The Great Airline War
Will IT’s “whiz kids” fizzle?! Will sexy Southwest conquer all?! Will Braniff lose its routes?!
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Texas was the next most likely state on the list, and in 1967 a Harvard Business School contemporary of Francisco Lorenzo’s named Rollin King decided to give the idea a try. That year he incorporated Air Southwest, and in January 1968 he filed with the Texas Aeronautics Commission for a license to fly commuter flights between Houston, Dallas, and San Antonio. The TAC, by every indication, was delighted to have this case fall into its lap. Established in 1945 to modernize and promote the air system within the state, it had up to this point divided its attention between the two-bit local air taxis and the rural air strips necessary to keep small, lonely towns in touch with the rest of the state. An intrastate commuter line, which could provide fast, cheap travel between the state’s major cities, was part of its vision of a better Texas. Then as now, Southwest was supplied with ample political credentials. On its list of investors appear such names as Dolph Briscoe, Robert Strauss, Jake Jacobsen, George Brown, John D. Murchison, and several others from the big time of Texas politics and finance. After the hearing in January 1968—at which Braniff and TI had made their own stab at political weight, being represented by Fulbright, Crooker of Houston and Clark, West, Keller, Clark, and Ginsberg of Dallas—the TAC voted unanimously to give Southwest its license. Then the troubles began.
Demonstrating the ancient truth that, with enough money to pay for enough good lawyers, a dedicated opponent can keep almost anything from happening for years and years, Braniff and TI ran Southwest through half the courts of the country. The first prolonged legal battle was over the TAC decision; that finally made its way to the Texas Supreme Court in 1970, where Southwest won a unanimous decision. Braniff and TI promptly appealed to the U.S. Supreme Court, but the Court refused to hear their case.
Not to be daunted, Southwest’s opponents tool another tack. This time they appealed to the CAB, saying that Southwest’s operations would inevitably violate their “intrastate” limitations. Who could tell, their lawyers asked, whether someone journeying from another state into Dallas might step onto a Southwest flight into Houston, thereby making the airline part of the interstate system. The CAB, even though it is traditionally the trunk lines’ friend threw this case out promptly, at which point Braniff and TI appealed that decision to the courts. By the time this case was finally disposed of, in December of 1972, the Senior Judge of the U.S. Court of Appeals for the District of Columbia let Braniff and TI know that he was on to their game:
“I have read carefully the pleading and briefs filed by all parties in the Texas Courts—a mass of material more than four inches thick—and have become familiar with the arguments advanced by the diligent and resourceful counsel for Braniff and Texas International. They have omitted no point which their ingenuity could devise in their attack upon Air Southwest….It is now five years since Air Southwest applied to the Texas Aeronautics Commission for a certificate of public convenience and necessity. This litigation should have been terminated long ago; it’s under prolongation approaches harassment.”
While this case was bobbling through the courts, an equally bitter and even more complicated one was also keeping the lawyers occupied. This time the zeal of Braniff and TI was exceeded by that of the cities of Dallas and Fort Worth, who envisioned their mammoth, expensive, world’s-largest airport turning into a municipal disaster at the hands of Southwest. The cities—which had been forced by the CAB to give up their downtown airports (Love Field in Dallas; Greater Southwest near Fort Worth) and join in a shotgun wedding to build the gala new facility—had made all the CAB-certified carriers sign a blood oath that they would move to DFW when it was built, so they could start paying enormous landing fees to help retire the bonds. The airlines were hardly delighted at the prospect; it was made palatable only by the fact that everyone was being forced to do it together.
There was one airline left out, however—Southwest, which had only been a gleam in Rollin King’s eye when the DFW contracts were being signed. As opening day approached at the big field, Southwest was understandable reluctant to move its commuter flights twenty miles outside the city—passengers would spend more time in their cars than they would in the plane. As Herbert Kelleher, the attorney from San Antonio who has fought Southwest’s battles up and down the appellate system, likes to say, “The passenger has a right to travel from Dallas to Houston, and not from Grapevine to Conroe.” Although this litigation probably has a few more appeals left before it finally dies, some of the panic seems to have left the city fathers of Dallas and Fort Worth. Everyone except Southwest is now at DFW, chipping away at the construction bonds, while Southwest continues to use Love Field and Hobby Airport in Houston.
This was the courtroom side of the story; and while it may illustrate the many evils to which the law is prey, it was aboveboard and legitimate. At the same time, efforts of a darker sort were underway—this, at least, is the contention of the U.S. government in its indictment of Braniff and TI for violations of the Sherman Anti-Trust Act. Everyone, even a corporation, is innocent until proven guilty, but the allegations, spelled out in a sixteen-page Bill of Particulars, tell a fascinating story of commercial intrigue.
