," I repeated like a madman.

"We've just got to do it.  It's the only way.  What are you suggesting?
That we get towed home?"

2 50 "God, you're worse than me," Chay said.

"All right.

We'll give it one last shot."

I hugged him and we both fell against the railings.

"Right!"  Chay yelled to the crew.

"We're casting off."

We all summoned up our strength again and went into action.  We cast
off from the refuelling boat and, with fine-tuning from Eckie and
Steve, the engines roared back into life.  They were coughing and
spluttering and liable to cut out, but at least they worked and we
didn't have to get out the oars.  We waved up at the Esso boat, and
headed off into a grey light.  We felt better now that we were away
from the oil fumes, but we were all exhausted.  I felt as if my stomach
had been punched over and over again by a prize fighter.  Everyone was
now in his own world, fighting to get through each hour.  I just kept
repeating to myself that we had to get on.  As well as fighting the
weather and the fuel, we were all immersed in fighting our own will not
to collapse.

Every four hours the fuel niters were so clogged up that they needed
replacing.  We stopped the engines;

Steve and Eckie replaced the filters, and on we went.  As hour by hour
passed, it became clear that we were not going to have enough filters
to make the last refuelling stop.  The filters would run out and the
engines would break down.  We would be marooned at sea.  I was in touch
with a passing Nimrod (as one is!) who had taken us under its wing.
These planes spend hour after hour flying over the Atlantic searching
for submarines, and we were a welcome diversion.  The pilot suggested
that another Nimrod could come out and drop a load of filters, but they
would need to get clearance from the top.  I radioed Tim Powell, who
was running the control centre from the Oxford Street Megastore.

"Tim, we need help.  We need some fuel filters dropped.  The Nimrod
has offered to do it, but they need to get clearance right from the
top."

Within an hour, Tim had spoken to the right people at Downing Street,
and an RAF Nimrod had picked up the niters from Southampton and was
flying to meet us.

We didn't hear the plane coming.  It just swooped low overhead, coming
straight out of the grey cloud behind us.  It was huge, and although
there was no sun the plane seemed to drain all the light and cast us in
shadow.  The Nimrod roared over us, with a rumble which shook the boat,
and dropped a small drum attached to a buoy in our path.  We all danced
and whooped with joy.  Chay cutback the engines and aimed for the
little red marker.  Steve picked it up with a long hook, and we hauled
it on board: it was a steel drum packed with filters.  On top of the
niters were some chocolate bars and a little handwritten note which
said:

"Good luck!"

We radioed up to the pilot and thanked him.

"I've got a TV crew on board," he said.

"The whole country's on the edge of their seat.  God speed."

We reached the third Esso ship and, with another set of full tanks and
some Irish stew for us, our first hot meal in two days, we approached
the last leg of the crossing with rising determination.  We calculated
that we had to travel at an average speed of 39 or 40 knots for the
final twelve hours if we were to break the record.  With our engines in
the state they were, it was going to be extremely close.  We battled
through more heavy weather, unable to go faster than 30 knots for three
hours, then the sun came out and the sea calmed.

Steve and Eckie replaced the filters for the last time, and we opened
the throttles and went flat out across the sea, hurtling over the waves
towards the Stilly Isles.

When we passed the point where we had sunk on the previous attempt we
all cheered and suddenly knew that we could do it.  Five miles out from
the Scillies, we were met by a posse of helicopters and then hundreds
of boats of all kinds who welcomed us home.  We zoomed past Bishop Rock
Lighthouse at 7.30 p.m. Eckie and Steve staggered up from the engine
room.  They were the heroes who had endured three days of pounding in a
hot cramped engine room, standing ankle deep in oil while they fought
to keep the engines going.

Dag Pike switched off his navigational system and we all threw our arms
round each other.  We had done it.

Our total journey had lasted 3 days, 8 hours and 31 minutes: in a
voyage of over 3,000 miles, we had beaten the Blue Riband record by a
mere 2 hours and 9 minutes.

16 The world's biggest balloon

1986-1987

After the big bang, how about a little pop?"

By 1986 everyone was heading for the City.

A~ Everyone who had bought shares in British Telecom had doubled their
money, and the British Gas privatisation had got everyone talking about
Sid: "If you see Sid, tell him."

I will never forget going into the City to see the lines of people
queuing up to buy Virgin shares.  We had already had over 70,000 postal
applicants to buy Virgin shares, but these people had left it until the
last day, 13 November 1986.  I walked up and down the queue thanking
people for their confidence, and a number of their replies stuck in my
mind:

"We're not going on holiday this year; we're putting our savings into
Virgin."

"Go on, Richard, prove us right."

"We're banking on you, Richard."

At one point I noticed that the press photographers were taking
pictures of my feet.  I couldn't understand it.  Then I looked down and
noticed with a shock that, in the rush to get dressed, I had put on
shoes that didn't match.

The flotation of Virgin attracted more applications from the public
than any other stock-market debut issue, apart from the massive
government privatisations.

Over 100,000 private individuals applied for our shares, and the Post
Office drafted in twenty extra staff to cope with the mail sacks. That
day we heard that The Human League had gone to number one in America.

Beneath our euphoria, we were worried to hear that only a small number
of City institutions had applied for shares.  It was the first sign of
the difficulty we were going to have in our dealings with the City.

By 1986 Virgin had become one of Britain's largest private companies,
with some 4,000 employees.  For the year ended July 1986, Virgin had
sales of 189 pounds million, compared with 119 pounds million for the
previous year, an increase of around 60 per cent.  Our pre-tax profits
were 19 pounds million, up from 15 pounds million.  Although we were a
large company, we had very little flexibility to expand:

all we could do was either use up the cash we had earned, or ask our
bankers for a bigger overdraft.  I watched a number of other private
companies sell their shares on the stock market: Body Shop, TSB, Sock
Shop, Our Price, Reuters, Atlantic Computers .. . There was practically
a new company every week, and the stock exchange had to set up a
queuing system so that, in between the massive privatisations of
British Telecom, British Airways and BP, there was an orderly
procession.

In many ways going public was an attractive option:

it would enable Virgin to raise money which we could invest in new
subsidiaries; it would swell our balance sheet and so enable us to
enjoy more freedom from the banks and use our expanded capital base to
borrow more if we wished; it would enable me to issue shares, which
they could easily trade, as incentives to the Virgin staff; it would
increase Virgin's profile; and a thought lurking at the back of my mind
was that, in due course, it would enable us to use the Virgin shares as
currency to make a bid for Thorn EMI, the largest record label in the
country.  Don was enthusiastic about the prospect of Virgin going
public and he was very

2 55 happy with the idea of being the chief executive of a publicly
quoted company.  Trevor and Ken were not keen, and they warned me that
we would all hate it, that the City was a very fickle place, and that
we were giving up a great slice of our independence.  For Simon, it
offered a free market in which they could sell their shares in Virgin
if they ever wanted to.  All in all, I had pushed away the negative
reasons and decided to go for it.  As a first step, the previous year
Trevor had arranged a private placing of convertible-preference shares
in Virgin.  He had set out to raise 10 pounds million, but, as word
about Virgin spread, Morgan Grenfell, who were underwriting the issue,
finally closed off the private offer at 25 pounds million.

In the public offer for sale, the financial institutions converted
their preference shares into some 15 per cent of the ordinary shares,
and we created new shares to sell to outside investors, which raised 30
pounds million.  After the flotation, I held 55 per cent of the Virgin
Group;

Simon held 9 per cent; Ken, Don, Trevor, Robert and some of the other
members of staff held 2 per cent; and the outside investors held 34 per
cent.  We had sold each Virgin share at 140 pence, and at that share
price Virgin Group pic was valued at 240 pounds million.  Of course,
this was only part of the company -Virgin Atlantic, Virgin Holidays,
Virgin Cargo and the nightclubs were all excluded because the City felt
that they were too financially risky to be part of the flotation.
Virgin Group pic was part of the same business that just twelve months
previously Courts had been prepared to push into insolvency for going
300,000 pounds beyond our 3 pounds million overdraft limit.  Some of
the cash raised was immediately moved across to finance Voyager, the
holding company for the airline, which we saw as a vehicle to invest in
a wide range of other businesses.

Beneath the facade of stability which a public company is meant to
engender, my life was as hectic as ever.  The mid-1980s, and the launch
of Virgin Atlantic, was the period when I really started having to put
myself forward to promote Virgin.  We didn't have the budgets that
British Airways and others had to spend on advertising, but I found
that the press enjoyed writing stories about Virgin if they could put a
face to the name.

In contrast to promoting Virgin Music, where we were actually promoting
the bands rather than Virgin as a brand name, for the first time I
began to use myself to promote the companies and the brand.  And so my
name and the Virgin brand name began to become intertwined.

Apart from never involving my family with the press, I was happy to do
anything to increase Virgin's profile: promotion was one of the keys to
our growth.  If nobody knew about us, nobody would fly us.  And if
nobody flew us we would go out of business.  So, if dressing up in
Biggies goggles and lying in a bubble bath helped the airline, I was
happy to do it.

One of my greatest failures with the press was my involvement in a
project dreamt up by the Department of Employment to create jobs.  It
was called UK 2000.  I was approached by Kenneth Baker, then secretary
for the environment, who asked me to become the chairman of this
project.  I agreed to do so only if the government made an
unconditional financial commitment to it so that, as far as possible,
it could be seen as a nonpolitical activity.  Unemployment was heading
towards 4 million, and this seemed a good way of helping to reduce
it.

The idea behind UK 2000 was to match up a large number of unemployed
people with jobs that would benefit the environment.  These jobs would
include all sorts of things, ranging from clearing up inner-city sites
to building playgrounds, clearing out canals, recreating footpaths,
clearing out old industrial sites and planting trees.  I made contact
with a large number of charities, such as Friends of the Earth and
Groundwork, who agreed to help supervise some of the projects and come
up with their own list of things they would like to see done but lacked
the money and manpower to do.

I was mulling over whether to agree to take on the role over the
weekend when I was down in the Scilly Isles thanking people for their
hospitality over the Atlantic crossing.  A helicopter arrived, causing
some excitement.  It turned out to be a journalist from the Sun.  For
some reason he was carrying a broom.

"Here, Richard," he said.

"Hold this for me, will you?

That's right' he shot off a number of pictures '-give us a grin."

I thought nothing more about it until the next day, when I saw the
Sun's headline: 'litter king'.

From that moment UK 2000 was branded as a campaign to clean up litter.
Try as I might to reverse this impression, the image stuck.  Whenever
any newspaper ran a story about the work we were trying to do, they
trivialised it as 'cleaning up litter'.  I sent countless letters to
countless editors, pointing out all our environmental projects up and
down the country, but these were either ignored or reproduced on the
letters page, where they were safely out of sight.  As it happened, not
one of our projects involved cleaning up litter, since that was not
what we'd been asked to do.

Our brief was to find useful work that would involve some kind of
training and lead on to full-time employment.  Picking up litter
-commendable though that is -did not fit the brief.

I stayed with UK 2000 for three years, but it was a lost cause.
Everyone involved in it began to lose morale since, whatever they did,
they were mocked as little more than people picking up litter.  No
matter that Jonathon Porrit and other leading environmentalists of the
day were involved; people still dismissed the idea.

It was a great shame: it could have created many more jobs than it did,
and made Britain a slightly better place in which to live.

Apart from the disappointment of UK 2000, everything else was going
swimmingly.  When we arrived back from the Atlantic crossing, the
entire country seemed to have enjoyed the challenge.  Mrs.  Thatcher
expressed an interest in seeing the boat, and I offered her a ride up
the River Thames.  We managed to win approval to break the
five-mile-an-hour speed limit on the Thames, and Tower Bridge opened
her gates as Atlantic Challenger came whizzing through.  We picked up
Mrs.  Thatcher and, together with Bob Geldof and Sting, we did a lap of
honour up to the Houses of Parliament and back, as other boats on the
river blared their horns and the fire brigade pumped great plumes of
water into the air in salute.  Mrs.  Thatcher, the "Iron Lady', stood
on the deck beside me and faced into the keen wind.

"I must admit," she said, as we accelerated up the river, "I do enjoy
going fast.  I love powerful boats."

I looked across at her.  She was indeed enjoying herself.  Her profile
cut through the wind like a bowsprit, and not a single strand of hair
had blown out of place.

So, riding on the crest of a wave there were all sorts of strange
surveys which voted me the best-dressed man in Britain, the
worst-dressed man in Britain and Virgin the most-admired company in
Britain I felt that

2 59 we could do no wrong.  Every day I was being asked to give an
interview to a newspaper, or open a shopping mall, or give a speech to
a business school.  One day I was probably feeling rather
self-important with all this floating around in my head when I hailed a
taxi and jumped in.

"Where to, guy?"  asked the driver.

"Billingsgate, please," I said.

As we set off he looked quizzically at me in the mirror as if he
half-recognised me, and said, "Give me a clue?"

"You know," I said modestly, 'a record company, an airline, Heaven
nightclub, record shops .. ."

"No," the taxi driver said.

"Give me a clue."

"The Atlantic crossing," I went on, "The Sex Pistols, Boy George, Phil
Collins .. ."

"Excuse me, sir," the driver said, completely nonplussed.

"I don't understand what you're rabbit ting on about.  Give me a clue
as to how to get to Billingsgate."

Another time, after I had been working virtually through the night on a
problem with the airline, I had to take a taxi early in the morning to
a meeting.  As usual I was running just a fraction late as I struggled
to say goodbye to the family, pick up my papers and make a last
telephone call all at once.  I flopped into the back of the taxi
looking forward to reading the papers and getting ready for the
meeting.

"Oil"  said the cab driver.

"I know you.  You're that Dick Branson.  You've got a record label."

"Yes, that's right," I admitted.

"Well, ain't it my lucky day," the cabbie went on.

"Fancy having Mr.  Branson in my cab.  Now I know I'm a cabbie -I mean,
that's clear, isn't it -but, you know what?  I'm also a musician.  I
really am.  I'm a drummer in a band."

"Great," I said unenthusiastically, feeling tired and hoping he would
shut up so I could get on with my paper.

"Now, do you mind if I play you my demo tape?  I mean, this could be my
lucky day, and it could be yours, too.  I could make you a fortune."

"That would be lovely," I said.

"No, you look a bit tired," he said, squinting in the mirror.

"You must have this the whole time."

"No, please put the tape on."

"No, you look too tired.  But I tell you what: my mum lives just round
the corner.  Would you mind if I just dropped you round there and we
had a cup of tea?"

"Well, I've got to go to a TV studio," I said, my heart sinking.

"She'd love to meet you.  It'd make her day," he said.

"Just a quick cup of tea."

"All right, that'd be lovely," I said, resigning myself to being
horribly late.

The cab turned down a side street.

"You know what," the cabbie said, "I will put on my tape.  Just to show
you."

As the cab pulled up outside a small house, the tape started with a
familiar drum beat.  Over the speakers came the words: "I can feel it,
coming in the air tonight .. ."

The cabbie jumped out and opened my door.  It was Phil Collins.

I had mentioned in a recent interview that, although I was not very
good at knowing who rock stars were or remembering their names, there
was one face I'd always recognise -that was Phil Collins'.

Although we had raised 30 pounds million from the stock market
flotation, I soon began to feel that we had made the wrong decision.  A
few weeks after our flotation in November, our investment banker at
Morgan Grenfell, Roger Seelig, was investigated by the Department of
Trade and Industry over his role in Guinness's takeover of Distillers,
which he had orchestrated in January.

Roger resigned from Morgan Grenfell and, although the case against him
was eventually abandoned, his career was ruined.  Without being able to
use Roger as a touchstone, I began to lose faith in the City and the
onerous demands they made of us.

Firstly, the City had insisted that Virgin appoint some non executive
directors.  Sir Phil Harris was recommended.

He was a self-made man who had made a fortune from selling carpets.  We
also appointed Cob Stenham, who had been finance director of Unilever
and was a well-respected banker.  I found it difficult to comply with
all the formality the City insisted we adopt.

I was used to chatting with Simon and Ken about which bands to sign,
and then letting them get on with it.

Virgin board meetings had always been highly informal affairs.  We met
on Duende, or at my house in Oxford Gardens, or while we were on a
weekend together.  I found our business was not one that could be boxed
into a rigid timetable of meetings.  We had to make decisions quickly,
off the cuff: if we had to wait four weeks for the next board meeting
before authorising Simon to sign UB40, then we would probably lose them
altogether.

I also had a number of disagreements with Don, notably about dividends.
I was extremely reluctant to follow British tradition and pay out a
large dividend.  I preferred the American or Japanese tradition whereby
a company concentrates on reinvesting its profits to build itself and
increase share value.  To me, a large dividend meant a loss of cash
which would be better employed within Virgin than by paying it away.
It seemed to me that our outside shareholders had entrusted their
money to Virgin in order for us to make it grow, not for us to hand 5
per cent of it back on a plate -which would be taxed as income and so
immediately lose 40 per cent of its value.

This may sound like a petty argument, but it illustrates the general
loss of control I experienced.

Most people think that 50 per cent of a public company is the key to
controlling it.  While this is true in theory, to a large extent you
lose control just by having to appoint non executive directors and
generally giving up your time to satisfy the City.  Previously, I had
always felt confident about any decision we made, but now Virgin was a
publicly quoted company, I began to lose faith in myself.  I felt
uneasy about making the rapid decisions I have always made, and
wondered whether every decision should be formally ratified and minuted
at a board meeting.  In many ways 1987, our year of being a public
company, was Virgin's least creative.  We spent at least 50 per cent of
our time heading off to the City to explain what we were doing to fund
managers, financial advisers and City PR firms, rather than just
getting on and doing it.

I also felt very responsible to the people who had invested in Virgin
shares.  Phil Collins, Mike Oldfield and Bryan Ferry had bought shares;
Peter and Ceris, my neighbours and close friends at Mill End, had
invested some of their life-savings in Virgin; and my family, my
cousins, and many people who had come across me in various walks of
life, had all bought shares.  Trevor Abbott had borrowed 250,000 pounds
from me to buy Virgin shares, and, although he knew the figures even
better than I, I still felt responsible in case the shares fell in
value.

I would not have minded if the City analysts had been correct in their
assessment that Virgin was doing badly, or that the management was
incompetent.  What began to infuriate me was that -no matter how often
Simon, Ken or I tried to explain that over 30 per cent of our income
came from royalties from the back catalogue, and even if we failed to
release another record we would still enjoy a stream of earnings; or
that 40 per cent of our earnings in France came from French singers
rather than Boy George or Phil Collins, giving us a steady local income
-the City continually oversimplified how Virgin worked.  The analysts
still assumed that Virgin was wholly dependent upon me and Boy
George.

Simon and Ken started taking recordings to the City analysts' meetings
and playing them UB40, The Human League and Simple Minds, but they
remained unimpressed.

Virgin shares, which had started trading at 140 pence, soon slipped
down to 120 pence.  The faith which the people in the queue had placed
in me, and the faith which the Virgin artists and staff placed in me by
spending their own money on buying Virgin shares, began to overwhelm
me.

As 1987 progressed, the Virgin share price recovered to around 140
pence but never took off.  We began to use the money we had raised from
the flotation to make two investments: the first was to establish a
proper Virgin subsidiary in America; the second was to start stalking
Thorn EMI with a view to launching a takeover bid for the company.
Virgin Records America Inc.  was not a cheap investment.  We had learnt
the hard way before and this time we invested heavily.  During 1987 we
managed to release four top-twenty singles and one gold album in
America.  Although Virgin America lost us money in 1987, it was a
long-term investment and we felt sure that eventually we would make far
more money from having our own record company there than from licensing
our best artists to American companies.

The second challenge, stalking Thorn EMI, had to be done with care. We
felt that the EMI record label was managed in a rather sleepy way and
that their incredible back catalogue, which included The Beatles, could
be run far more profitably.  The Thorn EMI Group as a whole was valued
at around 750 million, three times the size of Virgin. Eventually I
thought that the best thing to do was go round and have a chat with Sir
I Colin Southgate, the managing director of Thorn EMI, and ask him in a
friendly way whether he would like to sell us EMI Music.

"Shall we come along?"  Simon and Ken asked.

"It might be a bit overbearing," I said.

"I'll slip in and see him face to face, and then if he's keen we can
all meet him."

I called Sir Colin and arranged a meeting at his office in Manchester
Square.  I was shown up to the top floor of the office building, and
ushered into a room.  It fell silent.  I was confronted by at least
twenty unsmiling faces.  They lined one side of the table, their
pinstriped suits shoulder to shoulder, forming an unbreachable wall.
Sir Colin shook my hand and peered over my shoulder to see whether
there was anyone else.

"It's just me," I said.

"Where shall I sit?"

One side of the long, gleaming mahogany table was empty.  There were
ten or fifteen memo pads and sharpened pencils laid out on it.  I sat
down and looked across at the sea of faces.

"Well, let me introduce you," Sir Colin began.  He rattled off the
names of bankers, lawyers, accountants and management consultants.

"I'm Richard Branson," I introduced myself with a nervous laugh.

"And the reason I'm here is that I just wondered whether you would like
to ... might like to" I paused.  The necks opposite all craned towards
me.

"Might like to sell your EMI subsidiary," I said.

"It seems to me that Thorn EMI is such a big group and that EMI Music
might not be your top priority.  You have so much else going on. That's
all."

There was a hushed silence.

"We're quite happy with EMI," Sir Colin said.

"We are taking all steps to run it as a leading member of the Thorn EMI
Group."

"Oh well," I said.

"I thought it was worth a try."

And with that I stood up and left the room.

I went straight round to see Simon and Ken at Vernon Yard.

"They're serious," I said.

"They're on an emergency footing.  They thought I was going to bid for
them.  They practically had their bayonets fixed.  If Sir Colin's so
worried that he brought all his heavies along, then they clearly are
vulnerable and I think we should have a crack at them."

Simon and Ken agreed with me.  Trevor arranged for us to go and see
Samuel Montagu, another investment bank.  Samuel Montagu introduced us
to Mountleigh, a property group, and suggested that we could make a
joint bid.  Since Sir Colin would not sell EMI separately to us, we
could bid for the whole Group with Mountleigh and then split it up: in
a nutshell, Mountleigh would take the national chain of television
rental shops and we would take EMI Music.

We knew that our first year's profits as a public company were on
course to more than double, at over 30 pounds million (despite the cost
of setting up in the States), and so we planned to release these
results in October at the same time as announcing our bid for Thorn

EMI.

During the course of the summer, Trevor arranged a 100 pounds million
loan with the Bank of Nova Scotia and we slowly began buying shares in
Thorn EMI, paying about 7 pounds a share as we built up a stake which
we could use as a launch pad for the bid.  As the stock market soared
higher through the summer months and some rumours began to circulate
that Thorn EMI was vulnerable to a bid, I began to worry that if we
left it until October we might be too late.  There was not much I could
do about it, because I was determined to set off on a challenge which
many people thought would be the end of me.  A challenge as daunting
and as daring as anything in the world of business.  Per Lindstrand and
I were planning to fly across the Atlantic Ocean in a hot-air balloon.
Until I returned safe and sound, nobody was going to take the idea of
Virgin bidding for Thorn EMI too seriously.

It all dated from a telephone call I had received on my first day back
at the office after the Atlantic Challenger crossing.

"It's someone called Per Lindstrand," Penni said.

"He says that he's got an incredible proposal."

I picked up the phone.

"If you thought that crossing the Atlantic by boat was impressive,"
said a stilted, Swedish voice, 'think again.  I am planning to build
the world's largest hot-air balloon, and I'm planning to fly it in the
jet stream at 30,000 feet.

I believe that it can cross the Atlantic' I had vaguely heard of Per
Lindstrand.  I knew that he was a world expert at ballooning and held
several records, including one for reaching the highest altitude.

Per explained to me that nobody had flown a hot-air balloon further
than 600 miles, and nobody had been able to keep a hot-air balloon up
in the air for longer than 27 hours.  In order to cross the Atlantic, a
balloon would have to fly more than 3,000 miles, five times further
than anyone had ever managed before, and spend three times longer up in
the air.

A balloon filled with helium, like the old zeppelins, can stay in the
air for several days.  A hot-air balloon relies on the hot air within
the envelope rising above the surrounding cold air and taking the
balloon with it.

But the loss of heat through the balloon's envelope is rapid, and, in
order to heat the air, balloonists burn propane.  Until Per's proposed
flight, hot-air balloons had been hampered by the impossible weight of
fuel needed to keep them afloat.

Per thought that we could break the flight record by putting three
theories into practice.  The first one was to take the balloon up to an
altitude of around 30,000 feet and fly along in the fast winds, the jet
streams, which move along at speeds of up to 200 miles an hour.  This
had previously been considered impossible as their power and turbulence
could shred any balloon.  The second was to use solar power to heat the
balloon's air during the day and thus save fuel.  This had never been
attempted.  The third was that, since the balloon would be flying at
30,000 feet, the pilots would be in a pressurised capsule rather than
the traditional wicker basket.

As I studied Per's proposal, I realised with amazement that this vast
balloon, a huge ungainly thing which could swallow the Royal Albert
Hall without showing a bulge, was actually intended to cross the
Atlantic Ocean in far less time than our Atlantic Challenger boat with
its 4,000-horsepower engine.  Per reckoned on a flying time of under
two days, with an average speed of 90 knots compared with the boat's
speed of just under 40 knots.  It would be rather like driving along in
the fast lane of the motorway only to be overtaken by the Royal Albert
Hall travelling twice as fast.

After wrestling with some of the science and the academic calculations
about inertia and wind speeds, I asked Per to come and see me.  When we
met, I put my hand on the pile of theoretical calculations.

"I'll never understand all the science and theory," I said, 'but I'll
come with you if you answer me this one question."

"Of course," Per said, stiffening his back in readiness for some
incredibly challenging question.

"Do you have any children?"

"Yes, I've got two."

"Right, then."  I stood up and shook his hand.

"I'll come.  But I'd better learn how to fly one of these things
first."

It was only later that I learnt that seven people had already tried to
be the first to cross the Atlantic and that five of them had
perished.

Per took me for a week's crash course on ballooning in Spain.  I
discovered that ballooning is one of the most exhilarating things I had
ever done.  The combination of soaring up over the world, the silence
when the burners are off, the sensation of floating, and the
breathtaking panoramic views all immediately seduced me.  After a week
of being shouted at by Robin Batchelor, my instructor, who looked like
my double, I had my balloon licence.  I was ready.

As the prevailing jet stream flows from west to east, we found a launch
site in Maine, close to Boston, about a hundred miles inland to avoid
the effect of sea breezes.  Per reckoned that by the time we crossed
the coast we should be up in the jet stream and above the local
weather.  Our two key mentors were Tom Barrow, who headed the
engineering team, and Bob Rice, an expert meteorologist.  Both men were
clearly such authorities that I unreservedly put my trust in them.

The jet stream parts over the Atlantic, with one branch

2 69 heading up to the Arctic and another branch swerving down to the
Azores and back out to the middle of the ocean.  Bob Rice told us that
getting our route right was like 'rolling a ball bearing between two
magnets'.  In the event of running out of fuel or icing up, we would
have to ditch the balloon at sea.

"There are flotation collars round the capsule which will keep it
buoyant," Tom Barrow said.

"What if they don't work?"  I asked.

"You'll get your money back," he said.

"Or rather, we'll get the money back on your behalf."

At our final briefing with Tom at Sugarloaf Mountain, Maine, the day
before the balloon went up, he went through the last emergency drills:
"Landing this thing is going to be like freewheeling a Sherman tank
without any brakes.  It's going to be a crash."

His last warning was the most telling: "Now, even though we're here, I
can still abort this project if I think it's too dangerous or if you
develop health problems."

"Does that include mental-health problems?"  I joked.

"No," Tom said.

"That's a prerequisite for doing this flight.  If you're not completely
nuts and scared to death, then you shouldn't be on board in the first
place."

I was certainly scared to death.

17 "I was almost certainly going to die."

1987-1988

Per and I took sleeping pills the evening before the launch.  When we
were woken up at 2 a.m. it was pitch-dark, but as we were driven to the
launch site we saw the vast balloon lit up by floodlights and towering
over the trees.  It looked astonishing: the sides were silver and the
dome was black.  It was monumental.

The balloon was fully inflated and straining at the anchors.  We were
worried that a wind might strike up and tip it over, so we climbed into
the capsule and the ground crew set about the final checks.

Inside the capsule, we were unaware of the accident which actually
catapulted us upward.  A cable became caught round two of the propane
tanks and as the balloon strained up and down it pulled them off.
Without their weight, the balloon shot up, still trailing a couple of
cables carrying sandbags.  As we gained height and headed over the
Maine forest towards the sea, Per climbed out of the capsule and cut
the last two cables.  We made rapid progress towards the glowing dawn,
soaring along in the jet stream at 85 knots -just under 100 miles an
hour.  After ten hours we had flown over 900 miles and had easily
broken the long-distance record for a hot-air balloon.  Over the radio
Bob Rice told us to keep at 27,000 feet whatever happened, since that
was where the fast winds were.

That first night we hit a storm and came down to calmer weather, but it
was snowing and we immediately lost the speed of the jet stream.

"We need to get back up there," Per said.  He fired the burners and we
rose again to meet the bad weather.  The balloon was buffeted hard by
the storm and the capsule was tossed to and fro, but just when we
wondered whether we should head back down we shot out into clear
weather and reached a speed of 140 knots -over

160 miles an hour.  The next morning the Virgin 747, Maiden Voyager,
arrived and flew in a figure of eight round us.  My mother's voice came
crackling over the radio:

"Faster, Richard, faster!  We'll race you."

"I'm doing my best, Mum.  Please thank the crew and passengers for
going out of their way to greet us," I said.

In fact, we sped along and crossed the coast of Ireland at 2.30 that
afternoon, Friday 3 July.  It was a dream crossing compared with the
boat.  We had been in the air for just 29 hours.

The incredible speed of our flight gave us an unexpected problem: we
still had three full tanks of fuel attached to the capsule, and they
could well explode on landing.  We decided to swoop down very low and
drop off the fuel tanks in an empty field, and then come down a second
time for a controlled landing.  Per stopped burning propane and brought
the balloon down low so that we could see where we could safely
jettison the extra fuel tanks.  As we came down, the wind suddenly
swirled around us, much harder than we expected.  The ground rushed up
to meet us.  Travelling at a speed of almost 30 knots, 35 miles an
hour, our ground speed was not so much the problem as our sudden plunge
downward.  We hit the ground and bounced along a field.  All our fuel
tanks were torn off by the impact, along with our radio aerials.
Without the weight of the tanks, we hurtled back upward.  I didn't see
it, but we narrowly missed a house and an electricity pylon.  We had
hit the ground in Limavardy, a tiny Irish village.

With no fuel tanks we were utterly out of control.

Unless we could heat the air, once this rise topped out we would fall
rapidly, gathering speed like someone in an unopened parachute.  We had
one small reserve fuel tank inside the capsule with us, and Per quickly
connected it to the burners.

"It's tangled," Per said.

"The cables are tangled."

The balloon was rising like a rocket.  The top of the dome was forced
down by the pressure, and the cable that hung down the middle of the
balloon snagged on something and started spinning us round in a knot.
The whole balloon was twisting itself into a corkscrew, closing the
mouth so that there was no chance of heating the hot air inside.  As we
began to drift downward, I opened the capsule hatch and climbed out on
top.  I took my knife and hacked away at the twisted cable.

"Quick!"  Per shouted up at me.

"We're falling fast."

I finally managed to cut the cable, and the balloon whipped round.  The
dome straightened out, and the hole in the bottom of the envelope was
open.

"Get in!"  Per yelled.

As I dropped down through the hatch, he fired the burners full blast.
We were within 300 feet of the ground, but the burst of heat steadied
our descent and we rose again.  I tried some switches, but there was no
power in the capsule.

"Damn," I said.

"No lights, no radio, no fuel gauge.

Only the altimeter's working."

"Let's try coming down on the beach," Per said.

"We can't risk anywhere inland."

I put on my life jacket and parachute, and attached the life raft to my
belt.  We saw the coastline approaching and Per vented hot air from
the top of the balloon to reduce our height.  But once again the ground
wind was considerably stronger then we expected and it swept us out to
sea.  We were heading northeast, and without the radio or electricity
in the capsule we were more than ever at the mercy of the wind.

"Hold tight," Per said.

He let out more air, alternating this with burning propane to try to
reduce the speed of our descent through the thick grey cloud.  As we
finally came out of the fog, I saw the foaming sea rising up to meet
us.  We'd missed the beach.  We were going far too fast.  I realised
the truth of Tom Barrow's words: it was like trying to stop a Sherman
tank without brakes.  With horror, I watched the ocean rushing towards
us.

We hit the sea, crashing me into Per.  We were tilted at a crazy angle,
unable to stand upright.  The balloon started to drag us across the
surface of the ocean.  We were being bounced from wave to wave.

"The bolts!"  Per shouted.

He grabbed hold of the chair and hauled himself upward.  I tried to
help push him to his feet, but the capsule was smashing up and down and
each time I reached up I was knocked back.  I watched Per's hand
stretch out, grasp the red lever and pull it down.  This was supposed
to fire the explosive bolts, which would sever the cables connecting
the capsule to the balloon.

In theory the balloon would then sail away and crumple into the sea,
leaving the capsule to float on the water.

But nothing happened.  Per yanked the lever up and down but the bolts
did not fire.

"Jesus Christ!"  Per yelled.

"The bolts are dead."

The balloon was now bouncing us across the Irish Sea like a monstrous
beach ball  I was knocked sideways again and hit the upturned edge of
the flight deck.

"Get out!"  Per shouted at me.

"Richard, we've got to get out."

Per braced himself against the hatch, wrenched down the levers and
pushed it open.  The balloon slowed for a moment as the capsule dug
into the water, and Per heaved himself up and climbed through the
hatch.  As I saw Per's backside squeeze through the hatch and disappear
from view, I lunged after him and followed him up the rungs.  I noticed
that Per was still wearing his parachute.  We clutched at the steel
hawsers and tried to balance on the tilting capsule.

"Where's your life jacket?"  I shouted.

Per didn't seem to hear me.  The wind and the roar of the sea blew my
words straight back into my face.

The balloon was lurching at an angle, one side of it ploughing through
the grey sea.  It showed no signs of slowing down.  Behind us we left a
foaming white wake.

Then a gust of wind caught us and the balloon lifted off the surface.

Per threw himself off the top of the capsule into the cold black water.
The drop seemed at least 100 feet.  I was sure that he'd killed
himself.

I hesitated.  Then I realised with horror that I was too late.  Without
Per's weight, the huge balloon soared up.

I almost fell backward over the edge of the capsule as it swung
underneath the balloon like a pendulum.  I ducked down, grabbed hold of
the railing and watched the grey sea fall away beneath me.  I was
rising rapidly, and I couldn't see Per.  Now that the balloon was
sailing with the wind and no longer dragging the capsule through the
water, it was much quieter.  I watched with mounting dread as I soared
upward into thick cloud and lost sight of everything.

I was now by myself, flying in the biggest balloon ever built, and
heading towards Scotland.  The wind was freezing cold; the sea below
me was icy; and I was in thick fog.  I had only the tiny emergency fuel
tank left.

I climbed back into the capsule.  It was now the right way up and I
felt reassured to see the screens and controls the way they had been as
we crossed the Atlantic.  I ran through the options: I could parachute
into the sea, where nobody would be likely to find me and I could
drown; or I could sail up into the darkening sky and try a night
landing, should I be lucky enough to reach land.  I picked up the
microphone, but the radio was still dead.  I had no contact with the
outside world.

The altimeter ticked down so I instinctively fired the propane.  To my
delight, the flame surged up inside the balloon and steadied it.  I had
assumed that the seawater had killed the burners.  I gave a good long
blast and the balloon started rising again.  I was having difficulty
breathing so I put on an oxygen mask.  I checked the altimeter: 12,000
feet.  Thick white cloud pressed all around me.  I had no sense of
where I was.  All I knew was that the grey foaming sea was waiting for
me below.  Before Per had ditched the balloon, he had told me that it
was unlikely we had enough fuel to reach Scotland before dark.  The
remaining spare fuel tank gave me only about an hour's worth of flying.
Sooner or later I would have to face the Irish Sea again.

I wondered about the explosive bolts.  Perhaps they had cut through
one, two, three or even four of the five key cables that held the
capsule to the balloon.  Perhaps even now that last cable was straining
and fraying under the weight and might give way.  If so, the capsule
would plunge straight down into the sea and I would be killed on
impact.  It was this fear which had prompted Per to jump.  The capsule
hatch was still open and I gave the propane one good long burn before
climbing out once more on to the top of the capsule to look at the
cables.  It was now completely quiet.  I could not see all the cables
without leaning out over the capsule railings.

Standing amid the swirling white cloud, I felt an overwhelming sense of
loneliness.  The cables looked intact so I squeezed back inside the
hatch.

Whatever I did in the next ten minutes would lead to my death or
survival.  I was on my own.  We had broken the record but I was almost
certainly going to die.  Per, with no survival suit, was either dead or
trying to swim on.  I had to get somebody to find him.  I had to
survive.

I cleared my mind and concentrated on the options in front of me.  I
hadn't slept for over 24 hours and my mind felt fuzzy.  I decided to
take the balloon up high enough so I could parachute off the capsule. I
blasted the burners and then found my notebook and scrawled across the
open page, "Joan, Holly, Sam, I love you."  I waited until the
altimeter showed 8,000 feet and then climbed outside.

I was alone in the cloud.  I crouched by the railings and looked down.
I was still wheeling through the possibilities.  If I jumped, I would
be likely to have only two minutes to live.  If I managed to open my
parachute, I would still end up in the sea, where I would probably
drown.  I felt for the parachute release tag, and wondered whether it
was the right one.  Perhaps due to my dyslexia, I have a mental block
about which is right and which is left, especially with parachutes. The
last time I had free-fallen I pulled the wrong release tag and
jettisoned my parachute.  At the time I had several skydivers around
me, so they activated my reserve parachute.  But now I was by myself at
8,000 feet.  I slapped myself hard across the face to concentrate.

There had to be a better way.

"Give yourself more time," I said out loud.

"Come on."

As I crouched on top of the capsule, I looked up at the vast balloon
above me.  The realisation dawned that I was standing beneath the
world's largest parachute.  If I could bring the balloon down, then
perhaps I could, jump off into the sea at the last moment before we
crashed.  I now knew I had enough fuel for another thirty minutes.  It
must be better to live for thirty;

minutes than jump off with my parachute and perhaps live for only two
minutes.

"While I'm alive I can still do something," I said.

"Something must turn up."

I climbed back inside and took off my parachute.  I made up my mind.  I
would do anything for those extra ( minutes.  I grabbed some chocolate,
zipped it into my jacket pocket, and checked that my torch was still
there.

Peering out of the capsule into the fog below me, I tried to work out
when I should stop burning, when I should open the vent, and when I
should leave the controls and climb out on top of the capsule for my
final jump.  I knew that I had to judge the last burn exactly so that
the balloon would hit the sea as slowly as possible.  Despite losing
all our fuel tanks, the balloon was still carrying a weight of around
three tonnes.

As I came out through the bottom of the clouds, I saw the grey sea
below me.  I also saw an RAF helicopter.  I gave a last burn on the
propane to slow my descent, and I then left the balloon to come down of
its own accord.  I grabbed a red rag and climbed out through the hatch.
I squatted on the top of the capsule and waved the rag at the
helicopter pilot.  He waved back rather casually, seemingly oblivious
to my panic.

I peered over the edge and saw the sea coming up.  I shuffled around
the capsule trying to work out where the wind was coming from.  It was
difficult to be sure since it seemed to be gusting from all directions.
I finally chose the upwind side and looked down.  I was fifty feet
away, the height of a house, and the sea was racing up to hit me.  I
checked my life jacket and held on to the railing.  Without my weight,
I hoped the balloon would rise up again rather than crashing on top of
me.  I waited until I was just above the sea before pulling my
life-jacket ripcord and hurling myself away from the capsule.

The sea was icy.  I spun deep into it and felt my scalp freeze with the
water.  Then the life jacket bobbed me straight back up to the surface.
It was heaven: I was alive.  I turned and watched the balloon. Without
my weight, it quietly soared back up through the cloud like a
magnificent alien spaceship, vanishing from sight.

The helicopter flew over me and lowered a sling.  I sat inside it like
a swing, but each time it tried to lift me it dunked me back in the
water.  I couldn't understand what was wrong, and I was too weak to
hold on much longer.  Eventually it winched me up and someone reached
out and pulled me inside.

"You should have put the sling under your arms," said a Scottish
voice.

"Where's Per?"  I asked.

"Have you picked up Per yet?"

"Isn't he in the balloon?"  the RAF man asked.

"Haven't you got him?  He's in the water.  He's been there ever since I
took off again.  About forty minutes ago."

The pilot pulled a face.  He spoke to someone on the radio, but it was
difficult to make out what was said.  The helicopter spun on its axis
and headed off.

"We're taking you to our boat," the pilot said.

"I want to look for Per," I said.

"I'm fine."

If he had survived the fall, Per would still be swimming -or, more
likely, drowning -in the Irish Sea.

The light was fading and, from the air, only his head would be visible.
It was like looking for a football -a

grey football in a grey stormy sea.  The pilot took no notice of my
arguments.  Within two minutes we had landed on a ship and I was pulled
on board.  Without pausing for breath, the pilot took off immediately
and headed back over the sea.  I was marched across the deck and put
into a hot bath.  Then I went up to the bridge to see how the search
was going.  For ten minutes, fifteen minutes, twenty minutes, there was
nothing.  Then the radio crackled.

"We've spotted him," the pilot said.

"And he's still swimming.  He's alive."

Per's struggles weren't over.  The winch that had pulled me up was now
jammed, and so they had to attract a dinghy to rescue him.  By the time
the dinghy arrived, Per was almost dead.  He had been in the water for
two hours, swimming as vigorously as possible to keep his circulation
going, but making no headway against the tide.  He had no life vest on,
and by the time of his rescue he was completely frozen and exhausted.

It was extraordinary that he'd survived, and he later put it down to
his experiences as a child, being forced by his father to swim every
day in the icy lakes of Sweden.

We met on board the ship, and fell into each other's arms.  Per had
been stripped naked and wore a survival blanket.  His face looked like
white marble.  He was blue with cold and he couldn't stop his teeth
chattering.

For what it was worth, we were the first to cross the Atlantic in a
hot-air balloon.  More importantly, we were alive.  We could not
believe that we had both survived.

During the summer of 1987 British Caledonian had been struggling to
stay in business.  It took out a series of advertisements which showed
businessmen singing "I wish they all could be Caledonian girls' to the
tune of The Beach Boys' "California Girls', and they made a great play
about their cabin crew's tartan.  But it was no good: British
Caledonian were losing money and in August they announced that they had
agreed terms for British Airways to take them over.

It seemed to me that this takeover clearly breached the strictures of
the Monopolies and Mergers Commission in that it was the largest and
the second largest UK carriers forming one company with a market share
across the Atlantic of well over 50 per cent.  We complained to the
Commission that this deal increased BA's share from around 45 per cent
to 80 per cent on several transatlantic routes, but the deal was still
given the go-ahead in September.  BA pad B-Cal made great play that
B-Cal would be run independently and the B-Cal cabin crew would
continue to wear their tartan uniforms and retain their independence.
Without B-Cal offering competition, BA could now turn its full
attention to mopping up the last tiny British competitor -us -and then
concentrate on dominating the Atlantic routes.

As the BA/B-Cal deal went ahead we realised that, as well as the threat
that a larger BA would pose to us, this takeover could contain a hidden
opportunity for us.  We had already used the increased value of our
first jumbo, which had risen in worth by $10 million, to leverage up
and lease a second plane, which we were flying to Miami.  We wanted to
expand further.  Under the terms of the Bermuda Agreement, which
governs international air traffic between America and Britain, there is
provision for two British carriers between America and Britain.  Our
lawyers also discovered that the Japanese inter governmental agreement
contained the provision for two British and two Japanese carriers to
Japan.  With B-Cal removed from the scene, Virgin Atlantic was now free
to push itself forward and apply to fly these routes as the second
carrier.

Just as surely as Mike Oldfield and The Sex Pistols had been turning
points for Virgin Music, BA's takeover of B-Cal was a turning point for
Virgin Atlantic.  Prior to their merger, we flew only to Miami and
Newark Airport near New York.  Now, as the second British long-haul
carrier, Virgin Atlantic was entitled to apply for the routes that
B-Cal had served and were duplicated by the BA/B-Cal alliance.  Top of
our list was to fly to JFK, the main airport at New York; Los Angeles;
and Tokyo.

Further down, we listed three other destinations that B-Cal had
operated: San Francisco, Boston and Hong Kong.  In 1987 we had just two
aircraft.  In order to fly to Los Angeles and Tokyo we would have to
lease two more aircraft and double the number of our cabin crew.

In the meantime, as well as stalking B-Cal's routes, we were also
continuing to stalk Thorn EMI.  In the last week of September, Trevor
had finalised our 100 pounds million loan with the Bank of Nova Scotia.
Despite the stock market rising all summer, we felt that Thorn EMI was
still undervalued.  With 100 pounds million at our disposal, we started
buying on 25 September 1987.  Undaunted by the size of EMI, we started
putting in buying orders for 100,000 shares at a time.  We decided to
buy up to 5 per cent of the company before announcing our takeover bid.
Even if our bid failed, we knew that in the long run the 5 per cent
stake would increase in value.

Immediately rumours started going around the market that Thorn EMI was
going to be bid for.  Some days we bought 250,000 shares, costing us 1
pound 75 pence million

other days we spent 5 pounds million.  Sometimes we sold shares to keep
people guessing.  We were stirring up the pot and ensuring that a high
number of Thorn EMI shares were traded, which kept the bid rumours
going.

By the second week of October, our share holdings had cost 30 pounds
million.

During the night of Thursday 15 October 1987 there was a hurricane in
Britain.  I remember walking from Oxford Gardens to Duende and looking
across the green streets -they were carpeted with leaves.  With so few
people able to get to work as a result, the stock market was closed on
Friday.  But, in America, the selling of shares which had started on
Wednesday became a stampede.  I watched with amazement through Friday
evening as the Dow Jones fell 95 points, then its largest one-day fall.
The full significance of Wall Street's crash did not really hit London
and the rest of the world until Monday.  The Sunday newspapers were
full of optimistic noises, and even encouraged their readers to buy as
many BP shares as they could.  On Monday the Australian market was the
first to open and fell by a fifth; Tokyo fell 1,500 points.  I thought
that this was a great opportunity to buy more Thorn EMI shares, and I
called up our broker and asked him to buy 5 million worth of Thorn EMI
shares first thing.  I wanted to get in there before anyone else and I
was worried that someone else might have seized the opportunity.  In
the event I needn't have bothered.  I don't think that anyone could
believe their luck that there was a buyer in the market.  The broker
filled his order within twenty seconds, and asked me if I wanted to buy
any more.

