December 1975
The Great Airline War
Will IT’s “whiz kids” fizzle?! Will sexy Southwest conquer all?! Will Braniff lose its routes?!
Russell Thayer held the world between his outstretched hands. “This, over here, is Hawaii,” he said, jiggling his right hand, “and this,” jiggling his left, “is Dallas. We fly a 747 between them, the only 747 we’ve got. To make a 747 pay off, you have to have a long haul with a lot of people on board. Now, it turns out that the distance between Dallas and Honolulu is exactly right. If it were any shorter, you couldn’t fly it as efficiently. And if it were any longer, you couldn’t turn it around for the daily round trip.”
Thayer lowered his hands and leaned across the desk. “I decided that the islands were in the right place, and I didn’t move ’em an inch.”
Russell Thayer laughed, a hearty, warm-natured laugh that rumbled up out of his football player’s body. He was sitting in his office on the ninth floor of the Braniff Tower on the west side of Dallas. Around the airlines industry, Thayer is known as a genius, as the man who has helped turn Braniff into one of the most efficient money makers the business has ever seen. Five days a week he works in Dallas as Braniff’s executive vice-president for Corporate and Market Planning The other two-days—this is the beauty of working for an airline—he spends at home in Princeton, New Jersey. Word is that he hates Texas.
One floor above Thayer, Harding Lawrence—with studied informality—came from behind his desk and gestured his visitor to the coffee table at the opposite end of the room. Perched on the table was a model of the supersonic Concorde jet, painted in bright Braniff colors. At Lawrence’s elbow was a matching model of the Boeing 747.
When he became chairman and chief executive officer of Braniff ten years ago, Lawrence was often described as “dashing” and “romantic.” Now, his silver hair and deeply creased face make him look ten years older than 55; his appearance hovers on the line between “distinguished” and “tired.” A smile on his face, Lawrence offered his visitor an expensive cigar, then began chewing on an unlighted one himself as he talked about his airline.
“We have our creeds, our objectives. We know what we stand for. Our job is to promote the foreign and domestic commerce of the United States, the national defense, the postal service—and to do that in the public interest. You might say, in the consumer’s interest. The airline industry is the most consumer-oriented business I know.
As Lawrence spoke, a red and orange jet from Southwest Airlines, perfectly framed in the picture window behind him, settled in for a landing at Love Field. In addition to pursuing its high-flown goals, Braniff has spent almost five years trying to prevent this very occurrence. For its efforts, the company has been indicted by a federal grand jury for antitrust violations in trying to kill Southwest.
Serious as such a charge is, it is not the most serious challenge facing Lawrence and his airline. In Washington, an accusation of unprecedented gravity is now pending before the Civil Aeronautics Board (CAB). Based on revelations of a sizeable Braniff slush fund (generated through “off the books” sale of tickets and used to bribe ticket agents in South America), the complaint threatens Braniff’s right to operate any route, foreign or domestic, as long as “present management retains operational control.” “Present management,” as everyone understands, means Harding L. Lawrence.
In Houston, Francisco Lorenzo was turning on the charm. Four years ago, when he had just turned 30, Lorenzo came down from the Northeast, trailing his Harvard Business School pedigree, to take control of Texas International Airlines. TI was in deep, deep trouble at the time; the year before Lorenzo became president, the airline lost more than $6 million. Now TI is in deep trouble again. During the first half of 1975, after TI’s disastrous, five-month-long strike, the company was losing money even faster than it had in 1971. Like Braniff, TI is under federal indictment for antitrust activities against Southwest. Nonetheless, Lorenzo was the very picture of urbane good will as he listened to a question based on the latest appalling hypothesis about Texas International: that it had outlasted its reason for existence.
“Of course we don’t agree with that,” he said, attempting to suggest with his smile that no reasonable man possibly could agree. “We came to a company that was flat on its back, twenty million in the hole. It was in trouble not because it had bad routes, not because its employees weren’t dedicated, but because management had made some bad mistakes. We’ve turned that around now. Until the strike, we were making money. We’ve paid off more than half of that twenty million. We are making long strides forward.”
Lorenzo was ready for another question; whether, as many people suspect, he had taken over TI as a business pirate’s booty, to be sold quickly at a profit.
