The Great Airline War
Will IT’s “whiz kids” fizzle?! Will sexy Southwest conquer all?! Will Braniff lose its routes?!
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On the other hand, Teas International’s people are too preoccupied with survival to worry about appearances. Lorenzo and his friends grumble freely about the injuries they suffer at the hands of Southwest, and about the Texas Aeronautics Commission, a demon in their dark hierarchy second only to Southwest. They prepare position papers to plead their side of the story, they slug it out in the courts, they leave absolutely no doubt about who their enemy is.
The differences in the airlines are highlighted by the personal contrast between Muse, Lawrence, and Lorenzo. Lamar Muse is as uninhibited as his airline’s advertisements—the ones that refer to Southwest as “The Someone Else Up There Who Loves You,” that manage to work a busty stewardess into every bit of publicity, that strove, at one point, to give the company an “Ali McGraw image.” When the company’s stock was introduced for trading on the American Stock Exchange in October, its chosen symbol was “LUV.” Muse drives a flashy Mark IV, whose license plate reads FLY SWA. It is as difficult to imagine Harding Lawrence riding in that sort of car as it would be to see him with the white patent-leather shoes that would be the perfect complement to Muse’s outfit.
If Muse is a spectrum from the raw entrepreneurial end of the business spectrum, Harding Lawrence comes from the other extreme: he is the cold shark of the boardroom, charm and calculation mixed in his icy stares and fixed smiles. When Lawrence responds to a question, large sections of the answer are likely to be missing, as if he were producing a verbal Swiss cheese. When several of these answers are put together, something like deception is the result. (When asked about Braniff’s two-fold reputation—as the most efficient, and the meanest, of the Texas airlines—Lawrence set off on a long spiel about Braniff’s employment totals in Texas and its commitment to public service. Thirty minutes later he smiled and said, “I haven’t really answered your question, have I?”) Through his factotum, Jere Cox, Lawrence demurs on questions about the Latin American kickbacks, saying that it would be “inappropriate” to talk while the CAB investigation is going on. That may well be true, but it did not keep him from plastering a one-sided explanation, distorted by omission, before the Braniff stockholders in the latest annual report. Lawrence is a man who won on a fast track; not surprisingly, he is both suspicious and suspect. He is smart enough to have brought men like Russell Thayer to work for him, and smart enough to know now the kind of trouble he is in. Lamar Muse might look on the “airline war” as a kind of exhilarating sport; Harding Lawrence must sense that he is now involved in a struggle for his life.
In a different world, Francisco Lorenzo might have learned to play the part of Harding Lawrence. Since he is at Texas International, however, a more straightforward role has fallen to him. There are few ellipses in his answers, few obviously canned responses. He is trying to save the airline, and disguise or chicanery will not help him in that task. He is affable without being overtly manipulative. “Many people think that because Frank is so charming, he must be a real politician,” says a man who has worked with him in Houston. “But he’s not. You remember Lyndon Johnson’s definition of a politician—a man who could walk into a room full of strangers and know, before anyone spoke a word, who was for him and who was against him. Frank can’t do that. Most of the time he thinks everyone is for him except on bad days, when he thinks everyone is against him.” Harding Lawrence would pass the politician’s test easily.
The arena in which these disparate spirits contend is one of the remaining romantic pockets of the business world. The shades of Lindbergh and Earhart may have departed the airline business, but the romance they embody lives on. An accountant who works at General Foods might think of himself as an accountant; an accountant who works at Pan Am would tell his friends that he is “in the airlines business.” This pull of glamour and derring-do is felt all the way to the top of the corporate structure; most of the presidents and managers of airlines have had a life-long affair with they sky. Muse and Lawrence both got their start at the same time, as very young men, shortly after World War II. Lorenzo, twenty years their junior, was trained in finance but soon heard the seductive song of the airlines. If he had simply been interested in maximizing the return on his time and his capital, he would have sold TI long ago and sunk the money in real estate. He has not done that, because he too has been captured by the romance.