There're tons more of it where that came from," he said.

Finally sensing a crisis, I paused.  Even as I thought about it, the
London stock market fell by 100 points, then another 100 points, then
another 50 points -a full day's fall of 250 points.  That afternoon the
Dow Jones crashed by another 500 points.  Within a three-day period,
the world stock markets lost around a quarter of their value.

Trevor and I got together.  For me the immediate

2 83 damage was that the price of Virgin had nearly halved in value
from 160 pence to 90 pence.  Someone worked out that I had lost 41
million in value on my shares in Virgin Group pic.  The actual picture
was much worse than this.  The share price of Thorn EMI had dropped
from 7.30 to 5.80, a drop of over 20 per cent, and the value of our
shareholding had crashed to 18 million.

The Bank of Nova Scotia was unamused.  With the crash in share prices,
they asked for an immediate cash payment of 5 million.  Oddly enough, I
was still rather confident about buying Thorn EMI.  I felt unaffected
by the slump in Virgin's own share price since I was never going to
sell my shares anyway, and I was absolutely certain that the share
price was grossly undervalued.

And, since I was focusing more on the profits and cash flow from EMI, I
began to see the stock-market crash as a golden opportunity to buy the
company.  But Mountleigh were blown apart by the crash -their share
price collapsed by 60 per cent and they were unable to borrow any more
money to buy shares in Thorn EMI, or anyone else for that matter.

That week I had a furious argument with the two non executive directors
whom we had brought in to represent the outside shareholders' interests
when Virgin went public.  Sir Phil Harris and Cob Stenham were utterly
opposed to continuing the siege of Thorn EMI and announcing a bid when
we released our results later in October.

"But it's a unique buying opportunity," I said.

"It simply cannot be true that Thorn is now worth only two-thirds of
its value on Friday.  We know the cash we can earn from its back
catalogue, so in terms of straight cash to us it's a bargain."

"There could be tough times ahead," they warned me.

"This crash has changed the whole picture."

"But the people who buy records won't stop," I said.

"Most people don't hold any shares anyway.  They'll carry on buying
Beatles and Phil Collins albums."

But everyone disagreed with me.  They all wanted to see where the stock
market went next.  The Thorn EMI share price continued to fall until it
reached 5.30.1 was sure that, if we could present a united front, then
we would be able to raise the money and buy Thorn EMI at a bargain
price.  I argued that there was no good reason for the crash, and that
share prices would recover soon.  I told them that there would never
again be such a wonderful opportunity.  But they all disagreed, and
since I could not persuade them I had to let the matter drop.  I
expected the Virgin share price to jump up when we released our
results.  And so, when we announced that Virgin's profits for the year
ended July 1987 had more than doubled from 14 million to 32 million, we
made no reference to Thorn EMI.  As it happened, our share price did
not move upward.

Anything but.  It was difficult to understand how Virgin could have
floated with a share price of 140 pence the previous year, and then our
share price be halved on the back of doubled profits.

The stock-market crash was the final nail in Virgin's coffin as a
public company.  I knew that Don would be opposed to changing
direction, but Trevor and I had a quiet chat about the logistics of
going private again, and Trevor set about working out the finances that
such a large buy-back would entail.

In July 1988 we announced that the management of Virgin would conduct a
management buy out of Virgin Group pic.  We could probably have got
away with paying less than the original 140 pence per share, but we
decided we would offer the same price we had sold the Group for on the
stock market, a large premium over the 70 pence at which shares were
changing hands just before our announcement.  This meant that nobody
who had invested in Virgin when it was floated -all those people in the
queue outside the bank who had wished me well -would lose money.  Our
reputation would stay intact.

Trevor renegotiated the entire financial structure of the Virgin Group,
and set in place the mechanics for going private at the end of November
1988.  It was a colossal task made no easier when our advisers, Samuel
Montagu, approached their parent bank, Midland Bank, to come and join
the syndicate of lending banks, but were turned down out of hand.

Trevor decided to dispense with Samuel Montagu's services in all but
name.  Rather than set up a syndicate of banks which would have had one
leading bank as the point of contact and prime negotiator, he began to
pull together a consortium of banks, each of whom he approached
directly.  This meant that he would have to do much more legwork, since
he was speaking to them all individually, but it also meant that he
could play each of them off against the others.  In the end he arranged
lines of credit with twenty different banks, and we drew up an
overdraft of 300 pounds million.  We bought in the outside
shareholders' shares, refinanced the debt which had been secured upon
our Virgin Group pic shares, and similarly for Virgin Atlantic.

With over 300 pounds million of debt, we were so heavily borrowed that
we knew we had to move rapidly if we were going to survive.  We had to
give up the idea of buying Thorn EMI, so we sold our shares, and
concentrated on dealing with our own problems.  I had always felt that
the City had undervalued Virgin Music, and now we would have to see
what its real value was.

Don Cruickshank, Sir Phil Harris and Cob Stenham left Virgin.  Don had
carried out a superb job in recasting the company as one that could
demonstrate clear lines of management.  Trevor took his place as
managing director.

Trevor and I set about finding other companies who might wish to invest
in any of the Virgin subsidiaries as joint ventures.  We wanted to
replace the shareholders in the City with one or two key partners in
various Virgin subsidiaries.  The structure of the Virgin Group was
about to become extremely complicated.

2 8 7 18 "Everything was up for sale."

1988-1989

When I had bought back Nik's 40 per cent stake, I had been able to
repay my 1 pound million overdraft because Virgin had suddenly released
a string of hits starting off with Phil Collins.  At the time I knew I
was on a knife edge.  Now the sums of money were far more daunting: we
had a debt mountain of over 300 pounds million, and we had to reduce it
by 200 pounds million within the first year.  This pressure meant that
everything was now up for sale.  There were no sacred cows.  If we
received a good offer for a part of any Virgin business, then we would
take it.  Trevor, Ken and I began to put out feelers to see what level
of interest there was.  One of the first areas we looked at was Virgin
Retail.

Right from the beginning in 1971, Virgin had never made much profit
from our record shops.  They put our name out on to the high street and
were a big part of the public perception of Virgin.  They also helped
us keep in touch with the kinds of bands that people were buying.  But,
after we had paid our staff, paid the rent and allocated the central
Group overheads, the shops had always lost money.

The problem with Virgin Retail was that after Nik had left in 1980
nobody had really been able to organise them effectively.  HMV and Our
Price began to outstrip us.  When Don Cruickshank instigated a review
of the company in 1987, it became clear that retailing was not making
us money and was apparently never likely to.

"Let's sell the lot," I said at a board meeting, after we had once
again gone through the expected losses for Virgin Retail.  After second
thoughts, I changed my mind and wondered whether we should sell the
smaller record shops and keep the Megastores.  I had two reasons for
changing my mind: the new HMV store on Oxford Street, the world's
largest record store, was opened to great acclaim and had actually
increased record sales along Oxford Street; and secondly, Patrick
Zelnick had found a building on the Champs Elysees in Paris that he
thought would make a sensational conversion into a Virgin Megastore.

In Britain we had 102 Virgin Records shops up and down the country, and
when WH Smith asked us whether they could buy some and rename them Our
Price Records we jumped at the chance.  In June 1988 we agreed to sell
67 of the smaller shops for 23 pounds million.

Trevor and I then divided Virgin Retail into three separate divisions:
the first comprised the rump of the record shops that we had kept back
from selling to WH Smith, the typical high-street shops together with
the Oxford Street Megastore; the second comprised Patrick Zelnick's
proposed Paris Megastore on the Champs Elysees, where Patrick would set
up a separate French subsidiary to invest in the shop; the third
comprised the plans we had for Ian Duffell, the man who had designed
and set up the HMV record shop on Oxford Street, and whom we had
managed to persuade to join Virgin.

I'm still not sure why Ian decided to leave Thorn EMI and come to
Virgin.  I know that in the short term he forfeited a decent salary
with a large, reputable company to come and work for us at a time when
Virgin was having great trouble in retailing.  But we offered him the
chance to set up Virgin Megastores anywhere in the world, and we
promised to back his judgement and let him have a direct share in the
Megastores.

was one of the best record retailers in the business:

had excellent plans for the record shops and, for first time since we
opened our earliest batch of Vii shops, I felt that we could be back on
the map.

interest lay in opening a sequence of overseas Vi Megastores.

We thought about setting up in America, but retail rents at the time
were astronomical and competition was high.  Instead we chose to open
the one in Sydney, which was a quiet market without much competition.
There we could open a Megastore experiment a little with different
formulas without losing a lot of money.  Ian went to Sydney, where said
-only half-jokingly -that Thorn EMI would never!

be able to track him down to persuade him to come back again.  Ian
recruited his old partner from HMV, Mike Inman, and together they
started work on the Sydney Megastore.

In the meantime, the Paris Megastore was the first overseas shop to
materialise.  Patrick had found a grand old bank dating from the late
nineteenth century.  It had marble floors, soaring high ceilings and
the most spectacular staircase.  This grabbed my imagination.  We knew
that small record shops did not make enough money; they just attracted
passers-by who were disappointed by the lack of depth of stock.  Now
that the 1970s were over and the cushions on the floor had been cleared
away, the traditional Virgin shops seemed to have lost their identity
and customer loyalty.  We had to go for something bigger, where we
could offer the best range of products in the world.

The rest of the Virgin board hated the idea of the Paris Megastore.  I
saw it as our final gamble with retailing.  If it didn't work, we could
sell the whole less off.  When Patrick first presented the idea of
Paris Megastore, none of the other directors red his sales forecasts.

"If we can't make money from Oxford Street," Simon pointed out, 'how on
earth are we going to make money from the wrong end of the Champs
Elysees?"

I knew that he was particularly angry about the continuing failure of
Virgin Retail since the record company, in which Simon had a
shareholding of 20 per scent, subsidised Virgin Retail's losses.  With
the whole board against the idea, I would have to do something if
Patrick was to get permission to go ahead.  The next week I was asked
whether I would do a television commercial about doing business in
Europe.  I immediately agreed and quietly asked whether we could film
it in Paris.  The next thing the Virgin board saw was the television
commercial where I stood on the Champs i Elysees and announced that it
was great doing business in Europe indeed, the next Virgin Megastore
was going to be right here.  Simon, Ken and Trevor were furious with
me, but I trusted Patrick and was sure that he was on to a winner.
Although I listen carefully to everyone, there are times when I make up
my mind and I'll just go and do it.  At times like those, the more
people disagree with me, the more obstinate I become.

Patrick's Paris Megastore was an incredible success.

From its opening day it smashed all his sales forecasts and became the
most celebrated shop in Paris.  Indeed, it became far more than a shop:
it became a landmark and a tourist destination.  After a few months the
Paris Megastore attracted as many visitors as the Louvre.

Today it still generates sales per square foot over twice those of any
other record store in the world.  It seems that every teenaged Japanese
and German tourist makes a pilgrimage there and buys huge numbers of
CDs and even the cafe at the top has become a smart place for French
executives to meet.  I was delighted for Patrick, but I still had no
idea what to do about the British record shops.

It was the disaster of Valentine's Day 1988 which brought matters to a
head.  The retail team decided to sell orchids that day and ordered
5,000 of the things.

Unfortunately, either nobody knew about this stock of orchids or people
preferred to buy roses, but by 15 February we had sold only 50 orchids.
The retail chain!

found themselves left with 4,950 flowers which, unlike CDs, were
wilting and dying and had to be chucked away.  I couldn't even have
given Joan that many.  We decided that it was time to bring some other
people in to turn Virgin Retail around.  Giving people their notice is
always heart-wrenching, and I hate doing it.  I hate confrontation and
I hate disappointing people.  I always try to give people another
chance.  But it was clear that this team was out of its depth and
losing money without any hope of turning the company round.  The
final;

straw came when, after the end of the financial year, they admitted to
us that the losses of Virgin Retail!  would be 2 pounds million more
than they had anticipated.  By leaving it so late we were stuck.

We asked some head-hunters to draw up a short list;

of suitable candidates, but I was most intrigued when Simon Burke
applied for the job of chief executive.

Simon had joined Virgin a couple of years previously as the development
manager.  His job was to sift through all the business proposals we
receive and see whether we want to follow any of them up.

One of the things that I am always trying to do with Virgin is make
people reinvent themselves.  I firmly believe that anything is possible
and, despite Simon's having no obvious qualifications to turn a large
chain of unsuccessful record shops into a chain of successful ones, I
was certain that, if anyone could do it, he could.

And, sure enough, as soon as Simon started work at Virgin Retail in
August 1988, things began to change.

After the initial sale of the 67 shops to WH Smith, we were left with
35 shops.  Of these 35 shops, 25 were shops within various Debenhams
stores.

Simon's first move was to clean out all the rubbish which had
accumulated in the stores.  In response to the pressure from the Virgin
board to make money, the Retail team had done all kinds of deals with
all kinds of people to try to bring in more money: they had expanded
the range of goods to include everything from metallic badges and boxer
shorts to Filofaxes and stationery.  In several shops there were
subtenants selling skateboards or American-football gear; in others
there were Athena posters and greetings cards.  The worst concession
was in the Birmingham shop, which had subleased space to Comet: the
entrance to the shop was occupied by washing machines.  Although these
deals brought in some immediate cash, in the long run they confused
people and stopped them from treating the record shops as proper places
to buy records.

In the Oxford Street store there was a mini CD factory.  I have to
admit that this was my idea, and it was a disaster.  I had dreamt up
the idea because I thought that people would be intrigued to see the
CDs being made right in front of their eyes.  When CDs had first been
introduced, we had invested in a CD factory in Wales called Nimbus.  We
asked Nimbus to set up the production line, and they brought up all the
gleaming stainless-steel machinery from Wales.  I thought that it would
become a tourist attraction in its own right.  But it was a mistake.
For a start it was probably the only factory this century on the
valuable real estate of Oxford Street.  But it was also a disaster for
a number of other reasons.

First, a good deal of stock was stolen and sold on to the black market.
Second, the staff who operated the machines had to be bussed up from
Wales and worked four days on, three days off.  And, although we were
happy to press any record company's CDs, our mini factory was too small
to compete properly on price with the giant CD factories.  As a result,
the long-suffering recipient of the CDs produced by this Megastore was
of course Virgin Music.  Ken and Simon only accepted them through
gritted teeth because I twisted their arms halfway up their backs.  I
was determined that this example of vertical integration would work in
the same way as the integration between owning a recording studio, a
record label and record shops had worked.

Simon Burke finally put his foot down and insisted that we immediately
dismantle the CD factory and return the space to selling records.

"It's just a gimmick," he told me.

"It's got to go."

Simon Draper and Ken both gratefully agreed, and we reverted to our
normal way of doing business, which is to minimise the amount of cash
we have tied up in fixed assets and buy in services from the most
efficient supplier.  I have a weakness for vertical integration, which
I admit does not always work.  The CD factory was one of my biggest
mistakes, but I also once bought the Earl of Lonsdale pub on the
Portobello Road because so many Virgin staff spent a lot of time there
and I hated seeing all our money disappear over the bar.  That didn't
work out.  On another occasion I almost bought a property-maintenance
company because we had so many properties which needed repairing and I
thought it would be better to keep this service in-house.  In some
instances, I was right -notably demonstrated in the signing of Phil
Collins, who had struck up a rapport with us during his time at the
Town House -but in many others I had to eat my words and admit that it
is better to pay an outside expert.

Simon Burke's strategy began to pay off, and by June 1989 Virgin Retail
had produced its first ever profit.  In his first presentation to the
Virgin board he showed us some slides and asked for 10 million to
invest in new shops.  He pointed out that Retail was falling apart, and
he showed us some pictures of the shops in which tiles were hanging off
the roof and the wiring was coming apart.  He suggested that, if any
airline customers saw this, they would worry about the state of the
aircraft.  Unfortunately for Simon, Patrick Zelnick was also asking for
10 million, to develop Virgin Megastores in Bordeaux and Marseilles.
Flushed with the recent success of the Paris Megastore, I felt more
inclined to divert the funding to France than the UK.  It must have
been galling for Simon.  In the meantime, the Sydney Megastore was
ready to open, and Ian and Mike were looking at Japan.

In order to create the investment in the UK shops and help pay off the
general debt, we set up another joint venture.  Ideally we would have
liked a financial investor to take a 30 per cent stake but, with the
high interest rates and the feeling that high-street retailing was
heading for recession, we had no takers.  We began talks with
Kingfisher, the owner of Woolworth's.  As these talks dragged on, WH
Smith got wind of them and called me to see whether they could make an
offer.  And so, just as Simon Burke was getting on with the job of
sorting out Virgin Retail for Virgin, he suddenly found himself with a
new boss: a two-headed creature comprising both Virgin and WH Smith. WH
Smith bought a 50 per cent stake in our ten UK Megastores,

which, unlike the earlier shops we had sold to WH Smith, continued to
trade under the Virgin name.  Their sale raised 12 million, which we
immediately used to pay off borrowings in Virgin Atlantic.  It was
another case of some frantic juggling to keep one step ahead of the
bankers.

While the UK retail arm spun off into a joint venture with WH Smith,
and the European retail side started to expand from Paris into
Bordeaux, Marseilles and then Germany, several different Virgin
companies turned their attention towards Japan.

While many British companies complain about how difficult it is to do
business in Japan, Virgin has always enjoyed an excellent rapport with
the Japanese.  I put it down to the success of my first ever trip to
Tokyo.  I had gone there as a twenty-year-old, before I was married to
Kristen, and rather ambitiously arranged a number of meetings with
people in the entertainment and media world to see whether we could set
up some kind of joint venture distributing records.  I think it was
before we started Virgin Music, so I didn't even have Mike Oldfield to
sell them.  I was young, impoverished and had very little to offer.  I
went along to a number of meetings where immaculate geisha girls served
tea, and I sat in my jeans and sweater and enthused about business to
kind and patient groups of Japanese businessmen.  No business deals
were forthcoming, but the great success was at my hotel.

When I arrived at the airport and took a coach into Tokyo, I realised
that I could not afford to stay at any of the hotels on the list
suggested by the tourist board.

So I took a taxi and asked for a cheap local hotel.  The hotel looked
utterly anonymous from the outside, just a plain little concrete
building, and my room was very small.  But that night, bored and
alone, I saw that room service offered a massage.  Two beautiful
Japanese girls came up to my room, where they asked me to lie in the
bath and gave me the most erotic massage of my life.

We all ended up in my bath tub.  When I breathlessly called up for a
massage the next night to repeat the experience, I was confronted by
two huge women in severe aprons who explained that the other two girls
were having a night off.  They proceeded to karate chop and pummel me
to within an inch of my life.  Nowadays I am booked into huge hotels
which are very nice, but nothing compares with that first business
trip.

By 1988 Virgin had become quite a well-known brand name in Japan.
Several of our artists sold well there, particularly Boy George, The
Human League, Simple Minds and Phil Collins.  After the British Airways
takeover of British Caledonian, we successfully applied for the right
to fly to Tokyo.  When we looked at ways of reducing our overdraft, we
realised that we would have to sell shares in both Virgin Atlantic and
Virgin Music in order to reduce our mountain of debt.

Our first deal was to sell 10 per cent of the airline to Seibu-Saison,
a large Japanese travel group.  Virgin Atlantic had just announced
doubled pre-tax profits of 10 pounds million, and Seibu-Saison bought
the 10 per cent stake for 36 pounds million.  At the same time as this
deal was going through, Robert Devereux was signing up a longer-term
contract with Sega for Virgin Communications to distribute Sega games.
It was becoming clear that Japanese companies shared much of the same
philosophy as Virgin.

Like us, they tend to operate on long-term objectives.

As well as the constrictions of having to report to non executive
directors and shareholders, one of my main frustrations with being a
public company quoted on the stock market was the short-term view
which investors took.  We were under pressure to produce instant
results, and unless we paid out a large dividend our share price would
suffer.  Japanese investors do not invest with the dividend payment in
mind; they look almost exclusively for capital growth.  And, given that
it can take a long time for investments to pay off, Japanese share
prices are very high in comparison with the company's earnings.  Hence,
Japanese price earnings ratios are often three times as high as British
ones.  I once heard of a Japanese company that was working to a
200-year business plan!  It reminds me of Deng Xiaoping's remark in the
1980s, when he was asked what he thought the implications of the 1789
French Revolution were.

"Too early to tell' was his reply.

The next part of the Virgin Group to embrace a Japanese partner was
Virgin Music.  This was the key sale.  If we were going to make any
sense of having bought back Virgin Group pic, then we had to raise a
good price for Virgin Music.  Simon, Trevor and I spoke to a number of
American companies about taking a stake in Virgin Music.  One of them
offered the most money but was not prepared to take the role of a
passive, long-term investor.  We all gravitated towards a Japanese
media company, Fujisankei.  I think my mind was made up at a meeting
with Mr.  Agichi of Fujisankei in the garden of our house at 11 Holland
Park.

"Mr.  Branson," came the quiet question.

"Would you prefer an American wife or a Japanese wife?  American wives
very difficult -lots of litigation and alimony.

Japanese wives very good and quiet."

19 Preparing to jump

1989-1990

By selling 25 per cent of Virgin Music for $150 million100 pounds
million -we had vindicated our argument that the City had undervalued
Virgin.

The sale was a clear sign that that company alone was worth at least
400 pounds million, and that was without any value at all placed on the
various other companies, such as Retail, which had made up the public
Group.  This was way above the 180 pounds million at which the City had
valued us before we offered to buy the company back, and still way
above the 240 pounds million price we had eventually paid to go
private.

With Japanese partners in our two main businesses, the airline and
music, we then turned to our third business and decided to expand the
retail side in Japan as well.  Ian Duffell and Mike Inman, along with
our Japanese adviser, Shu Ueyama, had already started to do their
research.  Mike had started learning Japanese in Sydney because his
brother had married a Japanese girl.

Ian sent him to Tokyo, and he himself headed to Los Angeles, where he
started looking for a Megastore site along Sunset Boulevard.

Mike reported that it would be impossible to set up a Megastore in
Tokyo by ourselves: Tokyo is a vast city with few distinguishable
regions, and it is extremely difficult for outsiders to identify the
key parts.  Retail, residential and commercial properties are all
jumbled up together, unlike in London, which has easily

2 99 definable shopping areas -like Oxford Street, Knightsbridge and
Kensington High Street -and where it is relatively easy to get your
bearings.  Tokyo all looks the same.  Property is extremely expensive,
and in order to rent a shop you have to put down a huge deposit called
'key money'.  Trevor, Ian and Shu had met up with a great many
potential Japanese partners, and eventually chose to team up with a
fashion retailer called Marui.

Trevor formed a fifty-fifty partnership which would be the start of
Virgin Megastores in Japan.

The difficulty with a record shop is that you are trying to sell an
identical product to that of every other record shop.  Virgin had
nothing that we could call our own or that was available only at Virgin
shops.  We knew that our competitors were losing a lot of money in
Tokyo, partly because they had had to pay such high

"I was going to pinch Kate Bush's new album but I think I'll forget
it."

key-money deposits on their shops, but also because they had not
established any customer loyalty and so did not get the vital return
visits.

In order to avoid these pitfalls, we set up the joint venture with
Marui.  They were the first retailer really to understand the
importance of railway stations.  They positioned their stores as close
as possible to the large railway stations, and so ensured a vast crowd
of passing pedestrians.  Marui's clothes were aimed at the young,
increasingly affluent generation and they had also pioneered a popular
in-house credit card.  Marui managed to secure us a fabulous site in
Shinjuku, a prime shopping area in central Tokyo, and we took 10,000
square feet.  The property belonged to Marui and we agreed a system
whereby we paid them a certain percentage of our sales instead of a
fixed monthly rent.

In this way we avoided paying the ruinous key-money deposit and,
although 10,000 square feet was small by European standards, it was
still larger than any other record shop in Tokyo.  It was the flagship
store I wanted.

In order to be different from our competitors, and to attract
customers, we installed listening facilities and hired aDJ  The DJ was
not only an entertainer: by playing great songs he soon covered his
costs by triggering sales.  The Tokyo Virgin Megastore soon acquired
the same kind of cult status as the early shops in Oxford Street and
Notting Hill.  Teenagers from across the city flocked there and it
became the place to go.  Tokyo is an expensive city and so teenagers
enjoyed being able to spend a cheap afternoon listening to music,
chatting and buying records.  The average time spent in our Tokyo
Megastores is forty minutes considerably longer than people spend
having a meal in McDonald's.  It was almost an extension of our
original 1970s retail philosophy.  With 10,000 customers a day, the
store was even more successful than we had expected.

With Ian in Los Angeles, Mike was by himself.  In due course, he
followed in his brother's footsteps by falling in love with a Japanese
girl.  They got married on Necker Island.

Within the space of two years, between 1988 and 1990, each Virgin
subsidiary had set up a deal with a Japanese company.  With Sega,
Marui, Seibu-Saison and Fujisankei, we were uniquely placed to begin
expanding in Japan.  I was also about to become involved in an
altogether different venture in Japan: Per and I were planning to take
off from Japan and fly across the Pacific to America in our second
hot-air-balloon adventure.

Per told me his worst fear when it was too late.  We were on the plane
on our way to Japan when he confessed that he had been unable to test
the capsule in a pressure chamber: he was not 100 per cent sure that it
would survive at 40,000 feet.  If a window blew out at that height, we
would have between seven and eight seconds to put on our oxygen
masks.

"We'll need to keep them handy," Per said in his usual understated
way.

"And, of course, if the other person is asleep then it'll be necessary
to put the mask on and get it going in three seconds and then put on
the other person's in three seconds, allowing two seconds for a
fumble."

I didn't fancy a fumble with Per, even for two seconds, and I vowed
that I wouldn't go to sleep during the flight.

"Will we have any advance warning about it?"  I asked.

"If the capsule decompresses, you'll notice that it suddenly becomes
misty.  The capsule will appear to fill with fog.  You will hear a
screaming in your ears and you will experience the sensation of your
lungs being sucked out of your chest and through your mouth."

When a journalist asked me about the dangers of the flight, I recounted
Per's words.

"You see, it's essential that one of us stays awake during the flight,"
I told the journalist.

"So, rather than using the comfortable Virgin seats which we used to
cross the Atlantic, we've asked British Airways for two of theirs."

We were attempting the flight in November, when the jet stream across
the Pacific is at its strongest.

However, it is also the time of year when the ocean is extremely
stormy.  We would take off from Japan and almost immediately be above
the sea.  We would then have to more than double our Atlantic distance
record of 3,000 miles in order to reach America.

Per's team had taken the balloon and capsule to the launch site in
Miyakonojo, a small town in the south of Japan which they had
calculated lay directly below the jet stream.  On my first night there
I was called by Tom Barrow, who had fallen out with Per since the
Atlantic crossing.  We had replaced Tom with Mike Kendrick, but Tom had
been following Per's progress and was extremely worried.

"You're going to end up in the water," he told me.

"Your first priority is to be prepared for a safe, survivable ditch in
the sea.  If, against all odds, you reach the mainland, you'll have a
60 per cent chance that it'll be dark.  In November it's dark for
fifteen hours of the day in North America, particularly the further
north you go.  You can't land in the dark, so you may well have to fly
for another fifteen hours.  Even at 30 miles an hour this'll take you
1,000 miles inland and you could well be in trouble then.  You should
assume that there'll be storm conditions -it's hardly likely to be a
still, calm day.  Up in the north you get people trapped in cabins
waiting for the weather to clear, so for God's sake have your search
and rescue team in place.  Don't be dependent on calm weather for your
landing.

"Check all the systems before you take off.  Don't get pressured into
taking off.  Even if everything's well built and works, the flight is
still terribly dangerous."

I thanked Tom for his advice.

"My last word on the matter," he told me.

"The Atlantic crossing was a successful flight that was out of control.
We all know that.  It was fully out of control at the end, but both of
you survived.  You both taught yourselves to fly that balloon as you
went along.  In the Atlantic you can ditch near a boat.  In the Pacific
you're dead.  So you'll either ditch in the sea and die, or you'll hit
land in the dark and that'll be a close call."

I put down the telephone.  I was sweating.  I had hardly finished
scribbling down what he'd told me when it rang again.  It was Joan.  It
was Holly's eighth birthday.

She came on the line:

"I'm keeping a diary, Dad," she told me.

"We can swap diaries when you come home."

"Yes, darling," I said, swallowing hard.

When I mentioned to Per the improbability of surviving if we ditched in
the sea, he agreed.

"We don't need to bother with health insurance," he said casually.

"It's only worthwhile taking out life insurance."

As Per's team assembled the electrical systems in the capsule, Per and
I sat down together and went through the flight operations.  It was
hard to believe that we were going to be once again incarcerated in
this tiny capsule, surrounded by all these gadgets -which were our only
means of communication with the outside world.

3 04 "Look," I found myself saying to a reporter who was running
through a list of everything that could go wrong, 'it'll either be a
piece of cake or it won't."

The jet stream above the Pacific is a different shape from the one
above the Atlantic.  The Atlantic one is a V-shaped polar jet stream,
like an upside-down Toblerone.  As you rise, the jet stream becomes
wider and the wind becomes faster, so you gradually increase your
ground speed  At 10,000 feet the air current might be 50 knots, then at
27,000 feet it will be 100 knots, and so on.  A balloon can ease into
it without being buffeted.

The Pacific jet stream is a different beast altogether.  It is a
subtropical jet shaped like a single-bore cable.  At 20,000 feet the
air current could be completely still.  At 25,000 feet it could be the
same.  Then suddenly at 27,000 feet you hit the jet stream, which is
moving at between 100 and 200 knots.  Nobody had ever flown a balloon
in the Pacific jet stream before, and we knew there was a danger that
when the top of our balloon hit the current it could be sheared off
from the capsule suspended below.  If that didn't happen we knew it
would be a pretty rough buffeting.  With the capsule travelling at 5
knots and the balloon at 200 knots, we knew it would initially be like
being pulled along by a thousand horses.

If we managed to get into the jet stream, we knew that it would have an
inner core which is generally about 4,000 feet in diameter.  To keep
within this tube would mean constantly monitoring the altimeter, and
watching out for any buffeting which would imply that the balloon and
capsule were in different streams.

The atmosphere at Miyakonojo was almost like a carnival.  A Shinto
priest even came to bless the site.  My parents had arrived, but Joan
had chosen to stay at home until the balloon went up and then take a
plane to Los Angeles so that she and the children could meet me at the
end of the flight.  By Sunday night our weatherman, Bob Rice, was
forecasting perfect conditions for Tuesday, but by Monday these had
been delayed to Wednesday.  Per and I spent another day in the capsule
going over and over everything that could go wrong.

"Keep the fire burning -that's all that matters," I wrote across a page
in my notebook after one three-hour session on all the possible
outcomes of our flight.

The delay gave me the chance to revisit the banks of dials, gauges and
switches built into the capsule walls.

It also gave me time to make sure that I remembered the difference
between the switches that released the empty fuel tanks and the ones
that separated the balloon from the capsule!

"It's code yellow," Bob Rice announced.

"Expect a green light by 2100 hours, November 23rd."

"Is the Pacific Ocean the largest ocean in the world?"  asked Holly
down the telephone.

"How many miles is it?

And how long would it take you to fly all round the world?"

It was time for a sleep.  I lay on my hotel bed but couldn't keep my
eyes shut, and so I started to write in my diary:

Trying to have a couple of hours' rest.  Failing miserably.  Just
looked out of the window to see the end of a beautiful day.  The smoke
from the volcano looks like thin cloud in the sky.  Cars with
loudspeakers going through the streets announcing the time of our
departure.  Civic fireworks planned for 2.30 a.m. for anybody from the
town not already awake.  Imagine an English city council doing that!

Still not feeling nervous: elated, excited, but not really nervous.
Everything seems to have gone so well.  Bob feels the crossing and
landing conditions are nearly as good as we can expect.  Still have
some nervousness about the inflation.  In two hours must go back to
site for a live interview for News at One.

When I went back to the site I sensed trouble.  The balloon's envelope
was still laid out on the ground:

inflation had not started.  The operation room was full of Per's team
being debriefed: "Too windy, too risky, too much downwind."  They
decided to leave the envelope laid out on the ground and hope that the
wind fell away by the next night.  With the 70-tonne balloon
stationary, a gust of wind could rip the fabric.  I went back outside
and asked for our translator.  Somebody gave me a microphone and I
apologised to the huge crowd huddled on the hillside above the launch
site.  We promised to try tomorrow.

The next day was long and listless.  The jet stream seemed to be
behaving peculiarly and Bob Rice was struggling to work out whether we
would land in California or Yukon.

"Oh, fuck the weather," Bob, America's most renowned and sophisticated
meteorologist, finally said.

"Just go!"

I went back to the hotel for a final sleep, and once again I ended up
staring out of the window at the volcano.  I heard the drummers
starting in town.  Then a fax was pushed under my door.  In spidery,
slanting letters, Holly had written:

I hope you don't land in the water and have a bad landing.  I hope you
have a good landing and land on dry land, and Miss Salavesen said to
have a good landing too.  I hope you have a nice trip.

Love from Holly.

PS.  Good luck and I love you too.

I took a sleeping pill and fell on to my bed.

A few hours later Per woke me up and we drove to the site.  A crowd of
around 5,000 people had come out!

to watch in the freezing cold.  There were families, old!

ladies, young babies.  I heard cheers as the balloon rose from the
ground and swung up above the capsule.  The burners were roaring now to
heat up the air.  The wind was still, but we needed to take off as soon
as possible in case any gusts caught us on the ground.  Hundreds of
coal braziers had been brought out on to the slope, Their smoke rose
straight up into the starry night air clear proof of how absolutely
still it was.

I was standing with my parents admiring the magnificence of the balloon
when a strip of the fabric suddenly peeled off the envelope and hung
down.

"What's that?"  Dad asked me.

I ran to find Per.

"What's happening?"

"Nothing to worry about," Per said.

"Just a little heat loss.  The balloon's big enough to cope."

I took Per back into the operation room and Dad grabbed his arm.

"What's that flapping off halfway up the envelope?"  he said.

"It's air coming up the side of the balloon," Per said.

Dad didn't look convinced.

Per and I walked out and stood underneath the balloon.

It effectively had a hole where the lamination had peeled off.  We went
back to the control room and I found Dad.

"Dad, don't tell Mum," I said, Tout we've got a hole.

Per still feels we'll make it to America."

"You can't fly in that thing," Dad said.

A minute later, more strips of lamination started falling off.

"Richard, I'm afraid we're going to have to abort the flight," Per
said.

"If we take off, we'll end up in the Pacific."

I looked out at the crowded hillside.  I was going to have to let them
all down.  With my hands trembling with cold and bitter disappointment,
I once again picked up the microphone.

"I'm so sorry," I said, trying to stop my voice from choking.

"The lamination of the balloon has torn apart.

We think that it was because we left the balloon out all last night and
the frost got into it .. ."

As the translator repeated my words, a groan rose from the crowd.  Then
there was a gasp and I looked up to see three or four huge chunks of
fabric crash off the envelope and fall down on to the burners.  Someone
pulled them off, but the whole balloon was disintegrating in front of
our eyes.

"Shut off the burners!"  I yelled.

"Stand back from there."

Without the burners, the balloon sagged.  It fell to one side, hot air
seeping out of its holes.

"We'll come back next year," I promised.

"Please have faith in us."

"Well, Richard," said Dad as we all drove back to the hotel, 'holidays
with you are never dull."

Joan was two hours into her flight to Los Angeles when she heard the
news.

"Excellent!"  she exclaimed.

"Champagne all round, please!"

The pilot pulled back the throttle and the helicopter rose still
higher.  The pale-blue sea shimmered and glittered beneath us.  I
watched as we approached Necker: the white coral reef and then the
pale strip of beach, the leaning palm trees and the pointed roof of the
Bali house, the deep green of the forest inland.  We circled overhead
and I saw our family and friends standing on the beach.  Most of them
were wearing white with wide-brimmed hats.  There was a splash of
colour from some tropical shirts.  I spotted Vanessa and Robert; Lindi
and her husband Robin; all the children;

Peter and Ceris, my friends and neighbours from Mill End; Ken and his
wife Nancy; Simon and his wife Frangoise.  I waved down at their
upturned faces.  In the middle of the crowd I saw Joan in her stunning
white dress, with Holly and Sam, her sister Rose, her brother John and
her mother beside her.  Granny was standing with Mum and Dad, waving up
at me merrily.

I tapped the pilot on the shoulder and he brought the helicopter round
once more.

I picked up the box of Milk Tray and gripped it in my teeth. Everything
was in place.  I crouched low and paused at the open door. The wind was
hot and fast in my face, the beach and silvery-blue sea spinning
crazily beneath me, as I stared down.  We were hovering over the
swimming pool.  I gripped the side of the door and looked back at the
pilot.

"All because the lady loves Milk Tray!"  he shouted.

I took the box out of my mouth for a moment.

"The kids do too!"  I shouted back.

I flashed him a thumbs up, took one last look at the swimming pool
directly beneath me, and then climbed out on to the struts and swung
off them.  Joan and I were finally getting married and I didn't want
the Milk Tray to melt.  I prepared to jump.

20 "Who the hell does Richard Branson think he is?"

August-October 1990

I was woken up by a heavy kick in my back.  I had been thumped and
prodded all night.  Since it was now 5.30 a.m."  I slipped out of bed
and put on my dressing gown.  I watched Sam snuggle into my warm
hollowed-out pillow, which he had been fighting to occupy all night. He
and Holly still often slept in our bed with us.  I turned on CNN and
put my head close to the screen to hear the news.  I didn't need much
sound to understand that it was just as bad.  Iraq had invaded Kuwait
the previous week and the world was in a tailspin.  The price of crude
oil had soared from $19 a barrel before the invasion to $36.  The price
of aviation fuel had rocketed from 75 cents a gallon to $1.50, an even
sharper increase than the rise in crude oil because the Allied Forces
had begun stockpiling aviation fuel in preparation for an airborne
attack on Iraq.

Two of the main ingredients of an airline's profitability are the
number of passengers and the cost of aviation fuel.  All independent
airlines were now facing disaster: we were having to operate when the
price of fuel -which represents 20 per cent of our total overheads -had
more than doubled, and the number of passengers flying had dried up. In
the first week following the invasion, Virgin Atlantic received 3,000
cancellations.  We had a 25 pounds million overdraft facility with
Lloyds Bank which we had just broken.  I wondered how far we could go
before Lloyds asked us to do something about it.  I pushed the worry to
the back of my mind.

I wondered how many more passengers would cancel today.  The big
state-owned airlines were even worse hit since nobody wanted to risk
flying on a flag-carrier due to the chance of a terrorist attack. Since
Mrs.  Thatcher had allowed the American jets to refuel in Britain on
their Libyan raid, companies that were closely aligned with the
government were seen as vulnerable to terrorist retaliation.  The bomb
on the Pa nAm jumbo over Lockerbie had shown how devastating such
retaliation could be.  Despite being a normal public company, British
Airways still proclaimed itself as the British flag-carrier, and for
the first time this reputation was to our advantage.  After the first
week of empty flights, I was beginning to feel a glimmer of hope that
passengers were cautiously returning: we had noticed a slight
preference towards Virgin Atlantic in place of either any American
airline or British Airways.

In the summer of 1990 Virgin Atlantic was still a tiny airline.  We
flew to just four destinations in two countries.  Each day we scanned
the bookings for these four routes to see whether there was any sign
that we were winning passengers back.  The Tokyo route was:

our worst hit.  We were allowed to fly only four times a week -and
never on Sunday, which is the most popular day for businessmen to
travel -and so the route was losing money even before Iraq invaded
Kuwait.

Throughout the summer we had been lobbying to be awarded the two extra
flights to Tokyo which were about to be released, but as always we were
up against ' British Airways.  Our flights to Newark and Los Angeles
had lost passengers from the first week after the invasion, but now we
detected a swing towards Virgin in preference to the American carriers.
The best news

3 12 was that our holiday flights to Miami and Orlando seemed to be
largely unaffected.

We had celebrated my fortieth birthday the previous month and, although
Joan had arranged a wonderful party on Necker, I had found myself
feeling uncharacteristically depressed.  I felt that Simon had lost
interest in Virgin Music, and I sympathised with him.  It was extremely
tough negotiating every contract and sometimes it felt rather
repetitive going over the same points time and again.  Although we had
built Virgin Music into one of the major independent record labels, all
Simon's wealth was tied up in that single company and I knew that he
was worried I might jeopardise it by some new risky venture.  Simon
wasn't interested in the other projects I talked about and had only
ever seen Virgin Atlantic as a huge liability to the rest of the Virgin
Group: a business that could be driven to the wall by British Airways
or by something out of the blue something like a war in the Gulf.

Turning forty had also made me wonder what I was doing with my life.
After the great leap into setting up Virgin Atlantic, I now found that
it was difficult to develop the airline as quickly as I wanted.
Although we had had a wonderful year and had been voted Best Business
Class Airline, Virgin Atlantic was confined to operating from Gatwick
Airport Due to a single short runway and the lack of connecting
flights, Gatwick was less profitable, both for cargo and passengers,
than Heathrow.  We were struggling to make money.  On top of this we
had fallen into a maintenance dispute with British Airways which
continued to be a large bone of contention.

Given Simon's gradual loss of interest, and our endless struggles to
make ends meet at Virgin Atlantic, I began to question whether I should
start doing something completely different.  I even thought of going
to university and studying history: it would be nice to have time to
read.  When I mentioned this to Joan she squashed the idea by bluntly
pointing out that this was really just an excuse to meet a whole lot of
pretty girls away from home.  I mulled over the idea of setting up as a
full-time political campaigner.  I thought of studying some of the
major issues, such as health care and homelessness, understanding what
the best solutions were, and then fighting hard for the political
change to implement them.

But all these thoughts were pushed out of my mind by Saddam Hussein's
invasion of Kuwait.  We had the full-blown crisis at the airline, and I
found myself caught up in the Gulf War in an extraordinarily personal
way.

"Daddy, please can you help me find my shoes?"

It was Holly.

"Which ones?"

"You know, my new trainers."

As the world on the television continued to disintegrate towards war,
and as our half-empty 747 Maiden Voyager headed across the Atlantic
towards a dawn over Gatwick, my family gathered in bed for breakfast.
Joan brought up a huge tray with fried eggs, fried bread, bacon and
baked beans.  As we ate, some of the Virgin staff let themselves in
through the front door.

I heard Penni start up the photocopier downstairs.  Our new press
officer, Will Whitehorn, trooped upstairs to his office.  A dynamo of
perpetually cheerful energy, Will had already proved himself to be a
terrific asset.

Getting Holly and Sam ready for school was always a kind of mad
initiative test.  Shoes, socks, vests, shirts, blazers and berets had
to be found wherever they had inexplicably hidden themselves overnight.
They could be conjured up only by the most inspired lateral
thinking.

"Here they are!"  Joan had somehow thought to look for Holly's shoes
inside the large doll's house, which hadn't been used by anyone for as
long as I could remember.

"What were they doing there?"  I asked.

"No idea," Holly said, and put them in her school rucksack without
further explanation.

"Sam, we're going in two minutes," Joan threatened.

Sam had started to reassemble the Scalextric.

As they finally managed to pick up all their bits and pieces and head
for the door, the phone rang.  It was Queen Noor of Jordan.

My friendship with Queen Noor was one of the unlikely consequences of
my balloon trip with Per across the Atlantic.  Queen Noor was the Grace
Kelly of Jordan.  She was American and had once worked as an air
stewardess.  Tall, blonde and wholly glamorous, she now lived in a
walled and heavily guarded palace in Amman.  Queen Noor had heard about
our balloon flight and telephoned me to ask whether I would teach her
and her family how to fly a balloon.  I had gone out to Jordan with Tom
Barrow and spent a week at King Hussein's palace teaching the royal
family how to fly a hot-air balloon.

We flew over Amman, hovering over the rooftops and looking down on the
ancient city with its minarets, whitewashed walls and faded
orange-tiled rooftops.

Nobody in Amman had ever seen a hot-air balloon before, and they stared
up in amazement as we loomed overhead.  When they realised that their
King and Queen were standing in the wicker basket, they cheered and ran
beneath the balloon waving up at us.

When we fired the gas burner, all the dogs in the city started
barking.  With the barking, the cheering and the calls of the muezzins,
the city gave in to total pandemonium.  King Hussein, Queen Noor and
the royal princes waved down as the balloon flew within three feet of
the rooftops.  I think that the only people who didn't enjoy the trip
were King Hussein's bodyguards, who had successfully shielded him from
nine assassination attempts but who could do nothing to protect him as
he floated around in a wicker basket.

When Saddam Hussein invaded Kuwait, King Hussein of Jordan was one of
the few world leaders who refused to condemn him out of hand.  King
Hussein pointed out that Kuwait had promised Iraq a number of oil wells
as part of its contribution towards the long war against Iran.  Yet
Kuwait had continually reneged on that promise and it had also cheated
on its OPEC quotas.

Among all the chaos which followed the invasion, a huge number of
foreign workers fled from Iraq into Jordan.  There were around 150,000
refugees congregating in a makeshift camp with no water and no
blankets.

It was extremely hot during the day, when they had no shade; and
freezing cold at night, when they had no warmth.  A blanket can be
rigged up as shade, and wrapped up in for warmth.  As soon as I heard
about this problem, I had contacted King Hussein and Queen Noor
offering to do whatever I could to help.  Queen Noor now telephoned me
to say that, although the Red Cross was in the process of setting up a
water-distribution system, there was still the task of trying to find
up to 100,000 blankets.

"A few very young children have already died," Queen Noor said, "but it
hasn't turned into a full-scale catastrophe yet.  I think that we've
only got about two or three days' grace before we start to lose
hundreds of refugees."

That day I drove down to Crawley and talked to some of the Virgin
Atlantic staff about how we would set about finding and then flying
100,000 blankets to Amman.  Everyone at Virgin rallied round.  During
the course of the day we called up the Red Cross, William Waldegrave at
the Foreign Office and Lynda Chalker at the Overseas Development
Office, and managed to secure 30,000 blankets, with the promise of more
to come from UNICEF in Copenhagen.  Now that we had offered to provide
the plane, the Red Cross put out an appeal on national radio and from
that evening a warehouse at Gatwick started filling up with blankets.

