How a favourite airline stooped to conquer: BA had been caught out travelling the 'dirty tricks' route before. Nevertheless, the airline flew too low once again in its campaign against Virgin. Chris Blackhurst reports

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The Independent Online
RICHARD BRANSON is not alone. Sir Freddie Laker, Harry Goodman, Sir Michael Bishop - in fact anyone who has had the temerity to challenge British Airways over the years - have their own tales to tell of 'dirty tricks' by the airline that likes to call itself the world's favourite.

In the cases of Messrs Branson, Laker and Goodman, the stunts pulled by BA were wilful. With Sir Michael, the question of when is a trick 'dirty' or mere sharp practice is not so clear-cut.

Sir Michael is the head of British Midland, which also has a small sister airline in Loganair. Not so long ago, Liam Strong, then BA's marketing director, approached Sir Michael. He had identified some problems with BA's own Highlands and Islands service. Would Sir Michael consider forming a joint venture with BA? He said he was interested. Because the discussions would involve the sharing of company secrets, especially on their head-to-head shuttle operations, the two sides had to swap letters of confidentiality. Sir Michael signed his, but BA's management never signed their letter. It did not matter: Sir Michael trusted them.

Information about passenger numbers was exchanged and negotiations began in earnest. Just before a deal was due to be struck, Mr Strong rang Sir Colin Marshall, BA's chief executive, for the final go-ahead. Sir Colin said call it off. Within six months, Loganair's most profitable route, from Manchester to Edinburgh, was flooded with BA flights.

'People will say Michael Bishop is losing his grip, but you have to go into these things in good faith,' says the British Midland chairman. 'BA will deny it was a dirty trick, but I felt they drew me into a deal and got all the information they needed.'

Dirty trick, sharp practice or genuine decision to pull out? Who knows? But it is yet another example of BA behaving in a way that many people, used to the airline's public face, might find surprising and some might find repellent.

According to Bob Beckmann, a US competition lawyer, 'it's part of BA's culture. The mentality of people at the top is 'we're big, we're strong and we'll crush you.' '

Mr Beckmann should know. He was the lawyer for Laker who proved in 1985 that BA and a group of other airlines had conspired to put the Skytrain operator out of business.

Mr Beckmann negotiated a huge settlement on behalf of Laker, its creditors, staff and pension fund. This weekend, he is again contemplating moving against BA on behalf of a small airline. He has been retained by Mr Branson to decide what legal steps, if any, should be taken in America following his victory last week in the High Court.

Eight years on, and here we are again. Lessons given then have not been absorbed. The exhortation to staff from BA's then commercial manager, 'to engage in jugular marketing' against Laker could just as easily have applied to Virgin.

THERE are two ways for a business to wipe out an enemy: improve your own product or play dirty. Under Lord King and Sir Colin Marshall, BA has tried to do both against Virgin.

Normally, the only time corporate 'dirty tricks' surface are during takeover bids, when the stakes are high. Instances of rubbish stealing, wiring up employees and spreading harmful, false stories have all been exposed in the heat of battle.

Virgin, though, was not about to take BA over. It has eight aircraft to BA's 250. What upset BA's senior executives was not Virgin's financial success. It was Mr Branson's decision to target the bigger airline's most profitable routes; his regular winning of industry awards that they had come to regard as their own; and his ability to acquire even more favourable publicity than BA.

Lord King seems only to have been irritated by Branson. Sir Colin, who had to confront Virgin on a day-to-day basis, appears to have been infuriated.

Three main operations were sanctioned by BA. The first, Mission Atlantic, started in 1986. The targeting of Virgin across the Atlantic, it was subdivided into specific activities: persuading Virgin passengers at airports to switch to BA; cold-calling Virgin customers; and alleged hacking into computers.

The second was the preparation of a report on Virgin by Brian Basham, BA's external PR consultant. His report, codenamed Barbara (after Barbara Cartland's fondness for virgins), was a strange mixture of compliments, hard analysis and damaging tittle-tattle. It cost pounds 40,000 to produce. The spend was sanctioned by Sir Colin Marshall and the findings were presented to him in the form of a slide-show.

Then there was Operation Covent Garden. It began towards the end of 1991, after BA became worried it had a mole in its midst. Ian Johnson, a security consultant, was hired by Sir Colin and David Hyde, BA's security chief, to find the leak. Beneath Johnson was a raft of private investigators. Reports were sent to Sir Colin and Mr Hyde. When David Burnside, BA's director of public affairs, became worried he was the target of an investigation - that he incorrectly assumed was by Virgin - Mr Johnson mounted a counter-surveillance exercise.

If anything illustrates the depths to which BA had sunk in its fear and loathing of Mr Branson, it is Covent Garden. Mr Burnside was wired for sound when talking to a friend, in case the friend was secretly acting for Virgin. Rubbish bags (see box) were taken from a journalist's house. Phone calls were taped. Innocuous encounters, like someone referring to Virgin at a drinks party, were passed to Mr Johnson for investigation.

The level of suspicion shown in the Covent Garden documents is frightening. If the people at the top of an airline were thinking like this, what else were they thinking and doing?

Tracing the chain of command on Covent Garden is not easy. Sir Colin, Lord King and Mr Burnside presumably did not know about the theft of rubbish, which was carried out by an agent a long way down the line. But someone had to hand over a journalist's address.

At no stage is there mention of all the board members knowing or caring what was going on. When the non-executives found out, they were horrified.

Their reaction is worth considering, though. Just what was it that forced the non-executives, apparently against the advice of some BA executives, to settle with such alacrity? If it can be shown computers were hacked into - and it is by no means clear - then the law, especially in the US, has been broken. The Barbara report is in places libellous and inaccurate, but it hardly merits such a response by the BA board. Covent Garden appears to have fluctuated between the comic and the plain absurd.

But was there something else? Something that was so outrageous that the board caved in? If it is there, it would have to be in the documents handed over to Virgin on discovery. For once, though, Mr Branson, fearful of a contempt prosecution, is keeping his lips firmly closed.

(Photographs omitted)

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