Battle of the Airlines: Rivalry that led to the humbling of 'world's favourite airline': Michael Harrison on the challenge that became an increasing annoyance to Lord King, a man used to getting his own way

LORD KING of Wartnaby used to have a habit of feigning momentary amnesia when the name of Richard Branson was mentioned; 'Richard who?' was his customary response.

For years the acerbic and doughty chairman of British Airways rode roughshod over opponents in the same imperious fashion that he rode to hounds. Giant airlines at home and abroad, entrepreneurs of the likes of Sir Freddie Laker, even ministers of the Crown, quailed before the might of Lord King's lobby machine.

How is it then, that he and BA have been humbled by an ex-hippie with a handful of second-hand jumbo jets and a penchant for woolly jumpers, hot air ballooning and self-publicity?

To understand, it is necessary to examine what motivates Lord King. For the last decade, he has been used to getting his own way - one reason he was paid pounds 670,000 last year. He conducted BA's affairs as if it were some latter-day fiefdom, revelling in the extraordinary power and influence that running a national flag-carrier confers.

When Lord King wanted BA's global network of routes protected before privatisation, he got it. When BA wanted British Caledonian, it got it. When Lord King wanted Dan-Air, he got it. When BA wanted protection from rival US mega-carriers at its Heathrow stronghold, it got it.

In Richard Branson's Virgin Atlantic, Lord King was confronted with a rather different proposition. Virgin, with its seven jets, eight destinations and staff of 2,000, was not a serious competitive threat to BA with its fleet of 280 aircraft, 24 million passengers, 151 scheduled services, pounds 5bn turnover and profits of pounds 285m. And yet Virgin and Mr Branson got under his skin and rattled the corporate complacency of BA.

Virgin cocked a snook at BA's self-styled reputation as 'the world's favourite airline' by targeting its most lucrative Atlantic routes and offering high-quality services at lower prices.

In reality, Lord King and BA had bigger fish to fry - the main competitive threat came not from Virgin but the susbidised state-owned flag carriers elsewhere in Europe and the modern, aggressive US carriers that had taken over the transatlantic routes.

But Lord King, the deal-maker par excellence, political manipulator and Thatcherite business hero, also knew that the airline business was about prestige and profile.

In September 1990, an event occurred which was to outrage BA - Britons stranded in the Gulf by Iraq's invasion of Kuwait were seen on television being airlifted to safety by courtesy of a smiling Richard Branson, not the country's flag-carrying airline.

To Lord King, who had always enjoyed easy access to the corridors of power, it was an affront.

From its inception in 1984, Virgin Atlantic had gradually begun to extend operations from Gatwick to the point where it was flying to half a dozen US cities. But as long as Virgin was restricted to London's second airport, BA could live with it.

In 1991, all that changed. First Virgin was allowed into Heathrow, BA's bastion. Second, BA was forced to surrender some of its services to Tokyo - one of the world's most lucrative routes - to Virgin to increase competition.

Lord King was angry about the first change but incandescent with anger at the second which he memorably described as an act of 'confiscation' by the Government. Formerly one of the Conservatives' staunchest allies, he cancelled BA's donation to party funds.

Although they later kissed and made up, the advance of Virgin on BA's long-haul international territory continued inexorably. In March last year, Mr Branson pocketed pounds 300m from the sale of his music business - providing him with more than enough cash to plan expanding his route network to Johannesburg, the US west coast and Australia. When the process is complete, BA will have a significant rival on its hands.

Lord King will, not, however, be in the cockpit helping BA in its dogfight. He retires in July to take up the honorary post of president - not, as initially reported, for life but for three years.

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