On top of that, David Sainsbury promised me that he would supply
several tons of rice.

Two days later, all the seats were removed from one of our 747s and
replaced by over 40,000 blankets, several tons of rice and medical
supplies.  The 747 then flew to Amman.  The blankets were loaded up
into a line of trucks waiting at the airport, and we came back with a
number of British nationals who had been stranded in Jordan and wanted
to come home.

When I returned to Britain, William Waldegrave told me that he had had
a call from Lord King, chairman of British Airways, who had been
surprised to see the Virgin Atlantic flight to Jordan featuring on News
at Ten.

"We should be doing that," Lord King had told Waldegrave.

William Waldegrave had pointed out to Lord King that I had just offered
to help and Virgin Atlantic happened to have an aircraft available to
make it possible.  The next week British Airways flew some supplies out
to Jordan and brought back some more nationals.  Christian Aid told us
that they were amazed: over many years they had unsuccessfully appealed
to British Airways to help them, but, ever since the Virgin Atlantic
flight to Amman, BA had been practically suffocating them with offers
of help.  Healthy competition even benefits charities sometimes.

Since I heard that some of our original shipment had not reached the
refugee camps, I decided to go and stay in Amman for a few days to
watch the procession of the next delivery of supplies until it finally
reached the camps.  Once again I stayed with King Hussein and Queen
Noor at the palace.  I had fierce arguments with the minister for the
interior about the need for strict accountability over these supplies
so that the people who had provided them could be confident that they
reached the camps.  I also had several long talks with' King Hussein
about the Gulf crisis.  King Hussein was sure that war could be
averted, but was worried that the West wanted diplomacy to fail so that
they could defend Kuwait and protect their oil supply.  By the time I
returned home it was clear that there would not be a full-blown refugee
crisis in Jordan.  Queen Noor told me that there were no more deaths
from dysentery or dehydration.  Over time the 150,000 refugees slowly
dispersed.

A few days later I was watching the news when I saw the extraordinary
footage of Saddam Hussein surrounded by the British nationals who had
been detained in Baghdad.  In one of the most chilling scenes I have
seen on television, he sat down and motioned a young boy to come and
stand by him.  He put his hand on this young boy's head, and then
continued to address the camera while gently patting his shoulder.  The
boy was about the same age as Sam.  I knew that I had to do something
to help these people.  If that boy had been my son, I would have moved
heaven and earth to bring him back home.  The reporters were expecting
that the hostages would be used as 'human shields' and would be
incarcerated inside the prime Allied targets.

I had no idea how I would set about helping bring these hostages home,
but I knew that Virgin Atlantic had an aircraft and that, if we could
somehow obtain permission to fly into Baghdad, we would be able to pick
up any hostages whom Saddam Hussein agreed to release.  It struck me
that, in the same way in which I had been able to help the crisis in
Jordan, I might be able to provide the vehicle for releasing these
hostages.

The next day I was called by Frank Hessey.  His sister Maureen and his
brother-in-law Tony were hostages in Baghdad.  Tony had severe lung
cancer and needed urgent medical attention.  He had telephoned every
department in the Foreign Office, the Iraqi ambassadors in Europe and
even the Iraqi Government in Baghdad, but nobody seemed able to do
anything.  Frank asked me to help.

As well as being in touch with the Foreign Office over the
blankets-to-Jordan flight, I also had my friendship with King Hussein
and Queen Noor.  King Hussein was one of the few points of contact any
government in the West had with Iraq.  I had heard that Iraq was short
of medical supplies and I wondered whether there were grounds for a
deal whereby, if we flew in medical supplies, Iraq could release some
foreign detainees.  I called Queen Noor and asked her whether she could
help me.  When I described my proposal, she suggested that I come out
to Amman once again and discuss it with King Hussein.

The next three days, which I spent in Amman with King Hussein and Queen
Noor, gave me an insight into how a businessman can help in moments of
crisis.  On the face of it, all I had to recommend me to Saddam Hussein
was that I had once taken King Hussein and Queen Noor up in a hot-air
balloon and I owned a tiny airline that operated four Boeing 747s.
Although nobody else had taken King Hussein hot-air ballooning, many
businessmen own large aircraft.  But these two qualifications had
propelled me into a unique situation: I was one of the only Westerners
whom King Hussein was prepared to confide in, and therefore I had
virtually direct access to Saddam Hussein.

I started to draft a letter to Saddam Hussein.  I told him that I was
staying in Amman, helping out with the repatriation of immigrants and
organising some medical and food supplies.  I asked him whether he
would consider releasing any foreigners who were caught in Baghdad,
particularly women and children and those who were sick.  As a gesture
of goodwill I offered to fly in some medical supplies that Iraq was
short of.  I mentioned Frank Hessey's brother and his lung cancer.

I signed it "Yours respectfully, Richard Branson'.

Then I went down to the drawing room and King Hussein spoke for an hour
about the problems in the Middle East.  As I sat there and listened, I
looked around and saw a signed photograph of Margaret Thatcher standing
beside one of Saddam Hussein.  King Hussein pointed out to me why he
did not automatically support the Kuwaiti position against Iraq:

"The people of Kuwait are divided into three categories."  he said.

"There are 400,000 Kuwaitis who are either very rich, or very, very
rich; and there are 2 million impoverished immigrant workers looking
after them."

He pointed out that there was no free press and no free elections in
Kuwait: it was hardly the 'democracy' the West claimed to be
defending.

"The Kuwaitis do nothing for the Arab world," he went on.

"All their money is in Swiss bank accounts, not in Arabia.  I've asked
a number of world leaders whether the West would have come to Jordan's
rescue if Iraq had invaded Jordan, a country with no oil.  Each time
there was a silence.  I doubt it."  Then he laughed.

"I know that you would, though!  Yes, you'd come sailing over the
horizon in your balloon with your Virgin planes beside you!

"No, seriously," he said, 'this is the chance to resolve the entire
Middle Eastern question.  Kuwait promised Saddam Hussein that it would
pay its share of the costs of the war against Iran, which Iraq fought
on its behalf.

It has reneged on that promise.  Originally, Saddam only planned to
take the disputed oilfields he thought were rightfully his.  He only
occupied the whole country because he heard that the Kuwaitis were
preparing the landing strips to let the Americans come in and defend
them.  He is certainly not interested in invading Saudi Arabia."

King Hussein's peace plan involved Iraq pulling back to the border but
keeping the disputed strip of land which he felt that Kuwait owed Iraq.
Then in three years' time there should be elections in Kuwait to see
whether these border people wanted to be part of Kuwait or Iraq.  He
told me that the West had little idea of the months of negotiation
which had gone on between Iraq and Kuwait, and how the Kuwaitis had
continually failed to honour their promises.  On top of that, the
Kuwaitis had not waived the debts which Iraq had incurred over the Iran
war, and the Kuwaitis continued to cheat all the Arab states by
overproducing oil and selling it too cheaply.

At the end of dinner, King Hussein took my letter off to his study and
translated it into Arabic.  He wrote a covering letter to Saddam
Hussein, and despatched it by special courier to Baghdad.  Before we
went to bed, he quoted something his brother had said: "Why did the
sheep bells of the Falkland Islands ring louder than the church bells
of Jerusalem?"

Back in London, I began talking to the Foreign Office.  I tried to get
the medical details of all those people stuck in Baghdad so that we
could 'prove' they were ill.  I then called around other foreign
embassies to alert them that there might be a rescue flight going into
Baghdad and that they should try to get some of their people on it by
showing 'proof that they were ill.

Two nights after I returned to England, we got a response from Saddam
Hussein.  He promised us that he would release the women and children
and the sick hostages, but he wanted someone of stature to be flown in
to ask him publicly to do so.  I telephoned Edward Heath, the previous
Conservative British prime minister, and asked him whether he would do
so.  He agreed.

King Hussein contacted Saddam Hussein and put forward Ted Heath's name.
Saddam Hussein agreed to him.  The next day we flew Edward Heath out to
Amman, where King Hussein arranged for him to go to Baghdad.

A day later, King Hussein phoned me:

"I have good news for you, sir," he said.  He was impeccably polite and
always addressed people as 'sir."  or 'madam', as did his children.

"You can set off for Baghdad.  I have Saddam's word that you will be
safe."

We had spent the last few days planning for this call and had already
found a brave volunteer crew, whom I'd like to name: Les Millgate,
Geoff New, Paul Green, Ray Maidment, Peter Johnson, Jane-Ann Riley, Sam
Rasheed, Anita Sinclair, Caroline Spencer, Ralph Mutton, Peter Marnick,
Paul Keithly, Helen Burn, Nicola Collins, Janine Swift and Stephen
Leitch.  We had forewarned passengers that there might be delays on
Virgin Atlantic and that we might have to move them on to another
airline.

When I told my fellow airline directors that we had permission to fly,
they were understandably concerned.

They knew that if the plane was delayed in Baghdad for more than a
handful of days we could go bust.

"The government has confirmed that they will stand behind our insurance
company if the plane is destroyed," Nigel Primrose, the Virgin Atlantic
finance director, confirmed.

"But nobody will give us loss-of business insurance if the plane is
hijacked and kept in Baghdad.  Remember, BA have already had one 747
wrecked in Kuwait."

There was silence round the table as they digested this.

"There is one upside," David Tait said with a serious face.

"They'll hold Richard there too and spare us any more of his
harebrained schemes!"

Everyone laughed.

Although I knew I was risking everything on this flight, I also knew by
now that there was no backing out.

We took off from Gatwick at 11 a.m. on 23 October 1990 and headed east
over Europe.  We sat huddled together at the front of the plane, a
strange collection of hostage relatives, doctors, nurses, Virgin cabin
crew, and one journalist to represent the press.  The remaining 400
seats behind us were empty.  It was rather eerie.  After a couple of
hours we all walked up and down the aisles to get some exercise.

The daylight outside rapidly faded and by the time we entered Iraqi
airspace it was dark.  I looked out into the night and wondered where
the Iraqi army was.

I imagined the radar monitoring us as we headed towards!

Baghdad.  We would be a single luminous green blob moving slowly across
their dark screens.  I half expected!

to see a couple of fighter planes come up and give us an escort, but it
remained unnervingly quiet.  The plane hummed and shuddered its way
towards Baghdad, the!

first plane in twelve months to do so.  Everyone stopped talking.  We
were entering the most dangerous airspace in the world, the
concentrated target of the Allied Forces' planned attack.  I wondered
when the assault would begin.

I let myself into the flight deck and sat behind the captain, Les
Millgate, and the two first officers, Geoff:

New and Paul Green.  They were talking to air-traffic" control over the
radio but that was the only sign that Baghdad was out there.  Ahead of
us through the windscreen there was nothing.  Iraq had a complete
blackout.  I wondered who lived down there, whether they could hear us
flying overhead and whether they thought that we were the first Allied
bomber.  We seemed to be the only plane in the sky.

"We're getting close to the city," Les Millgate said.

I scanned the screens in front of us and watched the altimeters drop as
we descended.  Flying long haul is deceptive.  For most of the time up
in the air you are above the cloud level in that magical world of the
jet stream, hardly aware that you are moving.  Then, as the plane
starts coming down, you suddenly realise that you are flying a massive
piece of metal at over 400 miles an hour and it has to be brought to a
standstill.

We came down lower and the plane hurtled through the darkness. Normally
an airport is a blaze of orange and silver lights and it is difficult
to distinguish the runway lights among them.  The runways, ramps,
planes and control tower are all brilliant with fluorescent and
halogen lighting.  But, for the first time, we were flying over a land
that was so blacked out we could have been flying over the sea.

Geoff New was being guided in by air-traffic control at Baghdad.  He
opened the wing flaps and let down the undercarriage.  I watched as we
came lower and lower.

Now we were only 600 feet up, now 500 feet.  The disembodied voice of
the air-traffic controller started counting out our height.  Suddenly,
two lines of landing lights lit up in the darkness below us.  We aimed
straight down the middle; the plane touched down and raced along the
tarmac.  A few more lights appeared to guide us, and we taxied to the
loading gates.  I could dimly make out men with machine guns standing
alongside a flight of steps.  Jane-Ann Riley, our in-flight supervisor,
signalled the door was safe to be opened, and I looked out.  It was
freezing cold.

The steps were being manoeuvred towards us.  I led the way down to
Iraqi tarmac.  Two lines of soldiers fanned out around us.  A couple of
senior government officials wearing brown camel-hair overcoats greeted
us and indicated that the relatives should stay aboard.

Baghdad airport is bigger than Heathrow but it was completely deserted:
ours was the only aircraft there.  I looked back at the incongruous
sight of the Virgin cabin crew, with their red miniskirts and red
stilettos, walking past the group of Iraqi soldiers in the vast empty
airport.  Their heels clacked loudly in the silence.  We all smiled.
The soldiers were a little timid at first, but then grinned back.
Without any other planes on the runway, ours looked unnaturally
large.

We were taken into a bare departure lounge where all the technology
-computer terminals, telephones and even light fittings -had been
stripped out.  This would have taken some time, and it indicated that
the Iraqis were fully expecting to be bombed and already salvaged
everything they wanted from the airport.  We handed out some presents
we'd brought boxes of chocolates for the officers and lots of Virgin
kids' flight packs for the soldiers to send home to their families.
Then I heard movement outside and Ted Heath came through the glass
doors at the head of a large crowd of men, women and children.  They
looked!

pale under the fluorescent lights.  As soon as they saw us they broke
into a cheer and ran forward to embrace us.  Ted was smiling and
laughing and clasping everybody by the hand.

I soon realised that we weren't going to take all these people back
with us.  Everyone was laughing and hugging each other, tears streaming
down their faces.!

Outside, the soldiers were unloading the medical supplies we had
brought.  We opened bottles of champagne and toasted each other and
those that were to be left behind.  I found Frank Hessey's brother and
we hugged.  A pregnant Filipino woman who was having' to leave her
husband behind came up to me.  She was in tears.  Another man had to
hand his three-year-old daughter to his nanny and say goodbye to her. I
just hugged him.  There was nothing else I could do.  We both had tears
in our eyes.  I was a father too.

After an hour the Iraqis told us to get back on the plane.  As we
walked across the freezing tarmac I shook hands with the soldiers and
gave them more children's packs for their kids.  We wished each other
well.  It was disturbing to think that when we flew away these
frail-looking, scared soldiers in their uncomfortable boots and
olive-green trousers would still be clutching their guns and keeping
guard at what would probably be the first target to be bombed to
smithereens.

Most of the hostages walked arm in arm across the

32 6 runway to keep warm and support each other.  They looked like
ghosts.  The lone 747 dwarfed them.  All the lights had once again been
turned off, apart from a single spotlight illuminating the steps.  I
went up the stairs and turned to wave goodbye.

"You're always late!"  said a gruff voice.  It was Frank Hessey.  He
had stayed on board to surprise his sister and brother-in-law.  When
they saw each other they burst into tears and hugged.

My last sight of the Iraqi soldiers was of them gathering together and
starting to pull open the red Virgin packs we had given them.  We may
well have been the first Westerners they had ever met.  They knew that
the second lot would soon arrive, roaring overhead and firing missiles.
Will Whitehorn had been checking through all the bags the hostages had
brought with them.  At the last minute he found a bag with a transistor
radio which nobody claimed.  Just as the plane door was about to be
closed he ran towards it and threw the bag down on to the concrete. The
soldiers were too startled to do anything.  The bag lay there as the
doors shut and the plane rolled back off the blocks.

Inside the plane there was a great cheer as the relatives swarmed down
the aisles to hug each other.

We put on seat belts for takeoff, but as soon as the plane levelled out
the party started.  We had got away.  We were standing around with
glasses of champagne and swapping stories when the pilot announced that
we had left Iraqi airspace.  There was applause.

I grabbed the microphone and pulled Ted Heath's leg by announcing, "And
I've just had word that Mrs.  Thatcher is absolutely delighted that Ted
has managed to return safely!"  Her bete noire was on the way home.

Frank Hessey, his sister Maureen and brother-in-law Tony held hands in
a state of disbelief: they couldn't believe that they were together
and had left Baghdad.

Others on the plane were crying -they were delighted to be free but in
turmoil over those they had left behind.

Two months later Tony was to die of lung cancer, and Baghdad airport
was reduced to rubble by the heaviest concentration of firepower ever
used by a military force.  I hope that the Iraqi soldiers with their
badly cut uniforms had somehow managed to escape.

"Who the hell does Richard Branson think he is?"  Lord King demanded of
William Waldegrave in his second call to him.

"Part of the bloody Foreign Office?"

Lord King's indignation was echoed by some newspapers, who suggested I
was doing it only for personal glory.  Stung by this criticism, while
staying with King Hussein I tried to analyse my motives in my diary:

Feel absolutely shattered.  Been burning the candle at both ends.
During an interview with ITN about the various people I saw, I choked
up.  Telling the story of the British father who had to hand his
three-year-old child to a nanny at Baghdad airport to take her out of
the country, and the woman from the Philippines who had that day left
the country to have her second baby.  I could only get halfway through
telling it.

What are the motives for doing things?  Is there any truth in the
jibes?  One month ago I was doing an interview with Vanity Fair and was
at an all-time low.

I'd seemed to have run out of a purpose in my life.

I'd proved myself to myself in many areas.  I'd just turned forty.  I
was seeking a new challenge.  I was even considering selling up
everything except for the airline.  Getting smaller.  Being able to
focus on one business venture that I loved.  But also to have the time
to try to use my business skills to tackle issues that I felt I could
help, such as in attacking the cigarette companies, cervical cancer,
etc.

I felt I'd get better self-satisfaction in this way and would not be
wasting the next forty years of my life just running companies, getting
bigger -a repeat of the first forty years.

Do I need recognition for this?  No, I don't think so.  The dilemma is
that to campaign on many issues you need to use yourself publicly to
get people moving.  Television is a very powerful medium.  By my
speaking on TV, the tons of medicine, the foodstuffs and blankets and
tents reached the refugees.  The 2 pounds million from Mrs.  Thatcher's
government has come through.  An emergency meeting has taken place
between the five main charities.  Free advertising is to start on the
BBC and I believe that by moving quickly a major disaster in this case
has been averted.  But, by not speaking out, it would not have been.

The dilemma is how often one can use the press in this way in one small
country like England without losing one's appeal to the public.  If
there should be a hint that I'm doing it for personal glory, then I
won't be able to do it at all.

By flying into Baghdad and rescuing the hostages Virgin had again
usurped British Airways' traditional role.  At the time I had no idea
that the Virgin flight into Baghdad would annoy Lord King so much.  I
was trying to help out -I had an aeroplane at my disposal and I could
act quickly.  Although this plane was one of just four planes Virgin
Atlantic operated, suddenly we looked like a much larger airline.  We
had successfully negotiated with Saddam Hussein; we had carried in
medical supplies; and we had brought back the hostages.  I only found
out later that Lord King's indignant reaction was the start of an
entire campaign by British Airways to try to put Virgin Atlantic out of
business.

21 "We would have about two seconds to say our last prayers."

November 1990-January 1991

"Duck!"  I shouted to Janet and her husband Rene, and fired the gas.  I
didn't want Janet's hair to catch fire -I always wore a hat in my
balloon to stop my head getting scalded.  We all looked up as the flame
surged inside the envelope.  The balloon strained at the rope and I
cast off.  Janet peered over the edge of the wicker basket as the
ground fell away beneath us.

She was wearing an old fur coat we had found in our cloakroom because
she hadn't brought anything warm enough to fly in.  She looked tiny.
Rene had borrowed an ancient flying jacket.

We drifted silently through the autumn afternoon.

The trees had lost most of their leaves and the few that remained were
red and gold.  The pale November sun cast long speckled shadows through
the branches.

Shadows are one of the great pleasures of ballooning:

each tree, hedge, even the cows, have long distinct shadows which you
hardly notice from ground level.

While I had been negotiating with Saddam Hussein, I had also started
negotiations with Janet Jackson, who had shown an interest in signing
to Virgin Music.  Like Queen Noor, Janet had asked whether she could go
up in a balloon.  I had invited her over to Mill End.

I love ballooning.  It is one of the most peaceful things I have ever
done and makes me feel completely immersed in nature.  Apart from the
times when you fire the burner, which can frighten horses and cows and
make them stampede across their fields, when you are gliding along you
feel absolutely separate from the rest of the world.  Nobody can
telephone you; nobody can interfere with your flight: you are free.  A
balloon is one of the most natural forms of transport, and when I see a
balloon suspended in the sky I feel that it's just as lovely as the
rest of the landscape: it doesn't ruin it in the way a motorboat or a
car does.  From up in a balloon you also have magnificent views all
around you and directly under your feet.  I once flew over a haystack
and found two stark-naked lovers curled up on the top, out of sight of
everybody except me.  They leapt apart when I fired the propane burner
ten feet above them.

With Janet and Rene on board, we followed the River Cherwell down
towards Oxford.  Soon we could see the Oxford spires.  As we came
closer I stopped firing the gas and we slowly descended.  The wind was
so still that we drifted almost imperceptibly and we could hear all the
noises on the streets below.

"Hello down there!"  Janet leant over and waved down at some
undergraduates on their bikes.  They stopped cycling and waved up at
us.

"The last time I flew over Oxford I was with Mike Oldfield," I told
Janet.

"I ran out of fuel and crash-landed on the roof of the local bread
factory.  The Oxford paper ran a cartoon asking if I didn't have enough
bread already!"

We were still in the sunlight when we saw the ground below us fall into
shadow.  A deep-red autumnal sunset started and a flock of geese flew
in a V formation across the sky.  We could almost have reached out and
touched their wings.  Eventually we came down to land in Christchurch
Meadows and our car picked us up.

That night Joan cooked roast chicken and we had supper round the
kitchen table.  We ended up playing Trivial Pursuit until we went to
bed exhausted from all the fresh air.  Although we hadn't mentioned the
record business once, I felt sure that Janet Jackson would want to sign
with Virgin.

My next balloon trip was not going to be as idyllic as that autumnal
flight over Oxford in the wicker basket.

Ever since we had abandoned our attempt the previous December, Per had
been building the new envelope for the balloon that would attempt to
take us across the Pacific Ocean.  By the beginning of December it had
been shipped out to Miyakonojo to join the capsule and await a good jet
stream overhead.

A Japanese balloonist, Fumio Niwa, was challenging us to be the first
to cross the Pacific, and was planning to fly a helium balloon.  Per
and I and our families and the balloon team arrived in Miyakonojo, and
Fumio and I talked and joked over the radio as the preparation went on.
He too was grounded by the unseasonably slow jet stream, which our
weather-forecasting charts implied would leave us stranded somewhere
over the Pacific.  We waited and practised safety drills.  We also
watched the mounting tension in the Gulf on CNN.  We felt sure that the
Allied attack would take place just after Christmas.  Per and I agreed
that, if the Allied Forces declared war on Iraq, we would cancel the
trip for a second time and return home.

As we approached Christmas there was still no war in the Gulf but there
was also no sign of a sufficiently strong jet stream to take us across
the Pacific.  Bob Rice told us it was likely to be at least a week
before an improvement.  Per flew back to England for Christmas.

Joan and I took our family down to Ishigaki, an island off the south
Japanese coast.

The island was very quiet and had the classic Japanese landscape of
mountains and sea.  I spent time with my mother and father, and we
watched the cormorant fishermen in their canoes.  These fishermen were
carrying out a tradition dating back several thousand years.  They
lined up six or seven birds along the edge of the boat and one by one
the cormorants went diving for fish.  The birds then brought them back
to the boat and opened their beaks for the fishermen to remove the
fish.  The birds had rings round their necks to stop them swallowing.

I would have loved to have spoken to these fishermen.  Probably they
were as stressed about their money and families as anyone else, but
their life seemed so tranquil and rooted in such an ancient tradition
that I felt they must have come to terms with time in a way I never
had.  I wondered how they would have viewed my constant rushing about,
my wish to set up new companies, to challenge myself, and to fly over
the Pacific at 30,000 feet in a hot-air balloon.

At the end of our holiday, Joan took the children back to London to
start school.  Joan does not understandably -like the idea of my
ballooning and likes even less the idea of seeing me take off.  I
hugged them all farewell at Tokyo's Narita Airport and then braced
myself for the trip.  As my parents and I walked through the airport to
catch an internal flight to Miyakonojo I saw a television screen.  In
wildly flickering footage the news showed a helicopter hovering over
the sea and winching a body on board.

From the respectful tone of the reporter, I immediately knew that it
was Fumio, and that he was dead.

We had all been on such a high, but this put our lives and the risks I
was taking with them into perspective: it could have been us.  We found
somebody who could speak a little English.  They explained that Fumio
had taken off the previous morning but had crashed into the sea just
off the coast.  He had radioed for help from his capsule but he was
dead by the time the rescue helicopter arrived.  He had died of
exposure.

The sight of Fumio's body being winched out of the freezing ocean
killed off much of my enthusiasm for the flight.  I felt a deep sense
of foreboding, but was equally helpless to withdraw.  If the weather
conditions were right, we would climb into the capsule and take off.  I
resigned myself to fate, and forced myself to make the best of it.

Later we found out exactly what had happened to Fumio.  He had taken
off the day before we were due back, hoping to steal a march on us. The
strong winds had torn the envelope of his balloon, forcing him to ditch
in the Pacific in his capsule.  But the ocean was so rough that when
the seaplane arrived it was unable to pick him up and had radioed for a
helicopter.  There was a delay while the rescue services sorted out
which helicopter should come.  By the time it arrived Fumio was dead. 
He'd been only about 10 miles into the 8,000-mile journey.  It was a
salutary warning.

Per and I planned to launch the balloon on Sunday 13 January.  The
Allied Forces had given Saddam Hussein a deadline of 15 January by
which to leave Kuwait, and we felt sure that the attack would take
place very soon after that deadline.  Unfortunately it was too windy
for us to inflate the balloon on Sunday and we postponed it until
Monday.  The jet stream now picked up speed, and by Monday 14 January
it looked as if the flight might be possible.  In the evening the
weather cleared and we started inflating the balloon.

After taking a sleeping pill that afternoon, Per and I were woken at
2.30 a.m. to go down to the launch site.

We made our way through the thousands of people who had come to watch
despite the cold.  We walked behind a police car which slowly inched
along.  The Japanese children held up candles and waved Union Jacks at
us.

They sang "God Save The Queen' in perfect English accents.  Once again
people had set up braziers and were barbecuing fish and sweet corn

"Don't eat anything," I warned Per as he was about to accept some
fish.

"The last thing I need is you having a bout of food poisoning up
there."

In front of us, absorbing all the attention, the balloon was straining
at its steel hawsers.  It towered over everyone.  This time it was
large enough to swallow the dome of St.  Paul's cathedral.  It had been
heated to a great temperature, and was ready to soar upward as soon as
the cables were cut.

We thanked the people of Miyakonojo for their hospitality and released
some white doves as a rather futile peace gesture.  Just before I
climbed up the steps into the capsule, I sent someone to fetch my
parents.

Everyone was now very edgy, looking up at the straining balloon as it
tried to rise.  My parents made their way through the barriers and
police and we just hugged each other.  My mother gave me a letter which
I zipped into a trouser pocket.

"Time to go!"  Per yelled.

As we turned we saw Alex, our designer and engineer, emerge from the
capsule with the biggest adjustable spanner we'd ever seen.

"I think it'll be OK now," he said.

We climbed up the steps and ducked down into the capsule.

As the ground crew backed away, we started firing the burners.  The
pressure to lift grew stronger and stronger, and then Per fired the
bolts which released the steel hawsers and we rocketed upward.  For the
first few breathless minutes we just marvelled at our silent speed.
Then the balloon rose above the dark covering of cloud and we saw the
silver dawn on the horizon.  I got on to the radio and made contact
with the ground crew.

"You're up and away!"  Will Whitehorn shouted.

"The crowd down here are cheering like crazy.  It looks amazing. You're
heading up fast."

Within five minutes we were out of sight of Miyakonojo and heading up
into the jet stream.  Within half an hour we were well over the Pacific
Ocean.  Then at 23,000 feet we hit the bottom of the jet stream.  It
was as if we had struck a glass ceiling.  However much we burnt, the
balloon refused to go in.  The winds were too strong, and they were
pushing down the flat dome of the balloon.  We kept pushing up against
it, and we kept being buffeted back down.  We put on our parachutes and
clipped ourselves to the life rafts in case the balloon suffered a
catastrophic rip.  Then, at last, the balloon edged into the jet
stream.

The top of the balloon took off ahead of us, and I saw it streaming in
front of and even below the capsule.  We were knocked to one side. From
travelling at 20 knots we were suddenly flying at 100 knots.  For a
moment I thought we were going to be torn apart, and I remembered my
image of the thousand horses dragging us to pieces, but then the
capsule came into the jet alongside the balloon and we were righted.
The balloon rose above us again and we were safely tucked into the jet.
Per's relief didn't give me the greatest of confidence:

"Nobody's done that before," he said.

"We're in uncharted territory."

After seven hours it was time to dump an empty fuel tank.  We had six
tanks of propane bolted to the capsule.

The idea was that we would change the fuel tank when one was empty,
jettison the dead weight, and fly correspondingly faster.  We decided
to go down out of the jet stream as we dropped the tank in case
anything, went wrong.

We had a video camera beneath the capsule which pointed vertically
downward -in effect an extra window for us.  The sea below us looked
dangerous: it was running to great waves, and although we were 25,000
feet above it we could clearly see the white tops and the deep shadows
of the troughs.

I looked at the video monitor as Per pressed the button to release the
empty fuel tank.  Before I could see what happened, the capsule lurched
sideways.  I was thrown across the capsule and landed on top of Per.

"What's happened?"  I cried.

"No bloody idea."

I crawled back up the sloping floor of the capsule to my seat.  We were
suspended at an angle of about 25 degrees above the horizontal.  Per
checked all the controls to see if he could see what had gone wrong. We
had no idea if we were hanging by just one steel rope and the capsule
was about to part company with the balloon and plummet down into the
sea.  I reran the video and watched what happened when the fuel tanks
fell away.  To my horror I saw three tanks falling down to the sea
rather than one.

"Per, look at this."

We watched again in silence.

"Bloody hell!"  Per said.

"All the tanks on one side of the capsule have gone."

Rather than jettisoning one empty tank, we had actually jettisoned one
empty tank and two full ones.

The implications of this were horrific.  We had flown only around 1,000
miles and now we had just half the fuel we had started out with.  We
had three tanks of propane rather than five to fly us across the most
dangerous and remote part of the Pacific Ocean.

"Watch out!"  Per said.

"We're rising."

I looked at the altimeter.  Without the weight of the two fall tanks of
fuel, the balloon was soaring upward.

We were once again buffeted as we entered the jet stream, but we hit it
with such speed that we carried on rising.  The altimeter ticked
steadily upward from 31,000 feet to 34,000 feet.

"I'm letting air out," Per said.

"We've got to come down."

I stared at the altimeter, willing it to slow down:

35,000, 36,000, 37,000, 38,000 feet.  We had no idea how strong the
capsule was.  We knew that the glass dome was able to withstand
pressure of only around 42,000 feet, and even that was something of a
guess.  If we reached 43,000 feet the glass dome would explode.  We
would have about two seconds in which to say our last prayers, long
enough to see our lungs being sucked out of our chests.  After that our
eyeballs would pop out of their sockets.  We would become a scattering
of debris somewhere in the Pacific.

Per had opened the vent at the top of the balloon, but it was still
rising.  The weight of the three fuel tanks we had dropped and the
amount of hot air we'd needed to support them was the problem.  It was
a race between time and the altimeter.  Thank goodness we had gone down
out of the jet stream before we had dropped the fuel tanks.

"It's slowing," I said with helpless optimism.

"I'm sure it's slowing."

The altimeter ticked up: 39,000, 39,500, 40,000,

We were now in the realm of the unknown.  None of our equipment had
been tested at this kind of height and anything could go wrong.

At 42,500 feet the altimeter finally stopped rising.

I wondered bleakly whether this was because it had broken and simply
could not register any greater height.  We were way above the heights
flown by all passenger jets except Concorde.  But then it clicked down
500 feet.  And then some more.

"We don't want to come down too fast," Per said.

"We'll only have to burn fuel to bring us back up again."

He shut the vent and the balloon continued to fall, down to 35,000
feet.  Then we had to start firing the burners again to stay in the jet
stream.

At last we could confront the problem of the lost fuel tanks.  Our
radio contact with the San Jose flight centre remained good, and they
were clearly as devastated by the loss of the tanks as we were.  There
were some rapid calculations.  If we were to reach land in the time
available to us before the fuel ran out, we had to fly at an average
speed of 170 miles an hour, twice as fast as any hot-air balloon had
ever flown before.  The odds against us were overwhelming.

"What about Hawaii?"  I asked.

"Can we aim to land nearby?"

"It's a needle in a haystack," Per said.

"We'll never get anywhere near it."

"I wonder if America is doable," I whispered.

"Of course it's doable," he said.

"The question is whether we can do it."

Per's a precise logician when he wants to be.

I asked over the radio about the conditions below us.

Mike Kendrick, the project manager, came on loud and agitated:

"I've just spoken to a cargo ship which is in the area.

They said there's a strong wind and high seas.

"Atrocious" is the word he used."

Per leant over and urbanely asked Mike, "What do you mean by
"atrocious"?  Over."

"I mean fucking atrocious.  You're not going to ditch in there.  No
boat will turn round to pick you up.  There are waves over 50 feet
high.  The nearest boat says that the seas are running so high their
boat would be bust in half if it tried to turn.  Do you understand?
Over."

"Keep going on your current altitude," Bob Rice came on.

"The jet is reasonably strong."

Then, all of a sudden, the radio cut out.

For the next six hours we had no contact with the outside world.  Due
to the terrible weather around us we were in a high-frequency blackout
spot.  We were somewhere over the Pacific, hanging by a few steel
hawsers to a vast balloon, the remaining fuel tanks dangling off the
side of the capsule like a necklace, and we could not make any contact
with anybody.  We could barely control where we were going or how fast
we were getting there, and we hardly dared move around the capsule. Our
three main points of reference were the Global Positioning System, our
watches and the altimeter.  Every ten or fifteen minutes we took a
reading off the GPS and calculated our ground speed

As we flew on Per began to show signs of utter exhaustion.

"I'm just going to have a rest," he mumbled, and lay down on the
floor.

I was alone.  Unlike during the Atlantic crossing, when I had been more
of a passenger than a pilot, I now really understood what was
happening.  If we were going to make land, our only chance was to keep
the balloon absolutely in the centre of the jet stream.  The vein of
wind there is only a hundred metres wide, just four times the width of
the balloon itself.  But staying in it was our only hope.

The sky was pitch-black all around us.  I scarcely looked out of the
capsule and tried to concentrate on the instruments.  As I sat there, with Per lying comatose on the
floor, it seemed clear that we were both going to die.  With just three
fuel tanks we would run out of fuel some thousand miles off the
American coast and have!

to ditch in the sea.  It could well be night-time; Mike had told us the
ground weather was atrocious -fucking atrocious -and nobody would be
able to find us.  We would have to fly this balloon for another thirty
hours if we were going to live.  I knew that the only chance of our
living was for me to fly the balloon right in the core of the jet
stream.  I put all thoughts of death out of my head, and for the next
ten hours concentrated intently on the dials.

I do not believe in God but, as I sat there in the " damaged capsule,
hopelessly vulnerable to the slightest shift in weather or mechanical
fault, I could not believe my eyes.  It was as if a spirit had entered
the capsule and was helping us along.  As I watched the instruments and
calculated our ground speed it became clear that we were beginning to
fly very fast, close to the necessary 170 miles an hour.  Before we had
dropped the fuel tanks we had been flying at about 80 miles an hour,
which had been very good progress.  This was a miracle.

I slapped myself across the face to make sure I wasn't hallucinating,
but each fifteen minutes the speeds grew faster: 160 miles an hour,
180, 200, and even 240.  This was astounding.  I tried not to imagine
the size of the balloon above me: I just looked at the dials and
pretended that I was driving some kind of weightless car which I had to
keep within a ribbon of road.  Whenever we dropped speed, I assumed
that we had dropped out of the inner core of the jet stream and so I
burnt a little gas -as little as possible -and generally we picked up
speed again.

Even at this amazing speed, it still takes an hour to fly 200 miles
and we had 6,000 of them to fly.  I tried not to be daunted by the
length of the journey ahead, but concentrated on each fifteen-minute
section.  I was desperately trying not to fall asleep.  My head kept
dropping forward and I pinched myself to keep awake.

I suddenly saw an eerie light on the glass dome above us.  I looked up
and marvelled at it: it was white and orange and flickering.  Then I
yelled: it was fire.  I squinted at it and realised that burning white
lumps of propane were tumbling all around the glass dome, just missing
it.

"Per!"  I yelled.

"We're on fire."

Per lurched awake and looked up.  He has incredibly quick reactions,
and in spite of his exhaustion it took him a split second to decide
what to do:

"Take her up," he said.

"We've got to get up to 40,000 feet where there's no oxygen.  Then the
fire'll go out."

I fired the burners and the balloon began to rise.  It seemed to rise
too slowly, and the lumps of propane continued to drop all around the
glass dome.  With the outside temperature at minus 70 degrees and the
heat of the fireballs, it would take only one hitting the glass to
explode it.

We rose through 36,000 feet, 38,000 feet, and put on our oxygen masks.
They were scant comfort.  If the glass dome cracked or melted, we would
die within seconds from loss of air pressure.  We were caught in a
catch-22:

the lack of oxygen at 40,000 feet would snuff out the flames on the
glass dome but it could also snuff out the burners.  If the burners
went out before the propane fireballs, we'd drift back down to 36,000
feet before we could restart the burners and the propane fire would
continue to threaten the glass.

We rose to 43,000 feet.  At last the burners spluttered and the fire
was snuffed out.  Per opened the vent at the

3 43 top of the balloon and we headed back down.  As well as risking
the capsule exploding at 43,000 feet, we had wasted precious fuel.

We flew on without radio communication for another hour.  I kept myself
going by talking into the video camera.  I imagined that I was talking
to Joan, Holly and Sam, and kept chatting away, telling them how much I
loved them and that we were coming back to land in America.  The
balloon stayed at 29,000 feet, and continued to sweep northeastward
towards the West Coast of America.  We were in a tiny metal capsule
swinging around in the stratosphere above a dark ocean.  I was too
frightened to eat anything other than apples and some chocolate.  I
wrote in my logbook:

Flown seventeen hours and four minutes.  Feels like a lifetime.  Coming
near the dateline.  When we cross the dateline we beat our world
hot-air-ballooning record.  However, right now we are about as far away
from help as anyone could ever be, sitting in a tilting capsule with
half our fuel gone, terrified that if we move the rest will fall off.
Not sure whether war has broken out because we have lost all
communication with the outside world.  Unlikely to reach the coast.

But spirits up and the speed we're going is amazing.

As our hours out of contact with San Jose continued, I wrote, "Things
look pretty desperate.  I'm not certain at this moment that we'll get
home."

Then, just as abruptly as we had lost contact, we made it.  I heard
voices on the radio.  By this time radio contact had been down for six
hours and ten minutes.

Mike had thought he'd lost us as two of the ships he had steaming
towards us had reported sighting wreckage.

"Mike, is that you?"

"Richard!  Where are you?"

"Sitting in a tin can over the Pacific' We nearly wept with relief.

"We thought that you must have ditched.  God, we practically mobilised
the airforce and the navy."

"We're OK," I lied.

"We've had a fire up on the capsule from propane but it's gone out."

I gave them our position.

"Any other problems, apart from not having enough fuel to go home?"
Mike wanted to know.

"No.  We're still tilting.  We're certainly not going to fire off any
more fuel tanks."

"War's broken out in the Gulf," a girl's voice said.  It was Penni, who
was in the control room with them.

"The Americans are bombing Baghdad."

I thought of the soldiers I had met at Baghdad airport.

The outbreak of the Gulf War meant that, if we did have to ditch, quite
rightly we would be the last priority for anyone.

"Thank God we've got hold of you," Bob Rice said.

"I've worked out your route.  You need to come down immediately.  Your
current jet stream will soon start bending back towards Japan.  You'll
be marooned over the Pacific.  If you come down from 30,000 feet to
18,000 feet you might get the jet that's heading north.  It's sweeping
up towards the Arctic but at least it's land."

"Christ!"  Mike swore.

"Another half an hour and you'd have been swinging back away from
us."

We cut off the burners and began to descend.  After five hours Bob told
us to rise again.  We went back up to 30,000 feet and sure enough found
ourselves heading northwest.  We now flew steadily hour after hour.  We
stayed in the jet stream and kept the fuel we burnt to a minimum.  We
were still over the Pacific, flying at 200 miles an hour in a lopsided
capsule, and we were exhausted, but now we had radio contact I felt
that anything was possible.  And the miracle continued.  Our speeds
were extraordinary: 210 miles an hour, 220, 200.

We were just beating the average 180 miles an hour we needed.  Someone
was being very kind to us.

The good news was that we were now heading steadily towards the
Canadian coastline.  The fuel was lasting well; our speeds kept up; and
Per and I began to believe that we might even make land.  I was still
too frightened to doze off since the only few seconds I had fallen
asleep I had terrifying nightmares of skulls and death.  We were both
exhausted, dehydrated and fighting to keep our concentration.

"You're heading way north," Mike Kendrick told us."

"The rescue team is chasing you to try to get to where you're going to
land.  They're in a Learjet.  Will's there, and so are your parents."

After 36 hours of flying, we finally crossed the coast of northern
Canada.  It was too dark to see, but we felt safer.  Even though we
were now heading for the Rockies, one of the most inhospitable mountain
ranges you could find, at least it was land.  We hugged each other and
shared a chocolate bar.  It was an incredible feeling.  As we started
flying over the Rockies, we made radio contact with the local ground
control, Watson Lake Flight Service.

"Put your rescue beacon on," they advised.

"You're heading into a blizzard There's zero visibility and a wind of
35 knots.  The Learjet has turned back to shelter at Yellowknife."

Our exhilaration turned to despair.  We put on the rescue beacon, and
from then on every five seconds there was an ear-splitting beep.  We
had been expecting to land in California with an escort of helicopters
but we had missed Los Angeles by 3,000 miles and were heading into an
Arctic blizzard.  We knew we could land safely and then die, just as
easily as Fumio had done.

Hot-air balloons are fragile things: they are not designed to be flown
in blizzards.  A bad blizzard could tear up the balloon and we could
drop out of the sky.  It was just before dawn.

We knew we had to land soon after dawn.  If we left it for another two
or three hours the sun would heat up the balloon's envelope and we
would continue to fly past Greenland, deeper into the Arctic and out of
reach of any rescue team.

One of my allotted jobs was to prepare the balloon for landing.  When
we were at 750 feet, I opened the hatch.  Cold air and snow rushed in.
I climbed out on to the top of the capsule.  We were in the middle of a
snowstorm, and whirling along at around 80 miles an hour.  It was
difficult to keep my balance as we were still hanging at an angle and
the top of the metal capsule was frozen.  I held on to the steel
hawsers and leant across to remove the safety pins which are there to
prevent the bolts from firing if we hit a lightning storm.

I pulled them out and threw them into the snowstorm.

I crouched there for a minute and watched the snow whirl around me.

The only light was the huge orange flame above me.

Snowflakes were spinning around me and falling into the flame, where
they vanished.  One of the most magical things about ballooning is that
you do not hear the wind because you are travelling at the same speed
as it is.  You can be flying at 150 miles an hour and put tissue paper
on the capsule which -in theory shouldn't blow off.  And so, although
we were in the middle of a snowstorm, it was very quiet.  I was
mesmerised by the sight of the snowflakes vanishing into the flames.
Then I peered around and began to see the ground below us.  I realised
that one of the reasons why it was so dark was that we were flying over
a thick pine forest.  I shouted down to Per:

"Don't get too low.  It's all forest.  We'll never get out of there."

I stayed on the top of the capsule and shouted down what I could see.

"There's a space ahead.  Can you see it?"

"Prepare for landing," Per shouted, and shut off the burner.

I climbed back into the capsule and we headed down.

Our ground speed was around 40 miles an hour when we crashed to earth
with a hell of a bang.  We went skidding across the ground before Per
managed to fire the explosive bolts.  Mercifully, this time they worked
and the capsule ground to a halt as the envelope flew off without us.
We were strapped in, but in a trice we were struggling to get out. Both
of us thought the capsule might blow up with the last of the propane
fuel.

We wrenched open the hatch and clambered outside.

We hugged each other and danced a little jig in the snow.  The silver
balloon envelope had draped itself across the pine trees and was being
shredded by the wind.  Then we realised two things: the capsule wasn't
going to blow up, and it was minus 60 degrees outside.

Unless we got back inside, we'd get frostbite.  We crawled inside the
capsule and I made radio contact with Watson Lake Flight Service.

"We've done it.  We've arrived.  We're all in one piece."

"Where are you?"

"We've landed on a lake surrounded by trees."

"It's a frozen lake," came the laconic Canadian voice.

"It's quite safe.  The only trouble is that there are about 800,000
lakes in your vicinity and they've all got plenty of trees."

We had to wait in our capsule for another eight hours.  Per had
frostbite in one of his feet, and I had frostbite in a finger.  We
huddled together, half-asleep, eating our supplies, desperate for
warmth as the snow and wind howled around our metal capsule.  We had
landed over 300 miles from the nearest habitation, 150 miles from the
nearest road, in an area of wilderness about 200 times the size of
Britain.

"We've flown for 6,761 miles," Per said with weary triumph.

"We flew for 46 hours and 6 minutes.  That makes our average speed 127
knots, 147 miles per hour.  These are all significant records.  We've
flown further than any other balloon has ever flown."

"I'm dying for a hot drink," was all I could say, 'and a log fire.  And
a sunny beach.  Why aren't we in California!"

"Next time it's the ultimate flight," Per started fantasising.

"It's round the world."

When I peered out of the capsule I thought I saw something move.  For a
moment I thought that it was a dog and I had a surreal vision of
somebody taking their dog for a walk along the frozen lake.  As I
watched the creature, it came up to the capsule and sniffed at it.  It
was an otter.  It sniffed around us, then turned up its nose as if to
say, "Big deal -a capsule," and slunk off.  It was the only creature to
have witnessed that we were the first to cross the Pacific -and it
didn't even have a camera.

Every five seconds of those eight hours the emergency bleeper went off,
piercing our eardrums.  As we huddled together, I relived the flight
and wondered why I had trusted Per with my life.  We had landed over
2,000 miles away from our destination; we had lost two fuel tanks; we
had caught fire; we had flown across the Pacific in the dark with no
radio contact.  I remembered the previous flights -the first attempt
from Japan had seen the balloon disintegrate and catch fire, and the
Atlantic crossing had nearly killed us.

