The Great Airline War
Will IT’s “whiz kids” fizzle?! Will sexy Southwest conquer all?! Will Braniff lose its routes?!
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“Once you’ve got the equipment and the scheduling,” Thayer continues, “then you market the system, you tell people what you’re offering. We have schedules at all our ticket counters; a lot of other lines think they’re too expensive to print up. You don’t use your advertising to talk about legroom or frills. [Braniff has reason to be modest about its legroom. Its coach seats are only 34 inches apart, compared to 36 inches for TWA.] You tell people where you go and when. It’s all part of coordination—really, coordination is the key to our success. You have to coordinate four elements. First, the kind of equipment you purchase. Second, how much of it. Third, the scheduling, and fourth, the marketing. At some lines, the equipment is chosen by the engineers, and the amount is determined by how many planes they’re getting rid of. The scheduling is set up for the convenience of the maintenance men, and marketing has to push what’s left. That’s no way to run a railroad.”
While Harding Lawrence was painting his planes and helping his airline prosper, another side of his spirit was making its influence felt. The consequences have not yet fully run their course, but they came to a climax of sorts last summer, when a tenth-floor office at Braniff Tower was hurriedly vacated. In August 1975, ten years after he arrived, Braniff’s president Edward Acker was leaving the airline business. An announcement in the Wall Street Journal brought the surprising news that Acker was going to New York—a city low in his esteem—to be second in command of the Transway Company, whose main business was ocean freight. In Braniff Tower, the official reaction was predictable: a mixture of heartbreak at the loss of a great and promising executive, and best wishes for Eddie’s future. As Lawrence put it, with the faintest glint of a tear in his eye, “Ed is forty-six years old. That’s a vulnerable age, a time when many people make changes in their careers. I made mine when I was forty-four. The man he’s understudying at Transway is sixty-five years old. I am fifty-five. Now, Eddie’s never said anything like that to me, but if I had to put forward a supposition about why he left, that would be it.”
Lawrence continued, “Ed was my choice for president, my successor, but”—and here he flashes a steely grin—“I’m going to be around for a long time.”
There is another view about Acker’s departure, a view Lawrence flatly labels “nonsense” but which has somewhat wider credence outside his office. It involves Braniff’s troubles with the CAB, and it begins—small world—with Watergate.
In the fall of 1973, Harding Lawrence was one of the many corporate officials who pled guilty to making illegal contributions to the Nixon Campaign. Braniff had given $40,000 to the Finances Committee for the Re-election of the President, in violation of federal law. The company was fined $5,000; Lawrence himself was fined $1,000. If its involvement in the Nixon scandal did not make Braniff unique among American businesses, the subsequent course of investigations did; for the government was soon much more interested in how Braniff had generated the money than in the uses to which it had been put.
According to the complaint now pending before CAB, Braniff’s political contribution to CREEP was only a droplet from a slush fund it had been illegally collecting for the previous three years. Beginning in the fall of 1969, Braniff distributed some 3,626 tickets for “off the books” sales. The tickets looked like ordinary tickets, and the customers who bought them got to take their airplane rides. But the tickets were never recorded on the company’s normal books, and their proceeds went into a special fund. In this manner, Braniff built up a sum of money, which the CAB has estimated, contained between $641,285 and $926,955.
Apart from the relatively small contribution to Nixon, the money (so Braniff says) went for kickbacks and bribes for ticket agents in South America. Because the CAB complaint inconveniently hit the headlines just as Lawrence was preparing his glorious ten-year report, he felt obligated to begin with a special explanation to his stockholders, designed to knock down the “erroneous and misleading publicity” the company had been receiving. The case he made, essentially, was that all the other fellas were doing it, and that Braniff had to play the game in order to survive. “The fact is,” Lawrence wrote in the report, “the market in South America in 1968 and 1969 was being diverted from Braniff to foreign carriers who were paying travel agents extra commissions.” As responsible managers, the executives at Braniff had little choice: “Your company executives charged with responsibility for the Latin American division decided in late 1969 to defend the company by meeting the competitive practices used by other carriers, and thus to protect the company’s revenues from continuing erosion.” The same Harding Lawrence who felt it would be “inappropriate” to answer questions about the CAB complaint tossed a final plum to the shareholders in his report: he assured them for that modest investment of less that $1 million in kickbacks, the company had “protected” more than $13 million in revenues.