According to the government, the collaboration between Braniff and TI began long before Southwest took to the skies. “On or about May 14, 1970,” the Bill says, “the management of Braniff and TI held a meeting in Dallas. The purpose of the meeting was to promote more cooperation between the two airlines.” Among the alleged fruits of that cooperation was not only the legal and administrative appeals, but other tactics of much less subtlety. Some of these were immediately obvious to the public: on June 18, 1971, the day that Southwest’s first plane went aloft, Braniff and TI decided to cut their fares to competitive levels. Later, in 1973, Braniff embarked on a brief, and even more obvious, fare war with Southwest. The “Thirteen Dollar War,” as it was called, saw Braniff dramatically slash its fares—but only on flights directly competitive with Southwest. This meant, for example, that passengers flying to Dallas from Hobby Field (where Southwest was a competitor) paid $13 on Braniff, while a flight from Houston’s Intercontinental Airport, where Southwest was out of the picture, still cost $27. For a short time, Braniff charged less on flights from Dallas to San Antonio (where it competed with Southwest) than from Dallas to Austin (where it did not). With its brassy full-page newspaper ads, reading “No One’s Going to Shoot Us Out of the Sky for a Lousy Thirteen Bucks,” Southwest generated a handsome return in both business and public relations during the “war.” “The Thirteen Dollar War was what really backfired on them,” says Lamar Muse, who came to the company when it looked as if the planes would finally get off the ground (Rollin King became Southwest’s number-one pilot). “It was so incredibly obvious what they were trying to do. They lost more sympathy on that than on anything else they did.”
According to the government’s allegations, Braniff and TI also took other steps which, if less evident to the outsider, were even more heavy-handed. One was to keep Southwest from using the fuel hydrant at Houston’s International Airport; another, to blackball Southwest’s application from membership in the interline credit card system, an application all other airlines were willing to support. When a flight on Braniff or TI was cancelled, passengers were allegedly funneled to the collaborating carrier; they would be picked up in a bus and taken to a waiting plane, rather than allowed to roam free in the terminal, where they might happen upon Southwest. There was a touch of the vindictive as well; according to the Bill of Particulars, Braniff cancelled an agreement with a package pickup service, called Security Couriers, because Security had had the poor judgment to sign a contract with Southwest.
The Bill mentions one other incident, rendered thus in its dry prose: “On or about July, 1972, Edward Acker, president of Braniff, pressured First of Texas Co., a stock brokerage firm in Houston, to withdraw an investment research analysis which represented Southwest as a favorable speculative stock for high risk capital seeking growth.” Lamar Muse tells the story with somewhat richer detail:
“We’d been in business about a year, when the vice-president for research at First of Texas got real interested in us. He wrote up a beautiful investor’s report on us, and when it came out he sent us a few copies. About a week later, I got a call from the guy. He said they’d found a mistake in the report that they needed to correct. He asked us to send all our copies back. So we sent them back. The weeks went by—two, three. There was no report. About six months or a year later, I was told in casual conversation—assuming that I already knew—that Braniff had called the top man at the First of Texas. The First owns Docutel, which had a contract to construct baggage-handling facilities at DFW. Braniff said that if you don’t call that report off the streets, we’ll cancel the contract with Docutel. That contract was about ninety per cent of Docutel’s business.”
If even one of these stores is true, the most interesting question is why—why Harding Lawrence’s Braniff, which had only a small fraction of its business threatened by Southwest, would try with such vengeance to extinguish its tiny spark. Lamar Muse’s theory that “Harding got a hard-on” may, in its own way, hit the mark. Lawrence has long been a creature of formidable pride. In Ling, Stanley Brown tells the story of Lawrence’s twisting James Ling’s arm for an enormous increase in pay, so that he could keep pace with his wife’s bountiful earnings from Wells, Rich. As one of the industry’s swashbucklers, Lawrence has a reputation as a man who can get away with things; indeed, among his colleagues the events of the last year seem actually to have improved Lawrence’s reputation, since he has survived scandals that would have toppled less agile men. If the CAB does finally do Lawrence in, the psycho-historians may look back and decide that this was Lawrence’s tragic flaw, the hubris that led him astray. The man at the top might have thought that anything was possible, that if you were smart enough you did not have to play by the rules, that there was no reason not to indulge a whim. (And it was not just the rules of fair play which fell by the wayside; simple business sense suffered too. Although Braniff disputes these estimates, Lamar Muse claims that Braniff lost $4 million during the course of the $13 war out of Hobby Airport—or about half of the entire profit from Braniff’s domestic operations in that year, 1973.) It was this apparent absence of proportion, the loss of any sense of limitation, which has now endangered Lawrence in holding on to his very job, and will force his company to stand in the defendant’s dock in San Antonio as well as before the CAB in Washington.
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