As Per talked about our flying round the world, I wondered whether I
was mad to consider ever going with him again.  I knew that he had
pushed the technological boundaries of balloon flying further forward
than anyone, but it was sad that we hadn't developed a stronger bond
with each other.  I get close to most of the people I spend a long time
with.  But Per is not a team player.  He's a loner.  He's often
difficult to read.  He's someone who is quick to criticise.  I'd been
brought up to look for the best in people.  Per always seemed to find
the worst.  Despite this, we somehow managed to get on together as two
opposites who can respect each other's strengths and weaknesses.  And
when it conics to ballooning I have plenty of weaknesses for him to
respect!  He also has had to put up with every project we do being
branded a "Branson' or "Virgin' challenge, and he copes with that very
well.

Certainly, we have been through more together than most people
experience in a lifetime.

As I tried to imagine us setting off round the world in a high-altitude
balloon, I realised that, for all our horrendous moments together, our
balloon flights had been some of the greatest adventures of my life.
During the rest of my life, I am -to a greater or lesser extent in
control of my destiny.  Up in a balloon we are at the mercy of the
elements, the technology, the teams of engineers who have built it, and
we are 30,000 feet up.

The odds are not the best but I have always been unable to resist
taking on odds that look formidable and then proving them wrong.  And
once again fortune had been kind to us.

At last we heard the thudding sound of a helicopter's

35 0 blades.  It got louder and louder, and then the helicopter
circled overhead and landed beside us.  We had the bags of videos and
our logbooks ready, and we staggered over to the helicopter, Per
limping with frostbite.

It was another four hours' flight to Yellowknife.

When we landed at a tiny airfield, the yellow fluorescent lights made
blurred circles in the driving snow.  We crunched across the snow to
the hangar.

Gusts of flakes blew across us as we opened the door and stepped
inside.

There was Will, Mum, Dad, Per's wife Helen, and some people from
Yellowknife.  I almost didn't recognise anyone since they were all
wearing strange bulky clothing: bright-red padded jackets and thermal
trousers.  They roared with delight when we came in.

"Have a cold beer!"  Will shouted.

"It's all there is!"

Per and I ripped off the ring pulls and sprayed everyone there.

"You've made it!"  said Mum.

"Never again!"  said Dad.

"What do you mean?"  Per joked.

"We're going round the world next time.  If those fuel tanks had stayed
on we'd be over England now!"

"Have you got that letter I gave you?"  Mum asked me.

It was still in my trouser pocket.

"It was written by some Japanese schoolchildren.

You have to give it to the local child closest to where you land."

One of the ground crew at Yellowknife had brought his six-year-old son
along to see these two balloonists who had arrived from Japan, so I
knelt down and gave him the letter.

"It's from some children who live in Miyakonojo in Japan," I told
him.

"You'd better go there one day.  But perhaps not by balloon!"

Yellowknife town is so cold in January that diesel freezes solid.  In
order to stop your car from freezing, you either keep the engines
running or plug them into special electric supplies which look like
parking meters and heat the engines.  We had a meal in the town's
largest steak house, to which half the people living in Yellowknife
turned up.  When we came out of the restaurant, we could hardly breathe
for exhaust fumes.

Most of the shops are in underground shopping malls, which are easier
to heat without the wind-chill to worry about.  During the meal a fax
arrived from the new prime minister, John Major, congratulating us on
the flight.  Surely Yellowknife was one of the most remote places the
10 Downing Street letterhead has ever found itself.

The next day we said goodbye to the gold miners and fur trappers who
had looked after us so well at such short notice.  It's not often they
have guests ballooning down on them from Japan, and they invited us to
come again.  We flew to Seattle and then on to the warmth of Los
Angeles From there we caught the plane back to London, and I had a
chance to read the newspapers and understand what was going on.  The
stock market had soared on the back of the invasion, and looking at the
amount of firepower the Allied Forces were using it was hard to imagine
that Iraq would survive for long.  I spent some time talking to the
crew and the pilots and heard how empty the flights were.  One of the
pilots warned me that the Gulf War was actually hiding a recession that
was going to last a very long time.

"After all the bombing is over and Saddam Hussein is dead," he said,
'the world will suddenly realise that it wasn't the "Mother of all
Wars" which was the issue, but the "Mother of all Recessions"."

22 Flying into turbulence January-February 1991

Friday 25 January was the end of a bad week for Sidney Shaw, our
account director from Lloyds Bank.  He sat on the edge of my sofa
fidgeting with his pen and papers, refused to have a cup of coffee and
then changed his mind.  Trevor and I began to worry.

Sidney expressed no interest in last week's Pacific crossing and was
reluctant to meet my eye.  He was behaving ominously like my old Coutts
bank manager.

"I saw Air Europe on Monday and Dan Air on Wednesday," Sidney began,
'and I suspect that you're in much the same trouble.  I'm afraid that
we're pulling our loans out of both those airlines, and I don't see why
we should support you any more.  We can't see how you can possibly keep
Virgin Atlantic going."

It was clear where he was heading.  He had come to see us in perhaps
the worst week in what would become the worst year of aviation history.
Virgin's group overdraft facility with Lloyds Bank was formally set at
20 pounds million but we had now hit 50 pounds million.  After a visit
by Lloyds Bank on Monday and the subsequent withdrawal of their loans,
Air Europe -the largest independent short-haul airline in Europe -run
by Harry Goodman, had been declared bust on Wednesday, with 4,000
redundancies.  As with Laker, B-Cal, Dan Air and of course Virgin
Atlantic, British Airways had managed to keep Air Europe confined to
Gatwick.

As the Gulf War continued, the price of aviation fuel

3 53 was still over $1.20 a gallon, and passengers were still not
flying -and certainly not flying the flag-carriers.  To an outsider,
the airline industry looked like a disaster.

Yet, for the rest of the Virgin Group, the picture was pretty good.
Virgin Communications would reach sales of over 150 million that year
on Sega equipment alone.

Simon and Ken were having no problems in selling records.  Indeed
Virgin singers Paula Abdul and Steve Winwood were top of the charts in
America, and Bryan Ferry was there in Britain.  The Gulf War and the
gathering recession were not affecting record sales.  The Virgin
Megastores weren't making much money, but weren't losing anything
either.

Virgin Atlantic was our biggest liability in that we had high overheads
that we couldn't cut down.  But even here the underlying picture was
encouraging.  Virgin holiday makers were still all taking their
holidays, and Ron Simms, the managing director of Virgin Holidays,
forecast that we would increase this number from 83,000 the previous
year to around 100,000 in 1991, a jump of 20 per cent.  Ron had built
up Virgin Holidays into one of the most profitable parts of Virgin
Travel, and since I've never known him make a forecast that he can't
comfortably beat by several thousand I took this as a concrete figure.
Given that the average value of a Virgin holiday was 730, this meant
that we would receive sales of over 73 million from these customers
alone, and they would be taking seats that would otherwise be empty.
There was equally good news on the cargo side: the rates for cargo to
Japan had actually increased.  Alan Chambers, who had successfully
built up our cargo division, pointed out that so many airlines had
suspended services to the Far East that he was now able to charge a
premium to transport cargo to Japan.

"What are we shipping out there?"  I asked him.

"You'd never guess," he said.

"Scottish smoked salmon and whisky are the bulk of it.  Then we're
bringing back computer games.  It's a roaring business."

It sometimes seems to me that I have spent all my life trying to
persuade bankers to extend their loans.

Given that Virgin's policy has always been to reinvest our surplus cash
back into the business, our profit and loss accounts understate the
underlying value of the businesses.  This policy has worked over the
long term, but whenever there is a crisis it disguises the real picture
and means that the banks worry about our short-term profits and ability
to pay our immediate interest.  Trevor explained to Sidney Shaw that
our balance sheet had included no value either for the Virgin brand
name itself or for the contracts with the Virgin artists.

"Look," I told Sidney Shaw.

"In a nutshell, we have very sound businesses.  The record company
alone will make 30 pounds million profit this year, and that's in spite
of the cost of making a massive investment in America.  It's forecast
to make 75 pounds million next year.  Virgin Communications and Virgin
Retail are profitable.  The airline, the holiday company and the
freight company will also make profits by the end of the year.  They're
just having a bad patch.  With the Gulf War and the winter, we've got a
cash-flow shortage of 10 pounds 20 million.

This is a tiny percentage of the total value of the Virgin Group and
it'll be ironed out by the end of the year.

"Anyway," I pointed out, 'we could easily sell some or all of Virgin
Music.  The latest Citibank valuation shows it to be worth $900
million.  Now, are you going to withdraw your loan because of a
temporary blip due to a war?"

"No, no, no," Sidney backed down.

"But you must see it from our point of view."

I could see it all too clearly from his point of view:

Virgin Atlantic had a small cash-flow deficit, which, despite the great
value in the rest of the Group, put us at the mercy of Lloyds Bank.
Under the British banking system, banks make their money from charging
high interest rates rather than taking any kind of equity stake, as
they often do in Japan and Germany.  British banks therefore have a
greater incentive to cut and run from a company than see it through the
bad times.  It is in desperate times like the middle of a war that
perfectly good profitable businesses go bust.  The frightening thing
about an airline is that it can go bust faster than almost any other
business: all it takes is for the telephones to go quiet and for
passengers to stop booking flights.  Even a large airline can unravel
in a matter of days.

By the time Sidney Shaw walked away from Holland Park, he seemed to
have had most of his worries put to rest.  He wrote me a letter
admitting that his worst fears had been unfounded; he even apologised
for 'overreacting'.

For the time being, Lloyds Bank was back on our side.  The only trouble
was that the idea of our selling part or all of Virgin Music was now
firmly on their agenda.

Trevor had made a number of forecasts for 1991, even the worst of which
showed that over the year Virgin Atlantic would make a profit of 7
pounds million.  So we ourselves felt quite confident.  However, as
soon as I arrived back in London I realised that, beyond the immediate
concerns of Lloyds Bank, there were some wider rumours going around the
City that Virgin was going the way of Air Europe and Dan Air and that I
was destined to become another Freddie Laker.

Rather than spending time searching for the right partner to invest in
Virgin Music, I had to switch my attention to stamping out a bizarre
variety of rumours about Virgin Atlantic.  I was closely in touch with
journalists, and so, when I started receiving a series of calls from
them asking me in one breath whether there was a drugs problem at
Heaven nightclub and in another breath about the finances of Virgin
Atlantic, I was rather baffled.  Up until then journalists had
typically asked me about our new services on board the planes, the
latest record signing, or what Janet Jackson was really like.  And so,
when 'serious' newspapers began firing questions about the drug scene
at Heaven, and in the same conversation asking about the impact of
currency movements on our profit and loss account, I felt that
something rather strange was happening.  I was bewildered.  By the time
almost every newspaper had inquired about Heaven, I felt that there
must be some kind of campaign against us.  It was most odd.

The news coming from the airline was also disturbing: the number of
passengers who booked seats and then didn't turn up, the 'no-shows',
had increased way beyond the levels any of us remembered since we had
set up.

One day Will came into my office looking worried.

"I've just had a call from a friend at Rothschilds," he said.

"Apparently Lord King was there for lunch yesterday, and he was
bad-mouthing Virgin Atlantic' An accusation of financial weakness can
rapidly become a self-fulfilling prophecy, particularly when it comes
from as lofty and authoritative a source as Lord King of Wartnaby, whom
nobody would think could ever feel threatened by a tiny airline like
Virgin Atlantic.  Lord King's accusation of Virgin Atlantic's financial
weakness had a number of key audiences.  For a start there was the
press, which would not be slow to run a story about another successful
entrepreneur who, like Alan Bond, Ralph Halpern, George Davis, Gerald
Ronson, the Reichmanns and many others, was now overstretched and
running into trouble.  But, more significantly for us, Lord King would
also be listened to by the bankers in the City whom we were considering
approaching to place some shares in Virgin Atlantic.  We had had some
preliminary talks with the American bankers, Salomon Brothers, who were
preparing a selling document to raise around 20 million.  Rumours of
our impending insolvency would pull the carpet from under our feet when
trying to negotiate.  The third audience whose antennae would pick up
this rumour was the aircraft manufacturers and leasing companies:

despite the recession we were looking to expand our fleet, but nobody
would do business with a crippled airline.  The last key audience was
in many ways the most important to us in those first months of 1991:
the Civil Aviation Authority, which has a duty to ensure that all
airline companies are trading vi ably

I am no stranger to healthy competition -working hard and playing hard
-but there was no love lost between Virgin and BA.  Over the last two
years we had become embroiled in an increasingly acrimonious dispute
over some maintenance BA had carried out on one of our planes.

When we first set up Virgin Atlantic our maintenance was carried out by
B-Cal.  When British Airways took over B-Cal they promised the
Department of Transport and the CAA that they would honour all existing
maintenance contracts.  However, when we acquired our third and fourth
747 in September 1988, British Airways quoted an extortionate cost for
servicing them: their average charge for labour flipped from 16 to 61
per hour.  At first I thought that this must be a simple typing
mistake, but to our horror it wasn't.  Since BA was the only company
that had hangar space wide enough to service 747s, they thought they
had us over a barrel: even if they tripled our costs they believed we
would have no alternative but to use them.  Although it was expensive
and very inconvenient, we had to start flying our planes to Ireland to
be serviced by Aer Lingus instead.

The other aspect of our maintenance dispute dated from the summer of
1988 when British Airways was servicing one of our 747sBA engineers had
failed to spot a crack in a pylon, the link between the engine and the
wing.  Eventually a new pylon had to be ordered and the plane was put
out of service.  To cap it all, BA refused to let us have one of their
spare aircraft to replace our 747.  Roy Gardner therefore chartered a
747 to replace our 747 for two days.  Then the situation became worse:
the spare part wasn't available; there was another delay; the plane
lost its space at the hangar;

then the engineers weren't available; and so the saga went on.  By the
time the BA engineers welded the struts to the pylon upside down, we
thought that the whole sorry episode had been jinxed.  All in all, our
747 was grounded for sixteen days in August, the busiest time of the
year.

In desperation I had called Sir Colin Marshall, chief executive of

BA.

"Your engineering was so bad that it could have brought an aircraft
down," I told him.

"That's one of the perils of being in the aviation business," he told
me coldly.

"If you'd stuck to popular music you wouldn't have had this problem.
No, we won't lend you a plane."

All of which meant that, instead of making good money in the summer and
living off it through the winter's lean months, Virgin Atlantic had a
terrible summer and alienated passengers.  Since we had paid out to
lease the replacement aircraft, our cash flow was severely hit.  When
we tried to agree compensation, BA dragged its heels.  They owed us
several million pounds of compensation and by delaying payment
precipitated a cash crisis at the airline which Virgin Music had to
bail out.  Just before I set off to Japan for the balloon flight, we
had sued BA Alongside the maintenance dispute, our major battle with
British Airways was our application for two extra flights a week to
Japan, which was being negotiated with the Japanese Government.  Flight
timetables and slots may have no appeal outside the world of aviation,
but they form our lifeblood.  Without permission to fly somewhere, we
literally can't take off.  The battle over the slots and routes to
Tokyo was a vital one for Virgin to win if we were to expand After the
B-Cal takeover, their four flights to Tokyo had been transferred to
Virgin, but it still wasn't enough.  For the route to be viable we
needed to be able to fly daily, and from Heathrow.  Surely that had to
be a priority before BA was allowed to fly twice a day during the week.
Two frequencies -four slots -were then offered by the Japanese
Government BA naturally presumed they would be theirs After
consultations with our lawyers, and even though we knew that BA had
already lined up for the slots, we made an application.

Our future depended on it.  If we were successful, Virgin would win not
just the routes but -crucially -the slots that BA had arranged for them
at Narita Airport, Tokyo.

When news of our application leaked out, British Airways went berserk.
This kind of thing had never happened before: small airlines were meant
to just let BA walk all over them and be grateful for any slots at all.
But to ask for slots that were 'rightfully' theirs!  They went into
action.  Lord King and his team lobbied good and hard that these slots
were British Airways' rightful inheritance and that it was illegal to
transfer them to Virgin Atlantic.  This argument backfired:

"They're not "your" slots," Malcolm Rifkind, the then secretary for
transport, said curtly to British Airways.

They actually belong to the government and we issue them to you.  BA
does not own them."

When British Airways realised that they had lost that argument, they
turned to more damaging allegations, pointing out that Virgin Atlantic
was not a financially strong enough airline to take on these slots.  In
fact, they muttered, word was in the trade that Virgin Atlantic was
about to go bust.  Hence Lord King's comments at the Rothschilds lunch.
They also wrote 'confidential' letters to the Department of Transport
casting doubts on our finances.  This hit the CAA on their Achilles
heel.  They could not award the frequencies to Virgin Atlantic only to
see us suddenly go bust.

We had to battle to persuade the CAA that Virgin Atlantic was a viable
airline.  Throughout January, as the CAA deliberated whether to award
these two Tokyo frequencies to us, I heard an increasing number of
rumours about both Virgin and me, all of which implied that we were in
trouble.

Finally, in the last week of January, the CAA made two historic
decisions in our favour: it awarded the two extra frequencies to Virgin
Atlantic, ordering British Airways to hand over to us the slots it had
organised at Narita Airport; and it announced that it would recommend
to the Department of Transport that Virgin Atlantic should be allowed
to operate from Heathrow.

Lord King was furious.  As a major donor to the Tory Party's finances,
he announced that he had been betrayed and appealed against the Narita
decision.

On 29 January, the first television documentary about the rivalry
between Virgin Atlantic and British Airways was broadcast by Thames
Television.  This programme described the battle we were having over
the Tokyo frequencies and open access to Heathrow, and also highlighted
some of the other complaints Virgin Atlantic had about BA, including
our longstanding maintenance dispute.  The day after the Thames
Television programme, British Airways issued a press release which
claimed that Virgin Atlantic was abusing them.  It referred to our
attack on them as an 'onslaught'.

After hearing of another tirade of abuse from Lord King about me, and
recognising that it could indirectly drive Virgin Atlantic bust, I
wanted to have the rumours stopped.  I didn't mind competition from
British Airways or anyone else as long as it was fair competition, but
I continued to hear a growing collection of damaging rumours.

On 31 January, I wrote my first letter to Lord King.

I hoped that by bringing matters out into the open I would be able to
stop the rumours.  I have always believed that personal relationships
are vital in business and that people should be directly accountable
for their actions.  If I alerted Lord King to what he had set in
motion, I hoped that he would then call me and we would have a quick
chat about it and bury the hatchet.

I wrote:

I am writing to put on record to you that I resent the level of
personal abuse your people at British Airways have recently resorted
to.  As chairman of a small independent airline I have behaved no
differently than you would have done in my place.  I have argued our
case with the CAA over Tokyo slots.

They have decided in our favour.  That decision is now under review.
We have argued our case for _ access to Heathrow.  The CAA have decided
in our favour and we are waiting on the secretary of state's final
decision.

In none of these issues have we behaved improperly.  We have sought
remedies through the CAA, the Department of Transport, the EEC and the
High Court when appropriate.  We have not at any stage made offensive
personal remarks about you or Sir Colin Marshall.  I would expect the
same courtesy from your company.

My letter was wishful thinking.

The next week Will was called by a man who introduced himself as Frank
Dobson, private detective.

He said that he wanted to have an urgent meeting with Will.  He
suggested a pub underneath Waterloo Station.

Will went along with Gerrard Tyrrell, our lawyer from Harbottle and
Lewis.  Frank Dobson told them that a detective agency called Kroll
Associates was investigating me and the whole Virgin Group.  Frank
Dobson asked Will whether he could work for Virgin to counteract
whatever Kroll were up to.  Will thanked him for his information but
turned down the offer of his help since we never use private
detectives.

I received Lord King's reply on 5 February.  He merely quoted what he
had said to the Sunday Telegraph: "I run my airline; Richard Branson
runs his.

Best of luck to him."  He added that he intended to say nothing more on
the subject.

The letter's brevity was matched only by its arrogance.  It was clear
that Lord King treated me with a contempt that would rub off on how
everyone at British Airways felt they could treat Virgin Atlantic.

Lord King's letter contained two short sentences.

Lord King did not mean me to have the best of luck'.

Indeed, if he could have anything to do with it, luck would not enter
into it.  And Lord King would go on to say a great deal about 'the
subject' to a number of people.

The other peculiar thing about Lord King's letter was that it did not
address me personally but only quoted a response he had made to a
newspaper.  It was as if he could not bring himself to address me as a
person or even acknowledge me.  I knew that he had coined the
contemptuous expression 'the grinning pullover' to describe me.  In the
same way that British Airways was trying to steamroller Virgin Atlantic
out of sight, it struck me that Lord King was pretending I didn't even
exist.

23 Dirty tricks February-April 1991

In the aftermath of the Thames Television programme, more alarming
proof emerged of some kind of campaign against me and Virgin.

"I've had a call from an ex-British Airways man," Chris Moss, our
marketing manager at Virgin Atlantic, told me.

"Peter Fleming saw the Thames Television programme and says that he can
confirm all sorts of things BA have been up to."

"Will he write it down?"  I asked.

"Is it hard evidence?"

"He says that Virgin is BA's number-one enemy and that after the
Baghdad flight they set up a special team to undermine you."

"Can you get it in writing?"

"I'll try.1 Throughout February and March we discussed with Malcolm
Rifkind, the transport secretary, the question of the disputed Tokyo
frequencies and our access to Heathrow.  He was a down-to-earth Scot
who gave us a very fair hearing.  I really felt that he was on our
wavelength when he pointed out how vastly improved the Heathrow-Glasgow
shuttle was:

"I now get a decent meal with proper cutlery," he said.

"It used to be a damp little white sandwich."

"That's British Midland bringing in some competition," I pointed out.

"They've got the slots to do it from Heathrow."

I thought our lunch meeting had gone well, but right at the end he
floored me:

"Richard."  he said.

"You must admit that BA does do an excellent job."

"Yes, they're much improved," I agreed.

"But they have been given everything on a plate: for instance they were
given Concorde for nothing with all the debts written off, and they
were given the exclusive use of Heathrow."

"They were," Rifkind admitted.

"But it's all in the national interest."

Silence fell between us.  To my mind we had just undermined the entire
lunch.

"There's no national interest at stake here," I argued.

"British Airways is just a large airline which is owned by its
shareholders.  It happens to have a monopoly because that's what it was
given while it was nationalised.  But it's no longer like Aeroflot.
Think of your old white sandwiches on the Glasgow shuttle.  And, unlike
other privati sed monopolies, which have their market dominance reduced
by regulators, BA has no regulator and has actually been allowed to
increase its dominance since it was privati sed

I thought that I might have gone too far because Malcolm Rifkind nodded
rather awkwardly and made his way to the black Rover outside.  I knew
that he'd never flown Virgin because all members of parliament, all
civil servants, all soldiers, were still encouraged to fly British
Airways as if it was somehow still the 'national carrier'.  As I
watched his car head off back to Westminster, I wondered whether he
really believed that British Airways operated in the national interest
or whether he had just been playing devil's advocate.

"Good news, Richard," said Malcolm Rifkind on 15 March 1991.  "I am
pleased to say that the government is going to allow Virgin Atlantic to
operate from Heathrow.  And, on top of this, we are also going to
nominate you as the British carrier to operate the two extra flights to
Tokyo."

It was the crucial turning point we had been waiting for.

"Fantastic news!"  I shouted.

"Penni, let's have some champagne!  Call down Will.  Call down
everyone!"

As everyone gathered in my office to celebrate, I dialled Hugh
Welburn's number.  Hugh had written a paper that pointed out the
critical importance for an airline of operating from Heathrow.  The
paper's conclusion was that, due to the single short runway at Gatwick
and the lack of connecting flights, an identical route from Heathrow
would be 15 per cent more profitable than one from Gatwick.  Hugh's
paper, and the revelation that Virgin would be able to fly more cargo
from the longer Heathrow runways and thus earn more taxable revenue,
had made a powerful impression on Malcolm Rifkind.

"We've won," I told Hugh.

"Well done.  We've finally managed to get into Heathrow."

Hugh was delighted and amazed.  He had been a consultant in the
aviation industry for a long time, and he had seen the demise of
British Caledonian and several other smaller airlines that had failed
to make ends meet from Gatwick.

"This is your breakthrough," he said.

"But watch out.

British Airways won't like it at all -they'll go berserk."

As we drank champagne, the telephone started ringing with calls from
journalists who had picked up the story.  They were also ringing up
Lord King, and the following day and over the weekend I read his
reaction with interest:

"Government transport policy?"  Lord King snorted in the Observer, of
which his son-in-law Melvin Marckus was the business editor.

"What transport policy?"

I didn't know whether to laugh at the interview or be annoyed.  I read
on with growing amazement:

"It seems that every time we build up a profitable route," Lord King
went on to say, 'someone comes along and says, "I'll have some of
that," and the government obliges."

Lord King estimated that Malcolm Rifkind's decision to allow Virgin
Atlantic to fly the extra two flights to Tokyo would cost BA around 250
pounds million a year in lost revenue: "That is 250 pounds million of
revenue lost to our public shareholders which has gone straight into
Richard Branson's back pocket," he fulminated.

If only revenue did go straight into my back pocket.

Perhaps in his rage Lord King had forgotten that there are costs that
unfortunately crop up between revenue and profit.

On the same day the Sunday Telegraph commented:

This week Lord King was breathing fire over the decision finally to
allow Virgin into Heathrow.  Its long confinement at Gatwick has been a
boon to BA and now I can see why.  British Airways' approach to its
services is hidebound by the managerial thinking of a national airline
while Virgin has all the cheek, determination and original thinking of
the whippersnapper entrepreneur snapping at the heels of the giant
conglomerate.  In terms of food and service, upper-class Virgin is like
first class.

In the Observer Lord King argued, no doubt with a straight face, that
each time the government tried to foster a strong second airline it
ended in disaster.  He gave the examples of Laker Airlines, British
Caledonian and Air Europe.  This was stunning hypocrisy.  British
Airways had helped push Freddie Laker out of business a grand jury was
em panelled to look into the issue but, ultimately, no charges were
brought after the intervention of the UK and US Governments.  All three
airlines had been confined to Gatwick.  British Airways championed the
benefits of competition, as long as the competition stayed out of sight
at Gatwick.

My parents had always drilled into me that the best motto to follow is
"Nothing ventured; nothing gained'.

By fighting tooth and claw for access to Heathrow, we had finally won.
Virgin Atlantic was still tiny in comparison with British Airways, but
we were now a serious threat to their long-term future in a way that
British Caledonian had never been.

The demise of Pa nAm and TWA was also to play a role in the question of
our access to Heathrow.  American Airlines and United Airlines, the two
giant American carriers, moved in to buy the rights to the routes into
Heathrow that Pa nAm and TWA had operated.  In order for these routes
to be activated, the two airlines asked for the Heathrow slots to be
transferred over to them.  Under the strict letter of the Traffic
Distribution Rules these slots could not be transferred but should
revert to the Heathrow Slot Committee.  We immediately argued that, if
this should happen, then Virgin Atlantic should be allowed to apply for
them alongside all other carriers who were interested in flying from
Heathrow.  Although Malcolm Rifkind had opened up Heathrow in
principle, we still had a battle on our hands over how we would
actually get the slots to fly from there.

The letter I had asked Chris Moss to try to extract from the British
Airways employee, Peter Fleming, came through on the following Monday
morning.  It added to my sense of unease.  Dated 18 March, Peter
Fleming's letter said:

There is no doubt that BA's UK sales management had Virgin as public
enemy number one.  The real crisis was precipitated by the high profile
Richard Branson achieved during his campaign to return hostages from
the Gulf.  During this period I was debriefed from aUK sales management
meeting and told that a management team had been set up to undermine
the "Branson image'.

The development of actions in the European Courts [Virgin had put in a
formal complaint] has however precipitated a thorough 'cover-up' of
activities.  In the last few months at BAI was told on three separate
occasions to destroy 'any reference to Virgin in my files.  Staff in
sensitive areas have been briefed on 'anti-trust' laws and how to
respond to a sensitive situation involving Virgin.  Actually, the
current situation is verging on paranoia!

Peter Fleming had been a senior marketing executive based at BA's
Victoria office.  This was the first real intimation I had that British
Airways had actually set up a special internal unit to discredit me,
and had ordered the shredding of documents relating to Virgin.  Why
were those documents so incriminating that they needed to be shredded?
I decided to put Peter Fleming's letter on file while we watched to see
how the British Airways campaign, which became known as their 'dirty
tricks' campaign, developed.

In the meantime, we had plenty to do.  If Virgin Atlantic was going to
operate from Heathrow, we had to set up check-in desks, baggage
handlers, an engineering team, and of course we had to have a working
timetable to offer our passengers.  This meant being allocated slots.
Only when we had the slots in place could Virgin Atlantic set up a
timetable and then sell tickets.  If we were going to benefit from the
busy summer traffic we had to have these in place by April at the
latest.  Every single item was a battle.

First of all we were told there were no check-in desks available.  When
I walked around Terminal 3 I saw a whole line of empty check-in
desks.

"Whose are those?"  I asked.

"British Airways," came the answer.

British Airways refused to sub rent them to us when they weren't using
them.  Since we were being blocked on both slots and check-in desks, I
appealed to the British Airports Authority, BAA, which was privati sed
in the burst of privatisation in the 1980s and ran all the airports in
Britain.  Its chief executive was Sir John Egan, who used to run
Jaguar.  I thought that Sir John might show me some sympathy since he
was an entrepreneur who had built Jaguar into a thriving company.  When
I explained to him that Virgin Atlantic was being continually blocked
with our slot applications and even the small detail of where to have
our check-in desks, and that I was seriously considering filing a law
suit at the European Court, he promised to try to help.

We spoke over the telephone and I told him that I just wanted the
chance to compete with British Airways and that I wasn't going to let
them walk all over me.

Eventually BAA found some check-in desks that could be allocated to
Virgin Atlantic, but we weren't allowed to use our own baggage
handlers.  Faced with a choice of British Midland or British Airways,
we chose British Midland.

The most difficult question remained the slot allocation.  The system
of slot allocation at a congested airport gives 'historical precedence'
to airlines already established there.  In 1993 the European Commission
modified it a little to give 'new entrants' priority, but there is
still an overwhelming degree of priority given to established
airlines.

We applied for 64 slots so that we could operate our flights to Los
Angeles, Tokyo, and New York from Heathrow.  Despite all the press
comment welcoming Virgin to Heathrow and the high expectations of the
passengers, the Heathrow slot coordinator (Peter Morrisroe, then a
secondee from British Airways but constitutionally obliged to treat all
airlines equally) offered us just 23 rather than 64 slots.  These 23
slots were unworkable, mostly at absurd times of day, and some of them
enabled us to take off but not to land or return.

"You know these don't work."  I told Peter Morrisroe.

"They're ridiculous.  Nobody in their right mind would fly out of
Heathrow at 2 a.m. to arrive in New York at 4 in the morning!"

"You didn't have to come to Heathrow," he said.

"You could have stayed at Gatwick."

This refrain that I should have stayed out of the heart of the airline
business began to annoy me.

The deadlock with the slot coordinator continued throughout March and
into April.  I talked to Colin Howes at Harbottle and Lewis about the
legal basis for slot allocation.  We reached two conclusions.  First,
that the entire system was a voluntary code: any one airline, by
refusing to accept the cartel system which fixed slot allocations,
could blow the voluntary system apart and force the government to
intervene.  Second, that the system was in breach of EU competition law
because it stopped effective, new competing airlines coming into an
airport as congested as Heathrow.

I decided that we had a strong enough hand to take on Heathrow's
established players and their slot allocation system.

Winning access to Heathrow was a phoney victory unless we could take
off and land.  Before playing either of our trump cards, we argued that
the slot coordinator had not complied with the procedures that the
airport had appointed him to apply: he had handed over Pa nAm and TWA's
slots to American and United without putting them back in the pot for
everyone to share.

At government level, Malcolm Rifkind had given American and United
together with Virgin Atlantic access to Heathrow.  He had made it clear
that all three airlines would have to take their chances with securing
scarce slots, thus balancing the British and American carriers'
opportunities to some extent.

He had created the possibility for this to happen by abolishing part of
an obscure but incredibly anticompetitive piece of legislation called
the Traffic Distribution Rules.  One of the Rules said baldly that only
the airlines that operated scheduled services from Heathrow to airports
outside the UK when the Rules were made (in the 1970s) could operate
new overseas scheduled services from Heathrow.  Not surprisingly, the
government had been unable to find any argument to justify a piece of
law that made new competition illegal, and it abolished the Rule.  It
was that which created Virgin's opportunity.

But we could hardly expect monopolists who had been protected from new
competition for over a decade to welcome us with open arms.  The
coordinator, with the backing of other airlines already operating from
Heathrow, tipped the balance by handing the slots that Pa nAm and TWA
had used to the two American carriers while offering Virgin Atlantic
unworkable ones.  Despite the government's permission for us to do so,
Virgin Atlantic was being prevented from operating from Heathrow.

I decided that I was ready either to go to the European Commission or
to refuse to join the consensus which allowed a voluntary system to
operate.  As the deadlock with the slots coordinator continued and time
ticked on, it looked as if we would miss the busy summer months.  My
back was up against the wall and I was prepared to lash out.

At the last possible moment before it would be too late and we would be
unable to publish a summer timetable, Peter Morrisroe agreed to come
and have lunch with me at Mill End.  I was encouraged when he told me
he wanted to bring his lawyer, Diana Guy.  Colin Howes had told me that
she was a competition-law specialist: it looked as if one of our trump
cards had been spotted.  Over Sunday lunch the four of us discussed the
future of Heathrow's slot-allocation system.

I again told Peter that I thought what he had done was wrong.  He
should not have simply handed over all the TWA and Pa nAm slots but
should have put them in a pool where all airlines could apply for them.
We had a fierce debate about that.  I also suggested that we could ask
the European Commission to review the slot allocation system or force
an unwilling British Government to take over Heathrow slot allocations.
Just when it seemed as if we were never going to agree, I offered to
compromise.  I told him that I would not force the government to
intervene if we could work out a feasible timetable.  Peter Morrisroe
said that, given a few more days, he could juggle and adjust slots in a
way that could create some new spaces for us.  I decided that it was
better to compromise than to create chaos by forcing government
intervention.  I also knew that, by the time the European Commission
could deal with any complaint we could make, the airline would be out
of business.

After we had climbed down from our respective positions, Peter
Morrisroe and I buried the hatchet over that Sunday lunch round our
kitchen table.  Virgin Atlantic was finally able to operate from
Heathrow.

While I was locked in my debate with the Heathrow Slot Committee,
Jordan Harris and Jeff Ayeroff, who ran our American record label,
called me to say that Janet Jackson had told them she would like to
sign up with Virgin Music.  This was as sensational a breakthrough for
Virgin Music as winning access to Heathrow was for Virgin Atlantic.
Janet Jackson was the world's top female singer and I recognised that
she had the single-minded determination to stay at the top.  She wanted
to become even more successful than her brother Michael.  Alongside
talent, one of the deciding factors in a singer's success is their
mental strength.

And Janet had plenty of that.  She had built up her success over a
number of records.  In many ways it is better for a band if they take a
long time to build their success since they can then learn to live with
it, and they have a broader, more loyal, fan base.

When Janet had come to Necker Island, I saw some of that determination.
For instance, she insisted that she didn't go out into the sun since it
would spoil her complexion.  It is almost impossible to avoid the sun
in the Virgin Islands, but Janet put her mind to it.  Without stopping
herself from having as much fun as everyone else, she managed to avoid
all direct sunlight -even if she did look a little out of place sitting
on the beach in a shroud.

Although Janet told me that she would like to sign with Virgin, there
was still to be an auction for her and Virgin would have to match the
highest offer before her preference for us would swing it.  It was
going to cost far more money than we had at our immediate disposal,
but I instinctively knew that we had to have her: signing Janet Jackson
would confirm Virgin's position as the world's sexiest record company.
I was damned if I was going to let the caution of our bankers stop
us.

Throughout my business life I have always tried to keep on top of costs
and protect the downside risk as much as possible.  The Virgin Group
has survived only because we have always kept tight control of our
cash.

But, likewise, I also know that sometimes it is essential to break
these rules and spend lavishly.  The chance of signing Janet Jackson
was one of these moments: she could not be missed.  After talking with
Simon and Ken, I decided to offer Janet the largest amount of money
ever to be offered to any singer.  On top of this, I decided to break
all the rules of the record industry: rather than tying her down for a
number of future albums, Virgin would offer her a contract for just one
album.  This was virtually unprecedented.  I wanted to blow away the
competition.  I felt confident that once Janet started working with
Virgin she wouldn't want to go anywhere else.

As well as cementing Virgin Music's position as the best record label,
signing Janet Jackson would send out the right message to all the
people in the City and the CAA who might believe the British Airways
rumours that the Virgin Group was suffering a cash crisis.

The only trouble was that we were indeed suffering a cash crisis.  I
knew that we would receive no help from Lloyds Bank if I asked for an
extension of the overdraft to sign her, so Trevor and I looked for ways
to juggle our assets and find more finance so that we could make the
down payment.  After a number of rapid meetings with banks, Trevor
finally won the approval of the Bank of Nova Scotia, who told us that
they would fund the Janet Jackson contract.

We offered Janet Jackson $15 million, with a payment of $5 million on
signature.  However, the auction soon topped that and we had to jump up
to $20 million and finally $25 million, just for the one album.

It was millions more dollars than any record company had ever paid for
a single album.  We pointed out to the bank that Janet was the world's
top female singer and she had had more top-five singles from her last
album than any other singer, including her brother Michael.

The Bank of Nova Scotia assured us that they would stretch to the $25
million.

As good as her word, when the bidding levelled out at $25 million,
Janet chose Virgin.  The contract was ours for the signing and we had
to find $11 million to pay her upon signature.

Feeling exhilarated, I left Trevor in London to finalise the
negotiations with the Bank of Nova Scotia and Ken in Los Angeles with
Janet's lawyers, and took the family and Peter Gabriel on an Easter
skiing holiday to Zermatt.  Peter had been the original singer with
Genesis, was now signed to Virgin as a solo artist, and is one of my
closest friends.  We arrived on Thursday night, and skied on Friday
morning.  We came back to the hotel for an early lunch, and Holly and
Sam decided that they wanted to have a swim in the hotel pool.  Peter
and I agreed to play a game of tennis.  As I passed by the reception,
Alex, the owner, called after me:

"Richard, there's a telephone call for you."

There were no telephones in our bedrooms, so I took the call in the
little kiosk in the foyer.  It was Trevor.

"Bad news, I'm afraid.  We can't get the money together to sign Janet
Jackson.  As you know, we're due to sign today, but Nova Scotia have
pulled out.  We need $11 million by close of business in Los Angeles.
Ken thinks we'd better tell her that we can't raise it and call it a
day."

Before I'd left on Thursday, the Bank of Nova Scotia had promised to
come up with the $11 million down payment we needed for signature of
the contract.  As I listened to Trevor I watched the snow melt off my
boots and form a small puddle on the tiled floor around me.  I wondered
which other assets we could juggle to raise the money.  I had no
intention of either delaying until the next week or backing down.  It
would allow our rival bidders the opportunity to steal in and sign
her.

Peter Gabriel came back with his tennis things.  I knew that we were
due to pay him a royalty cheque of nearly 2 million the following week.
"Hold the line, Trevor."  I put my hand over the mouthpiece.

"Peter, I'm sorry but this is going to take quite a long time."

"Don't worry," he said cheerfully.

"I'll join the kids in the pool."

37;

24 "I wouldn't do this for Madonna."

April-July 1991

I waited for peter to go out of sight before asking Trevor about the
royalty cheques.

"We've got about 5 pounds million going out next week, including the
big one to Peter Gabriel," he said.

"Well, we could do something there.  I'm sure that Peter wouldn't
mind," I tried to convince myself.

"I'm sure he wouldn't.  I'll buy him a drink.  But what else is
there?"

By now it was mid-morning in London, almost lunchtime in Switzerland,
and we had to have the $11 million by close of business in Los Angeles.
It looked impossible.  The only thing in our favour was that nobody in
Los Angeles was awake yet and we had fifteen hours to raise the
money.

We rapidly ran over the list of options: we could ask Fujisankei to
make a further investment in Virgin Music; we could ask Seibu-Saison to
invest more in Virgin Atlantic; we could see what cash we could strip
out of Virgin Communications.

"How's Robert doing with the sale of the Sega licence?"  I asked.

"It's not to be agreed for some weeks yet," said Trevor.

I added a few other ideas: selling Necker Island, selling my house in
London, sub licensing some of our artists.  The trouble was that all
this would take time, and I knew that neither Fujisankei nor
SeibuSaison

3 79 would be able to commit even $1 million at the drop of a hat, let
alone $11 million.  Indeed, Seibu-Saison had invested heavily in hotels
and was suffering a large loss in the aftermath of the Gulf War.

It seemed to me that we'd never raise the money any other way, so we'd
have to go back to the Bank of Nova Scotia.

"Were you dealing with the bankers in London?"  I asked.

"Yes," Trevor said.

"Well, I wonder whether we shouldn't go over their heads?"  I
suggested.

"If you went to see the chairman in Toronto then perhaps he could
overrule the London branch."

"I could go and see Bruce Birmingham, the vice chairman," Trevor
said.

"I know him pretty well.  I'll just find out the flights."  I heard
Trevor call out to Shirley in his office.

"When's the flight?"  I asked.

"There's a one o'clock flight from Heathrow."

As Trevor set off to fly back against the clock to Toronto, I found
Peter with Holly and Sam in the pool and decided that I couldn't bring
myself to ask him whether we could delay our royalty cheque to him.

Bruce Birmingham at the Bank of Nova Scotia was our only hope.  I
called Ken in Los Angeles.  It was the middle of the night there and
Ken had clearly not slept.

"Trevor's heading towards Toronto," I told him.

"We're trying to get Nova Scotia back on track."

"We've got until this evening to close the deal," Ken said gloomily,
having worked enormously hard to negotiate the contract and have it
ready for signature.

"Whereabouts is the Los Angeles branch of the Bank of Nova Scotia?"  I
asked.

"I'll find out," Ken said.

"We'll have a courier waiting outside."

It was an eight-hour flight to Toronto.  I spent most of the rest of
that afternoon trying to see whether we could raise any funds in
London.  It became clear that there was no chance.

By teatime in Zermatt, Ken was up and had started his final meeting
with Janet Jackson's lawyers in Beverly Hills.  They started through
the contract one last time.  Peter, Joan, the children and I had a late
supper together.  Trevor arrived in Toronto at 3 p.m. Toronto time, and
he arrived at the Bank of Nova Scotia just before their close of
business.

By 3 a.m. the hotel lobby in Zermatt was silent.  The children and
Peter had long since given up on me and even the night porter had
disappeared into the back office.  I sat on a plastic sofa by the
payphone and fretted, imagining Trevor in Toronto locked in
conversation with Bruce Birmingham.  After a while my payphone rang: it
was Trevor and Bruce calling me from the Bank of Nova Scotia's dining
room.  We went through the problem using their conference-call phone.

I blindly promised that Virgin would sell as many copies of Janet
Jackson's next album as her brother's Thriller had sold.  I felt that
Bruce Birmingham understood the value of the album to Virgin, but he
was reluctant to overrule the decision of his London office.

The easy option for him would be to sit on the fence over the weekend,
by which time the decision would be unnecessary.

"We need a decision now," I said.

"I'm sitting in this hotel foyer and it's nearly four in the morning.
Thank goodness Ken's negotiating in LA because if he was trying to sign
this in Hong Kong we'd have lost it by now.  If we're to sign Janet
Jackson, we have to have a banker's draft in Los Angeles by close of
business LA time."

"It's a matter of trust," Trevor said.

"Virgin has never let you down on any of our loan repayments.  This
will be no different."

"Trev," Bruce said, 'can I trust you?  Otherwise I'm dead."

"Yes, you can."

There was a long pause.

"I guess they'll be mad at me in London," Bruce finally said.

"But what the hell.  Janet Jackson's a terrific lady.  Let's go ahead
and do the deal.  But I wouldn't do this for Madonna!"

It took another agonising two hours to release the banker's draft from
the Los Angeles branch of the Bank of Nova Scotia.  Then at 5 p.m. Los
Angeles time, while Trevor and Bruce were celebrating with a dinner in
Toronto, and I was trying to get some sleep, a banker's draft for $11
million arrived at the meeting in Beverly Hills and was handed over to
Janet Jackson's lawyers.

Janet Jackson was blithely unaware that there had been any kind of
problem, and she and Ken Berry signed the contract.

"Damn!"  one of her lawyers said, holding up the banker's draft.

"We should have asked for this earlier.  We can't cash it until
Monday."

We still had the balance of the contract to pay when Janet delivered
her album, so we didn't stop our search to realise assets.  In the
aftermath of the Janet Jackson signing, which had caused alarm bells to
ring at Lloyds Bank as they saw us take on board another load of debt,
Trevor and Robert managed to sell the European licence to distribute
Sega computer games back to the parent company, Sega in Japan.  We
needed the cash and we needed to show the outside world some of the
hidden value within the Virgin Group.  None of the bankers had put
much value on the licence, but we sold it for 33 million.  The sale was
also perfectly timed: a year later the bottom fell out of the
computer-games market, and the yen soared, which would have sliced the
value of the licence to practically nothing.

Virgin had acquired the European licence to distribute Sega games in
1988, when we bought the company who owned it, Mastertronic.  At the
time we had little idea of the potential of the computer-games
business.  All I knew was that Holly, Sam and their friends were
suddenly spending a lot of time playing computer games on the
television.  While Trevor was at MAM he spent time with Sega as he
leased out their arcade machines.  He felt sure that Sega would be able
to draw upon their software expertise to rival Nintendo, and that their
new portfolio of small machines to play with at home would sell well.
It seemed like a good business to get into.

Mastertronic was only five years old.  Frank Hermann had set it up in
1983 and acquired the rights to a number of computer games.  At that
time he distributed these games, which were on cassettes and played on
consoles, through news agents  Frank noticed that a new games series
manufactured by Nintendo was selling well in America.  He tried to sign
up the licence to distribute Nintendo in Britain, but Nintendo had
already signed it to Mattel, a large toy manufacturer.  Nintendo had a
95 per cent share of the computer-games market in America, so Frank
went to see its only other competitor, Sega.  He signed up to become
Sega's British distributor in 1986, and in the first year his company
managed to sell 20,000 Sega consoles.