Inside the government, a somewhat colder eye is being cast on the Braniff affair. The CAB’s Petition for Enforcement has an unmistakable voice-of-doom quality about it. (The petition is, in a way, Ralph Nader’s doing. The Aviation Consumer Action Project, one of his organizations, is listed as the complainant, and it was largely at ACAP’s insistence that the CAB began looking hard at Braniff.) It names six individual respondents (Lawrence and Acker; John Casey, the vice-president for sales and operations; Charles South, vice-president for Latin American division; Robert Burck, executive vice-president for public affairs; and Camilo Fabrega, regional vice-president for Panama) and accuses them of scheming to “generate an ‘off the books’ source of funds for use by Braniff management, including Lawrence and Acker, as management saw fit, and at least in part for unlawful purposes.” The six are accused of lying to the CAB investigations about the scope and nature of the program. Finally, at the end of the complaint, the boom comes crashing down. As part of its “Prayer for Relief” the Bureau of Enforcement not only makes the rather obvious point that Braniff should cease and desist from its illegal operations, but also asks the full CAB to answer the following question:
“Whether the public convenience and necessity require that Braniff’s authority to operate in air transportation generally or to operate air transportation within Latin America should be altered, amended, modified, or suspended for such period of time as present management retains operations control over its activities, or be revoked for intentional failure to comply with the Act…”
Translated from legalese, the question is whether the CAB will pull Lawrence from the helm. That the CAB does have the power to “alter, amend, modify, or suspend” Braniff’s route authorities is beyond question, even though the agency has never exercised it in such circumstances before.
Whether Lawrence will actually bite the dust is quite another issue. One school of thought, as expressed by a Texas airline man, is that “If they’re going after Harding, they’re going after a mighty big hoss.” In this view, the CAB’s purpose was to strike a tough pose, and to give Braniff a scare in the process. Now that Acker, Lawrence’s number-two man, has disappeared, the government will settle back, content with the “shakeup” in the management. But many familiar with the CAB’s intentions think that the board actually does mean to depose Lawrence. When a man has so molded an airline in his own personal image, this argument runs, he can hardly escape liability when it comes to grief. Although officials at the CAB, in proper legal fashion, will say absolutely nothing about the case, outsiders point out that the new director of the Bureau of Enforcement is Thomas McBride, who has had his dealings with Braniff before. As part of the Watergate Special Prosecutor’s office, he investigated Braniff’s illegal campaign contributions. He is, in the words of Business Week, “an advocate of strong deterrent penalties.”
Whatever their final legal consequences, the Latin American kickbacks suggest a certain frame of mind at Braniff, an inner voice saying, “When the going gets tough, the tough pay kickbacks too, rather than running like sissies to complain to authorities.” Perhaps the most interesting aspect of the Latin adventure, and about Braniff’s run-ins with Southwest, is the light they shed on Harding Lawrence’s character. More than most businesses, the airlines have traditionally borne the stamp of their romantic leaders; and it is Harding Lawrence, with his vanity and derringdo writ large, whom many people see embodied in the warfare with Southwest.
The Southwest concept, anathema as this may seem to local patriots, originated not here but in California. Ever since the Civil Aeronautics Act went into effect, people in the business knew that there were only two ways to escape the CAB’s heavy-handed regulation. One was to operate small air-taxi services, of the variety that Metro, Rio, and Davis airlines now run in Texas. Their aircraft were so small that they could never hope to complete in the big leagues. The other solution was to operate wholly within the boundaries of one state, so that the power of the CAB, even when extended to its limits under the “interstate commerce” clause of the Constitution, could not apply. This second approach had some geographical limitations, however: to make an intrastate airline pay off, it took a special kind of state—one with several large cities separated by several hundred miles. If the cities were too small, there would not be enough traffic, and if they were too close together, airplanes could not compete with cars. California—with San Francisco and Los Angeles separated by more than 400 air miles—was the intrastate man’s dream, and the local lines go their start there. More than a dozen of the lines rose and fell—this is the law of the marketplace—before one of them, Pacific Southwest Airlines (PSA) established itself as the model of a profitable, low-cost intrastate line.
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