“Texas International is not for sale. It has not been for sale. It will not be for sale,” Lorenzo continues to smile, with apparently genuine graciousness.
“Are there any circumstances under which it might be for sale?”
“When we get to the bankruptcy courts.”
Lamar Muse was a symphony in pink. On his bald spot and on the cheeks which framed his white mustache, his skin was as pink as a newborn baby’s. His aviator’s glasses were tinted pink. He wore a pink-striped tie, and a shirt of pink checks. His jacket was a plaid—gray and pink. He radiated, like a pastel sun, as he sat munching on a cheeseburger in Austin’s Polonaise restaurant.
“There’s a story I love to tell, about a man who ran a hamburger stand, whose children wanted to open up a fancy restaurant. He took them aside and told them, ‘Boys, remember this: feed the rich, and grow poor; feed the poor, and grow rich.’ That’s really what we’ve done. We’ve made airline travel available to the average person.”
Muse is president of Southwest Airlines, whose flights between Houston, Dallas, San Antonio, and the Rio Grande Valley cost 25 per cent, 40 per cent, 50 per cent less than do comparable ones on Braniff and TI. Muse, however, has spent at least as much time fighting the two other Texas airlines as in running his own. (“Mr. Muse hasn’t been here in weeks,” the Southwest office said at one point this fall. “He’s been too busy with the suits.”) Southwest has been tied up in virtually continuous litigation by its rivals, ever since it filed for its first routes in 1968.
“You know,” Muse said between bites, “Harding Lawrence is probably the best chief executive officer of a trunk line in the United States. But he just got a hard-on about Southwest Airlines. It didn’t make any difference to him whether it made economic sense to fight Southwest. He was just going to do us in. He had told hundreds of people in Dallas that we weren’t going to make it, and he wasn’t going to be proven wrong. He let his emotions get control of him.”
Muse paused, and called the waitress over for a dish of butter-pecan ice cream. “The funny thing is,” he continued, “every one of his tricks backfired on him. If he had just let us alone from the very beginning, we’d probably have gone under by now.”
The dilemmas of Lawrence and Lorenzo have their own special drama, but it took the entry of Muse and Southwest to create the Great Texas Airline War. Like other grand episodes of commercial conflict, this one has all the requisite elements—jealousy, intrigue, back stabbing, high stakes, and occasional honor. The personal futures of several of the participants hand shakily in the balance, and a corporate future or two as well. This war is also a preview of the future for the American airlines. During the coming year, the airlines, along with their benign regulators in Washington, are in for a major assault. Waving banners of “competition” and “deregulation,” their opponents will be storming the barricades of Braniff, American, United, and a dozen other carriers, as well as the CAB which nestles protectively over them; the assailants will ask that the industry be broken up the way the oil trust was at the end of nineteenth century (for all the good that has done). And, as the national struggle wears on, every one of the potential outcomes will already be on display in Texas. Price competition, the decline of the “feeder” lines, shake-ups in long entrenched management—you’ll see it all first, right here.
As much as anything else, the struggle between the three Texas airlines is a contrast of styles—different styles of making money, different views on life. Lamar Muse may grumble about the $2 million Southwest has shelled out in its legal crusades since 1968 (during 1975, this came to $35 per flight), but he clearly relishes having the bullies of the block so relentlessly picking on him. The scrap books in Southwest’s office in Dallas bulge with clippings describing the latest horror visited upon them by Braniff or TI. While recounting their troubles, the people of Southwest often resemble the conspiracy nuts who hang around so many newspaper offices, fitting every random occurrence into a seamless pattern of malign intent. The difference in this case is that Southwest’s paranoia seems justified: there really are people out to get them. No vindication could have been sweeter than the day last February when the federal grand jury indicted Braniff and TI for their dirty tactics against the fledgling airline. Southwest is only too eager to take off its bandages, display its bruises, and point the finger at the man with the blackjack.
Meanwhile, everyone at Braniff feigns magisterial disdain for any other airline that might happen to be operating in the same corner of the country. The Braniff PR man, a corporate incarnation of Ron Ziegler name Jere Cox, at first affected not to understand references to an “airline war,” and then, when the mystery was finally explained, said, “Oh, you must mean the controversies between Southwest and TI.” The impression, up and down the Braniff organization, is of a classily dressed society lady who makes polite conversation while kneeing her neighbor in the groin.