The next year, 1987, Mastertronic's sales of Sega were soaring but,
given that Sega were charging 55 for a console, Frank needed a partner
to finance the sales.

Although he could sell the consoles for 99, pounds he needed a large
amount of working capital to finance the gap between the 55 pounds
outlay to Sega for supplying the console, which was cash in advance,
and receiving the 99 pounds from selling it.

In June 1987 I was telephoned by Roger Seelig, who asked me to come and
meet a friend of his, Frank Hermann, who had stumbled into this rather
amazing business.  Trevor and Simon Burke negotiated to buy a 45 per
cent stake in Mastertronic, and we put it in with Virgin
Communications.  Frank and Robert started working together and they
bought the licence to distribute Sega in Spain, France and Germany for
five years.  Their challenge was to build the Sega name from scratch in
Europe.  Virgin marketed Sega as the cool game to play, and initially
we sold it on the basis that, while your younger brother may be happy
with Nintendo games such as Super Mario and Gameboy, the smarter games
for smarter kids were ones such as Sega's Sonic the Hedgehog.  Then, as
the market developed rapidly, we found that younger and younger boys
were buying Sonic: they all wanted to be like their older brothers. Our
trick was to position Sega above Nintendo and force them further and
further down market

And it worked: in Europe Sega overtook Nintendo with a 45 per cent
market share, compared with a tiny market share back home in Japan.

By 1991 the sales of Sega in Europe had soared to 150 pounds million,
up from 2 pounds million in 1988.  By then we were beginning to be
rather terrified that the bubble might burst.  In order to maintain our
position we were having to spend 70 pounds million marketing Sega each
year, before the cost of financing the sales.  There was always the
danger that, because these games were primarily sold to an extremely
narrow section of teenage boys, if another craze came along out of the
blue, then Sega's sales would collapse.  Peer pressure ensures that
nobody wants to be left behind for a moment.

At home I noticed that Sam and Holly began to grow bored with their
computer games.  They spent less time tapping away at their consoles
and Gameboys.  Sam began to listen to music more, and Holly began to do
other things.  Just as they had turned us on to the idea of buying into
this business, so Holly and Sam gave us the first warning signs that
the market was topping out.

If we stayed in the business we would have to commit to another huge
budget for promoting Sega.  It was time to sell.

The sale of the Sega licence surprised both the outside world and our
bankers: 33 million in cash had been conjured up for a business on
which they had placed no value.  This was over ten times our original
purchase price.

Before starting discussions to sell the Sega licence, Robert had hived
off the small team who wrote the software programmes into a separate
company called Virgin Interactive.  In 1990 the next wave of technology
would be games which were played on compact disc, and Robert
commissioned a number of software writers to come up with programmes
for CDs.  Without Sega and Sonic the Hedgehog to worry about, the tiny
team of software programmers that Robert had assembled in America began
to devise a new game for CD ROM technology.  They named it "The 7th
Guest', and I noticed that people were growing increasingly excited
about it.  It was a game that involved battling your way through a
haunted house while all kinds of attacks were launched at you without
warning.

"I've no idea what happens in this game since I'm always killed by the
kick boxer in the first room," Robert told me.

"All I know is that these guys tell me that The 7th Guest is going to
be big.  They say it's way ahead of anything else on the market."

As the world of virtual reality and CD ROMs expanded and kids fought
their way out of haunted houses on their computer screens, I found
myself in an equally weird world in which I had to fight off a growing
number of attacks that arrived from every side without warning.

"Perhaps it was just a bad day but one of Virgin's passengers was
clearly not impressed with the service in upper class last week.  An
entry in the visitors' book read: "No wonder your boss travels round
the world in a balloon."

This was a small piece entitled 'verdict on virgin' among the sheaf of
press cuttings I looked through one Monday morning in June 1991.  The
journalist was Frank Kane, who wrote extensively about aviation and in
particular British Airways; the newspaper was the Sunday Telegraph, of
which Lord King was a non executive director.  I picked up the phone
and called Syd Pennington, the managing director at Virgin Atlantic:

"Did you see that piece in the Sunday Telegraph?  Please can you send
me the pages of the visitors' book for the last fortnight?"

It sounded all wrong to me.  We had so few passenger complaints that I
felt sure that the crew would have alerted me to this one.  I found the
entry in the visitors' book.  It read exactly as Frank Kane had quoted
it, but he'd missed out the punch line: "But seriously, I had a great
time."

All the other quotes in the book about that flight were highly
complimentary.  I don't mind bad press as long as it is accurate, but
this clearly was not.  I traced

38 6 the passenger, Cathy Holland, and phoned her up to check that
she'd had a good flight.  She assured me that she'd had a wonderful
flight and that -as she'd made clear -it was just a joke.  Then I wrote
to the Sunday Telegraph and pointed out that Frank Kane had failed to
quote her comment in its entirety.  I knew that many elderly Sunday
Telegraph readers would be sceptical about flying Virgin anyway, but
this snippet would put them off even more.  What was a casual mean joke
to a journalist meant many thousands of lost pounds to Virgin Atlantic
-and to my bankers.  Worse still, Carol Thatcher then read the piece
out on television on the David Frost show.  I wrote to her pointing out
that the journalist had misled her, but the damage was done.  Six
million viewers did not know that this comment was taken out of
context.

I called up Frank Kane to complain and he was apologetic.

"Oops, I'm sorry about that misquote," he said.

"I

looked over a neighbour's shoulder and that's all I could see."

"That's all right," I said.

"There was another comment in the book," Kane went on.

"It said, "I couldn't get a seat on the BA flight because they were
giving tickets away today.  I'm glad.

I shall fly Virgin from now on."

A couple of days later he was on the phone again.

"Do you still own Heaven nightclub?"  he asked.

I was astonished.  Frank Kane was a financial journalist working for
the Sunday Telegraph.  Heaven, the largest gay nightclub in Europe, was
always good for a 'sleaze attack' from the tabloids, but I couldn't see
how a responsible journalist working on the business section of the
Sunday Telegraph could possibly be interested.

"Yes, I do."

"Is it very salacious?"

"No, it's just a gay nightclub."

"Aren't you having problems with licensing?  I've heard that there have
been some complaints."

"No, I don't think so."

"I've just been looking at your accounts for last year and I think
they're misleading," Kane said, changing the subject.

"The foreign exchange transactions look misleading."

I tried my best to explain how the accounting worked, and before he
rang off he said, "Don't worry.

I'm not trying to do a hatchet job."

It was extraordinary that a City journalist should be remotely
interested in Heaven nightclub.  His comments also echoed the other
string of questions I'd received about Heaven nightclub and our
accounting policies.  I couldn't understand what the connection was: I
was obviously missing something but I couldn't see what it was.  It was
very mysterious.  To be fair to Frank, he was only doing his job, but I
was left to wonder who the source of all this nonsense was.

I put the phone down and wrote a letter to Trevor Grove, the Sunday
Telegraph editor, setting out my concern that the newspaper was indeed
trying to do a hatchet job.  Trevor Grove called me back to say that
the battle between British Airways and Virgin had been fully reported
and that the point of the question about Heaven nightclub was purely to
establish which subsidiary it was in.  He accepted that the quote from
the visitors' book had been misleading and we left it at that.

I crouched inside the van waiting for the signal.  It was 4 a.m. on 7
July 1991, just before dawn, and we were parked on the roundabout
outside Heathrow.  We had hired a crane which was slowly lowering a
red flag with the Virgin logo over the tail of the Concorde which is
parked on the Heathrow roundabout.  Boards proclaiming virgin territory
were put up against the British Airways boards.  The flag was ready,
and I sprinted across the roundabout.  The press and film crews came
out of the van parked beside us, loaded with their equipment.

To celebrate the occasion I was wearing a brocaded frock coat and had a
stuffed parrot wobbling on one shoulder.  I had a patch over one eye
and a sword hanging off a sash.  As the traffic started to get busier,
the passing cars all paused to hoot their horns and the drivers
cheered.  After our passionate lobbying, we'd finally been let into
Heathrow and we wanted the world to know.  Soon the police came to see
us.

"Everyone's having a good laugh, I see," the policeman said.

"But British Airways has asked us to arrest you."

"Are you arresting me, then?"  I asked.

"Of course not," the policeman laughed.

"I told BA that nothing would play into your hands more!"

I had dressed up as a pirate because Lord King had called me one.  He
felt that I was 'robbing' him of air routes and revenue that somehow
rightfully belonged to British Airways.  I had decided to take him at
his word and 'hijack' Concorde by putting the Virgin logo over its
tail.

One of the reasons why I dress up is to give the press photographers a
good picture that will make it into the papers and so promote the
Virgin brand name.  Today was no exception, with the picture running on
the front page of papers worldwide.  A pleasant by-product is that it
makes people smile.

On 7 July Virgin started flying in and out of Heathrow.  As Hugh
Welburn had predicted, our sale on the three routes we offered, JFK,
Tokyo and Los Angeles, rapidly increased by 15 per cent.  On 14 July,
British Airways' internal magazine, BA News, published I an article
entitled 'virgin out to snatch more slots', and I once again said how
unfair it was that a lower-priced competitor should be allowed to
compete with them.  Then, on 16 July, Lord King stood up at the British
Airways Annual General Meeting and announced that British Airways would
stop making its annual donations to the Conservative Party.  Lord
King had failed to spot that this gave away the fact that they thought
that donating money to the Conservatives in the past had I helped them
secure various privileges.  Some critics pointed out that these same
donations, which totalled 180,000 since BA had been privati sed in
1987, had helped secure a sympathetic hearing whenever British Airways
needed to speak to the Department of Transport.  If an airline in
Nigeria gave money and free air tickets to the ruling party in return
for being granted a monopoly, it would be scorned in the West as being
blatantly corrupt.

"It's impossible to do business in Africa!"  people would retort.

"Look at the Nigerians:

they're so damned corrupt!"  The round of applause that British Airways
won for this announcement at its Annual General Meeting on 16 July
struck me as amusing.

Indeed, BA's influence went further than merely giving money to the
Conservative Party.  During the summer I gave a presentation to a group
of MPs about the lack of competition in British aviation.  Afterward, I
was having a drink with the MPs and found myself chatting to two of
them about their holiday plans.

"Have you seen your travel agent yet?"  one asked.

"No, I'm just going to give them a call to get my free ticket."

"Who's this travel agent?"  I asked.

"British Airways, of course!"  they chorused.

When Lord King stopped British Airways' donations to the Conservatives,
I hoped that it would put British Airways as firmly out of favour as
the previous donations had clearly kept them in favour.  I also hoped
that the government would start encouraging more competition.  The day
after BA's AGM, Sir Michael Bishop, the chairman of British Midland,
and I released a press statement which congratulated the British
Government on freeing up Heathrow, and supported it against British
Airways' criticism.

Despite the excitement of starting our Heathrow operation in July 1991,
it was clear that Virgin Atlantic would be unable to expand any further
for a while.  In the event, we couldn't offer a new route for another
three years, until we started flying to Hong Kong in 1994.  This was
due to one of the fiercest, most focused and vicious attacks ever
launched by an airline against a smaller competitor.

25 "Sue the bastards."

September-October 1991

My grandfather on dad's side was a cousin of Scott of the Antarctic.  I
remember being taken as a child to visit Bertie Scott, an elderly and
distant relative who lived in Hampshire.  I used to sit on the sofa
beside him, eating digestive biscuits while he told all kinds of
stories about Scott and his fatal race to the South Pole.  I was
mesmerised by Scott's battle against the elements and determined to try
to do something similar, although I had no idea what it could be. Scott
of the Antarctic was my childhood hero, and in later life I met and
also greatly admired his son, Sir Peter Scott.

Sir Peter Scott was an extraordinarily talented man, a true Renaissance
man.  Rather like his father, Sir Peter proved that if you put your
mind to something you can do almost anything.  He fought in the war as
a commando and became an expert at sailing small boats.

He was picked for the British Olympic team and once won a bronze medal
at the Olympic Games for sailing.

He then took up gliding and promptly won the world record for the
longest flight.  In later life he set up the World Wildlife Fund.  Sir
Peter Scott also set up the Wildfowl and Wetlands Trust at his home in
Slimbridge, near the mud flats of the Severn estuary.  He was one of
the great amateurs of the time.

I met him at Slimbridge in his sitting room, which overlooked the lake
he had created.  The muddy water came right up to the window.  There
he stood and painted mallard, teal and Bewick's swans.  Slimbridge is a
huge sanctuary for these birds.  As well as inspiring me by the wide
variety of different causes he followed, Sir Peter encouraged me to
build my own lake as a wildfowl reserve in our fields at Mill End in
Kidlington.

The land is quite flat around our house.  The River Cherwell meanders
between the fields, along the edge of our lawn, and disappears beneath
the old Mill House, which belongs to Peter and Ceris Emerson.  We live
next door to them in two cottages knocked together to form one house,
Mill End.  In the 1980s I had a lake dug out in one of our fields.  It
soon began to attract a wealth of wildfowl, and like Sir Peter Scott I
also kept a selection of exotic birds which had their wings clipped.
These birds mingle with the wild ones and help attract more of them.
The most dramatic of these exotic birds are the huge black swans with
red beaks from Australia.

I noticed that the number of birds was far fewer than at Slimbridge and
asked Sir Peter to come up and take a look at it.  His advice to me was
to build lots of small islands so that the birds would have dozens of
different places to nest and, more importantly, dozens of different
escape routes when they were threatened by predators or other birds
trying to invade their nesting sites.  Now, from some sides, the lake
looks almost like a marsh.  There are large areas of water, which we
keep clear of algae by placing special bales of barley by the edge;
dozens of small islands; and inlets and reed beds.

It is teeming with birds.  Every year I am thrilled to see the first
Bewick's swans arrive on the lake after their epic flight down from
Siberia.

Whenever we are at Kidlington, I take a walk round the lake before I
start work, another one after lunch and a last one in the evening.  I
find it both inspiring and relaxing.  I also enjoy the brief solitude.
When I was a child my parents would always insist that all the children
come out for walks after Sunday lunch with them, whatever the weather. 
There was no prospect of our lounging around in the sitting room.  I do
the opposite: I never insist that anyone comes with me and I'm quite
happy to leave the family watching television or doing whatever they
want to.  (Actually, I don't think I have a choice!) We were up at Mill
End one weekend in September 1991 when it really looked as if my world
was falling apart.  After the high point of signing Janet Jackson and
getting into Heathrow earlier in the year, everything was now going
wrong.  With the burden of funding the Janet Jackson deal, even Virgin
Music was having difficulties.  And the airline was stretched almost to
breaking point by trying to operate out of both Gatwick and Heathrow. 
On top of that, the rumours about Virgin's financial troubles were
mounting.  It was rather like being engulfed in a bush fire: although I
kept stamping out flames, I was aware that more and more people were
talking about my impending bankruptcy.  I had taken so many telephone
calls from journalists demanding to know whether our cheques were
bouncing that I could barely think straight. I needed some fresh air
and privacy, so I walked round the lake several times to try to work
out what to do.  I felt overwhelmed by the problems I faced.

Although we had signed Janet, I was growing increasingly worried about
Simon's commitment to Virgin Music.  He had stopped going out to clubs
to search for new talent and, as a result, Virgin had failed to break
any significant new bands for a couple of years.

In many ways, breaking a new band is the acid test of how dynamic a
record company is.  I knew that Simon was worried that the value of
his shares in Virgin Music was at risk if something went wrong with
Virgin Atlantic.  But, equally, I was worried that his lack of
commitment to Virgin Music would damage the value of my shareholding.
His heart wasn't in the business any more, and he seemed more
interested in his own personal projects.

Virgin Atlantic was having an extremely hard time competing with
British Airways.  Our engineering teams were now driving three or four
times a day between Heathrow and Gatwick to service each flight, and if
a flight was delayed at one airport it had a knock-on effect in the
other.  Will had heard that Lord King was going around announcing
proudly that the "battle of Fortress Heathrow has been won -Virgin's
about to collapse'.

On top of all this, BA was now blatantly poaching our passengers.  We
had two reports that BA had called up a Virgin Atlantic passenger at
home and tried to persuade them to change their flight from Virgin to
BA.  Our staff had also seen BA staff approaching Virgin Atlantic
passengers at the terminals and trying to persuade them to switch to
BAI was caught in the middle between Virgin Atlantic and Virgin Music. 
I was alone in being the only person with a foot in each camp.  The
only other thing that bound them together was Lloyds Bank, in that the
loans which Lloyds had made to Virgin Atlantic were guaranteed by
Virgin Music.  This was the crux of Simon's worry, but the airline
would not have been able to function any other way.

Our troubles at Virgin Atlantic brought the question of the future of
Virgin Music to a head.  Throughout the summer, Simon, Trevor, Ken,
Robert and I had tried to work out what to do.  I had effectively put
the idea of the possible sale of the record company to the back of my
mind, but with the rumours about Virgin Atlantic mounting into a great
wave I realised that something had to give.

When I had decided to set up the airline in 1984, I had done so against
Simon's wishes.  Our friendship had never fully recovered.  He thought
that I was mad to risk everything we had built up on a new venture, and
I think that he must have resented how I overrode him.

Now, when Virgin Atlantic was again under attack and in need of more
investment, Simon was implacably opposed to swapping money from Virgin
Music into Virgin Atlantic.  He had in some ways done all he wanted to
do with Virgin Music and was now looking to crystallise his wealth.  He
certainly didn't want to see it gambled away on Virgin Atlantic, whose
value he rightly felt could be destroyed by a winter price war.

We asked John Thornton, an investment banker at Goldman Sachs, to look
at the various possibilities open to us in order to realise some of the
value within Virgin Music.  I would have preferred to have sold part of
the company to raise some funds for Virgin Atlantic, but as discussions
went on it became clear that Simon was not really interested in a
partial deal.  He wanted to sell the whole company and make a clean
break.  Ken told me he didn't mind what happened to Virgin Music since
he would stay with it whatever happened.  In some ways this made the
idea of selling Virgin Music to another company easier to contemplate:
Ken would remain there to look after everyone, both the staff and the
artists.  John Thornton drew up a list of possible purchasers, and
through the summer he quietly explored the sorts of prices they would
pay.  John was also the adviser to Sir Colin Southgate, chairman of
Thorn EMI, and it soon became clear that Thorn EMI were very interested
in buying Virgin Music.

I was caught in a horrible dilemma.  As I walked round the lake that
September weekend, I simply couldn't decide what to do about Virgin
Music.  If we agreed to sell it, it would enable me to invest
sufficient cash in Virgin Atlantic to survive the winter and see off
what I was beginning to suspect was a concerted British Airways attack.
But, if we sold it, we would be selling the one thing that we had spent
the best part of our lives building up.  Everyone who worked at Virgin
Music had become a close friend, and many of them had been there for
over ten years.

I would have been happy to sit on the fence until the last possible
moment in the hope that something would turn up.  But our banking
consortium, led by Lloyds Bank, was continually pushing us to sell.
John Hobley had replaced Sidney Shaw as our account director, and, as
the recession worsened and an increasing number of high-profile
businesses went bust, he became increasingly determined to rein in our
overdraft from 40 pounds million to 20 pounds million.  The trouble
with Lloyds Bank was that they were our clearing bank, so rather than
having a fixed line of credit, as we did with the other members of the
consortium, our overdraft with Lloyds fluctuated on a daily basis,
soaring up when we paid our salaries, coming down when we received
block bookings.  Although we had never defaulted on any interest
payment, they were becoming increasingly concerned.

On the Saturday evening I played a game of chess with Peter Emerson. We
saw Peter and Ceris almost every weekend and they had become two of our
closest friends.  Peter is in his mid-sixties, almost a generation
older than me, yet still plays a fighting game of tennis, and he has
one of the most incisive minds I've ever come across.  After retiring
as dean of Westminster Medical School, Peter had become a consultant
to Chelsea and Westminster Hospital.  I couldn't really concentrate on
the chess, and during the game John Hobley, the Lloyds Bank director,
called.  I suppose that he called on a Saturday night to impress upon
me how urgent our financial crisis was, and once again he wanted to go
over the figures.

"I'm sorry," he said.

"I've got a mental block over the security you're offering for this
extended loan."

Trevor and I had proposed that we put up Virgin's share of Virgin
Retail as additional security for the overdraft.

"What don't you understand about it?"  I asked.

"I don't understand whether we'll be able to easily retrieve any value
out of the joint venture if we need to call in the loan."

I felt rather exasperated by this and wished that he had thought of it
earlier instead of ruining my weekend by calling on a Saturday night.

"Also, the penny's just dropped that you're simply going to use this
loan from us to pay off other banks' debt," he added.

"We don't like lending money on that basis."

I felt a wave of indignation.  Trevor and I had spent all Friday
explaining to Lloyds that the Virgin Group was going to make 35 pounds
million pre-tax profit, which was easily enough to service our debt.  I
had also explained that Goldman Sachs had valued Virgin Music at over
500 pounds million, which would give us plenty of cash should Lloyds
ever need their loan back.  I looked over at Peter, who was sunk in
thought over the chessboard, and decided to take a more aggressive line
than I previously had.  I was beginning to lose my patience and one way
or another I wanted to resolve the situation and bring matters to a
head, rather than carry on as we were, with Lloyds always increasing
the pressure on us.

3 98 "Well, there's not a lot I can do to help you, I'm afraid," I
said with studied carelessness.

"Why don't you speak to Trevor about it on Monday?"

When I sat back down at the chessboard, Peter looked up at me.

"Was that wise?"  he asked.

"I want to test him," I said.

"I've realised that I've had enough of being pushed around by banks.
Courts almost put me out of business in 1984, and I know that the
company is worth a hell of a lot more than he's giving me credit
for."

"It's still not exactly sensible," Peter said.

"But if we sold Virgin Music then we'd be one of the most cash-rich
companies in the country."

"That's still an "if"," Peter said.

"And, anyway, what's stopping that sale?"

"To be honest, I don't want to sell.  Therefore, I suppose I'm waiting
for a knockout price.  Thorn EMI are very interested."

"But why are you holding out for so much money from Thorn?"  Peter
asked.

"What's the difference between 500 million and 600 million?  I know
you're going to say 100 million is a lot of money -of course it is -but
it's not a done deal.  Why don't you sell for 500 million, which is a
hell of a fortune, and be done with it?  Then you'll never have these
problems again."

I thought about what he said for a while, as we sat staring at the
chess game in front of us.  I could barely see my way through the game
of chess, let alone my bank troubles.

"It's hard to explain," I said finally.

"I feel as if I want to test the British banks.  I've had enough of
being pushed around by them and always having to give in.  I want them
to sweat it out for a change.  We've got this massive value in the
Virgin Group which they are refusing to recognise.  It seems that in
order to prove the value of Virgin Music we're going to have to sell
it.  That seems madness.  It's like having to kill something to prove
that it was alive."

"But you need cash for the airline, don't you?"  Peter insisted.

"Yes, we do," I admitted.

"The airline has debts of 45 million and the rest of our borrowings are
fully secured.

Thorn have already offered us more than 400 million for just Virgin
Music.  I don't see what the bank is worried about."

Peter shrugged his shoulders and disagreed with me.

"If Lloyds are worried about you, then you have to be worried about
them," he said.

"You have to deal with them."

I felt better after at least having been able to explain to someone why
I was pushing the banks so hard.  Peter then trounced me at chess.

The next day it was raining.  I took an early-morning walk round the
lake.  As it began to rain harder, I was joined by Harry Butler, the
local butcher, who was out with his dog.

"My father died when I was nine years old," Harry said.

"I missed him enormously.  I see you playing with your son and you
obviously love having each other around."

I agreed with him and we plodded on in silence for a while.

"You've proved everything you need to prove," Harry went on.

"Don't be selfish.  You owe it to your son not to go and kill yourself.
So stop this high-altitude-ballooning-round-the-world idea."

I was sobered by his advice.  I went back to the house feeling utterly
chastened.  I realised that it was one thing to put my business at
risk, but another to put my family in jeopardy.  Normally when I'm
under pressure from the business, I take refuge in my family.  But
Harry's comments had made me feel that I was taking them for granted
and being selfish.

The telephone rang again.  It was John Hobley.  I wondered whether my
apparent insouciance the previous evening would have alienated him.

"Just thought I'd touch base," he said.

"I've had an extremely helpful conversation with Trevor and I'll follow
his line.  We're going to drive ahead down the retail route.  We'll
come back to you with an answer midday Monday."

The Sunday papers were full of Alan Bond's arrest in Australia.  He was
described as a 'troubled entrepreneur'.

He had to pay $200 million back to the banks within 28 days or face
bankruptcy.  The papers compared his days when he won the America's Cup
for Australia with his financial collapse, and talked of the
difficulties all entrepreneurs were currently facing.  I looked for any
mention of Richard Branson, contrasting his feat of winning the Blue
Riband or his ballooning trips with his current predicament, but
luckily there was none .. . Not yet.

"Have you seen this?"  Will brought in the new issue of Fortune on
Monday morning.  It had a photograph of me lounging on the floating
deck chair in Necker Island.  I was holding a book entitled Mavericks
in Paradise, and the caption was: "Richard Branson, founder of the
Virgin Group, savours the billionaire's life ... in the British Virgin
Islands naturally!"

I read with interest that I was worth $1.5 billion.

"I hope Lloyds read this."

"They may read it," Will said.

"But will they believe it?"

"It's in the papers," I laughed.

"It must be true!"

'will Richard Branson's balloon burst?"  was the headline on Wednesday
2 October.  The entire page of the Guardian's business section was
devoted to discussing my debts.

"Behind the Man with the Midas touch there is a picture of a highly
indebted and not-very-profitable conglomerate," it read.  The sub
headline was: 'the MELODY LINGERS BUT WON'T MEET INVESTMENT NEEDS'.
This article had come out of the blue.  Normally when journalists do a
profile, even for a hatchet job, they I contact me to go over some of
the ground.  But this Guardian journalist had never made contact.

I started reading: "The latest available accounts for the Virgin
companies show an alarming picture of faltering cash flows failing to
meet the companies' investment requirements."  I looked through the
article with a horrible feeling that this could inspire a host of other
newspaper stories along similar lines.  If it looked to informed
financial journalists that Virgin was in such trouble, then the bankers
would head straight back to their vaults, taking their money with
them.

"Virgin therefore remains highly exposed," the article concluded.

"It remains tiny by comparison with its key competitors.  Its main
businesses are in highly volatile industries.  The legacy of the
buy-back, together with the ballooning growth of the empire, keep debts
at stubbornly high levels.  The Branson balloon appears to be pursuing
a dangerous path to the stratosphere.  It is an exciting journey,
undertaken with no shortage of panache, but Mr.  Branson's balloon
journeys are unfortunate models for any business to follow."

This article had caught us at our most vulnerable.  All the accounts
were shown in the worst possible light.  To the world at large, or at
any rate to the Guardian's readers, it looked as if I was in the same
boat as Alan Bond: Richard Branson was sinking fast.

The phone started ringing with other journalists asking for my
reaction, and I went through the response which Will and I had drafted.
We tried to emphasise how factually inaccurate the figures were, how
the article ignored the intangible value of Virgin Music's contracts,
and how it put no value on Virgin Atlantic's aircraft.  I was due to
fly to Japan that day and, with the flight leaving at 5 p.m."  I didn't
have much time to respond to the Guardian.  I began scribbling a letter
to the newspaper's editor.  I tried to shrug off the article:

There are many inaccuracies that could have been avoided in your
article 'will Richard Branson's balloon burst?"  if your journalist had
had the courtesy of speaking with me before writing it.  Since I'm off
to Japan in a few minutes (amusingly in the context of this letter to
be made a doctor of economics!) I'll spare your readers a long list of
them.  However, to give you but one inaccuracy, our profits didn't
'plunge' as a public company -they doubled!

I went on to argue that the net worth of all my companies after
repayment of every debt was around 1 billion.  Will came down to
discuss the letter.

"It's got to be more than a letter on this one," Will said.

"You've been attacked with a whole-page article.

What I want to do is get them to give you a whole page to defend
yourself."

"They'll never do that."

"They might.  It'll cause a commotion and that's good for the Guardian.
It's better than a letter tucked away on page 27 that nobody will
read."

Together, we wrote out a whole article rebutting the Guardian's piece,
but before I could finish it I had to leave for Tokyo.  The moment I
arrived there, Will was back on the phone "OK, we've got half a page,"
he said.

"It's better than nothing.  I'm faxing you the draft.  The Guardian
thought I we might sue them so I think they were relieved when we asked
for the right to reply."

I called up Trevor and asked what Lloyds thought of the piece.

"Funnily enough, they're quite relaxed about it," he told me.

When I telephoned Lloyds I found out why.

"Yes, I did see the piece," John Hobley said, "but I don't think many
other people did.  In any event, nobody I know takes the Guardian very
seriously.  If that piece had been in the Daily Telegraph or the FT it
would have been a different matter."

"Now, what's your decision on the loan?"  I tried to sound casual, as
if I really didn't mind one way or another.

"The board have passed it," Hobley said.

"We've got a mechanism which will give us precedence over your assets
in the retail operation."

I put the phone down, lay back on my hotel bed and shut my eyes.  If
that article had appeared almost anywhere else, the City's reaction
would have been very different.  It is a frightening truth, but
perception is everything with some of these bankers.  Normally we have
been able to use the perception of Virgin to our advantage.  But for
the first time the boot was on the other foot and we were fighting to
restore confidence.

If such an article had appeared in the Financial Times, the banks could
well have pulled out their loans and brought the Virgin Group crashing
down.

I was in Japan to receive an honorary doctorate.  The university had
asked me to fly out to meet the students and suggested I do a question
and answer session rather than a formal speech.  As I sat in front of a
thousand students, the professor asked for questions.  There was a
deathly hush which lasted for nearly three minutes.

To break the ice I said that the first person to ask me a question
would get two upper-class tickets to London.

Fifty hands shot up.  For the next three hours I was kept very busy.

I was also looking at a possible site for a Virgin Megastore in Kyoto.
Mike Inman and I took the train from Tokyo to Kyoto.  This train was
called the "Shinkansen', popularly known as the "Bullet Train'.  It was
rather like being on board a plane: there were audios to listen to,
steward service and even vending machines.

"Why can't trains be like this in the UK?"  I wondered.

I jotted down some notes about trains in Britain and trains in Japan
and then turned my attention to the Megastore site.

Back in London the next week, Will's telephone rang on Friday evening.
It was Toby Helm, the transport correspondent on the Sunday Telegraph.
He asked Will whether Virgin would be interested in operating trains if
the government privati sed British Rail.  Will came down to ask me.

"Well, are we?"  I asked back.

"It's quite an interesting idea," Will said.

"I love trains.

And they could be run in a completely different way.

We could give free meals, free newspapers, all the Virgin on-board
services.  We could compete directly with British Airways on the
London-to-Manchester and London-to-Glasgow routes.  Maybe it would free
up slots at Heathrow."

The more we talked, the more sense it made.

Railways had to be one of the answers to all the traffic problems.
Every new motorway was immediately clogged up; driving from London to
Manchester was a nightmare.

"Tell him that we are," I suggested.

"It can't do any harm."

The headline of the Sunday Telegraph read 'virgin to go into trains'
and explained that Virgin wanted to operate the east-coast franchise
and do a joint venture with British Rail.  It became the story of the
week -a useful distraction from our cash problems and an excellent
counter to all the negative publicity we had suffered.  It showed us
thinking about expanding rather than worrying about our finances.  It
was a crucial release of pressure for us, and for a while journalists
stopped going on about our finances and imminent collapse, and started
taking an interest in our bold plans for the future.

All kinds of people called us up on Monday, including Siemens and GEC,
and among them was someone who introduced himself as Jim Steer from
Steer Davies Gleave, transport consultants.  Will immediately
recognised that Jim knew what he was talking about.

"You've got to follow this through," Jim told Will.

"I

suggest that you get together with Intercity and offer a joint service
on the 125s."

We registered three possible trading names, "Virgin Rail', "Virgin
Express' and "Virgin Flyer', and asked Jim to commission an artist's
impression of a Virgin train.

We warned him that our budget was zero, but he went ahead anyway and
then put us in touch with a venture-capital firm called Electra who he
said might put up some seed money to investigate the idea.  Will and I
went along to Electra and met someone called Rowan Gormley who agreed
to put up 20,000 to commission a feasibility study.

Armed with a small business plan and a mock-up of a Virgin train,
Trevor, Will and I, together with Jim and Rowan Gormley, met Chris
Green, the director of British Rail's Intercity service; Roger Freeman
from the Ministry of Transport; and John Welsby, the chief executive of
British Rail.  We talked about the possibility of Virgin running some
railway services, but British Rail weren't keen.  John Welsby was
against any kind of privatisation and he saw our proposal as the thin
end of the wedge.

As he walked out of the meeting, he turned to one of his companions and
made a comment which was picked up on the intercom and broadcast all
over the office.  He said, "I'll be in my grave before that fucker gets
his logo on my trains."

Throughout the week of 21 October, I stood in for Angela Rippon on her
early-morning BBC radio show.

This was not my ideal job since it entailed getting up at 5 a.m. and
heading off in the dark to the BBC building near Euston.  I was in the
studio from 6 a.m. to 8 a.m.

and then went home for breakfast.

The radio-show producer called up Lord King to invite him on the show
to debate with me the problems which British Airways and Virgin were
having and the sorts of tactics that British Airways was employing
against us.

"Tell him we're not prepared to lower our standards that much," Lord
King snapped at her.

"And you can quote me."

It was the first time I had approached Lord King since our exchange of
letters in January and February, but his reply had lost none of its
sting.  My invitation to Lord King to debate what was going on was only
half tongue in cheek.  The previous week I had been called by Joseph
Campbell, who runs our fleet of company cars.

"Richard," he said, "I'm sorry to bother you but I thought you should
know that something rather sinister has happened.  One of the ladies
who works for us has a daughter who works for a company of private;

investigators.  And she told her mother that the;

company has just started spying on you.  They followed;

you to Claridges last week and sat at the next door table."

I flicked back my diary: I had indeed had lunch at Claridges.  I
thanked Joseph and wondered what to do.

Should I call the police?  I put the telephone down and looked at it.
All my life the telephone had been my ?  lifeline.  But now I wondered
whether anyone was listening in to my calls.  I wondered whether these
private detectives were following my children to school.  Or sifting
through my dustbins.  I wandered over to the window and looked up
Holland Park.  Perhaps the British Telecom van parked there was a fraud
and was actually packed with listening devices.  Perhaps I had been
reading too many spy novels.

Then I pushed the thought out of my mind.  I couldn't change the way I
lived and I had nothing to hide.  If I tried to second-guess these
detectives and whoever was employing them, who I was sure had to be
British Airways, then I would drive myself mad.  I couldn't live like
that.  If I started thinking that I was being continually followed, I'd
rapidly become paranoid.  I decided I would carry on my life as normal.
I wouldn't even stoop to their level by having my telephone checked for
bugs.

All week I was up at 5 a.m."  and by Friday I was feeling rather
exhausted.  In the middle of the afternoon I went back to my office to
find a note on my desk from Penni: "Chris Hutchins from Today called
about a potential gossip story.  Wanted you to call him back."

Chris Hutchins was a gossip columnist with Today newspaper who had a
known drink problem.

I called him back.

"Richard, first of all I want you to know that I've done Alcoholics
Anonymous," Chris said.

"I'm clean, so you can take what I say seriously."

I began to listen and picked up my notebook.

"I've spoken to Brian Basham."

"Who's he?"

"BA's PR man.  He is to Lord King what Tim Bell is to Lord Hanson.  I
know Basham's wife Eileen quite well because she used to work for me
here.  She called me to say that Brian might have a good story about
Branson and drugs."

"Great," I said sarcastically.

"I called Basham up and he told me that he'd been doing a detailed
study for BA on Virgin's operations, its strengths and weaknesses.  He
also mentioned an unsubstantiated story about Heaven and suggested that
I check out the drug position there for myself.  He said he didn't
particularly want to put you out of business;

in fact the last thing BA wanted was to be seen to have your blood on
its hands."

This struck a chord.  I tried to remember which other journalists had
been asking about Heaven and suddenly it came to me: among them was
Frank Kane, the financial journalist on the City pages of the Sunday
Telegraph.

"He then told me that I should also look at the recent piece in the
Guardian about your cash position.  Well, finance isn't my thing and I
wasn't that interested."

"Well, perhaps you should turn the tables on BA and investigate them,"
I suggested.

"I could consider that," Chris said, but it's not really my style.  I
just write a gossip column.  Anyway, I'm having lunch with Brian Basham
on Monday at the Savoy."

"Will you come and see me over the weekend?"  I asked.

"I'd love to chat this through with you."

"Sure."  Chris said.

I buzzed the intercom up to Will.

"Chris Hutchins called me."

"He was the one in 1989 who caused all that fuss by claiming you were
in for a knighthood: "arise, sir Richard".  Remember?"  Will said.

"He sounds like he's cleaned himself up.  He called me with a story
about BA and their interest in us."  I read from my notes.

"Have you heard of Brian Bingham?"

"No," Will said, nonplussed.

"Well, he is to Lord King what Tim Bell is to Lord Hanson."

"Never heard of him," Will said.

"Basham," I corrected.

"Brian Basham, and he's talking about drugs at Heaven."

"Brian Basham!  Christ!  I'm coming down."

Will always looks flustered, as if he's itching to get on and make the
next telephone call, but when he stormed into my room he looked in a
flat panic.

"Brian Basham is bad news," he said.

"He's one of the most influential PR men in the business.  If he's up
against us we're in deep, deep shit.  He's got closer ties in Fleet
Street than anyone."

"He's spoken to Chris Hutchins about Heaven."

"Yes, but would Chris Hutchins be the first journalist you'd call?"

I saw Will's point.  If Brian Basham had told the story to Chris
Hutchins, a gossip columnist on Today, then who else knew about it?

The phone rang again.  Will picked it up.

"Harvey Elliott from The Times."

"I gather that Virgin is going to have to make a great many
redundancies," Elliott started off.

"I've heard that you've sent a letter to your staff explaining these
cutbacks."

"I send a letter to my staff every month," I said.

"But I haven't written that there are going to be any cutbacks."

"I can get hold of the letter, you know," Elliott said.

"My letter to the staff is private," I told him.

"But even if you do get hold of it and read it you will find that there
are no redundancies."

The Sunday Telegraph was the next on the line.  Frank Kane had a long
list of allegations which he rattled off.

His method of checking a story seemed to be to recite a number of
allegations which he claimed he would print and leave it to you to
prove them wrong.  Every denial sounds exasperated against such a long
list.

"I've got a letter you wrote to your staff," Kane said.

"You admit that there are going to be massive redundancies."

"How did you get that letter?"  I asked.

"It came to me in a brown envelope."

"Well, Frank, if you actually read it, and it is a private letter,
you'll see that there are not going to be any redundancies.  I have it
in front of me now and it says, "The Gulf War, when the Japanese
stopped flying for months, subsequent spiralling fuel prices, the
recession, the added competition .. . The losses for the industry as a
whole have been astronomical."

"It's not that bit," Kane said.

"Then I go on to say, "Our loads have been good but our yields have
slipped considerably.  The initial forecast for the next twelve months
has given us cause for concern and, therefore, we have taken some
immediate measures to counterbalance it."" "There you are," Kane said,
jubilant.

"Redundancies."

"No," I said.

"Virgin isn't making any redundancies.

We're making savings elsewhere."

"Like what?"

"I can't tell you.  They're just savings within the airline."

"Well, I know from a source inside Virgin that you're planning wage
freezes, recruitment freezes, overtime bans, and combining flights."

"No," I said.

"None of that's true."

"I've heard that if you keep your eight jumbos going through the winter
you'll lose 50 million."

"Look, Frank," I finally said.

"I don't know why I bother talking to you.  You're just aBA puppet."

"Don't accuse me of being aBA puppet," he snapped back at me.

"Then tell me where you got all this information from."

"You know I can't reveal my sources."

"Well, whatever I say will make no difference to whatever you write, so
just go and write it up," I said, and rang off.

I realised I was a clearly defined target.  It was a strange and
frightening sensation.

I was due to do a live television interview with talk-show host Clive
Anderson.  Before we left another call came through.  It was Sir
Freddie Laker from Miami.

"Hi, Richard."  He sounded in high spirits.

"Just a quick call to remind you that it was exactly ten years ago to
the day when British Airways put me out of business."

"Are you celebrating?"  I couldn't keep the exhaustion out of my
voice.

"Well, soon enough.  The bastards stopped my refinancing package with
McDonnell Douglas on 25 October.  That was the beginning of the end.  I
was bust by the next week."

"I'll mention that on the radio," I said, making a note.

"I'm doing an early-morning radio show at the moment, so we can do a
piece about you."

"I've heard about your problems with BA," Freddie said.

"I just want to say that you've got to cry "Foul!"  before it's too
late.  Don't leave it too long."

"I won't, Freddie."  I tried to muster up some energy.

"I'll try my best' "I've said it before and unless you do it soon I'll
say it again: sue the bastards!"  With this shout ringing in my ears,
Will and I went off to the television studio.  As I sat waiting to go
on, all I could think of was the events of the last few hours.

I walked on to the set but I could hardly hear what Clive Anderson was
saying.  He jabbered away about Virgin Atlantic as if it was fair play
to take the piss out of it and pull it to pieces.  It's so easy to pull
something to pieces, I thought; it's so much more difficult to build it
up.

"Now, what about these balloon flights?"  Clive Anderson was saying.

"Is there nothing you won't do for publicity?"

While I tried to answer him, he flipped to another subject.

"Now, what about your project to clean up litter -whatever came of
that?"

I began to answer him, but I could tell he wasn't interested.  I stared
at him with mounting indignation and fury.  I looked at his balding
head, which had been carefully powdered so that it wouldn't shine
through his remaining hair.  No, I thought, I didn't do a litter
project;

I was trying to create something worthwhile.  You can take as much piss
out of me as you like, but I've worked flat out for twenty years to
build up one of the biggest private companies in the country and the
Virgin brand name, and now I've got British Airways trying to put me
out of business and chuck all my staff out on to the street.  Unless I
can do something pretty extraordinary in the very near future I'm going
to go bust like Sir Freddie Laker.  And now I'm sitting here in front
of a witty journalist who feels that he can ridicule me for trying to
run a good airline.

I scarcely heard the rest of Clive Anderson's comments.  I smiled at
him with gritted teeth, stood up, picked up my glass of water, and
poured it over his head.  I then walked out of the studio, brushed
through the gang of sound engineers, and tried to find my way out on to
the street to get some fresh air.

"Oh well," Clive Anderson said, mopping at his hair and jacket.

"I've only got one thing to say to that: fly British Airways."

26 Barbarians at the departure gate

October-November 1991

I had dinner with Harry Goodman last night," Chris Hutchins told me.

"How's he doing?"

"He's fine.  But he told me that he'll never get Air Europe off the
ground again."

Harry Goodman had set up Air Europe, the airline that at one point had
won almost 20 per cent of the European market flying out of Gatwick.
The Gulf War had stopped some of his passengers flying, but I still
couldn't see how it had stopped so many that it had destroyed his
business.  He had gone bust at the beginning of the year, the same week
as Sidney Shaw, my bank manager from Lloyds, had almost stopped our
credit.  Just before he had gone under, there had been a wave of
rumours about the difficulty Air Europe was in, the fact that they were
having to pay cash for their fuel, and that their planes were unsafe.

Chris Hutchins had come to Holland Park to see me on Sunday evening, 27
October 1991, and I sensed that he was caught in a dilemma.  The
following day he was due to have lunch at the Savoy with Brian Basham.
I wanted him to go to the lunch with a hidden microphone to record
whatever Brian Basham had to say.  This would be vital proof.  I also
wanted Chris to give me a transcript of the telephone conversation he'd
had with Brian Basham on Thursday.  He was reluctant on both counts.

"Look at what BA are doing," I said to him.

"This could destroy our business.  When Air Europe went down, thousands
of staff lost their jobs.  I need somebody to help me or Virgin
Atlantic will also go bust and thousands more people will be out of
work.  I need proof so that I can stop them.  Why did you originally
call me up about Brian Basham if you now say you can't help me?"

"I called you up because I thought that what BA was doing was wrong,"
Chris said.

"And you were right.  And, if I'm going to stop BA, then I need proof.
We need either a transcript of the conversation or a recording of what
is being said."

"But now I'm not so sure I can carry it out.  I don't think I could
secretly record him."

We sat in silence.  I let it build up and decided not to break it.  I
just looked across at Chris as he sat wrestling with his conscience.

"All right," he finally agreed.

"I won't get any more BA upgrades but what the hell.  I'll have done
some good to other people."

"What about the tape recorder?"  I asked.

"Believe it or not, the News of the World are the only paper to have
got that all sorted," Chris said.

"There'll be nobody there now and tomorrow's going to be too late."

"All right, we'll buy you one."

I went through a list of questions I wanted Chris to ask.

That night Chris called me again.  I thought he was going to duck out
of the whole thing, but he said, "Basham's just called me.  He
suggested that I come to his house at Primrose Hill for coffee instead
of lunch at the Savoy."

"What time?"  I asked.

"Eleven o'clock."

"I'll get the tape recorder round to you first thing."

Will bought a tiny tape recorder on Tottenham Court Road on Monday
morning and took it round to Chris Hutchins' house.  He showed him how
to work it, and told him to tape the microphone to the inside of his
shirt.  I had spoken to Martin Dunn, the editor of Today, the previous
evening and let him know what I had put Chris up to.  Martin confirmed
that he was happy for Chris to go in with a hidden tape recorder.
Things were building up to a head.

I was due to see Tiny Rowland, who was chairman of the Observer and
Lonrho and had extensive interests in Africa, at the same time as
Chris's meeting with Basham.

If I hadn't been so preoccupied with how the fate of my businesses was
riding on the shoulders of a reformed alcoholic, I'd have taken Tiny
Rowland much more seriously: it was to be the only time I met him.  All
I could think about was whether Chris Hutchins had managed to operate
the tape recorder, whether the microphone was working, and what Brian
Basham was saying.  This little chat over coffee in a Primrose Hill
house was critical to the future of Virgin Atlantic.  We would never
again have such a good chance to catch British Airways out.  As I
fretted over the recording and tried to guess the probability of its
being successful, I also had to chat away to Tiny Rowland.  Tiny had
several ideas about working together in some way, and he offered to fix
everything so that Virgin Atlantic could fly to South Africa.

"Come and meet Pik Botha on Sunday," Tiny offered me.

"I'm sure we could do lots of business together."