From casual glances at the business page, the industry’s fortunes might also seem to be romantically unpredictable. During the Sixties the airlines were making money faster than they could carry it to the bank, but during most of the Seventies they have had to try desperately to avoid big losses. What this apparent riskiness conceals, however, is the basic secret of the airlines business. In some industries you make money by driving your competitors out of business, or monopolizing the talent, or landing the big contract, or getting the best patents. In the airlines industry, you make money by being in business. Like broadcasting, though to a less grotesque extent, the airlines are government franchisees, whose product is almost guaranteed to sell. Management and intelligence can make a difference: bad managers have gotten many lines into trouble, and smart management, at a line like Braniff, can help it clean up on its competition. But the rules of the game are fixed far more than for most businesses. The most vicious competition—the efforts which will make the big difference in profit and loss—take place not before the customer but before the government: before the Civil Aeronautics Board, to be precise, which distributes routes to the various supplicant airlines. If you get a route from Dallas to Seattle, Chicago to London, or Houston to Mexico City, then you should make money. It is like being given the right to operate a new TV station: the opportunity is there, yours for the taking. There is, of course, a whole subsidiary level of competition over scheduling and equipment, but the real battle is to get the route. This is why the airlines were so distraught with the CAB’s “route freeze” of the last few years. While the CAB was awarding no new routes (they said they might start again last summer), airlines did what they could to squeeze extra profits out of their existing routes, but they knew they would not see any big changes. Those big changes were not under the customers’ control or the managers’, but under the CAB’s.
Because of the CAB, the airlines business has been more stable than most others. Of the sixteen truck lines (the cross-country carriers) chartered by the CAB in 1938 eleven are still in existence. Not one of them has gone bankrupt or out of business (five disappeared through mergers). Not one new competitor has been allowed to enter the market.
It is, of course, possible to lose money in the airlines business, even in good times. One of the quickest ways is to buy too many airplanes, or airplanes too big for your market. When the first commercial jets came rolling off the assembly line in the late Fifties, they were a godsend to the industry. The cost of carrying a passenger from point A to point B was cut dramatically, and the speed was dramatically increased. The airlines bought planes as fast as Boeing and Convair could turn them out; to get on the delivery list ahead of your competitor was to have a significant edge.
At the end of the Sixties, another generation of miracle planes was on the way. These were the “wide body” jets, the 747s and the DC-10s. Airlines stood in line to buy these, too; soon Delta had 20, Eastern 27, Continental 15—and these were only the smaller trunks; United had 45. But these planes were different from the jets of the early Sixties. They might bring the cost per passenger down, if you were flying full planes over long hauls (such as Braniff’s flight to Honolulu), but they could run the cost per passenger right through the ceiling if they were only one-fifth full, or if they flew on unrealistically short routes. There were far fewer profitable markets for the 747 than the airlines had hoped, and two or three years after they made their first appearance the jumbo jets were looked on as one of the major threats to the airlines’ financial stability. Continental had to park three 747s on the sand near Roswell, New Mexico; whatever rot and deterioration they suffered there would be less expensive than keeping them in the air. (Finally, last summer, Continental managed to unload them on the Iranians, who are able to afford such things.) Braniff was virtually the only line to avoid the 747 frenzy; the company bought only one big jet, and makes a profit flying it to Hawaii.
One class of airlines, however, was created to lose money, to fly routes where the passengers aren’t. These were the “feeder” lines, the “local service” carriers, which included companies like Trans-Texas, the forebear of TI. Theirs has been a riskier life than that of the trunks; of the nineteen feeder lines that have sprung into brief existence since 1945 only nine remain. The rest have fallen to the bankruptcy courts, the license-renewal office at the CAB, or to mergers and name changes. The cost of serving the little towns, the Brownwoods and the Big Springs that generate a handful of passengers each day, continues to rise, while the money that the government will cheerfully devote to this cause keeps going down. The question running through many minds, both in Washington and in offices like the TI headquarters, is how long the feeders can last, and what contortions they might have to go through in order to survive. If the Texas Airline War is any indication, the outlook is not good.
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