He amused me with one comment: "You're a young man and British Airways
is very stuffy.  Why don't we bid together for them?  Their market
capitalisation is very low at the moment."

He was absolutely right, of course, and it would have been one way to
stop the dirty tricks.

As he walked me back to the lift he put his arm round my shoulders.

"If you have any trouble with anything in the Observer," he said, 'just
let me know and I'll sort it out for you."

I didn't know what to say.  It seemed sad if a newspaper as great and
independent as the Observer could be influenced in this way.

I phoned up Will and then Penni, but Chris Hutchins hadn't called in.

"Whenever he calls, put him straight through to me," I said.

I was eventually put out of my misery when Chris called up Penni, who
told me that he'd said, "I can't say much because I'm at the office and
there are lots of people around.  Please tell Richard I'll come round
tomorrow morning."

When he came round I could see that Chris was horribly embarrassed.  He
didn't want to give me either the tape or the investigation on Virgin
that Basham had handed over to him.  I assumed complete nonchalance and
pottered around making us a cup of tea.  As I handed over the tea and
smiled encouragingly at him I knew that there was no way he was walking
out of my house with either the tape or the report.

"So, how was it?"

"Well, I brought you a couple of things but I don't think that I can
hand them over."

"What did you bring?"  I asked pleasantly, in my most genial manner.

"I brought the printout of my first conversation with Basham, and also
the tape and Basham's report."

"Let's have a look at the conversation first."

Chris opened his briefcase and I fleetingly saw the tape recorder and
its mess of wires as he pushed over a piece of paper.  It was entitled
"Chris Hutchins' conversation with Brian Basham in a telephone call
which started at 1.40 p.m. Thursday 24 October'.  It had been written
at 2 p.m. on Thursday 24 October and read as follows:

Basham: And you've been talking to my good lady wife about the Heaven
story.  Eileen Basham had initially contacted Chris to offer him the
story as a favour.  Well the fact of the matter is that you can
apparently buy anything down there in the way of drugs.  Personally I'm
not interested in what goes on at Heaven; what I'm interested in is how
Branson runs his operation.

Needless to say my client British Airways is very interested in that.
He won the two Japan slots -I take it all this is just between the two
of us.  Good -and I'm taking a really good look at his cash position.
He's always run very tight with money to the point of getting into
trouble, then he refinances.  For example, he sold some stores to WH
Smith.  Now he's getting Japanese investors.  It's a dangerous way to
operate but all right as long as your reputation is intact.  He'd be in
real danger if a story came out exposing what goes on at Heaven: it
would certainly inhibit his reputation.

Hutchins: Then why don't you investigate it yourself?

Basham: I have no intention of... I don't want to put Branson out of
business.  In fact looking at it from my client's interest the last
thing they want is to be seen to have Richard Branson's blood on their
hands.

There was a huge heap of rubbish outside the British Aerospace office
in the Strand which backs on to Heaven and when Admiral Sir Ray Lygo
wanted it cleared his office manager called Westminster Council and
they said their people wouldn't touch it because of all the needles.
It's not there now.

Eileen knows that I've got a major interest in Mr.  Branson.  There
was a huge piece in the Guardian on Branson analysing his finances and
the rollercoaster way he operates.  He refinances periodically; he must
be bleeding at the moment with all these fare cuts.

I'd be interested to hear how you get on with your inquiries.

"There's worse," he said.

"In our chat yesterday he was talking about how a plane of yours would
fall out of the sky.  He kept calling Virgin a "dicky business".  I
don't know if the tape came out or not, but here's his report."

"Well, let's hear it anyway," I suggested.

Without meeting his eye, so that I didn't give away either my mounting
fear that he would snatch it back or my growing excitement over what we
were about to hear, I took the tape and slotted it into the tape
deck.

Then I slid Basham's report towards me.  I had them both.  This is the
turning point, I thought to myself: if I ever come out on top against
British Airways it is because of this moment.

But the tape was just a maddening combination of whistles and hisses. I
heard abuzz of raucous scratching as if Chris had just sat there
rummaging through his clothes, banging the microphone, and had picked
up a jammed radio station.  Then, quite clearly, I heard Basham's voice
say, "Dicky business .. ."  And then there was another, amusingly
ironic, comment: "I'll have to get this place swept for bugs .. ."
After several more agonising minutes of hiss and crackle I heard Chris
asking where the loo was and being directed to one near the front door.
The clearest part of the recording was hearing Chris unzip his flies
and have a long and substantial pee into the loo.  Then it cut off.
This was hardly the tape that was going to break British Airways.

"I tell you what," I said.

"I'll get the tape over to our sound engineers in the studio and see if
they can cut some of that background noise out.  They might be able to
use Dolby or something."

Chris agreed, relieved that I had given him an excuse for handing over
the tape.  I turned to Basham's report.

It was headed private and confidential and simply dated October 1991.
Basham had made a number of key points in the first section of the
report:

Popular misconceptions about Virgin include:

"Virgin is small': The four private Virgin groups of companies have a
combined estimated market value of 860 pounds million;

"Virgin's management is of low quality': The Virgin style is informal
but the management team has demonstrated itself to be resourceful and
fast-reacting to changing situations.  Core businesses are managed by
professional managers with relevant industry experience;

"Virgin is financially weak': Virgin businesses require large amounts
of cash to finance investment and organic growth.  However, finance has
been raised through the use of such devices as joint ventures.

Finance could be a source of weakness in future.

As well as identifying our strengths, the report also contained a
section pointing out our weaknesses.

Basham made a list of the transactions that we had done since going
private, culminating in our Megastore joint venture with WH Smith and
the sale of Sega.  I turned the page and was surprised to read:

Personal profile: Branson has cultivated an independent, almost
'anti-Establishment' image.  He has great appeal to young people and
also to the Japanese (where there is something akin to 'hero
worship').

I skipped to another paragraph, where Basham wrote, "With unsuccessful
ventures Branson displays what can be characterised as a Houdini-like
ability to escape from tight corners."  And another revelation:

"Branson displays obsessive tendencies in revisiting business areas
after previous failures -most notably he appears to want to be in
communications."

I turned over a page and saw:

Weaknesses: Branson's strategy has been highly experimental.  In the
past he has always been able to extricate himself well in advance from
unsuccessful ventures; he may not always be successful in the future.

Branson has been able to finance the organic growth of the business to
date from the joint venture and financing deals with the Japanese.
Joint-venture links with the Japanese investors are likely to lead
eventually to constraints on the direction of those businesses, and are
limited by the extent to which Branson would wish to dilute his own
control.

Continued growth of the businesses may lead to un sustainable demands
for cash.

Japanese loss of confidence for any reason could and probably would cut
off his cash lifeline and could lead to disaster.

Branson thrives on publicity.  He appears to get bored very quickly
when a business becomes routine and dull.  He likes to break down
barriers.  However, he is sensitive to criticism.

He owns Heaven nightclub, which seems to be high risk in terms of his
all-important image.

There was a further reference to Heaven in which I recognised the germ
of Basham's comments in his original call to Chris Hutchins: "There
have been suggestions that Westminster Council would not remove rubbish
bags from the club on the grounds that they contained infected sharp
objects."

I tossed the report back on the table and looked across at Chris.

"Where do we go from here?"  Chris asked.

"I'll have to mull it all over," I said.

"But will Today expose what BA is up to?"

"I'll have to talk to our editor, Martin Dunn."

Chris didn't seem that enthused.  I wondered whether he was unhappy
about blowing Brian Basham out of the water by handing this material
over to me.

We left it that we'd speak later on the phone, once he'd had a chance
to talk to Martin Dunn and I'd had a chance to see whether we could
salvage anything meaningful from the cassette.  I supposed that Chris
would look pretty foolish in front of his editor once he'd admitted
that he'd passed over the tape to me, but I felt that this was a
scandal that Today would be pleased to publish.

An hour later Will and I were in the recording studios.  Two engineers
were fiddling with all kinds of mixing controls when suddenly Basham's
voice came out over the large black speakers loud and clear.  We sat in
silence and listened to what sounded like a slick and well-rehearsed
briefing.  To be fair to Basham, he was concentrating on Virgin's
corporate profile, and he was later to claim, with some justification,
that his role in the whole dirty-tricks affair had been distorted by
BA, who were only too happy to blame others for their activities.

Basham was saying, "The pattern with Branson is that he has lots of
schemes going on, some of them big capital eaters.  His whole world is
based on Tubular Bells.  I mean, you know more about the music business
than I do, so you know that.  He got the cash and he immediately
borrowed.  Business is not about profit; it's about cash, cash
availability.  It's about whether you've got enough cash to pay your
overheads, and at the end of the day whether you've got enough cash
left over.

Profit doesn't matter.

"What Branson does, he runs his cash flow close to the wire all the
time, and just before he runs out of cash he refinances.  He'll sell
some record shops in Japan;

he'll sell some shops to WH Smith.  And, if you look at the weekend
press, Frank Kane in the Sunday Telegraph says he's trying to raise 20
million.

"Branson has two things which could really drag him down.  One of them
is his physical courage, if you like, in ballooning, which is a very,
very dangerous occupation.  Even with safeguards and everything, if
you're up at -whatever it is30,000 feet, right up in the fringes of the
atmosphere in a balloon, it's dangerous.  Lots of things could go
wrong.  And if he got into trouble I believe the business would
collapse, because it's his charm and his magic that pulls the cash into
the business.

"There's also what I call "moral danger", which really focuses on
Heaven.  And if he's got Heaven I can't believe that there aren't other
things."

"What's wrong with Heaven?"  Chris asked, the first time he got a word
in edgeways.

"Nothing," Basham said quickly.

"Nothing wrong with Heaven at all.  It's a gay nightclub.  For Lord
King to own Heaven would be bizarre, right?  For Branson to own Heaven,
if he wants to become a serious businessman, is bizarre and leads him
into danger.  It not only leads him into danger, it leads the business
into danger.  Can you imagine a hypothetical case: Salomons get a
prospectus together, and they are just in the middle of a float and
Heaven is raided?  Charges are pressed against the ownership.  Right?
Not inconceivable."

From the way Basham dwelt on 'in-con-ceiv-able' it sounded as though he
had conceived the ideas very clearly.

"Especially if there are lots of drugs involved," Basham went on.

"And that is where I think he is bound to run amiss.  I think he has
got some problems and he does run his business very riskily."

Basham then broke off to call his office.  The copy of the report he
was going to hand over to Hutchins was missing a page on Heaven.

"Hello there, sorry to bother you," he said.

"I'm just in the middle of a meeting.  Thank you very much for getting
the document together.  It's very useful.  There's one thing missing
from it which is quite crucial, which is the original report that our
friend did on Heaven.  I want it because it talks about the war between
the bouncers.  Could you fax it to my home?  Thanks very much."

When Chris Hutchins asked him about the government's decision to allow
Virgin to fly to Tokyo, Brian Basham's voice became warmly
persuasive:

"I try to look at my client's business through their eyes.  So, when I
see Branson getting routes from British Airways, I think it's
scandalous for two reasons.  First of all I think he runs a dicky
business, just dicky.  Bits of it are good, but I think it's dicky.  I
wouldn't care to invest in that business with my money.  What King
understands is that anybody who runs a business like Branson is taking
a big risk on going bust.  This is Freddie Laker all over again.

"I think that for the government to give these routes, which are
really big assets, to a businessman, is bad news, scandalous.  To take
those routes away from a business which has been privati sed where
you've got lots and lots of shareholders, and take it away from all
those private shareholders and give it to somebody who's got a
privately run business, is, I think, doubly scandalous."

Brian Basham then smoothly changed tack to discuss the Virgin
management and the extraordinary behaviour of Mike Batt, who had left
BA to work for Virgin and then returned to BA after two days: "Mike
Batt was taken into Virgin to take over from Richard Branson."

"Roy and Trevor will enjoy this!"  I said.

"Anyway," Basham went on, 'he worked for one week and resigned.  I took
him out for dinner and asked what happened.  He said, "Well, actually,
the business is appallingly run."  He said one day, without doubt, an
aircraft is going to fall out of the sky -because aircraft always fall
out of the sky, you know.  Must happen.  If an inquiry takes place,
someone is going to swing, because the procedures and the way the
business is run are appalling."

"Sue the bastard!"  I said, echoing Freddie Laker.

"This is incredible."

At least Basham then went on to point out that since that time we'd
brought in good people to improve things.

On the tape, Basham and Hutchins were preparing to leave.  The
crackling increased as Hutchins stood up and smoothed down his
clothes.

"I have a couple of concerns," Basham told him.

"First of all, I don't want to be involved in this at all.  Secondly, I
mustn't have BA involved in this at all.  I mean, all the good I might
have done by saying, "Here is Virgin, good and bad," would be entirely
wiped out if it looked as though BA was in any way running some sort of
campaign against Virgin -which they're not.  All right?

"It's not going to get you in trouble with Lord King, is it, if we
rubbish Branson?"  Chris asked.

"No," Basham said.

"If you blow Branson out, it doesn't make any difference to me as long
as neither BA nor I are associated with it."

"But it's not going to meet with their disapproval, right?"

"No, not at all.  I mean, they don't care if you wipe out United
Airlines -they wouldn't mind."

Then there was more crackle and hiss until Basham said, "I really must
get this place swept for bugs."

A few moments later, Chris was asking to use the loo.

And he unzipped his trousers and had a long refreshing pee, which we
heard in magnificent quadrophonic sound until the tape cut out.  Will
and I stared at each other.

"Play those last comments again," I said.

"No," Basham said.

"If you blow Branson out, it doesn't make any difference to me as long
as neither BA nor I are associated with it."

"Well, I'm afraid that' both you and BA are going to be very associated
with it," I said, wondering what to do with the tape.  I felt as though
I had just witnessed a crime, and it was doubly strange knowing I was
the victim.  I asked the engineers to copy it, and we immediately biked
a copy round to Gerrard Tyrrell, our lawyer at Harbottle and Lewis.
Then I put the original tape back in my pocket, together with two more
copies, and went back to Holland Park.

Things moved very quickly that week.  Chris Hutchins called to say that
his editor, Martin Dunn, had put Bob Graham, an investigative
journalist, on to the story over his head and that they were about to
lead with a front-cover exclusive.  I was expecting Today to run the
story any day, but they began dithering about how to check British
Airways' side of the story.  I couldn't believe that they weren't
rushing it through.  In the meantime the phone carried on ringing.  The
first call I received on Tuesday was from Syd Pennington at Virgin
Atlantic, who had been reading the Virgin upper-class visitors' book.

"There's an entry here which reads, "You obviously have BA worried!  I
received a call from BA asking why I booked on a Virgin Atlantic flight
today rather than BA.  Good job!  Good luck!"" "Who wrote that?"

"Marcia Borne from Procter and Gamble, New York."

"Do you have her contact number?"

"I thought you'd ask," Syd said, and carefully read it out.

I could hardly wait for lunchtime, which was the earliest time I could
call Marcia Borne in New York without waking her up.  She told me that
she normally flew BA on her quarterly flights to the UK, but this time
she had decided to come back with Virgin to try it out.

BA had called her to ask why she had changed her return flight to
Virgin.

"The guy from BA said, "If you change your mind, let us know and we can
change your ticket."  It didn't bother me at the time, but then I
started wondering how my itinerary was such public knowledge.  The more
I thought about it; the more it bothered me.  I didn't know that there
was a big computer in the sky which told everybody else where I was
going to be.  I was a bit upset."

I thanked her for her help, and for flying Virgin.

"By the way," Marcia said, 'it was a great flight and I can see why BA
are so worried.  I'm converted."

British Airways was obviously gaining access to computer information
that should have been off limits.

It was confirmed by the next day's post: out of the blue Peter Fleming
from BA wrote a second letter in which he detailed a number of things
that British Airways had done.  Dated 29 October 1991, it covered a
wider range than his letter from earlier in the year.  He started off
by repeating how a management task force had been set up to discredit
the "Branson image'.  "This, I felt," he wrote, 'would have originated
as a strategy at a very senior level within BAI was shocked that the
company could be so open about this and state it in such an
uncompromising way."  He went on to say:

However, not long after when Virgin took some concerns to the European
Courts there was a noticeable backlash which swept the whole company.
At this time I was told to destroy all documents that had any
references to Virgin, not once but four or five times by different
people from managers to managers' secretaries.  Again I was reasonably
shocked that BA's senior management could be so concerned about its
activities that it felt that all references to an airline should be
destroyed in this way.  I did not destroy anything myself, as I did not
feel that my files had anything of a damaging nature, but I know that
other people in my department did destroy material because of this
directive.

Peter Fleming had already described these two aspects of BA's campaign,
but I was still surprised to see them set out in black and white.  More
interesting were the further details he highlighted: "The following
points are the issues that I was aware of in respect of BA trying to
squeeze Virgin out of the picture.  They do not necessarily constitute
anti-competitive behaviour but this is something for you to decide."

The list included British Airways deliberately applying for slots to
Japan and Australia that it didn't need for the sole purpose of
stopping Virgin getting them; a special sales force getting business in
the Gatwick area and offering low fares from Gatwick to squeeze yields
for all airlines there (while continuing to operate a high-fare
monopoly from Heathrow); refusing to process bookings for passengers
who had flown from Japan to Gatwick by Virgin and then wanted to switch
to BA, so that they would have to fly BA all the way; and accessing our
booking information by delving into the computer reservations system.

"In my opinion," Fleming wrote, "BA lacks integrity and this stems
right from the top of the organisation with Lord King, and
unfortunately permeates the whole structure."

With Peter Fleming's evidence, I now knew some of what British Airways
was doing behind the scenes; with Chris Hutchins' tape of Brian Basham
I also knew what they were doing in the press.  Although I was caught
in this two-pronged attack, at least I knew exactly which tactics BA
was using.  It was sinister, but I could begin to think about how to
retaliate.

While the journalists at Today were still wondering what to do with the
Brian Basham tape recording, we received a call from the Sunday Times.
Now that I knew that Basham had prompted some press inquiries, I was
always on my guard.  And, given that a good journalist will phone up to
check allegations, I was on the lookout for Basham's words coming
straight through to me.

Nick Rufford worked on the Sunday Times' Insight team.  He was
planning an analysis of the Virgin empire, and he had set up a meeting
with Brian Basham in the Savoy the previous Friday to hear BA's
perspective on Virgin.  Basham told him some of the same things he had
told Chris Hutchins but, because Rufford was a financial journalist, he
mentioned a rumour within BA that Virgin was having to pay for its fuel
in cash because of a low credit rating.

After that lunch, Rufford called up Basham to check some of the details
he had mentioned, and, unknown to Basham, took the precaution of taping
the call.  Basham gave Rufford a long list of other airlines that had
gone bust:

"The list is extraordinary," Basham told him.

"Channel Airways, World Wide Aviation, British Eagle, Scottish
European, Air Safari, Southern Airways, Laker Airways, Air Europe,
British Caledonian, Highland Express, Donaldson, Scimitar, Senator,
Victor, Westwood Aviation, Scillonian, Air Charter, Air Link, Lloyd
International, Paramount and Novair.  These are all companies that come
off the top of the head.

"The question of cash for fuel is something we can't verify .. . but
it's something which a number of people I've spoken to have heard and
they think it's Shell.  We think he's having to pay up front for fuel."
Basham told Rufford to call Shell to check the information.

Nick Rufford called up Will to get a response to the story.

"I'm going to say that Virgin Atlantic is having to pay cash for its
fuel," he said.

"Do you have any comments on that?"

"Yes, I bloody well do," Will said, furious.

"That's complete bollocks.  I hope you're not going to print that
because if that sort of thing gets into print about a small airline it
can be fatal -belly up in days.  We'll have to sue you."

Rufford then began to recite the list of airlines that Basham had given
him.

"Hang on, this is a put-up job," Will said.

"I'll get Richard for you."

Will came into my office and explained the situation.

I spoke to Rufford and told him that it was rubbish: I did not have to
pay cash for my fuel.  Indeed, not only was it rubbish, it was exactly
the sort of rumour that would cause most damage to Virgin and probably
lead to Shell demanding cash for fuel, and that in turn would put us
out of business due to its own momentum.  Fuel represented over 20 per
cent of our costs and, without the cash-flow credit which comes from
passengers paying for their tickets up front and us paying for the fuel
a month later, we'd have to take out a further loan, which no bank
would countenance.

"Why don't you turn the tables on British Airways," I suggested, 'and
write about their dirty tricks?  That's the real story."

"I could try that," Rufford said.

"What other evidence do you have?"

"I don't know where to begin," I said, thinking of the Basham tape
which Today was sitting on.

By the time I'd finished with Rufford I sensed that he might see it
from our point of view.  He told me that one of British Airways'
executives had told him that he'd seen a file about me sitting on Colin
Marshall's desk.

"I think you'll find that it's a report written by Brian Basham," I
said.

"I'm not surprised Colin Marshall has got a copy.  I only hope he
didn't have to pay too much for it."

Nick Rufford promised to check the story with Shell and then call
Basham.  A few hours later he called me back: "I checked with Shell
and they told me that Virgin has normal credit terms, so I called up
Basham and told him that I was turning the story on its head.  We're
now running a story about British Airways' campaign to smear Virgin,
and mentioning him."

"Was he pleased?"

"He was on a car phone.  I think he must have gone through a tunnel,"
Rufford said diplomatically.

At that moment I had the gut feeling that the tide was turning in our
favour.  Over the previous few months Will and I had seemed to be the
only people who believed that British Airways was up to no good.

Other people within Virgin Atlantic had told me that they wished I
would take a lower profile as they just wanted to get on and run the
airline and their jobs were made increasingly difficult by our being on
a virtual war footing with our competitor.  I felt that at last I was
making some sense.

I was just taking a call from the Daily Express in which their
journalist said they had heard that Today was about to run an exclusive
story about the drugs problem at Heaven and what did I want to say
about it, when Penni pushed a note under my nose: "John Thornton
holding for you."

I told the Daily Express reporter that there were no drug problems at
Heaven and that he should go along there one night, then I pushed the
button to pick up John's call.

"Haven't heard from you for a while," John said.

"I've been reading a lot about you, though."

"It's building up," I agreed.

"The trouble is that so many stories are just plain wrong."

"Journalists and bankers," John said affably.

"Never trust them."

"What's the news from Thorn?"

4 33 I had put Lloyds Bank and Thorn halfway out of my mind, but I
knew that the next call from Lloyds wouldn't be far away.  They had
extended the overdraft at the beginning of the month, the day of the
Guardian article, but we had not been able to show them any positive
cash flow since then.  The pressure to sell Virgin Music was still
there.

"Thorn says that it would be emotionally great to do the deal with
you," John said.

"What on earth does that mean?"  I asked.

"Their accountants are still going through the kinds of figures I don't
want to bore you with, but we're looking at the numbers beginning to
add up to your price by the end of the year."

"Call me if I can do anything," I said, wondering how we could find
some cash to prevent the sale taking place.  We were running out of
options.  We had recently instructed the American investment bank
Salomon Brothers to raise some equity in Virgin Atlantic, but they
weren't exactly being overwhelmed with calls from investors.

Just before the weekend I had another call from the Sunday Times.  It
was Andrew Davidson from the business section.  He asked me to confirm
that Virgin was having difficulty paying for its fuel and had to pay in
cash.  Since I had been living with this story all week, I found it
difficult to treat it as the amazing scoop which Andrew Davidson
thought he had.  I didn't refer him to his Sunday Times colleague, Nick
Rufford, since I reckoned that the Insight team liked to surprise even
their own colleagues.  I didn't want Andrew's business editor to get
hold of the story that Nick Rufford was planning to run on Sunday as he
might do his best to kill it.

"Branson attacks BA "tricks" was the headline in the Sunday Times on 3
November 1991.  This wasn't exactly what I had in mind but it was true
nonetheless.  I'd been hoping that the Sunday Times would stick their
neck out and say how scandalous they thought BA's tactics were rather
than just repeating my claims, but it was a start.

For the first time in the campaign, Brian Basham was publicly linked
with British Airways, blowing his cover.

Insight reported how Basham had given his confidential report to a
number of journalists.  I was quoted as saying that I had a list of one
hundred complaints which I would take to the European Commission unless
British Airways stopped their dirty tricks.  And Nick Rufford made no
mention of the cash-for-fuel story which had started his
investigation.

But a footnote to the Insight article drew me to a piece in the
business section by Andrew Davidson entitled "Branson's pickle'.  It
was much less positive about Virgin.

Inspired by the Sunday Times, Today finally screwed up their courage
and faxed me a copy of the front-page splash that they were going to
publish the next day.

"We're going to call Brian Basham to check his quotes," Bob Graham told
me.

An hour later he called back.

"The shit's hit the fan," he said.

"Basham has gone mad.  Burnside from BA has been on the line to Martin
Dunn.  It's got very nasty."

In the event, Today decided to kill the story, bowing to the pressure
from BAI expected a whole lot of journalists to call me in the
aftermath of the Sunday Times Insight piece, but the phone was
strangely quiet.  I didn't know what was going on.  Given what the
article had said, I was surprised that no one was offering to
investigate the story.

Now that Today had capitulated I wondered how else I could try to hit
back at British Airways.  They had to this point escaped lightly.
Andrew Davidson's article had counteracted the Insight article and,
overall, the Sunday Times had probably caused me more harm than good.
Most of the follow-up stories had quotes from Lord King saying that I
was orchestrating a campaign against British Airways, or that I was
just seeking publicity, or that BA was too busy fighting off the big
carriers to be bothered about Virgin, or that I was just plain
'scurrilous'.

"Ricky must learn to take the rough with the smooth," said Jeannie
Davis, a friend of my parents, to my mother when they next bumped into
each other.

Jeannie's opinion could be seen as the general opinion of the country.
To the outsider it looked as if I was complaining about some tough
competition, and they might well believe that I shouldn't be flying my
planes if I couldn't stand a bit of competition.  But Jean Davis should
have known better: she was married to Michael Davis, who was a non
executive director of British Airways.

27 "They're calling me a liar."

November 1991-March 1992

Penni put her head round the door.

"Prince Rupert for you?"

I almost leapt at the telephone.  I had not heard that The Rolling
Stones were available, but a call from their manager out of the blue
could mean only one thing.  Sure enough, Prince Rupert confirmed that
The Stones were on the market, and told me that he wanted me to be the
first to know so that Virgin Music could put together a package to bid
for them.  After I hung up the phone, I started jotting down numbers.
The most important thing was to offer a high enough price so that
Prince Rupert would deal with us exclusively.

I called up Ken and he started to look at their sales figures.  Most of
their back catalogue was available, and Ken and I thought that we
should push for a three-album deal.  The recession had hit the music
industry as well, so the figures were going to be lower than in
previous years.  After Ken had run through the future sales figures and
looked at possible sales of their back catalogue, his hunch was that we
would need to make a down payment of around 6 pounds million to secure
The Stones.  Although it was less than we'd paid for Janet Jackson, our
consortium of banks was in no frame of mind to provide it.

I put the troubles with British Airways and the impending sale of
Virgin Music out of my mind for the moment, and concentrated on winning
The Rolling Stones.  A great many people in the record industry were
writing off The Stones.  Some articles had appeared questioning how
much longer a bunch of grandparents could continue playing rock music,
and once again everyone thought that The Stones were about to pack it
in.  But when Simon, Ken and I sat down and listened to the studio
tapes of some of the songs from their next album, Voodoo Lounge, we
agreed that The Stones sounded better than ever.  If we could get them
on to Virgin, we'd be able to reinvent them and push them up on to a
different level.  The best thing about the negative press comment was
that it had frightened away some of the other record labels.  If we
were quick and came up with the right offer, we might have a clear run
at them.

Since we had our backs to the wall, we had to be extremely careful.  We
couldn't let word get out that we were trying to sign The Stones and
then fail to raise the finance.  Trevor approached a number of the
lending banks, and finally managed to scrape the 6 pounds million loan
from Citibank to sign The Stones.  This loan was repayable the next
April.  We were living so much from hand to mouth that we didn't care
about next April: we felt sure that something would turn up and we'd be
able to renegotiate the loan then.  The vital thing was to sign The
Stones now.  We had a signing ceremony at the private room above
Mossiman's restaurant on 20 November, Holly's birthday.

As Holly waved Joan and me off, she looked serious for a moment and
said, "Daddy, who are The Rolling Stones?  Are they some kind of pop
group?"

For a moment I wondered whether I had made a ghastly mistake.

As Joan and I drove there, I remembered that it was almost 25 years ago
that I had first gone along to interview Mick Jagger in his house on
Cheyne Walk.

Then I had been a nervous schoolboy and he had been a demigod.  A few
years later I had ambitiously offered to sign The Rolling Stones and
scuttled around Europe trying to raise $4 million.  The wheel had now
come full circle: Prince Rupert saw Virgin as the best record label for
The Stones.

Throughout the dinner I felt rather dazed.  Looking around the table at
Mick Jagger, Keith Richards, Bill Wyman, Charlie Watts, and Jerry Hall
and their other wives and girlfriends, I tried to enjoy myself but was
constantly preoccupied by the impending sale of Virgin Music.  I hoped
that something would turn up, but without it I would lose control of
Virgin Music -or lose it altogether and never have the chance to enjoy
releasing The Rolling Stones' next single.

After I had first failed to sign The Stones back in 1975, I had come
across them again when they came to record at the Manor for a week.  I
was there one weekend when they were lounging around the sitting room
after an all-night session.  Keith Richards was still in bed with his
girlfriend, a Jamaican girl.  There was a crunch of gravel outside and
a frenzied knocking at the door.  The Stones were all lying around
drinking coffee and waking up, so I got up and opened the door.

A tall Jamaican in a purple jacket stood in front of me.

"Where is she?"  he demanded, giving the name of the girl who was
upstairs with Keith.

I had assumed that the girl was Keith's girlfriend.  It was quickly
clear that I was wrong.  As I hesitated, he pulled out a gun and
pointed it in my face.

"Where is she?  You tell me now."

As I looked speechlessly at the pistol, out of the corner of my eye I
noticed two naked figures tiptoeing out of a side door.  It was Keith
and the girl.  They took

4 39 a quick look at the Jamaican and then broke into a sprint across
the lawn behind him.  I admired their speed.  Keith's hair flapped up
and down his white back as he tore along and hurdled the wooden fence
in a great leap.  The girl kept up with him, running as if her life
depended upon it -which perhaps it did.  They both cleared the
railings, landed in the field and sped towards the river.

The Jamaican realised that my attention had wavered from his gun and
spun round to follow my gaze.  He saw the two bare bottoms, one black
the other white, gave an inarticulate roar of rage and ran to his car.
He revved up and tore off down the drive, trying to cut them off.  I
lost sight of them.

Now I had remembered the episode, I wondered how they had escaped.

"Keith?"  I leant across the table at Mossiman's.

"How did you and that Jamaican girlfriend of yours escape at the Manor?
Do you remember the tall guy with the gun?"

"Yeah," Keith said.

"That was her husband.  She saw the car coming up the drive and told me
to run.  He always carried a gun.  He was a Yardie or something.

She said we just had to get out.  We had no time to dress.

We ran along the river for miles and finally hid by the riverside and
waited for someone to come along.

"The next thing was a punt full of students all wearing these crazy
blazers and white floaty dresses.

We came out of the bushes and flagged them down.

They lent us enough clothes and we punted down to Oxford in style."

As the meal ended, Mick Jagger and I grinned at each other.

"Look at you two," Bill Wyman said.

"I wouldn't fancy being an apple between those two sets of gnashers!"

On the way home, Joan tried to persuade me not to sell Virgin Music.
She felt sure that with their next tour The Stones were set to smash
all records, and argued that we would make more money from having The
Stones on the label than we would make on the airline.

The dilemma was beginning to tear me apart.  With The Rolling Stones
and Janet Jackson alongside Phil Collins and Bryan Ferry and all the
others, Virgin Music was set to become the world's most exciting record
company.  If The Stones' next album took off, it would take us with it,
and we could double our money from the back catalogue.  I tried to
forget the bankers closing in on me and set my mind against selling.  I
decided to brave it out for as long as possible.

"Richard, you're not gonna believe this about BA," Ronnie Thomas told
me.

"Try me," I said.

"At this particular moment I'm prepared to believe almost anything."

Ronnie Thomas runs his own limousine company in New York.  Twenty years
ago he started out as a regular cab driver in Manhattan and slowly
saved enough money to trade in his clapped-out yellow cab for a smart
limousine, which he offered as a chauffeur-driven service special ising
in collecting and dropping off passengers at New York's two airports.
By the time I met him in 1986 he had a successful limousine service
with over 200 cars.  He had called me as soon as he read that Virgin
Atlantic was going to offer a limousine service to all upper-class
passengers, and he pitched for the entire account.  He won it, and over
the years Ronnie has never let us down.

In the previous few days he and his drivers had been finding that, when
they dropped passengers off at the kerb, British Airways staff were
meeting them and offering them 'incentives' to fly BAin stead of
Virgin.

Ronnie had had a flaming argument with them, and later got a call from
BA banning him from BA's own terminal at JFK.

"Have you ever come across anything like this before?"  I asked
Ronnie.

"No, man," he said.

"I thought that American carriers weren't exactly gentlemen, but this
is another ball game altogether."

I had no idea whether this was illegal or not, but it was certainly the
most blatant attempt yet to poach our passengers.

After the Sunday Times had exposed some of British Airways' tactics,
the next paper to follow was the Guardian, with a front-page headline:
"BA under fire for virgin campaign'.  There was a full-page analysis of
British Airways' tactics entitled 'virgin's complaint to ec

CASTS MORE DOUBT ON BA'S PRACTICES'.

In spite of the articles, the dirty tricks carried on.  No matter how
many accurate press stories were published, British Airways had always
been immune to criticism.  To the world at large, they shrugged off my
allegations as the hysterical overreaction of a man who couldn't take
competition.  Their arrogance was overwhelming.

As it became clear that British Airways was intent on seeing the back
of us, I knew that I had to fight back even harder.  In mounting
desperation, I began to look for any legal action that we could take
against British Airways.

"It would amount to an anti-trust case in America," Gerrard concluded
when we'd finished going through what BA was up to.

"But there's no equivalent legislation here."

There is a surprising lack of legislation governing competition in the
British aviation industry.  The Monopolies Commission and the Office
of Fair Trading had no jurisdiction over BAin this instance, since they
could investigate only an airline merger, and the CAA had little
jurisdiction beyond the safety angles involved in servicing aircraft
and supervising the prices of air tickets.  Although BA was a privati
sed monopoly like British Telecom, there was no government watchdog
like Oftel to supervise it.  We had lodged a complaint with the
European Court, but although there were some grounds for this court to
rule against BA under Article 85 of the Treaty of Rome, which deals
with the principles of fair competition, in practice it lacked the
teeth to enforce any request that might make a company change its
business tactics.  In effect, our list of complaints to the European
Court was useful only as a publicity exercise.

I didn't want to take British Airways to court.  I knew that it would
be expensive and risky, and that they would employ a top-flight team of
lawyers to try to overwhelm us and the jury with the great weight of
statistics that a vast airline can muster.  I simply wanted the dirty
tricks to stop and, as I cast about for other ways in which to persuade
British Airways to call off their campaign, I thought of the non
executive directors.

Since I had already written to Lord King without success, I hoped that
the non executive directors of British Airways might be more impartial.
If I asked them to investigate what was going on in their company, then
in principle they would have to take that request seriously.  A non
executive company director has the same legal responsibilities as an
executive director, but they typically look after the shareholders'
interests if there is a conflict between the directors and the
shareholders.  As British Airways was now being accused of behaviour
that could create such a conflict, and accused by the press as well as
by Virgin Atlantic, the shareholders deserved an explanation of what
their company directors were doing.

The British Airways non executive directors comprised Sir Michael Angus
(a director of Thorn EMI and formerly chairman of Unilever), Lord White
(who ran Hanson Trust with Lord Hanson), the Honourable Charles Price,
Sir Francis Kennedy, and Michael Davis.

Their names read like a Debrett of business.  The letter took me over a
week to compose, and set out everything we knew about what British
Airways was up to.  On 11 December 1991, I eventually signed and sent
off an eleven-page document which outlined the facts and concluded:

I have found it hard to believe that a major public company like BA
could be behind the sort of conduct identified in this letter whose
primary purpose can only be the discrediting of a competitor and the
damaging of its business.  I am writing to you because I doubt whether
you would want a company of which you are a director to conduct itself
in such a way and in the hope that the directors of BA would wish to be
absolutely and unequivocally disassociated from any such activities
because they would agree that it was not the proper way to run a
business.

I would like you to investigate the matters raised in this letter,
provide detailed responses and give me your assurance that you will
ensure that the conduct revealed to you on investigation or any similar
conduct is stopped and never again repeated.

I would have thought that British Airways' experience of trying to
eliminate the competitive threat posed by Laker Airways was sufficient
deterrent against trying to do the same to others.

I am sure you remember the impact upon BA of its actions towards Laker
Airway sBA privatisation plans were disrupted; the directors in the
United States were threatened with criminal prosecution;

there was a huge waste of management time; BA attracted considerable
adverse publicity; millions of dollars were spent in legal expenses and
BA made the biggest single contribution to the massive legal settlement
fund.

I attached an eight-page appendix which covered all the details I knew,
and divided the dirty tricks into six sections: the press campaign,
spoiling tactics, engineering matters, sales and marketing, dirty
tricks, and private investigators?).  I put a question mark on the
final category since I still found it impossible to believe, and wrote,
"Bizarre incidents have been taking place recently more suitable for an
episode of Dick Tracy than the airline industry."  I related the
snippets I'd picked up and asked, "Can you shed any light on any of
these incidents?  I cannot believe that a major public company like
British Airways is behind this sort of conduct."

As the letter was sent, I had no idea what reaction to expect.  I did
not wish to sue British Airways.  There was enough to do without having
to spend eighteen hours a day fighting British Airways.  I was acutely
aware that I was having to ignore all the other businesses within the
Virgin Group as we fought this battle.

I wondered whether the non executive directors would assume that I
couldn't compete with Freddie Laker's court case, which had produced
over a million legal documents.  Sir Freddie had sued British Airways
only after he had gone bust and had time to devote all his energy to
the lawsuit.  But, by then, of course, BA had accomplished their task.
The court case may have delayed their privatisation and forced them to
pay 10 pounds million compensation, but this was nothing compared with
the profits they made on the transatlantic route by hiking prices as
soon as Laker's planes were grounded.

I was trying to stop British Airways while simultaneously running the
airline, but BA might not back off until Virgin was grounded too.

Whatever their reaction, I felt sure that the non executive directors
could not ignore the eight-page attachment which detailed their
company's dirty tricks.

Since they were also responsible to their shareholders, we released
copies of this letter to the press to ensure that their shareholders
would have the chance to read it too.

To my amazement, I received a reply from both Sir Colin Marshall and
Sir Michael Angus the very next day.

Sir Michael Angus wrote a disclaimer saying that it would be 'wholly
inappropriate for the non executive directors of a public company to
report to a third party in the manner that you request', and concluded
that 'the proper course of action is for any such allegation to be
directed to the board as a whole'.

Sir Colin Marshall's answer was equally patronising.

His letter flatly denied that British Airways was involved in a
deliberate attempt to damage Virgin or sought 'to compete other than
through normal marketing and promotional efforts'.  He suggested that
our 'allegations' were made to gain publicity, and that I should devote
my 'undoubted energies to more constructive purposes'.

Given the time these two directors had taken to respond to my letter,
they could not have begun to investigate any of its contents.

I replied to Sir Colin Marshall on 16 December 1991 and urged him to
reconsider his dismissive attitude to my allegations.  I did not
accuse him of masterminding the dirty tricks or even condoning them,
but merely asked him to look at the facts.  I wanted to give him every
chance to put a stop to what was going on.  I wrote:

I had always hoped that you personally had no knowledge of the worst
that had been going on at British Airways.  However, having read your
response to my letter I'm no longer sure, for your letter continues the
lies that we at Virgin have had to contend with.  The allegations are
certainly not 'unjustified'.  In fact many of them are not our
allegations but matters that first came to our attention from reports
in the Sunday Times and the Guardian.  I notice that you have written
to neither paper refuting them.  They also came to our attention from
Virgin passengers who were shocked that BA could get their home phone
numbers and offer them incentives to cancel their firm Virgin tickets
and switch to BA .. . How can you dismiss them out of hand without any
inquiry?  I ask you to take the matters raised seriously and respond to
my letter point by point.  We can then get on to competing in a fair
manner.

But Sir Colin Marshall wrote straight back as if he had barely bothered
to read my letter: "I see nothing to be gained from further
correspondence."

For a time afterward it looked as if British Airways' version of events
was gaining ground.  Sir Colin Marshall was quoted everywhere saying
that my allegations were 'utterly without foundation' and, although he
never said that Marcia Borne or Ronnie Thomas were figments of my
imagination, people outside Virgin could have been forgiven for
assuming that there was an element of truth in BA's denial.

My allegations against British Airways had passed the point of no
return.  Unless British Airways apologised and put an end to their
dirty tricks, I would have to follow up my open letter to the non
executive directors with some kind of legal action.  The difficulty was
finding the appropriate grounds upon which to sue.

The row between us had one immediate casualty that I should have
foreseen: Virgin Atlantic was completely unable to raise any money.
Salomons, our American investment bank, were trying to raise 20 million
of capital by privately offering some of the equity for sale.  But, in
exactly the same way as it had been impossible to sell equity in
British Airways while the Laker court case dragged on, so nobody would
touch Virgin Atlantic while it looked as if we would go to court
against BA.  And we were still losing money.

While we had been frantically busy trying to piece together what
British Airways was up to, our consortium of lending banks had
continued to watch the cash flow.  And in the depths of winter the
numbers looked much worse.

I realised that, to this extent, I'd played straight into British
Airways' hands.  One of their objectives was to stop me expanding
Virgin Atlantic, and the only way I could do that was by refinancing
the airline.  The louder I complained about their dirty tricks, the
less any other airline, venture-capital house, or other investor wanted
to invest in Virgin Atlantic.  Outsiders probably thought that there
was no smoke without fire.  We lost both ways: nobody wanted to invest
in a small airline if it was being squeezed out by a vast organisation
like British Airways; and nobody wanted to invest in an airline that
might embark on lengthy and expensive litigation against one of the
world's largest airlines.

Without funds forthcoming from the City, Virgin Atlantic continued to
be starved of capital.  By Christmas 1991 Virgin Atlantic was ploughing
through the difficult winter months and losing money.  Our six main
lending banks continued to write to Trevor reminding us that our loans
were due to be repaid next April, and Lloyds Bank, which was our
clearing bank and so saw wide fluctuations as money came in and went
out, grew increasingly anxious.  Perhaps British Airways gambled that,
even if we did announce a legal action, they could spin it out long
enough so that we would go bust in the meantime.  Even after my letter
of 11 December, British Airways was brazen and laughed off my
allegations.

For once I did not know what to do.  I spent a lot of time thinking and
became very quiet.  Will went the opposite way and spent all day in a
fury about British Airways, shouting and ranting in his frustration at
not being able to land a proper punch on them.

On 21 December a letter arrived from Lloyds Bank which heightened the
sense that we were under siege.

It reminded us that we had recently exceeded our 55 pounds million
overdraft facility, and spelt out that the bank had allowed the excess
only because the money had been needed to pay salaries and because IATA
had confirmed that 7 pounds 5 pence million was due into our account
the following day.  We were warned that the bank might not 'respond
favourably to another request to break the 55 pounds million limit'. It
finished by wishing us a happy Christmas and 'a less stressful New
Year'.

If that 7 pounds 5 pence million had been delayed by a week Lloyds
might well have bounced our salary cheques.  If Virgin Atlantic went
bust, I couldn't even be sure that Virgin Music would remain intact.  I
doubted that Janet Jackson or Phil Collins would be impressed by the
airline's collapse.

As we talked about where we could find sufficient funding to replace
some of the bank debt, it became increasingly clear that we had to find
some radical solution rather than always arguing with banks over small
amounts of increased debt.  Virgin Music was our only seriously
profitable business, and it was our only chance to save the airline.
With the weight of bad publicity caused by BA hanging over us, we
couldn't sell Virgin Atlantic as a going concern, but we could sell
Virgin Music as one.  Selling Virgin Music would save the airline and
leave two strong companies.  Closing down Virgin Atlantic would leave
one strong company and one bust company, with 2,500 redundancies and
the Virgin Group's reputation as a company and a brand name in
tatters.

I called up John Thornton, who was still talking to several companies
that were interested in acquiring Virgin Music.  I had watched his
progress with a growing sense of foreboding, unable either to feel any
enthusiasm for it or be able to stop it.  John told me that Thorn EMI
was now offering 425 million up front with an earn-out starting from
the second year.  This was still below the level at which David Geffen
had sold his record label to MCA.  In March 1990 he had sold his I,
record company for $520 million, which then represented 2.6 times
annual sales.  On a similar multiple, Virgin Music was worth 2.6 times
our sales of 330 million over 850 million.

Throughout January 1992, Lloyds increased their pressure on us to
reduce our overdraft.  John Hobley from Lloyds toughened his stance
considerably.  Since we had mentioned the possible sale of Virgin Music
a year ago, that was all he wanted to hear about: Why wasn't there
more progress?  Could they talk to Goldman Sachs themselves?  From
their point of view, if the sale didn't happen then Virgin Music would
remain a collection of music contracts -intangible assets.  They
couldn't understand why there was such a long delay.

Was there something wrong with Virgin Music?  Had the bidders walked
away?  Was the company really worth the $1 billion we had airily
mentioned?  Their patience was wearing thin, and they wanted to see
their loans to Virgin returned to their vaults as real cash.  One of
our problems was that a large amount of our debt was due to be repaid
in April, and Trevor and I felt doubtful that we could persuade the
bank to roll these loans over to a later date.

The bank's correspondence reminded me of some of the letters I had
received from Courts when they were losing their nerve about their
client with shoulder length hair who had padded barefoot into their
offices to discuss a loan to buy a manor in Oxfordshire.  My hair was
now shorter and Virgin was bigger, but the bank remained uneasy.
Although we had never failed to make a payment, they had other clients
collapsing on them and they were concerned.

The investment atmosphere of early January is summed up by this
stock-market report:

Attention is now focusing on Lonrho's debt mountain and the attitude of
its principal lenders, Lloyds, Standard Chartered, Barclays and Nat
West.

Lonrho's director, Paul Spicer, insists Lonrho's relationships with its
bankers are 'in good order' and the group 'is under no pressure from
them'.  But, after the debt debacles at Polly Peck, Brent Walker and
Maxwell, there is hardly a banker in London who lives comfortably
these days with large lines of credit to entrepreneurial companies
driven by a powerful individual.  Rightly or not, Rowland is being
squeezed by 'the tycoon factor'; and his position is made worse by the
recession, which had slashed the value of Lonrho's assets at a time
when the company must sell businesses to raise cash.  The old maestro
has escaped from tight corners before, and nobody can say that he will
not do so again.  This time however the pressure is really on.

The ingredients of the story looked ominously similar to ours.

As Lloyds saw their money at risk to an entrepreneurial company, John
Hobley made one more effort to control our overdraft.  In a letter
dated 3 January, he pointed out that our overdraft had continued to
rise and that Lloyds was 'not in a position to fund this outflow'.

It was clear that Lloyds expected us to sell Virgin Music within the
month.  John reminded us that our overdraft had to be paid off in full
by the end of the month and that in the meantime we could not extend
our overdraft facility again.  He expressed surprise that we had even I
considered holding on to Virgin Music in the hope of a better offer
than Thorn EMI's.

This was as bad as the Courts crisis in 1984.  Even then we had time
and were able to see some other banks to form a syndicate.  But January
1992 was as bad a month for bankers and airlines as January 1991 had
been, when Air Europe and Dan Air went under.  All the bankers were in
a tailspin and it was difficult to remain calm.

We owed 55 million to Lloyds.  As we headed into February and March the
airline would need cash I funding of a further 30 million.  The winter
months are the most expensive since we have to pay for all the major
aircraft maintenance at the same time as the number of passengers drops
off.  So much for the unsecured debt.  Looking at the cash coming in,
we knew that Virgin Music had sales of 330 pounds million that year,
making operating profits of 38 pounds million; next year we were
forecasting sales of 400 pounds million with operating profits of 75
pounds million.  But Lloyds were not willing to wait.  I could see that
something had to give.

A second Thames Television programme about the battle between British
Airways and Virgin Atlantic was due to be broadcast at the end of
February.  This time it was Thames Television's flagship national
current affairs programme, This Week.  Will and I had first met the
producer, Martyn Gregory, at the beginning of January, when he had come
to see us about the documentary.  We had told him as much as we could
about British Airways, and then left him to carry out his own
independent research.  Martyn had spoken to Peter Fleming, along with
various other ex-British Airways staff whom we had not come across, and
had managed to verify many of my accusations of BA's dirty tricks.

British Airways refused to participate in the programme and their legal
director, Mervyn Walker, wrote to Martyn Gregory and accused him of
falling 'into the trap of being used as a vehicle for Richard Branson's
propaganda'.  Nothing could have been guaranteed to infuriate an
independent television producer more.

I was in two minds about the programme.  I could see that by showing
people all the dirty tricks we were up against they might have two
responses.  One possible response was that they would be able to see
our vulnerability and thus might back away from Virgin Atlantic as a
likely loser.  Just the words "A plane will fall

4 53 out of the sky', even if they were spoken by Brian Basham, who
was working for British Airways, might remain in people's minds and
worry them about flying Virgin Atlantic.  But, equally, the public
might rally round and support us as the underdog.  This was my main
hope.  Gerrard also pointed out that, since the television audience is
so wide, it might jolt some people's memories and prompt them to
telephone Virgin Atlantic and tell other stories that would help us as
we compiled all our evidence against British Airways.

I organised thirty salespeople to sit at the switchboard of our sales
office in Crawley on Thursday 27 February in case anyone telephoned
us.

The This Week film, "Violating Virgin?"  opened with a bird's-eye view
of all the mothballed planes lined up in the Mojave Desert, which is
like an aeroplane morgue where the planes are parked in the dry air so
that they will not rust.  They are drained of their oil, stripped of
some of their parts, and then their engines and valves are sealed with
silver foil.  Over this haunting picture came the narrator's voice:

"Virgin Airways is crying "Rape!"  and Richard Branson claims that
British Airways is putting him out of business."

"There's fair competition and unfair competition," I said to the
interviewer.

"And I can't believe that British Airways is resorting to these dirty
tricks."

The documentary interviewed Peter Fleming, with his face completely
concealed and his voice distorted, as he described the special unit
British Airways had set up to discredit me, and the mass document
shredding which had taken place.  A similarly concealed American
witness described how BA had shredded documents relating to Virgin in
the USA.  In New York, Ronnie Thomas told the story of BA buttonholing
Virgin passengers as they were dropped off by his limousines, and a
Los Angeles travel agent described how passengers were switching to BA
since they had heard that Virgin was about to go bust.  Then, with
subtitles to spell out what he was saying, we heard Brian Basham
telling Chris Hutchins that Virgin was a 'dicky business -just dicky'.
Sir Freddie Laker repeated his advice to sue the bastards.

Thames Television interviewed me standing next to one of the Tristars
in the Mojave Desert.  I was dwarfed by a line of over twenty Pa nAm
planes spanning almost a mile.  I stood underneath one of the seven
marooned British Airways planes.  It was odd to think that my entire
fleet consisted of only eight aircraft.

"I know a lot of these stories come from Brian Basham, who's employed
by British Airways, and Brian Basham reports to a man called David
Burnside, who is the head PR person at British Airways, who then
reports to Lord King," I said.

"I've never sued anyone in court for anything.  We've probably got a
good case to say that someone's tried to damage our business, but you
know it takes hours of management time.  I think our best bet is to get
it out into the open and hopefully there'll be people at BA who'll
realise it's counterproductive, and that they should not carry on in
the future behaving in this kind of way."

British Airways staff were door stepped by This Week.  Dick Eberhart,
one of BA's vice presidents, was confronted in New York, and David
Burnside outside his London home in Chelsea.  Both men refused to
answer any questions.  The final shots of the documentary were aerial
views of the dead aeroplanes stretching across the desert, gleaming
impotently in the Californian sunshine, just where BA would like to see
the Virgin fleet.

"Perhaps it's time for Richard Branson to put up or shut up," said the
final voice-over, 'or Virgin Atlantic's planes could end up like
Laker's: in the desert sand."

"Violating Virgin?"  was seen by over 7 million viewers and that
evening the Virgin switchboard received over 400 calls.  Most of the
callers just wished us well and said that they would never fly BA
again, but among all the well-wishers were many people who said that
they too had stories to tell of being approached by British Airways at
the airport as they tried to check into Virgin.

And then we hit the jackpot.

On 6 February Yvonne Parsons was at home when someone purporting to be
from Virgin's reservations department called her to say that her flight
was over booked  Since she hadn't been issued with a ticket, would she
mind changing to a British Airways flight?

This was the last straw.  Yvonne Parsons had flown to and from the
States four times in the last eight months, and each time there had
been an alleged "booking error' with Virgin.  The previous October,
Parsons had been called in her New York office by a "Virgin
representative' who gave her name as "Mary Ann' and told her that her
Virgin flight was over booked and, to compensate for the inconvenience,
she could fly -at no extra cost -the following day on Concorde. Parsons
refused.  She flew to and from New York and London regularly, and she
preferred Virgin -once she got on to the plane.  She was a valuable
customer, and she was rather surprised that Virgin was being so casual
about her.  She asked to be wait-listed for her flight and asked Mary
Ann to call her the next day to let her know whether she was on or
not.

As with "Bonnie' from Virgin in August, who had told her that the
flight was delayed, and "Larry' from Virgin in September, who said that
all nonsmoking seats were full, Mary Ann failed to call Yvonne Parsons
back.  So Parsons called up Virgin reservations and asked to speak to
Mary Ann.

"There's no Mary Ann here," she was told.

"Then who called me yesterday and said that I was bounced off the 16th
of October flight?"  Parsons asked.

"The 16th of October?  No, you're confirmed on that flight,
nonsmoking."

Yvonne Parsons was baffled.  She was also furious with Virgin and
switched to American Airlines and United for her flights for the rest
of the year.  When she decided to give Virgin one last try in February,
she couldn't believe it when another member of the Virgin reservations
staff called her to tell her that the flight was over booked and would
she mind flying British Airways.

Then she watched "Violating Virgin?"  The next day she called up Virgin
and was put through to our lawyers.  She told her story to Gerrard.

"As I watched the programme," she told him, 'it suddenly dawned on me
that I must have been the victim of an elaborate and disgraceful
deception by British Airways.  I'd always been offered flights on
British Airways, never on other airlines.  I wondered whether these
people were British Airways staff impersonating Virgin."

"We've got an amazing statement," Gerrard told me after taking down
this story.

"We could build a court case around her alone."

To drive the point home, I wrote to Sir Colin Marshall the day after
"Violating Virgin?"  28 February 1992, and asked him to reconsider my
letter to the non executives of 11 December 1991.  I pointed out:

Given the haste of your reply, I take it that you did not have
sufficient time within which to investigate the matter.  There have
been numerous further independent reports in the media on this subject
which have all supported the complaints that Virgin have made,
culminating in the broadcast on ITV last night of the This Week
television documentary.  This Week have independently uncovered many
more facts which go to prove that our allegations are totally correct.
The content of the programme speaks for itself and in fact confirmed
that the problem is even more serious and deep-rooted than we
originally thought.  The least your shareholders can now expect is a
full and proper explanation as to what exactly has been going on within
British Airways and of the activities of Mr.  Brian Basham and those to
whom he reports at British Airways.

I asked him directly whether he would now intervene:

I should now like from you in your role as deputy chairman and chief
executive of British Airways a clear assurance that you will make
certain that the activities that have been highlighted will immediately
cease and that you will give a clear apology.

Well, I thought, it wasn't too late -just.

But he'd better make sure that his apology was a good one.

I was up in Kidlington on Friday when Will rang me.

"Richard," Will said.

"I'm in a call box.  I've just landed at Gatwick and I've picked up a
copy of BA News.  The front-page headline says, "Branson 'dirty tricks'
claim unfounded".  They're calling you a liar."

Will had been on a skiing holiday when the programme was broadcast. The
dates of both the programme and his skiing holiday had been changed
several times so that they didn't coincide, but as luck would have it
they still did.  Since so many people were calling us, I had asked Will
to come back to manage the PR storm which was brewing.  In response he
had just landed at Gatwick.

The BA News article went on to say:

Thames TV's current-affairs programme This Week last night devoted its
programme to Richard Branson's allegations of 'dirty tricks' by British
Airways against Virgin.  British Airways was invited to take part but
declined after careful consideration for reasons explained to Thames's
producer Martyn Gregory in full in a letter from Mervyn Walker, legal
director.

The rest of the article reproduced the letter from Mervyn Walker which
accused Thames Television of falling into my publicity trap and said
that BA would not be 'provoked into playing Mr.  Branson's futile game
and must therefore decline to take part'.

"What a load of bollocks!"  we said together.

"They're calling me a liar and this is libel."

It was the last straw.  Will faxed me the article from Holland Park. We
tracked down Gerrard, who immediately agreed that they had libelled me.
Suing BA for libel would be a far easier case to bring to court and
make clear to a jury than a highly complicated case about BA abusing
its monopolistic position at Heathrow.  It would also push everything
out into the open.

On Monday morning I discovered that Lord King had written personal
letters back to any viewers who had written in to question him about
British Airways' dirty tricks, and he'd assured them that there was no
truth whatsoever in my allegations.  In effect, it was the same libel
repeated, and once again to members of the public.

I decided that I should sue Lord King as well.

That morning, I also received a letter from Sir Colin Marshall.  He
called my accusations 'unjustified', said he had nothing to add to his
previous letters to me, and asserted that the allegation of a 'dirty
tricks' campaign was 'wholly without foundation'.

I stared with amazement at the letter.  Perhaps Sir Colin Marshall had
been unable to watch "Violating Virgin?"  Perhaps he had been stuck in
a traffic jam or on board a delayed flight.  Perhaps he remained
blithely unaware of what was going on in his company.  If so, it seemed
very odd: by reputation Sir Colin Marshall was a workaholic, a man who
was obsessed with detail, who knew every single thing that went on in
any of the companies where he worked.

The next week the sale of Virgin Music finally overtook me.

28 Victory

March 1992-January 1993

There was 560 million$1 billion -on the table, but I didn't want it.

"They need to know by 2 p.m. this afternoon," John Thornton told me.  I
rang off and looked across at Simon and Ken.  We had spent the last
twenty years building up the company but nothing had prepared us for
selling it.

In many ways the signing of The Rolling Stones was the culmination of
everything I had ever wanted to do at Virgin Music.  We had been
fighting to sign them for twenty years, and now at last we had the
greatest rock and roll band in the world on our label.  From being a
start-up label back in 1973 that had relied on the genius of Mike
Oldfield, we had now come of age: now we were the label of choice for
many of the world's biggest bands.  Artists had seen how we had
launched Phil Collins' solo career, and how we promoted UB40 and Simple
Minds, what we had been able to do with Culture Club and Peter Gabriel,
and they wanted to sign with us.  But, just as we reached this height,
it was over.

"Ken?"  I asked.

"It's your call," he said.

"Simon?"

"Take the cash.  You've got no option."

Whenever anyone tells me that I've got no option, I try to prove them
wrong.  Over the last few days Thorn EMI's offer had changed from an
all-share offer, which would have left me as the largest shareholder
in Thorn EMI with 14 per cent, or a lower cash alternative, to a higher
cash offer.  Even though Thorn had now switched tactics and was
offering more cash than shares, I was more attracted to the share
exchange since it would mean that I could keep a stake in Thorn EMI
which I might use in the future as the basis to bid for the company.
The difficulty was that everyone told me it would be too risky to use
this stake as security to borrow any more money to support Virgin
Atlantic.

Shares in Thorn EMI were not seen as a cast-iron security.  Although I
had already drafted a letter to the staff explaining that I was going
to take up Thorn EMI shares and so keep an interest in the company, I
reluctantly had to change my mind and go for the cash offer.

Before finally agreeing, I called up Peter Gabriel and broke the news
to him.  I wanted his advice, and I was also aware that the sale would
affect his career.

"Don't do it, Richard," he said.

"You'll wake up one night in a cold sweat and wish that you'd never
done it.

You'll never get it back again."

I knew that he was right.  It was exactly what Joan had been saying.
But the pressure from BA was too great.  By now I felt so sure that
Lloyds was going to foreclose on us that I had no alternative.  I was
also aware that Simon wanted to sell, and that he wanted to take cash
rather than prolong his involvement with the Group by taking shares. If
taking shares in Thorn EMI would prolong the agony at Virgin Atlantic,
then it would defeat the whole point of the exercise.  My overriding
objective was to save Virgin Atlantic from going under, and -cruelly
-the only reason I was selling Virgin Music was because it was so
successful.  If I sold Virgin Music, the Virgin name would be saved.

Rather than having one struggling airline and a record company, there
would be a secure airline and a secure record company, albeit owned by
Thorn EMI.  And, although I knew that Simon would leave it, I could
stay on as president of the company.  Most importantly, Ken was going
to remain in charge of Virgin within Thorn, and he would safeguard the
Virgin reputation.

I called up Trevor, who confirmed the bank's line:

"Cash is the only choice," he told me.

"It means that we can pay back all the debt and start afresh.  It'll
give you complete freedom.  And, when thinking about Thorn shares,
remember what happened in the stock-market crash."

That made up my mind.  If I took Thorn shares and they fell
dramatically in value, I could be powerless to stop the bank moving in.
Sir Freddie Laker had reminded me how it happens so fast that it takes
your breath away.  Rather like Virgin, his airline had fought a long
battle against British Airways and, just when he needed their support,
the banks pulled in their loans.

He was invited in to see the banks, expecting them to agree to a small
increase in his overdraft on the back of an expected boom the following
year, but when he arrived he was shown into a side room.  Nobody came
to see him for thirty minutes.  Finally, he managed to get hold of the
bank director, who then invited him up to another room.  One look at
their faces as he walked in made him realise that something terrible
had happened.

"We've put Laker Airways into receivership," they told him.

It was all over.  There was nothing Sir Freddie could do to prevent the
receivers from sacking all the staff, changing the locks on the
buildings, confiscating all company property, leaving passengers
stranded and

4 63 handing the planes back.  The Laker check-in desks at Gatwick
vanished overnight and the sales desk stopped taking bookings.  The
telephones were unplugged and a lifetime's work disappeared in six
hours.  It was Sir Freddie's experience which more than anything else
made me hold back from pushing the banks too far.

Once I let them take control, Virgin Atlantic would be finished.  It
would be scant consolation to know that $1 billion had once been on the
table.

Obstinate as I am, I recognised that there is a time to back down.

"Live for the present' I heard my parents' old maxim in the back of my
head '-and the future will look after itself."  My instinct for
continued involvement with Virgin Music and taking Thorn EMI shares was
tempered by the need for financial security.  John Thornton, who was
advocating that I should take the shares, did not know the whole
picture; nor did Peter Gabriel, who was arguing that I shouldn't do it
at all.

And so, pushing Virgin Music into the past tense, I picked up the phone
and called John Thornton at Goldman Sachs.

"I'll take the cash," I heard myself say.

"I'll leave the rest to you."

"Fine," he said.

"The lawyers are on their last round now.  I'll call you when it's time
to come over."

Although I had saved the airline, I felt that I had killed something
inside me.  Looking at Simon and Ken, I was saddened that we would each
go in separate directions.  In some ways I was happiest for Ken: he was
going to stay with Virgin within EMI, and would soon be releasing
records by Janet Jackson and The Rolling Stones.  I had no idea what
Simon would do, but I suspected that he would enjoy a quieter life.  I
knew that, as soon as Virgin Music had gone, I would have to come back
out of the corner and slug it out with British Airways.  I'd already
lost count of the rounds we had fought and was beginning to feel
punch-drunk and exhausted.

We had to wait before signing contracts, since Fujisankei, our 25 per
cent shareholder, had a pre-emptive clause that allowed them to match
any offer for Virgin Music.  We also had to decide whether to accept
Thorn EMI's offer of 510 pounds million in cash and taking on Virgin's
debts fixed at 50 pounds million; or 500 pounds million in cash and
whatever debts were in the company at the date of completion in four
weeks' time.

Although we had to continue to run Virgin Music in the normal manner,
Ken felt sure that by completion the debt would be smaller.

"There are some good sales going on at the moment," he said.

"Let's take all the money now."

And so we opted for 510 pounds million plus 50 pounds million of debt
in Virgin Music.  In the event Ken was right (as always!) and we earned
an extra 10 pounds million by choosing this option.  In the meantime,
we had to wait until 3 a.m. before Fujisankei finally threw in their
lot with us and opted for Thorn EMI's cash.  We signed contracts as
dawn was breaking.  The next morning Thorn EMI announced the purchase
of Virgin Music for exactly $1 billion -or 560 pounds million.

Simon, Ken and I went to see the staff at our Harrow Road offices.

"It's like the death of a parent," Simon said to me as we went
inside.

"You think that you've prepared for it, but when it happens you realise
that you're totally unable to cope."

I felt that it was more like the death of a child.  Simon, Ken and I
had started Virgin from scratch, kept it going through all the times
when it looked as if it was coming to an end, and reinvented it with
every generation of music so that it continued to be the most exciting
record label in the business.  While other record labels such as Apple
still symbolised The Beatles and Abbey Road, Virgin had leapfrogged
from Mike Oldfield and Gong to The Sex Pistols, then Boy George, then
Bryan Ferry, then Janet Jackson and The Rolling Stones.  Throughout
each era -hippie, punk, new wave -Simon's taste had prevailed and Ken
had kept everything together.

Ken now stood up and told everyone that they would become part of Thorn
EMI, and that he would be staying with EMI to ensure Virgin's
independence.

Simon started to speak but instead burst into tears.

Everyone looked at me.  I stood up, on the verge of tears myself.  It
was no good.  I was in an impossible situation.

I couldn't tell them the real reason why their company had been sold.
If I told them the truth about the bank's attitude to Virgin Atlantic,
then the airline and the rest of the Virgin companies would be damaged
by lack of confidence.  Airlines are all built on confidence, and an
admission of weakness would scare away passengers.

And so, hating myself for appearing to have cashed in, I stood there
and offered everyone a job at Virgin Atlantic if they were unhappy with
EMI, and assured everyone that Ken would look after them.  When Jon
Webster proposed a vote of thanks to me, Simon and Ken for 'the best
years of our lives', I could bear it no longer.  I left the room and
set off at a sprint down Ladbroke Grove, tears streaming down my
face.

Oblivious to the stares of passers-by, I must have run for almost a
mile.  When I passed a newspaper stand I saw an Evening Standard poster
that should have dried the eyes of most grown men: "Branson sells for
560 million cash'.  I ran past it, tears still streaming down my face,
and somehow made my way home.  Joan was out, so I went into the kitchen
and put on the kettle.  It was a cold March morning, but the cherry
trees at the end of the garden and in Holland Park were just beginning
to blossom.  As I stared outside, a fox broke cover from the hedge and
trotted across to the back door, where Joan left out scraps for it.  It
picked up a chicken carcass and then turned on its heel and vanished
into the undergrowth.  The last photograph I had seen of Lord King had
shown him on horseback, resplendent in full hunting gear.

"Feeling thoroughly depressed," I wrote in my notebook about my
decision to go for cash rather than shares.

"Decided to go for the conservative route for the first time in my
life.  All my advisers (bar John Thornton) were advocating it."

As well as picking up an extra 10 million by choosing the fixed-debt
option, Ken also gained us another 9 million profit over the currency
transfer to Fujisankei.  Thorn EMI paid us the 510 million in cash, of
which we had to pay 127.5 million to Fujisankei.

Fujisankei wanted their money in yen, so we had to change it.  We had a
month's grace between taking the money and passing it on at completion
on 1 June.  We had to choose when to switch into yen.  Simon and Trevor
wanted to do it immediately so that we all knew where we stood.  Ken
and I were a little more relaxed and inclined to gamble with it.  We
kept it in sterling and, as luck would have it, sterling appreciated
against the yen.  We let it run and changed it at the last moment,
earning ourselves a further 9 million profit.

Nothing like a bit of luck!

And so the crisis was resolved.  From the original cash purchase price
of 510 million, Fujisankei received 127.5 million, and we received more
than 390 million.  Simon and Ken took their share of the proceeds and
went their separate ways.  I used my proceeds to

4 67 repay the bank and invested the remaining cash in Virgin
Atlantic.  Rumours about Virgin Atlantic having to pay for fuel in cash
were now well and truly scotched.  We had more disposable cash than
British'

The banks immediately started calling me with renewed impatience -no
longer to demand their money back, since we had returned their debt to
them, but to offer to put my funds in high-interest deposit accounts,
offshore accounts; to invest it; to invite me for lunch; to do some
kind of business with me; and -of course without seeing the irony
-offering to lend me as much money as I wanted to finance any future
deals!

It took a while for me to understand the implications of the sale.  For
the first time in my life, I had enough money to fulfill my wildest
dreams.  In the immediate future I had no time to dwell on this,
because that very week the British Airways story took a turn that
occupied all my attention.  In some ways I was pleased that I didn't
have time to think about the sale of Virgin Music.

I hate living in the past.  I particularly didn't want to think about
all the lost friendships.  But the weight had been lifted from my
shoulders and at the back of my mind I was aware that the Virgin Group
was now free to develop in whichever direction we chose.  Virgin Music
may have gone; Ken and Simon and I had split up; but the best was yet
to come.

Friday 13 March 1992

"Richard, I've just received a rather extraordinary tape."

Chris Moss, Virgin Atlantic's marketing director said.

"I

got it yesterday, just a tape in a brown envelope.  I thought it was
some crank sending in a music demo so I didn't get round to playing it
until now."

"What is it?"

"It's of two men talking, and I think one of them's Colin Marshall."

"What are they saying?"

"They're talking about the "Violating Virgin?"  programme and they
mention Chris Hutchins and the Basham tape.  And one of them says that
there's a clear case for defamation and he's very close to instituting
proceedings against the programme."

I asked Chris to send the tape to me.  It was already late on Friday
evening and we were due to go to the country.  In the morning we were
due to go to a lunch party with Tony Smith, manager of Genesis.  I
wondered who on earth could have sent it to us.  Somebody had
apparently bugged British Airways' phones and then sent the tape to us.
At first I was lulled into thinking that somebody was being helpful,
but as we drove up to Kidlington I realised that it was like being sent
stolen goods: it could well be a trap of some kind.  I decided to send
it straight back to British Airways for the personal attention of Sir
Colin Marshall.

Saturday 14 March 1992

We were just leaving for the lunch party on Saturday morning when the
phone rang.

"Hurry up," Joan said to Holly and Sam.

"We're getting into the car right now.  Richard, it's Frank Kane for
you.

Don't be too long."

"I gather that you've employed private detectives to investigate
British Airways," Frank Kane started.

"I've also got proof that you're phone tapping and my sources, who are
inside Virgin, have told me that Tiny Rowland is egging you on and that
he is also employing Freddie Laker."

"Don't be ridiculous, Frank," I said.

"That's complete bollocks."

"I've been told that the detective agency you're using is the American
operation IGI and that Goldman Sachs have also been involved."

"Frank, I've never issued a writ against a newspaper, but if you really
think that you can publish that then I'll have to sue you."

I rarely lose my temper with journalists, but I felt utterly helpless
with Frank Kane.  I knew that he was in danger of publishing some mad
story which would damage our reputation.  If he wrote that we were
employing private detectives then everyone would assume that Virgin was
as bad as British Airways.  I was about to tell him of the
extraordinary anonymous tape which had been sent to Virgin, but
something stopped me.  If I even admitted possession of it to Frank
Kane, he would be able to run an untrue story which it would be
impossible to refute.  He could describe Sir Colin Marshall as the
victim of a phone-tapping operation and nobody would believe that
anyone other than a phone tapper working for Virgin would supply me
with a tape.

Who else would?  An indignant Sir Colin Marshall could comment about
how alarmed he was that Richard Branson had got hold of this tape; he
would ask the police to interview me and all the inferences would be
against me.

"I can't talk to you now," I said, seeing Joan waving me off the
phone.

"I'll call you later."

We drove to Tony Smith's but I could hardly concentrate on the road
ahead.  I pictured the tape waiting for me at Holland Park, sitting in
its envelope like a time bomb.  Whoever had sent it had then alerted
the Sunday Telegraph.  It was deeply sinister and very clever.

I was just relieved that I had not received it myself.

4 70 Tony lived in a lovely Georgian house with a large front lawn
which ran down to a lake.  Mike Rutherford and Phil and Jill Collins
were there with their children, and as we got out of the car all the
children ran off to play down by the lake.  Everyone wanted to
congratulate me on the sale of Virgin Music, and Tony, Phil and Mike
were actually very sympathetic.  They understood better than anyone how
torn I had been.  I was touched by their concern for me.

"I'm sorry," I said after a while.

"I have to make a couple of phone calls.  There's some wretched
journalist about to accuse Virgin of using a detective agency against

BA."

Tony lent me a mobile phone and I went off to sit in the car.  I called
up the Sunday Telegraph and got put through to Trevor Grove, the
editor.

"This is a mad story," I said.

"You can't possibly publish it."

I knew that Frank Kane was in the office with him because there was a
pause before he answered.

"Frank tells me that he's got impeccable sources for this story," Grove
told me.

"Well, as I told Frank Kane, if you publish it, I'll have no choice but
to sue you for defamation."

"I'll ask Frank to go back and check the sources," Grove told me.

I called up John Thornton, whom Frank Kane had mentioned.

"I'm pleased you called," John said.

"I've just had a journalist from the Sunday Telegraph called Maggie
Pagano call me.  She wanted to know if it was true that you'd employed
private detectives on BA."

"What did you say?"

"I said that it didn't sound like your style.  I said that I'd been
speaking to you every day for three months over the sale of Virgin
Music and that I also knew Terry Lenzer, the head of IGI, very well,
and that it was very unlikely that neither of you would have mentioned
it to me.  She then said that BA had told her that you were up to it. I
said that in that case they'd better produce the evidence."

I looked through the car windscreen and saw Tony and Phil Collins going
off for a game of tennis.  They had obviously wanted me to make up a
four with Mike but recognised that now was not the time to interrupt.
My reputation and my case against British Airways were about to be
blown out of the water.  For me, this became the defining moment of the
entire British Airways campaign against us.

I called up Gerrard Tyrrell and asked him whether we should take out an
injunction on the Sunday Telegraph.

"Do you have a tape?"  he asked.

"It's either at Holland Park or we have already sent it to Sir Colin
Marshall.  I haven't heard it myself."

"Well, they could ascertain that in court," Gerrard said.

"I think the best thing is to threaten to sue and see how they stack up
the story.  We'll have a better idea later this afternoon.  We're
skating on very thin ice here.

This is very, very dangerous."

The entire lunch party was ruined for me.  For the first time in the
British Airways campaign, I had been caught wrong-footed.  I should
have insisted to Chris Moss that he send the tape straight back to
British Airways without even transcribing it.  But my curiosity had got
the better of me, and I had fallen into a trap.  I had the tape in my
possession and was guilty by implication.  I should have known better.
Whoever had sent the tape in had known that it would be human instinct
to want to listen to it.

As the afternoon wore on and I fretted and fretted, I received the
first signs that the Sunday Telegraph was backing down.  I could not
quite be sure that they knew for certain I had the tape -they never
told me what proof they had that I was using detectives to bug BA's
phones -but the story seemed to totter a little bit.  Had I volunteered
the information that I had the tape -and it had been on the tip of my
tongue -I would have been crucified, even if it was 'the other side'
who had set the whole thing up.  As I repeatedly asked Trevor Grove
what proof he had, and Gerrard Tyrrell sent them faxes promising that
we would sue if the story was published without proper evidence, I
sensed that we were grinding Trevor Grove down.  Hopefully a sense of
fair play and honourable behaviour would stop them running the story.

As we left the lunch party, I gave Tony Smith a hug.

Although everyone seemed to have enjoyed themselves, I felt that I'd
been about as entertaining as Banquo's ghost.  They'd been expecting to
celebrate with me, and also to chat about their next albums and how
Virgin under Thorn EMI would produce them, but I'd been stuck to the
phone all afternoon.

Sunday 15 March 1992

"Too old to rock 'n' roll; too young to fly' was the opening line of
the Sunday Telegraph business editorial.

I absorbed the entire piece in one panicked look.  There was no mention
of detectives or phone tapping.  I reread the article feeling almost
light-headed.  They wrote:

But is Branson for real?  If he was willing to settle his action with
an apology and a Basham firing he must be 'too young to fly'.  A
settlement on those terms would imply BA had misbehaved and it would
leave it wide open to future anti-trust attack.  If Branson did believe
BA had been anti-competitive he should not have settled for an apology.
It's like allowing me to mug his mother-in-law then offering not to
report the matter if I say sorry.

I noticed another couple of nice lines in the article:

Kane spoke to Brian Basham, the BA publicity consultant Branson wanted
fired as part of a settlement with BA.  Basham provided Kane with
information but stressed the strengths as well as the weaknesses of
Virgin.  There was not a whiff of dirty tricks, just standard
commercial lobbying.  It happens all the time, particularly in bid.

Monday 16 March 1992

On Monday morning I immediately wrote to Colin Marshall enclosing the
tape recording:

Last Thursday, even while talks were taking place, a tape was sent
anonymously to Virgin Atlantic.  It contains a recording of a private
conversation between yourself and Robert Ayling about Virgin Atlantic
and other matters.

I told him how the Sunday Telegraph had called me up with a view to
publishing a story about Virgin employing private detectives.

I don't know who within British Airways is continuing to supply
misinformation about us, but please can we have this stopped once and
for all.

Someone seems to be playing some mighty dangerous games.

That afternoon Joan Thirkettle from ITN called me.

"I tried to get Lord King on to television to debate the dirty tricks
with you," she said.

"Did he agree?"  I asked.

"No, he said that he didn't debate with losers."

I'd had enough.

Tuesday 17 March 1992

I wrote to Lord King and told him that his assertion in his letters
back to viewers of "Violating Virgin?"  was totally untrue.  I pointed
out that it was seriously damaging and deeply insulting to both Virgin
Atlantic Airways and myself.  I also set a deadline:

By this letter I am asking that, no later than close of business on
Wednesday 18 March, both you and British Airways formally withdraw the
assertion that I have said things which are untrue for the purpose of
obtaining publicity and apologise to Virgin Atlantic Airways and myself
for having made such an assertion.

Wednesday 18 March 1992

I hardly bothered to wait for an answer on Wednesday.

I knew that Lord King would never apologise.  Indeed, even if he lost a
libel action I didn't expect an apology.

I sat at home in a mounting fog of panic and despair.  I was going to
have to put my reputation in the hands of the law.  We were certain to
win, I felt sure, but the law courts are rarely reliable and always
funny places.  If I lost, then Virgin Atlantic would probably lose so
much credibility that it would have to fold.  No matter what
"Violating Virgin?"  had concluded, no matter what evidence Ronnie
Thomas, or Peter Fleming or Yvonne Parsons gave, if I lost the court
case my reputation would be in shreds and everyone would turn against
Virgin Atlantic.  British Airways would be able to make a mockery of us
and the press would be along to finish us off.  And, down the drain
with the airline, I would flush away my chances of anything else I
wanted to do.

Although I felt supremely confident that we would win, the stakes were
high enough to give -me a sense of vertigo.

By 6 p.m. on Wednesday I had not heard anything from BAI checked the
fax machine one last time.  I even stooped down and ran my hand
underneath the desk in case a fax had come in and been blown
underneath, but there was nothing there.

"Penni," I asked, 'please can you give me Freddie Laker's number in
Miami?"

I dialled the number.

"Freddie," I said.

"It's Richard here.  I've decided to take your advice: I'm suing the
bastards!"

"Go for it!"  said Freddie.

As we embarked on the court case, the single thing that I had to keep
reminding myself was that this was a libel case, not an argument over
business practices.  I had to clear my name.

Marshalling the evidence happened in three stages:

we had all our own evidence which we already knew;

we received a vast collection of documents from British Airways under
the rules of legal disclosure; and a great deal of evidence began to
materialise from disillusioned British Airways staff.  It was this
evidence that was the most powerful.

Out of the blue, Gerrard received a call from an ex-BA employee called
Sadig Khalifa who had worked in the airline industry since 1974, when
he was employed by British Caledonian in Tripoli.  When British Airways
took over B-Cal in 1988, Khalifa joined a division within BA called
Special Services which dealt with any special passenger problems.  In
1989 he started work as a check-in agent at Gatwick Airport and then
joined the Helpline section, which was ostensibly there to meet BA
passengers, help them transfer between flights, and look after elderly
people.  Another more clandestine activity was to try to poach other
airlines' passengers.

There was an equivalent team at Heathrow nicknamed the "Hunters'.

In April 1990 the Helpline team was taken over by Sales and
Reservations and the new boss, Jeff Day, came into the Helpline office
and announced to Khalifa and his team of fifteen staff that 'money
doesn't come from helping old ladies to the gate.  What you have to do
is get out and get more passengers from other airlines."

Khalifa told Gerrard about a second meeting in August which Jeff Day
specified had to be a 'closed meeting'.

no non-Helpline staff could attend or were to hear about it.

At this meeting, Jeff Day told Khalifa and his colleagues that Helpline
had a new task: to accumulate as much information about Virgin Atlantic
as possible.

This included flight information: the number of passengers booked on
flights, the actual number of passengers who went on board the
aircraft, the mix between upper class and economy, and the time of
departure.  At the end of each shift the Helpliners had to fill out a
form on each flight and personally give it to a Mrs.  Sutton, who gave
it to Day.  And how were they to get the information?  Jeff Day told
the Helpliners that they could get it by using the Virgin flight
numbers to gain direct access to the British Airways Booking System,
known in the trade as BABS.  This was something they had assured Virgin
that they wouldn't do.  The locks on the Helpline room were changed,
and they were to keep the nature of their activities secret.

One woman working alongside Khalifa refused to join in these activities
since she thought that they were immoral, and the rest of the team
covered for her.

Gerrard took a statement from Khalifa, and we sent it across to British
Airways.  It was set to become one of the main planks of the court
case.

Immediately after Khalifa's affidavit arrived with BA's lawyers, I
received a call from Michael Davis, aBA non executive director who was
a long-standing friend of my parents.  He asked me whether we could
meet for breakfast.

At our meeting, Michael began talking about 'egg on face'.  This was
the first hint of apology.  He had obviously been singled out as the
one non executive who could talk to me.  Lord King and Sir Colin
Marshall were still clearly unwilling to bring themselves down to my
level and acknowledge that there was any truth in my accusations, but
Michael Davis -as a family friend -had been designated the person who
could best finesse the difficult idea that BA might have made some
mistakes.

"I think the three of us should have a little chat," Michael said.

"A little chat.  The three of us -you, me and Sir Colin."

"Sir Colin?"

"Yes, he's going to be around for the next ten years, you see.  You
see, the King is dead; long live the Marshall.  I think it would be a
sensible thing to do to meet up, the three of us, and see if anything
sensible can come out of it."

I watched Michael Davis grope for the appropriate words.  Reading
between the lines, he was telling me that Lord King's days at British
Airways were over.

"You see, certain people at British Airways recognise that there's been
a certain amount of egg on face," he confessed.

"There has been an acceptance of that egg, but if we're going to have a
sensible relationship in the future I think you, me and Sir Colin
should sit down together."

As I listened to his tortured syntax and his attempt to offer me a
deal, I realised that I was listening to someone talking about somebody
else's money and somebody else's livelihood.  Michael Davis, Sir Colin
Marshall, Robert Ayling and Lord King would receive their salaries no
matter what they had initiated at British Airways.  The BA shareholders
would stump up money to pay for Brian Basham, to pay for the
detectives, and to pay for their lawyers when I sued them.  Perhaps it
was a good investment: if they had managed to put Virgin Atlantic out
of business it would have been money very well spent.  But Virgin
Atlantic was primarily my own company.  It was a private company and,
if BA poached an upper-class passenger to New York, that was 3,000
pounds that Virgin would lose: 3,000 pounds that we couldn't reinvest
in the business.  And, unlike BAI had no vast corporate reserves I
could draw on to fund salaries.  So, for all his talk of 'egg on face',
Michael Davis was missing the point: BA had tried very hard to put me
out of business and my staff out of their jobs.  They had also forced
me to sell Virgin Music, which had affected a whole group of other
people who had nothing to do with the airline.  It made me furious.

I was not going to sit back over a gentleman's breakfast and agree that
it was all just a certain amount of 'egg on face'.

4 79 Throughout the entire dirty-tricks episode I had been accused of
being 'naive': naive to believe that British Airways could behave in
such a manner, naive to think that British Airways would ever stop
behaving in such a manner, naive to believe that I would ever be able
to bring British Airways to court, naive to think for a moment that I
could win a court case.  The word 'naive' echoed round and round in my
head and at some points had almost undermined my resolve to go on.  Sir
Michael Angus told Sir Colin Southgate that I was naive to take on
British Airways 'as if it was a Boy's Own story';

Jeannie Davis told my parents that "Ricky should learn to take the
rough with the smooth'; and even people like Sir John Egan of the BAA
told me 'not to shake the money tree'.  Perhaps I was naive in fighting
for the justice I wanted; perhaps it was idealism; or perhaps I was
just plain stubborn.  But I knew that British Airways' activities were
unlawful and I wanted compensation.  I was determined to make all those
people, who had dismissed my stance as 'naive', eat their words.

I called Gerrard Tyrrell after the breakfast and told him how
sympathetic and persuasive Michael Davis had been.

"Rubbish," he retorted.

"BA had the chance to settle at the beginning but they didn't.  It's
only because their lawyers are now looking into a black hole of guilt
that they're being forced to consider settling."

I had never heard Gerrard sound so angry.

"You'll never have a better opportunity than now to nail them," he went
on.

"Don't cave in now."

"Just testing you," I said.

"Of course I won't cave in."

The next week we met George Carman, our formidable QC who was preparing
our case.  With his white hair and impeccable manners, George seemed
like everyone's favourite uncle outside the courts.

Inside, he had the subtlety, tenacity and killer instinct of a praying
mantis.  People went to extraordinary lengths to avoid him.

"What do you think of my opening line of address?"

George asked us.

"The World's Favourite Airline has a favourite pastime.  It's called
"shredding documents which are liable to be misconstrued"."

I called Michael Davis and told him that I couldn't agree to let my
accusations slip under the carpet.  The court case was set to start in
January and the British Airways directors would be cross-examined by
George Carman.  I didn't even need to hint at how much George Carman
would relish this.  Sobered by this prospect, Michael Davis put down
the phone.

By now I felt really confident that we could beat BA.  Not only had we
discovered so much about their dirty tricks, we had also found out
details of an extraordinary BA undercover operation.

Someone contacted my office to say that he had some information about
an undercover operation set up by BA involving various private
detectives.  He said that he had a computer disk containing a diary of
everything the private detectives had done.  He insisted that I meet
him personally before he handed over the disk.

I felt rather strange as I climbed into the car with one of my
assistants, Julia Madonna.  This was partly due to the fact that I was
wearing a microphone hidden in my crotch area so that I could tape my
conversation with the contact.  I knew how vital the tape of Brian
Basham's meeting with Chris Hutchins had been, and I wasn't going to
leave anything to chance with this meeting.

When I set up Virgin Atlantic I had no idea that I would have to resort
to James Bond-style activities in order to run it!

I scribbled in my notebook as our contact talked:

Trying to find out what we were up to but didn't want to give that
impression.  Not at Lord King's level .  Being careful not to be seen
to do any investigation only putting up de fences

Most importantly, our contact gave us the computer disk.  When I had it
printed out it was a revelation.  The private detectives had kept an
extremely detailed log of what they had been up to and who they had
been reporting to at British Airways.  The log revealed that the
operation had been code named "Covent Garden'.

The first entry, dated 30 November 1991, stated, "First sight of
Project Barbara report seen in Si's office in Enserch House "BA's
central-London HQ."

"SI' turned out to be the code name for David Burnside, and "Project
Barbara' was the report on Virgin that Basham had given to Chris
Hutchins.

Most of BA's top management had been named, but they had been given
alphanumeric references so that their real names never appeared in
print.  I found it relatively easy to establish who was who: Lord King
was "LK' or "Cl';

Colin Marshall was "C2'; and Basham was "S2'.  There were others, "Rl'
and "R2', who were unknown to us.  They turned out to be the private
detectives, Nick Del Rosso and Tom Crowley, who were leading the team
under the guise of trying to find the mole inside BA who was leaking
information to us.  Operation Covent Garden was supposedly run by Ian
Johnson Associates, 'international security management consultants'.
The log detailed how Johnson and Del Rosso briefed BA's director of
security, David Hyde, and the legal director, Mervyn Walker, on the
progress of operation Covent Garden.  It also recorded meetings with
Robert Ayling and Colin Marshall.

The log contained astonishing details of how the team of detectives
had convinced some of BA's senior management that we were running an
undercover operation against BAThe amount of money they estimated we
were spending on our nonexistent operation was 400,000 pounds pence. We
later found out that BA was spending 15,000 pounds a week on Covent
Garden.

The sheer absurdity of the operation was revealed by details of how the
detectives had staked out the Tickled Trout Hotel in Lancashire with
secret cameras and sound-recording equipment.  The idea was to secretly
record a meeting between Burnside and an 'agent' that the Covent Garden
team had convinced themselves was working for Virgin.  The log recorded
how their plans came unstuck when Burnside failed to turn on his
bugging device!  I could have spared BAthe trouble: I never have
employed private detectives and never will.

That is not how I or Virgin operate.

When I had finished reading the Covent Garden log I felt as if I had
returned from a parallel universe one created in the imaginations of
BA's hired conspiracists and senior management at the cost of thousands
of pounds.  I really began to look forward to the libel case, which was
being heralded as the 'mother of all libel trials'.

7 December 1992

"BA have collapsed," George Carman told me.

"They have today paid just under half a million pounds, 485,000 pounds
to be precise, into court.  They've admitted in effect that they're
entirely guilty as charged."

We later discovered that, just before the court case was due to start,
BA's lawyers had told them that they had no hope of winning.  If they
wanted to avoid the humiliation of having to stand in the witness box
and be cross-examined by George Carman, and seeing all their activities
written up in the press, then their only option was to make a payment
into the court and start negotiating an out-of-court settlement.

At first I was in two minds over whether to accept the money.  I was
innocent, and we could put all the BA directors in the witness box and
destroy them.  But then, as we talked about it, I realised that,
although this was tempting, such a move could be seen to be vindictive
and was highly risky.

"You've got to remember why you brought this case."

George Carman advised me.

"You wanted the dirty tricks to stop and you wanted to clear your name.
BA have admitted that you are totally right.  You've cleared your
name.

"If you persist with the case, then two things may go wrong.  The jury
might award you damages but they might think that you were such a rich
man that you didn't need 500,000 pounds and just award you 250,000
pounds pence.  That would be seen as a failure for you and a triumph
for British Airways.  If the jury award you less than British Airways
have paid into court, then you will have to pay both sets of costs.  So
you may win the case but lose a lot of money, and people will be
confused as to why Virgin Atlantic has to pay 3 pounds million of
costs."

This last part of George's advice was very persuasive.

Although in some ways my decision to settle out of court could be
something of an anticlimax, in that we wouldn't have the satisfaction
of watching George Carman cross-examining the directors, by deciding to
accept BA's offer we won a completely clear-cut victory with no risks
attached and were immediately free to get on and run the business.

"What do we have to do now, then?"  I asked.

"We have 21 days in which to take the money out of court if we're
going to accept it."

"So we'll do that?"

"Good Lord, no," George said, looking shocked.

"I'm not going to accept it.  I'm going to get them to give us at least
600,000 pounds pence.  If they've given 485,000 pounds they can go up
to 600,000 pounds pence.  Every 100,000 pounds makes an inch bigger
headline."

George spent a week negotiating over the payment.

On 11 December 1992 we agreed the terms of the highest uncontested
libel payment ever made in British legal history: 500,000 pounds to me
personally to compensate for the personal libel, and 110,000 pounds to
Virgin Atlantic to compensate for the corporate libel.

11 January 1993

'virgin screws BA' was the Sun's headline.  There wasn't much room for
anything else on the front page.

"I'd have preferred it the other way round," Kelvin MacKenzie, the
Sun's editor, told me.

"It would have made a better headline."

I was in George Carman's chambers with Gerrard Tyrrell and my father,
whom I was delighted to share in the triumph.  We walked round to the
High Court in the Strand and jostled our way through the mass of
photographers outside.  The corridor outside court eleven, where the
hearing would take place, was teeming.  Inside the court it was very
quiet.  British Airways were noticeable by their absence: Lord King,
Sir Colin Marshall and Robert Ayling, the three main protagonists,
weren't there.  David Burnside was absent.

Brian Basham had gone abroad, but his lawyers were there making a
last-ditch attempt to have his name removed from the statement of
apology.  The judge listened to the plea and then asked British
Airways' counsel their opinion.  They agreed with Virgin that Brian
Basham's name should be included in the apology.  The judge ruled that
the apology should stand as prepared.

George Carman stood up and read the agreed statement.  When he came
towards the end, there was complete silence in court:

"British Airways and Lord King now accept unreservedly that the
allegations which they made against the good faith and integrity of
Richard Branson and Virgin Atlantic are wholly untrue.  They further
accept that Richard Branson and Virgin had reasonable grounds for
serious concerns about the activities of a number of British Airways
employees, and of Mr.  Basham, and their potential effect on the
business interests and reputation of Virgin Atlantic and Richard
Branson.  In these circumstances, British Airways and Lord King are
here now by leading counsel to apologise and to make very substantial
payments to the plaintiffs by way of compensation for the damages and
distress caused by their false allegations.  They also seek to withdraw
their counterclaim against Virgin Atlantic and Richard Branson.

"In addition, British Airways and Lord King have agreed to pay Richard
Branson and Virgin Atlantic's legal costs in respect of the claim and
the counterclaim and have undertaken not to repeat the defamatory
allegations which are the substance of this action."

George Carman paused and took a breath.  The court held its breath.

"British Airways and Lord King are to pay Richard Branson 500,000
pounds damages and are to pay Virgin Atlantic 110,000 pounds
damages."

George had to raise his voice to make himself heard above the sudden
noise in the court:

4 8 6"In the light of the unqualified nature of the apology and the
payment of a very substantial sum by way of damages, Richard Branson
and Virgin Atlantic consider that their reputation is publicly
vindicated by agreeing to settle the action on those terms."

I saw tears running down my father's cheeks as he listened to the
settlement.  He had a large silk handkerchief in his breast pocket and
he took it out to wipe his eyes.  I clenched my fists under the table
to stop myself from jumping to my feet.

The single jarring note was in the British Airways apology when,
although they apologised unreservedly, they then went on to absolve
themselves of any blame:

"The investigation which British Airways carried out during the course
of this litigation revealed a number of incidents involving their
employees which British Airways accept were regrettable and gave
Richard Branson and Virgin Atlantic reasonable grounds for concern.  I
should however like to emphasise," their counsel said, 'that the
directors of British Airways were not party to any concerted campaign
against Richard Branson and Virgin Atlantic."

A number of people in the court snorted with derision.  It had been the
one phrase that British Airways had refused to take out of the
apology.

"Let them leave it in," George Carman had finally advised me.

"People will see exactly what it really means.

We haven't heard the last of that word "concerted"."

Then, with the judge's permission, Basham's counsel stood up to point
out that his client did not accept that the references to him in the
foregoing statement were an accurate summary of his actions on behalf
of BA.

Outside, in the mad hustle of journalists and photographers, I held up
both hands and shook my fists in triumph.

4 87 "I accept this award not only for Virgin," I said, 'but also for
all the other airlines: for Laker, for Dan Air, Air Europe and B-Cal.
They went under and we survived British Airways, but only just."

Back at Holland Park the party started.  I decided to share the 500,000
damages which had been given to me among all the Virgin Atlantic staff,
since they had all had to suffer from the pressure which British
Airways had put us under, in the form of reduced salaries and cuts in
their bonuses.  The television was on in the corner and every news
programme covered the Virgin success as the main story of the day.  ITN
even interviewed Sadig Khalifa and Yvonne Parsons.  The party stopped
to cheer them momentarily, and then went on.

Much later, I was in the middle of talking to someone when a wave of
exhaustion hit me.  I realised that we had won.  All the stress relaxed
out of my shoulders; I smiled a wide, happy, contented smile, toppled
sideways and fell deeply asleep.

Feeling on top of the world, I went off to our hotel in Majorca, La
Residencia, with Joan, Holly and Sam to celebrate.  The press had been
photographing me all week, and I felt that we were on the crest of a
wave that would transform Virgin over the forthcoming years.  We could
take on the world.

I was lying by the side of the pool one morning, reading all the press
cuttings about Virgin which had been faxed over to me and trying not to
let everything go to my head, when a young couple came up to me.

They coughed nervously to attract my attention.

"Excuse me," they said, proffering a camera.

"Would you mind?  We'd love a photograph."

I smiled at them.

"Of course not," I beamed, standing up and grinning.

I brushed back my hair.

"Where do you want to take it?"

"Just here would be nice," they said.

I went and stood with my back to the swimming pool, puffed out my chest
and pushed back my hair.

"About here?"  I asked them.

To my surprise, they were looking confused.  They whispered together.
Instead of pointing the camera at me, I realised that they were holding
it out towards me.

"Sorry," the husband said.

"We were hoping that you could take our photograph.  I'm Edward and
this is my wife Araminta.  What's your name?"

Epilogue Virgin territory

Nineteen ninety-three was a watershed for Virgin.

From that moment onward, and for the first time, we had the luxury of
money; and in "Virgin' we had a strong brand name which could be lent
to a wide variety of businesses.  We faced uncharted territory, but at
last we could afford to follow our instincts, rather than spending all
our time persuading others to do so.  Once we had made the lateral and
surprising jump from Virgin Records to Virgin Atlantic, we could try
our hand at anything.  We were a long way from when we first copied out
an old record contract on the houseboat and signed Mike Oldfield. Times
had changed and now we had $500 million in the bank.

At this point I could of course have retired and concentrated my
energies on learning how to paint watercolours or how to beat my mum at
golf.  It wasn't in my nature to do so.  People asked me, "Why don't
you have some fun now?"  but they were missing the point.

As far as I was concerned, this was fun.  Fun is at the core of the way
I like to do business and it has informed everything I've done from the
outset.  More than any other element, fun is the secret of Virgin's
success.  I am aware that the idea of business being fun and creative
goes right against the grain of convention, and it's certainly not how
they teach it at some of those business schools, where business means
hard grind and lots of 'discounted cash flows' and 'net present
values'.

Even though I'm often asked to define my 'business philosophy, I
generally won't do so because I don't believe it can be taught as if
it's a recipe.  There aren't ingredients and techniques that will
guarantee success.

Parameters exist that, if followed, will ensure a business can
continue, but you cannot clearly define our business success and then
bottle it as if it's a perfume.

It's not that simple: to be successful, you have to be out there, you
have to hit the ground running, and if you have a good team around you
and more than your fair share of luck you might make something happen.
But you certainly can't guarantee it just by following someone else's
formula.

You just need to look at where Virgin is now to see that business is a
fluid, changing substance.  As far as I'm concerned, the company will
never stand still.  It has always been a mutating, indefinable thing
and the past few years have demonstrated that.  When I began writing
this book a couple of years ago, Virgin was not involved in many of the
businesses that now take up so much of my time.  It is only when you
come to write a book such as this that you discover how far you still
want to go.  As a result, rather than endlessly trying to make this
book keep pace with the explosive growth of Virgin in the years since
1993, I wanted to publish what I have managed, in business terms, to
finish so far.

That's how I see this book: a comprehensive account of the first
forty-something years of my life -the struggling years -but also a work
and a life in progress.

There is much that has happened since 1993 that reflects my outlook on
life and on business, but the detail of it is for another book.  Since
1993 Virgin has expanded, perhaps more quickly than any other European
company, and has developed radically in the process.  Our way of doing
business may remain the same, but the context has changed
dramatically.  For now, I would like to give an impression of where
Virgin is and outline some of the elements that are as important now in
the closing years of the century as they have always been for the
company over the past 25 years, rather than attempt an endless and
terminally complex analysis of business strategy.  This book was never
intended to be as dry as a balance sheet, but will, I hope, give an
idea of what has been important to my life and to the people around me
thus far.

After the sale of Virgin Music and our victory over British Airways in
January 1993, I realised that for the first time in my business career
I had climbed the wall and could at least peer into the promised land.
It hadn't always been possible.  For anyone who starts without
financial backing there is a very thin line between success and
failure.  Survival is the key priority.  No matter how many successes
Virgin had, there was always the danger that the cash would run out.
Virgin has made money, but I have always invested it in new projects in
order to keep the company growing.  As a result, we rarely had the
luxury of spare cash to use as a cushion.  Over the years we have clung
on through three recessions; we have suffered losses; we have closed
down some businesses, and in one instance we had to make some staff
redundant; but after 1993 no bank would ever again be able to dictate
to us how to run our business.  We had financial freedom.  I was one of
a rare breed: most entrepreneurs don't manage to survive that far or
for that long.

In the process of gaining that freedom, we had to overcome all kinds of
obstacles thrown without warning into our path.  When we were
established as a mail-order record company, and thus dependent on the
post, out of the blue came a six-month postal strike.  If we hadn't
reinvented ourselves, we would have gone bust.  There was no choice.
Within days of the strike, we had opened our first Virgin Records shop.
It may have been up a dark, narrow flight of stairs above a shoe shop
and have consisted merely of some shelves, a shabby sofa and a till,
but in its own small way it taught us all we now know about retailing.
I can draw a straight line between that tiny shop and the Virgin
Megastores in Paris and New York.  It's just a matter of scale -but
first you have to believe you can make it happen.

In the same way, as the record label gathered momentum through those
early years, every deal was make or break.  We may have failed to sign
10cc, but we were still willing to put the company on the line when we
tried again with the next band.  We launched the airline on a wing and
a prayer, and when the engine blew up on our test flight it could have
been over before it had begun.  We were lucky: each time something went
wrong, we were the smallest jump ahead of the banks.

However tight things are, you still need to have the big picture at the
forefront of your mind.  The most vivid proof of this came during the
depths of the recession in 1992.  At the time, I was trying to raise
money to install individual seat-back videos in all our aircraft I have
always believed that Virgin should offer the best in-flight
entertainment.  We needed $10 million to install the equipment.  Nobody
at Virgin Atlantic could raise the necessary funding, and we were all
sitting down at Crawley one day in despair, on the point of giving up,
when I thought I would try one last gamble.

Nervously, I picked up the telephone, called Boeing and asked to speak
to the CEO, Phil Conduit.  I asked him whether, if we bought ten new
Boeing 747-400s, he would throw in the individual seat-back videos in

4 93 economy class.  Phil was amazed that anyone was thinking of
buying planes during that recession, and he readily agreed.  I then
called Jean Pierson at Airbus, and asked him the same question about
the new Airbus.  He, in similar financial straits, also agreed.  After
a few further inquiries, we discovered that it was easier to get $4
billion credit to buy eighteen new aircraft than it was to get $10
million credit for the seat-back video sets.  As a result, Virgin
Atlantic suddenly had a brand-new fleet of planes, the youngest and
most modern fleet in the industry, at the cheapest price we've ever
been able to acquire planes before or since.

Many people ask me what the limits to Virgin are, and whether we
haven't stretched the brand name beyond its natural tolerance.  With
monotonous regularity, they point out that there is no other company in
the world that puts its name to such a wide variety of companies and
products.  They are absolutely right, and it's something of which I am
proud.

It doesn't stop me thinking about the question nonetheless, and the
answer is not easily explicable.  I have always lived my life by
thriving on opportunity and adventure.  Some of the best ideas come out
of the blue, and you have to keep an open mind to see their virtue.
Just as an American lawyer called me to suggest setting up an airline
in 1984, a Swedish ballooning fanatic asked me to fly across the
Atlantic with him in 1987.  The proposals come in thick and fast and I
have no idea what the next one will be.  I do however know that, if I
listen carefully enough, the good ideas somehow all fit into the
framework which Virgin has become.  By nature I am curious about life,
and this extends to my business.  That curiosity has led me down many
unexpected paths and introduced me to many extraordinary people.
Virgin is a collection of such people and its success rests on them.

Virgin has always had a life of its own and I have always tried to
think ahead with it.  When I tried to sell Student to IPC Magazines,
they shied away from me because I started talking about all the other
business opportunities I wanted to explore: a Student travel company
which would offer cheaper travel than the existing airlines, a Student
bank because I thought that students were being ripped off when they
had no income to protect them.  I even wanted to hire trains from
British Rail because their tickets were so expensive and their trains
always late.  Even then I was attempting, with limited resources, to
explore what was possible by wanting to go into some of these
businesses and turn them upside down.  At the time, it was all
theoretical and beyond my capacity, but some interesting ideas emerged
from the process.  I may be a businessman, in that I set up and run
companies for profit, but when I try to plan ahead and dream up new
products and new companies I'm an idealist.

My grandiose plans didn't work for Student.  But at the start of 1993 I
was once again ready to start pushing at the barriers.  This time it
was rather different: I didn't have just a few pounds in the Student
biscuit tin which we ended up spending on take away curries, but a
treasure chest of hundreds of millions of pounds.  In an intoxicating
moment, everything seemed possible.  We had the finance, and even more
importantly we had the name, "Virgin', which already had a track record
of reinventing itself.  There was nothing to stop us becoming something
else.  The land ahead was all Virgin territory.

I could give free rein to my own instincts.  First and foremost, any
business proposal has to sound fun.  If there is a market that is just
served by two giant corporations, it appears to me that there's room
for some healthy competition.  As well as having fun, I love stirring
the pot.  I love giving big companies a run for their money -especially
if they're offering expensive poor-quality products.  In 1993, there
were already scribblings in my notebook about the possibility of
launching a range of Virgin soft drinks, led by Virgin Cola, which
could take on the might of Coca-Cola, one of the world's top-ten
companies.  The Cott Corporation specialises in bottling own-label
colas and was looking for a brand that could have global appeal.

"You've got the X factor, the Y factor -you've got every factor there
is," Gerry Pencer, the chief executive of Cott Corporation, said to
me.

"People like Virgin; they trust the name; they'll buy a product because
it's a Virgin product.  So how about it?  We've got the recipe;

you've got the name.  What do you say to Virgin Cola?"

The strong points about Coca-Cola and Pepsi are all too obvious.
Coca-Cola is the world's best-known brand name.  It is also the most
profitable company in the world.  It has only one competitor: Coke has
40 per cent of the American market; Pepsi around 30 per cent.

Outside the States, Coke completely dominates.  Both companies spend
billions of dollars a year advertising their products, and some of
their best advertisements remain in the public consciousness even
now.

But, when I studied the business closely, I could see some chinks in
their armour.  The most simple analysis will tell you that Coke is only
a fizzy drink with a massive marketing budget, and that simplicity
makes the market vulnerable.  There are some serious uncertainties over
what the 'real thing' is.  Coca-Cola pulled the original Coca-Cola out
of circulation and launched New Coke, a recipe that they said tasted
better.  The reaction from American consumers forced Coca-Cola to
reissue their original recipe under the name Classic Coke.  But the
seeds of doubt were sown.

If Coca-Cola admitted that Classic Coke was not as good as New Coke,
then, by definition, another cola recipe might be even better.  To my
mind, the spell had been broken.

On the other side of the duopoly, Pepsi looked the weaker partner.
Significantly, when we launched Virgin Cola, Pepsi were the first to
respond: they changed the colour of their cans from predominantly red
to predominantly blue.  It seemed that we had hit a raw nerve.  Even
so, there was still some resistance to the whole enterprise within
Virgin.  Understandably, people were protective of our brand name.  It
was only the first of many objections as to its usage.

As usual when people warn me against doing something once my mind is
made up, I grow increasingly determined to try it.  In this case we all
recognised that it would be an inch-by-inch fight along the shelves of
the supermarkets but, once we established that there was minimal
financial risk if we failed, we decided to proceed.  We knew that the
product was as good as either Coke or Pepsi, and the first blind
tasting we had at the local school, which was followed by many across
the country, established that most people preferred Virgin Cola to the
others.  And so we went into Virgin Cola.  Within a few months we were
selling 50 million worth of Virgin Cola across the country.  We've
launched in France, Belgium and South Africa, and we're now taking on
Coke in their homeland.  We've even got a Virgin Cola machine right
underneath the Coke sign in Times Square, New York.

Looking to the future, I have no idea whether Virgin Cola will become a
global leader in soft drinks or not.

As with all of our businesses, I keep an open mind.  But I do know
that Virgin Cola is indicative of the Virgin philosophy, and beneath
all the fun and razzmatazz of selling it there is a sound business
plan.  The decision to launch Virgin Cola was founded on three key
things:

finding the right people, the positive use of the Virgin brand name,
and protection of the downside.

The business plan for Virgin Cola is clear: we will never lose much
money selling Virgin Cola.  It is so cheap to produce that, unlike most
other products, the manufacturing cost is negligible.  We can therefore
balance the advertising and distribution costs directly against the
sales.  One look at Coca-Cola's balance sheets is enough to reveal what
a profitable business it is, and with that kind of margin there must be
plenty of room for someone else to come in with a decent cola to sell
alongside Coke and Pepsi.

Once I was convinced that we had protected the downside -which is
always my first concern -the other significant question to resolve was
whether the move into Virgin Cola really enhanced the Virgin brand
name.  Despite objections from colleagues, I was persuaded that cola
has a number of attributes that people associate with Virgin: fizz, fun
and freedom.  Not only that, but ours was a better, cheaper cola than
the others.  We thrive on the fact that we are small and a newcomer up
against the two giants.

"All right," people admit, when they hear this explanation.

"I can see that cola is fun.  It's fizzy and profitable and fits the
Virgin image.  But surely not life insurance?  What on earth are you
doing selling life insurance, mortgages and investments?"

I have to admit that some healthy discussions about life insurance took
place before we decided to launch Virgin Direct.

"Life insurance?"  everyone snorted when they heard the idea.

"People hate life insurance.  All the salesmen seem so unscrupulous,
barging into your home and taking secret commissions.  It's a terrible
industry.  It's definitely not a Virgin kind of business."

"Exactly," I said.

"It's got potential."

It is no secret that I love playing devil's advocate.  I could see all
the bad points about the financial-services industry.  The idea of
setting up Virgin life insurance and a Virgin bank would have horrified
our original staff at Albion Street, or our customers who lounged about
on the beanbags at the record shop.  And yet, whenever I see people
getting a bad deal, I want to step in and do something about it.  Of
course, this is not pure altruism -there's a profit to be made too. But
the difference is that I'm prepared to share more of the profit with
the customer so that we're both better off.  The maverick in me was
also quietly amused that the guy who brought you The Sex Pistols could
sort out your pension too.

Another part of me was equally amused by the idea that we were going to
set up our own bank to give those very banks that nearly foreclosed on
us a run for their money.

My attention was first brought to the financial services industry by
Rowan Gormley, who was a venture capitalist I had asked to work for
Virgin to identify new business opportunities.  One of the first things
he did was review the Virgin pension policy, which he told me made no
sense.  When he asked six different pension advisers to give quotes as
to how best to restructure it, he was the bemused recipient of six
different answers.

"I don't understand it," he told me.

"I've three degrees in finance, but none of what they're saying makes
sense."

Instinctively, I felt that the world of financial services was
shrouded in mystery and rip-offs and that there must be room for Virgin
to offer a jargon-free alternative with no hidden catches.

As with our other ventures, we needed a partner who both knew the
industry and could put up the money to go alongside the Virgin name.
Despite some of our past difficulties, I still believe that a
fifty-fifty partnership is the best solution to financing.  When
something goes wrong, as it invariably will at some point, both
partners have an equal incentive to put it right.  Such is not always
the case.  At worst, such as with Randolph Fields, Virgin will buy out
the partner entirely.  At best, as with Marui, our partner with the
Megastores in Japan, it stays at fifty-fifty and both sides remain
content.  In between these poles there can be many variations and we
have tried out most combinations.  Ultimately you never know what to
expect when dealing with other people and, although you might both
appear to go into a project with the same enthusiasm, situations can
change.  Knowing when and how to renegotiate a contract is all part of
the challenge of business.

Virgin Direct, our financial-services company, started off with Norwich
Union as a fifty-fifty partner.

After Virgin entered the financial-services industry, I can immodestly
say it was never to be the same again.

We cut out all commissions; we offered good-value products; and we were
practically trampled by investors in their rush to buy.  We set up a
new office in Norwich rather than renting a gleaming tower block in the
City of London.  We never employed fund managers, some of the world's
most highly paid people, since we discovered their best-kept secret
-they could never consistently beat the stock-market index.

We launched aggressively and the initial signs were good, but in spite
of our success we realised that we were going faster and further than
was comfortable for Norwich Union.  It looked like we would be three
times the size we had originally predicted.  After a short time we
arranged for Norwich Union to sell their shareholding to a partner who
shared our ambitions, Australian Mutual Provident, AMP.  Together with
AMP and our great team at Virgin Direct, we have now cut a broad swathe
through the financial-services jungle.  From a standing start in 1995,
it is staggering to think that Virgin Direct has become the country's
most popular PEP, and 250,000 people have trusted us with over 1 pound
5 pence billion.

The success of Rowan Gormley and his vision for Virgin Direct
illustrates one of the great strengths of the Virgin Group: we thrive
on mavericks.  The quality that recognised in Rowan when I first asked
him to work for Virgin was that he would make things happen.  When he
started work perched at a desk on a half-landing at Holland Park,
neither of us had any idea that a few months later he would start up a
financial-services company.  When -unsurprisingly, with hindsight -he
alighted upon financial services, we arranged a company structure that
gave him and his team a shareholding in the business and let him get on
with it.

Like all the managers of Virgin companies, Rowan has a high incentive
to succeed because he can clearly see the wealth that success will
bring him and his team.

Virgin Direct may appear to be an incongruous departure for Virgin, the
rock and roll company: it was a lateral leap in the same way as it had
been from records to airline.  But it is still all about service, value
for money and offering a simple product.  The vision I have for Virgin
does not run along the orthodox lines of building up a company with a
vast head office and a pyramid of command from a central board of
directors.

I am not saying that such a structure is wrong -far from it.  It makes
for formidable companies from Coca-Cola to GEC to British Airways.  It
is just that my mind doesn't work like that.  I am too informal, too
restless, and I like to move on.

The more diffuse the company becomes, the more frequently I am asked
about my vision for Virgin.  I tend to either avoid this question or
answer it at great length, safe in the knowledge that I will give a
different version the next time I'm asked.  My vision for Virgin has
never been rigid and changes constantly, like the company itself.  I
have always lived my life by making lists: lists of people to call,
lists of ideas, lists of companies to set up, lists of people who can
make things happen.  Each day I work through these lists, and it is
that sequence of calls which propels me forward.  Back in the early
1970s I spent my time juggling different banks and suppliers and
creditors in order to play one off against the other and stay solvent.
I'm still living the same way, but I'm now juggling bigger deals
instead of banks.  Once again it is only a matter of scale.

As anyone in my office knows when I've lost it, my most essential
possession is a standard-sized school notebook which can be bought at
any stationery shop on any high street across the country.  I carry
this everywhere and write down all the comments which are made to me by
Virgin staff and anyone else I meet.

I make notes of all telephone conversations, all meetings, and I draft
out letters and lists of telephone calls to make.  Over the years I
have worked my way through a bookcase of them, and the discipline of
writing everything down ensures that I have to listen to people
carefully.  Flicking back through these notebooks now, I see some
ideas that escaped me: I was asked to invest in a board game called
Trivial Pursuit and a wind-up radio.  But, when I turned down the offer
to become an underwriting name at Lloyds Insurance, my guardian angel
must have been looking after me.

Whenever I'm on a flight or a train or in a record store, I walk around
and ask the people I meet for their ideas on how to improve the
service.  I write them down, and when I get home I look through what
I've written.  If there's a good idea, I pick up the phone and
implement it.  My staff are maddened to hear that I met a man on the
airport bus who suggested that we offer on-board massages and please
can they organise it.

They tease me and call it "Richard's Straw Poll of One', but time and
again the extra services which Virgin offers have been suggested to us
by customers.  I don't mind where the ideas come from as long as they
make a difference.

I also insist that we continually ask our staff for any suggestions
they might have, and I try my hand at their jobs.  When I tried pushing
a trolley down the aisle of a jumbo, I found I crashed into everyone.
When I talked to the crew about this, they suggested that we introduce
a more waitress-style service and keep the trolleys to a minimum.

My vision for Virgin was ultimately summed up by Peter Gabriel, who
once said to me, "It's outrageous!

Virgin is becoming everything.  You wake up in the morning to Virgin
Radio; you put on your Virgin jeans;

you go to the Virgin Megastore; you drink Virgin Cola;

you fly to America on Virgin Atlantic.  Soon you'll be offering Virgin
births, Virgin marriages, Virgin funerals.

I think you should rename Virgin the "In and Out Company".  Virgin will
be there at the beginning and there at the end."

As ever, Peter, who is an astute businessman as well as a gifted
musician, was very close to the truth.  He had no idea at the time that
we had 200 people down in Eastbourne working on a range of Virgin
cosmetics, another team designing a range of Virgin clothes, or that we
were just about to bid for two British Rail franchises which would make
us the largest train operator in Britain.  I doubt that we'll ever go
into Virgin funerals, but Virgin Births has a certain ring to it.  If
there's a good business plan, limited downside, good people and a good
product, we'll go for it.

In some ways it all boils down to convention.  As you might have
noticed, I do not set much store by such so-called wisdom.
Conventionally, you concentrate on what you are doing and never stray
beyond fairly narrow boundaries when running a company.  Not only do I
find that restrictive, I also think that it's dangerous.

If you only run record shops and refuse to embrace change, when
something new like the Internet is launched you will lose your sales to
the person who makes use of the new medium.  It's far better to set up
your own Internet operation to which your record shops lose business
than lose it to somebody else's Internet operation.

This partly explains the jigsaw of companies we have.  As well as
protecting each other, they have symbiotic relationships.  When Virgin
Atlantic starts a flight to South Africa, I find that we can launch
Virgin Radio and Virgin Cola there.  In the same way, we can use our
experience in the airline industry to make buying train tickets easier
and cheaper.  We can draw on our experience of entertaining people on
planes to entertain people on trains.  We can use the cinemas to have
people sample our Virgin Cola.  We can use our vast stock of
entertainment at the Virgin Megastores to make trips to Virgin Cinemas
more fun.  A trip to the cinema used to involve queuing up in the rain
to buy your ticket from a man behind thick plate glass, watching the
movie with one cup of popcorn, and then blundering out through a fire
escape into some back street piled high with litter.  Not any more it
doesn't -and that's because we have put together all the Virgin
experience across retailing, entertainment, food, music, and travel to
make it an easy-to-organise and enjoyable night.

Despite employing over 20,000 people, Virgin is not a big company -it's
a big brand made up of lots of small companies.  Our priorities are the
opposite of our large competitors'.  Convention dictates that a company
looks after its shareholders first, its customers next, and last of all
worries about its employees.  Virgin does the opposite.  For us, our
employees matter most.  It just seems common sense to me that, if you
start off with a happy, well-motivated workforce, you're much more
likely to have happy customers.  And in due course the resulting
profits will make your shareholders happy.

Convention also dictates that "big is beautiful', but every time one of
our ventures gets too big we divide it up into smaller units.  I go to
the deputy managing director, the deputy sales director and the deputy
marketing director and say, "Congratulations.  You're now MD, sales
director and marketing director -of new company."  Each time we've done
this, the people involved haven't had much more work to do, but
necessarily they have a greater incentive to perform and a greater zest
for their work.  The results for us have been terrific.  By the time we
sold Virgin Music, we had as many as fifty subsidiary record companies,
and not one of them had more than sixty employees.

But there is little point in looking back, except to note that, since
then, Ken Berry has consolidated and made Virgin Music the most
profitable jewel in EMI's crown.

For us, we are now free to start again with V2 Records, using the same
techniques and skills.  Our first signing may not be quite as
successful as Mike Oldfield, but The Stereophonies were still named
Best Newcomers in the Brit Awards for 1998 and their future is
bright.

The Virgin way has been to develop many different ventures and grow
organically.  For most of our companies, we have started from scratch
rather than merely bought them ready made.  We want each of the Virgin
subsidiaries to be an efficient, manageable size.

As a result, Virgin is housed in lots of different offices around
Notting Hill Gate in London, Crawley in West Sussex, and Norwich,
keeping the focus tight and maintaining the great sense of team
spirit.

When it comes to setting up new companies, one of my advantages is that
I don't have a highly complicated view of business.  When I think about
which services I want to offer on Virgin Atlantic, I try to imagine
whether my family and I would like to buy them for ourselves.  Quite
often it's as simple as that.

Of course life becomes more complicated when you move away from organic
growth.  In recent years Virgin has bought companies to add to the ones
that we have set up.  The purchase of MGM Cinemas was the first big
acquisition we made, and we also bought two substantial British Rail
train franchises.  While we were able to fix the cinema chain
relatively quickly, the trains will be a much longer-term prospect.  In
some ways we became a victim of our own success in that the train
passengers expected that, as soon as Virgin had taken over the running
of the trains, miraculous change would take place.  Unfortunately, the
logistics of the task

5 0 6 were against us: our two train companies have 3,500 employees
and we needed to build a completely new fleet of trains and negotiate
with Railtrack, the company that owns the railway lines, over how they
could upgrade the tracks and signalling.

Despite a difficult start, we're confident that Virgin Rail will
eventually succeed and offer a cheap, fast, efficient train service.
Each time I get caught in traffic leaving London or trying to get round
the M25 or Birmingham, my confidence in the long-term prospects of the
railways is refuelled.  I am still convinced that, by 2002, rail will
be seen as one of the best things Virgin ever did with its brand.  Our
new 140-mile-an-hour trains will reduce journey times all over the
country, and their comfort and safety will make them the best trains in
Europe, if not the world.

Once you have a great product it is essential to protect its reputation
with vigilance.  It's not just a question of getting it into the
marketplace.  As a result, every day I receive a bundle of press
cuttings -everything that mentions Virgin.  These -and staff letters
-are the first things I read in the morning.  When I launched the
airline, I realised that I would have to use myself to raise the
profile of Virgin Atlantic and build the value of the brand.  Most
companies don't acknowledge the press and have a tiny press office
tucked away out of sight.  If an inaccurate story appears in the press
and is allowed to run for more than one issue of the paper, it becomes
fact.  Then, every time your product is mentioned, this same story will
be repeated.

My reputation has been threatened on two major occasions -first by
British Airways and second by Guy Snowden and his company GTECH, the
driving force behind the creation of Camelot, which won the franchise
to run the British National Lottery.  For both companies I was a
spanner in the works costing them millions of pounds of lost
earnings.

The GTECH incident was a particularly crucial one in terms of
reputation.  I met Guy Snowden at a time when the British Government
had finally agreed to go ahead with the National Lottery.  Various
commercial consortiums were beginning to form, but I felt strongly that
the Lottery should be run by a company who would donate all the profits
to charity.  This would be possible because it would be a monopoly with
no risk involved at all.  I had asked John Jackson, with whom I had
worked on the Healthcare Foundation when he was chief executive of Body
Shop and with whom I had launched Mates condoms, to pull together our
charitable bid.

GTECH was the leading supplier of lottery equipment, so we thought that
we should meet them to see whether they would be interested in
supplying us in the event that their consortium failed to win the
contract.

John Jackson and I met with Guy Snowden for lunch on 24 September 1993.
The conversation we had has since become the stuff of legal legend.
After we reached a stalemate, in that Guy Snowden didn't want to quote
for supplying equipment to us and I didn't want to join his consortium,
there was a pause.  Then Snowden pointed out to us that if we went
ahead with our bid it would cost the GTECH consortium millions of
pounds, since they would have to reduce the percentage they were going
to charge as the operators from the 15 per cent of turnover mentioned
in the government guidelines to 13 per cent and possibly lower.
Assuming that the annual sales of Lottery tickets reached 4 pounds
billion (which they did), each percentage reduction of the operators'
slice was worth 40 pounds million a year.  There was a great deal of
money at stake.

We were sitting in the conservatory in the garden at 11 Holland Park,
and I noticed that he began to sweat.

He shifted in his seat and looked at me.

"I do not quite know how to phrase this, Richard."

I looked across at him, wondering what he was going to say.

"There's always a bottom line.  I will get to the point.

In what way can we help you, Richard?"

I didn't know what to say.  Snowden clarified his intentions.

"I mean, how can we help you personally?"

My mind reeled at the question.  I was being offered a bribe.

"What on earth do you mean?"  I said, astonished and angry and trying
to give him the chance to stop.  But he didn't.

"Everybody needs something in life," Snowden said.

"Thank you," I answered.

"I'm quite successful.  I only need one breakfast, lunch and dinner a
day.  The only way you could have helped is by providing services for
our bid."

And with that I stood up and left the conservatory.  I wanted no
further part in this man's world.  While John and I were trying to pull
together a bid for the National Lottery that was intended to give many
millions of pounds to charity, this man was trying to bribe me to stand
aside and enable his bid to go through, which as well as giving less
money to charity would simultaneously enrich him and his company.  I
bounded down the stairs and into the loo.  There I scribbled some of
the words he had used on to a piece of paper.  I had never been offered
a bribe before.  Then I went back upstairs, and John and I ushered
Snowden out of the house.

"I wasn't mistaken, was I?"  I asked John.

"That was a bribe, wasn't it?"

"It most certainly was," John told me.

Later, John recited how he nearly fell off his chair when Guy Snowden
said those words.  To cut a long story short, in the court case which
ensued the jury found in my favour against Guy Snowden and GTECH, and
my reputation was restored.  In his summing-up, George Carman pointed
out to the court that, above any commercial success one might enjoy,
one's reputation for honesty is the most important thing.  As he said,
Guy Snowden had 'picked the wrong man, said the wrong thing in the
wrong place at the wrong time'.

The litigation with British Airways continues.  In late 1993 Virgin
launched an anti-trust action against British Airways in the United
States.  Evidence for this litigation had emerged out of the libel
case.

Some of this evidence concerned British Airways' sales and marketing
programmes with travel agents and corporate customers.  Virgin alleged
that these sales programmes used British Airways' monopolistic position
in the UK, to artificially tie these travel agents and corporate
clients to BA.

British Airways has denied the allegations and the case is pending.

Virgin also objected to the European Commission about these activities.
In January 1997, the European Commission issued a Statement of
Objections alleging that BA's activities were illegal under European
competition law.

British Airways filed a response denying that its actions were
unlawful, and the issue is pending before the Commission.

Ultimately though, while I have enjoyed much success for a variety of
reasons in my business career, my family is the most significant thing
in my life.  They are a guiding light to me, and we never seek to put
barriers round each other.  Just as I always felt that I could say
anything to my parents, so Joan and I have always kept a very open
relationship with Holly and Sam.

Perversely, it is the strength of my family which has given me the
courage to attempt my balloon flights, and kept me battling away with
my business ventures.

I spend much time travelling and so treasure the moments the family is
together.  In many ways we are closest when we are all on Necker.  It
has developed from being the jewel which symbolised the feelings Joan
and I have for each other into being a place where the whole family
feels at home and at peace.  We try to go for Easter, summer and
Christmas holidays.  With my parents, my sisters and their families,
our closest friends, and quite a few people from all the different
Virgin companies, it is like a melting pot where we all take stock of
what is happening and get away from everything apart from the fax
machine.  I've taught the children to play tennis there, and to swim,
snorkel and sail.  When we're there we're there for each other.  It's a
time to relax and reflect on what we're all doing, because we know that
when we're back in London it's back to work.

My favourite time of day there is the early evening.  By then it's
midnight in London and it's virtually impossible to speak to anyone in
Europe.  The fax and telephone are silent, and the sun sets quickly. In
an hour or so the daylight changes from brilliant, almost white
sunshine to dusk, with a deep orange blaze across the horizon.  Sitting
on the veranda, I can watch the last small flock of pelicans dive for
fish and flap creakily away to roost.

Within minutes the sky turns a velvet midnight blue, and the first
handful of stars are out.  The sea in front of me becomes inky black,
and everything falls quiet.

We generally have supper on the terrace.  Everyone is sunburnt and
happy.  It's great to be together, and I wonder what the future holds
for all the kids here.  I .

look over at Holly and Sam and realise that I don't want to plan their
lives for them.  I just want them to be happy.  At the moment Holly
wants to be a doctor and Sam wants to climb trees and rescue cats.  I
know that other businessmen like Rupert Murdoch and Robert Maxwell had
their children reading annual reports and financial accounts before
breakfast, but I want none of that.  At moments like these I am happy
to forget about my notebook with its constant burning list of things to
do and people to call, and relax into being among people I love and
care about.

Even so, as we sit there I know that Maiden Voyager, our original
jumbo, is heading from Heathrow to JFK, flight VS009.  She's been
flying from London to New York since 1984 and it's been the backbone of
our airline, the linchpin of our success.  Scarlet Lady is now humming
through the night to Johannesburg, our latest destination; and Lady in
Red, our first Airbus, which was christened by Princess Diana, is
heading overnight towards Hong Kong.  Virgin Atlantic's offices at
Crawley will be deserted save for the cleaners, and the night shift
will be drinking their second or third cup of coffee at Heathrow and
Gatwick.  The audiences will have long since filed out of Virgin
Cinemas, but there will be queues outside Heaven nightclub, and I
wonder who is performing tonight and what the future holds for them.

The Japanese and Paris Megastores will be shut, but late-afternoon
crowds will be leafing through the racks of CDs at the New York
Megastore, before buying a can of Virgin Cola from a nearby vending
machine.

At the outset, each of those individual ventures was a step into the
unknown for the company which I felt personally -like a loss of one's
virginity -but, unlike really losing your virginity, in whatever world
you make for yourself you can keep embracing the new and the different
over and over again.  That's what I have always wanted for Virgin and,
whether it's achieved by judgement or luck, I wouldn't have it any
other way.

Appendix

A history of the Virgin group of companies

1968 First issue of Student magazine.

1975 start of Virgin Mail Order operation.

1971 The first Virgin record shop opens in Oxford Street.

1972 The first Virgin recording studio opens at the Manor near
Oxford.

1973 The Virgin record label is launched and the music-publishing
operation is established in the

UK.

1977 Virgin signs The Sex Pistols.

1978 The first Virgin nightclub opens: The Venue.

1981 Phil Collins is signed to the Virgin label.

1982 Boy George and Culture Club are signed to Virgin.

1983 Virgin Vision, the forerunner of Virgin Communications, is
formed.

Vanson Developments is formed.

Virgin Games is launched.

1984 Virgin Atlantic Airways and Virgin Cargo are launched.

Virgin Vision launches the Music Channel.

1985 25 pounds million private placing of 7 per cent convertible stock
completed with 25 English and Scottish institutions in September.

Virgin wins a Business Enterprise Award for company of the year.

Virgin Holidays is formed.

1986 Virgin Group, comprising the Music, Retail, Property and
Communications divisions, is floated in November on the London stock
exchange.  The airline, clubs, holidays and aviation services remain
part of a privately owned company called Voyager Group.

1987 Virgin Records America is launched.  The investment is quickly
followed by the establishment of a subsidiary in Japan.

British Satellite Broadcasting, of which Virgin Group, Granada, Anglia
and Pearson were founder members, is awarded the UK licence for direct
broadcast by satellite of five new TV channels, commencing in the
autumn of 1989.

Virgin sets up the 525 post-production facility in Los Angeles.

Virgin sells its controlling interest in the Music Channel and
establishes Music Box.

Virgin acquires a 45 per cent stake in Mastertronic Group, which
includes UK distribution for Sega computer games.

Virgin buys Rushes Post Production in London.

The Virgin Airship and Balloon Company is launched.

1988 The first biography of Richard Branson is published.

The Olympic Recording Studios, the most modern studio complex in
Europe, are opened.

A new international record label, Virgin Classics, is established to
speciali se in a high-quality classical repertoire.

The smaller (non-Megastore) UK retail outlets are sold to the WH Smith
Group.  Retail strategy is then concentrated on Megastores.

Virgin Broadcasting is formed to further develop Virgin's interests in
radio and television.

Virgin Atlantic Airways wins three major business-class awards for its
upper-class service, and the airline becomes Britain's number-two
long-haul carrier.

Richard Branson announces a management buy out of the Virgin Group
following the October 1987 stock-market crash.

Virgin Hotels is started.

Virgin sells its shareholding in British Satellite Broadcasting.

1989 Virgin Atlantic Airways announces doubled pretax profits of 10
million and establishes its own engineering operations.

Virgin Mastertronic signs long-term European distribution rights for
Sega video games.

Voyager Travel Holdings, the holding company for Virgin Atlantic
Airways, sells 10 per cent of its equity to Seibu-Saison
International.

Virgin Vision, the video-distribution company, is sold for $83
million.

Virgin Music Group enters an investment partnership with Fujisankei
Communications Group.

1990 Virgin Retail Group and Marui, a major Japanese retailer, announce
the formation of a new fifty fifty joint-venture company to operate
Megastores in Japan.

Virgin Lightships is formed to develop and manage a new type of
advertising helium airship.

1991 Virgin Publishing is formed.

An historic ruling by the CAA allows Virgin Atlantic to operate extra
services to Tokyo through the transfer of rights from British Airways.
Virgin Atlantic wins the right to operate services out of Heathrow in
addition to Gatwick.

Virgin Communications sells Virgin Mastertronic, but retains the
publishing division and begins an expansion of Virgin Games.

Virgin Retail Group and WH Smith announce a fifty-fifty joint venture
to develop the Virgin Megastore business in the UK.

1992 The sale of Virgin Music Group to Thorn EMI pic is announced in
March.  The deal is valued at $1 billion.

The Radio Authority grants Virgin the licence for INR2, Britain's first
national commercial rock station.

Post-production interests are reorganised under a new holding company,
Virgin Television.

Virgin Retail opens stores in Spain, the Netherlands, Australia and
the

USA.

Virgin Megastores announces an important joint-venture agreement with
Blockbuster Corporation of Florida.

Virgin acquires 100 per cent shareholding of Euromagnetic Products, a
specialist in the personal-computer consumable market.

1993 Virgin Atlantic Airways wins an historic libel settlement of
610,000 pounds plus all legal costs from British Airways.

5 17 Virgin Atlantic is voted Executive Travel's Airline of the Year
for the third year running.

Virgin 1215, the UK's first national commercial rock-music station, is
launched.

Virgin Hotels obtains its first management contract: the Close Hotel
and Restaurant, Tetbury.

Virgin Games is renamed Virgin Interactive Entertainment pic.

1994 In February, Virgin Atlantic launches its daily nonstop scheduled
service from Heathrow to Hong Kong using the new Airbus A-340 300
aircraft.

Virgin Megastores Hong Kong is established.

Virgin Retail acquires the Our Price chain in the UK and Ireland.  WH
Smith owns 75 per cent of the new venture.

Virgin Management and Rodney Fitch and Company form a creative-design
and brand-development consultancy.

Virgin Television opens its first facility, Virgin Television Mexico.
Rushes in London and 525 in Los Angeles open multimedia post
services.

Virgin Trading Company and William Grant and Sons announce a commercial
agreement to market Virgin Vodka in the UK.

Virgin Group announces the formation of the Virgin Cola Company Ltd.

1995 Virgin Atlantic and Malaysia Airlines announce a twice-daily
scheduled service from London Heathrow to Kuala Lumpur with onward
flights to Australia.

The US Department of Transportation finally approve the partnership and
code-sharing agreement announced by Virgin Atlantic Airways and Delta
Airlines in 1994.

Virgin Direct Personal Financial Service is launched.  The company is
established to sell financial services by telephone at a significantly
lower cost than that of traditional financial-services companies.

Virgin acquires MGM Cinemas.

1996 In May, Virgin Atlantic launches a scheduled service from
Manchester to Orlando.  New services from Heathrow to Washington DC
commence in June, and Johannesburg follows in October.

Virgin Travel Group acquires Euro Belgian Airlines, now renamed Virgin
Express.

London and Continental Railways, in which Virgin is one of the main
shareholders, wins a 3 pounds billion contract to build the Channel
Tunnel Rail Link and operate Eurostar services between London, Brussels
and Paris.

V2 Music is launched.  It comprises the UK record label (V2 Records)
and V2 Music Publishing.

Virgin Net is launched as an Internet service provider.

Virgin Brides opens its doors and promises to revolutionise the wedding
industry in the UK.

The Virgin Rail Group Ltd is awarded the Crosscountry Trains Ltd
passenger rail franchise which operates Intercity and Express services
linking over 130 stations across England, Scotland and Wales.

1997 Virgin Rail is successful in its bid to operate the Intercity West
Coast and is awarded the fifteen year rail franchise.  Virgin promises
to introduce forty high-speed tilting trains and cut journey times.

Richard Branson acquires a 55 per cent stake in the London Broncos
rugby league team.

Ginger Productions acquires Virgin Radio for 85 million.  The new
company, renamed Ginger Media Group, is to be managed by the existing
staff, and the station will continue to operate as Virgin Radio, with
Richard Branson remaining a major shareholder.

Virgin Express, the Brussels-based low-cost airline, announces its
intention to become a quoted company.

Virgin Cinemas and Virgin Megastores Worldwide (excluding the UK) merge
to form the Virgin Entertainment Group.

Virgin Vie, a new joint-venture cosmetics and beauty-care company, is
launched.

Virgin Direct launches its first banking product, Virgin One, which is
a joint venture with the Royal Bank of Scotland.

1998 Richard Branson wins the GTECH court case, involving GTECH the
lottery-equipment supplier and Guy Snowden, its former chairman.

Diana, the tribute album for Diana, Princess of Wales, released by V2
Records on behalf of the record industry, raises over 40 million for
charity.

Virgin Sun, Virgin Holidays' first foray into short-haul holidays, is
launched.

Virgin Express starts flights from Stansted to Continental Europe.

Rail regulator John Swift approves Virgin Trains and Railtrack's
massive upgrade of the UK's West Coast mainline.

Stagecoach buys 49 per cent of Virgin Rail Group and Virgin increases
its stake from 41 to 51 per cent.

Virgin Entertainment Group buys out WH Smith's 75 per cent holding in
the Virgin Our Price retail chain in Great Britain and Ireland.

1999 Virgin Rail Group completes the financing of new high-speed
tilting trains for both its franchises West Coast and Cross-Country.  A
total of over 4 pounds billion of private-sector investment in
Britain's most rundown railways is now secured, with the introduction
of the new trains still on track for 2001-2002.

Virgin Atlantic announces further expansion plans on the back of
continuing growth and profitability.

1999 will see the launch of new routes, to Chicago, Shanghai and other
destinations.  Virgin Sun's first charter flights commence in May.
Virgin Atlantic's fleet of wide-body jets grows to 24.

Virgin Group announces its intention to enter the telecommunications
business.

Virgin Net goes free and Virgin continues its expansion into e-commerce
with a wide range of initiatives from Megastores online to train
booking facilities.