Hard Landing

by Thomas Petzinger, Jr.

  CRITICAL ACCLALM FOR

  THOMAS PETZINGER, JR.’S

  HARD LANDING

  “Vivid and detailed.… Unlike many dry analyses of deregulation, this book is foremost a tale, fashioned around the ambitions, schemes, and failures of the mercurial men who have dominated aviation for the last 30 years.”

  —The Washington Monthly

  “Petzinger tells his story with the clarity and attention to detail that makes The Wall Street Journal, for which he writes, so readable and entertaining.… There is much here that, in this reporter’s memory, the public didn’t know.… Hard Landing is recommended reading for those whose profession requires an understanding of the airline business—or for anyone interested in how big business really works when the TV lights are off and the boardroom door is closed.”

  —Newsday

  “None tell it better than Wall Street Journal columnist Thomas Petzinger, Jr. In his well-written tome that is organized and reads much like an intriguing novel, Petzinger shows how the airline industry painfully changed over the last 25 years.”

  —Chicago Tribune

  “This is an impressive and wonderfully readable book … the best picture to date of the dramatic changes in U.S. civil aviation over the last two decades. Much of it reads like a novel-only it is all true.… The overall effect is enthralling.… Read this one!”

  —Airways

  “Petzinger’s reporting shines. The book is filled with the reconstructed conversations of the men who led America’s airlines through the last three decades. Its sweep is breathtaking.”

  —Milwaukee Journal Sentinel

  “Lively and absorbing … required reading.”

  —Boston Globe

  “A sharply drawn, engaging book about air wars largely led by some colorful brigands.”

  —Kirkus

  “Petzinger focuses on the people in the epic contest. And that’s what makes the book so fun, and elevates Hard Landing above the typical aviation or business book.”

  —Dallas Morning News

  “A wonderful book that explains why the airline business is such a crazy industry.”

  —St. Petersburg Times

  “This riveting book is replete with little-known facts.… An important book [that] reads like a novel and leaves the reader eager for his next.”

  —Pittsburgh Tribune-Review

  “Fascinating insights from a journalist who obviously well researched the topic.”

  —Airliners

  “What makes this frank, matter-of-fact volume engaging is its detailed analysis of the politics and big-business duplicity behind those flashy ads.”

  —Air & Space

  “Colorfully chronicles the changing alliances and enmities of these men as they battle to win at any cost and change the way the world travels.”

  —Booklist

  “In this comprehensive exploration of the industry, Petzinger focuses on the brilliant but sometimes seriously flawed leaders who have revolutionized the business of moving people in flying cylinders.… Intriguing.”

  —Orange County Register

  ALSO BY THOMAS PETZINGER, JR.

  Oil and Honor: The Texaco-Pennzoil Wars

  Copyright © 1995, 1996 by Thomas Petzinger, Jr.

  Grateful acknowledgment is made to Warner Bros. Publications U.S. Inc. for permission to reprint four lines from “God Save the Queen” by Johnny Rotten, Paul Cook, Steve Jones, and Glen Matlock. Copyright © 1977 by Glitterbest Limited and WB Music Inc. All rights reserved. Reprinted by permission of Warner Bros. Publications U.S. Inc., Miami, FL 33014.

  All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without permission in writing from the publisher.

  Published by Three Rivers Press, New York, New York.

  Member of the Crown Publishing Group.

  Random House, Inc. New York, Toronto, London, Sydney, Auckland www.randomhouse.com

  THREE RIVERS PRESS is a registered trademark and the Three Rivers Press colophon is a trademark of Random House, Inc.

  This work was originally published in hardcover and in slightly different form by Times Books in 1995. Originally published in paperback by Times Books in 1996.

  Library of Congress Cataloging in-Publication Data

  Petzinger, Thomas, Jr.

  Hard landing : the epic contest for power and profits that plunged the airlines into chaos / Thomas Petzinger, Jr.

  1. Airlines—United States—History. 2. Aeronautics, commercial—United States history. 3. Aeronautics, commercial—Deregulation—United States history. I. Title.

  HE9803.A4P48 1995

  387.7′0973—dc20 95-13684

  eISBN: 978-0-307-77449-1

  v3.1

  To Paulette

  And to Beatrice, Eva, and Janis

  It was a love of the air and sky and flying, the lure of adventure, the appreciation of beauty. It lay beyond the descriptive words of men—where immortality is touched through danger, where life meets death on an equal plane; where man is more than man.

  —CHARLES LINDBERGH,

  The Spirit of St. Louis, 1953

  This is a nasty, rotten business.

  —ROBERT CRANDALL,

  American Airlines, 1994

  ACKNOWLEDGMENTS

  I grew up around the airlines. As a teenager I handled baggage and freight for United Airlines. My late grandmother, Beatrice V. March, founded a travel agency in Ohio 40 years ago. My father, Thomas V. Petzinger, Sr., built it into a business well known for integrity and innovation. My brother, Charles C. Petzinger, is now building the business into a world-class operation. Over the years my mother, Jean March Petzinger, and my sister, Elizabeth Ann Holter, involved themselves in the agency whenever it required class.

  My first thanks thus go to my relatives for exposing me to the delights of the travel profession. Only now, after researching this book, do I appreciate how hard they have had to work to extract a living from it.

  I owe a tremendous debt to my sources, who are listed elsewhere. In addition to thanking them for their time, trust, and candor, I wish to extend my regrets to each and every one of them that this is not precisely the book any of them might have wished me to write.

  At The Wall Street Journal, I thank Paul Steiger, the managing editor, who kept a job open for me while I disappeared to work on this project. News editor Cynthia Crossen helped assure a soft landing on my return. For their encouragement, moral support, and reporting assistance along the way, I thank my Journal colleagues Jill Abramson, Laurie Cohen, Brian Coleman, Al Hunt, Bruce Ingersoll, Hal Lancaster, Laurie McGinley, Walt Mossberg, Alan Murray, Asra Nomani, Rick Wartzman, and David Wessel, as well as my former colleagues Eugene Carlson, Jim Stewart, and Peter Truell. I especially wish to thank the Journal’s Bridget O’Brian, who not only shared her insights but provided years of outstanding coverage on which this manuscript heavily relies.

  Apropos of that, I am grateful to many other current and former Journal reporters whose trailblazing reporting precedes my efforts here. They include Teri Agins, Jeff Bailey, Buck Brown, Bryan Burrough, Harlan Byrne, Susan Carey, Gary Cohn, John Curley, Jon Dahl, Bob Davis, Steve Frazier, George Getschow, Dick Gibson, Roy Harris, Jim Hirsch, Al Karr, Scott Kilman, John Koten, Joann Lublin, Mike McCarthy, Priscilla Meyer, Daniel Pearl, Brett Pulley, Carl Quintanilla, Bob Rose, Dean Rotbart, Brent Schlender, Ron Shafer, Randy Smith, Roger Thurow, and Judy Valente. I would like to single out the Journal’s Bill Carley, who covered more big stories than anyone else during much of the period encompassed by this book.

  There is a regrettable trend in business journalism t
o resist acknowledging the work of people at other publications. I am proud to cite the work of outstanding journalists from elsewhere, including, at Fortune, Kenneth Labich, Rush Loving, Jr., Louis Kraar, and Peter Nulty; at Business Week, Aaron Bernstein; John Byrne, Reggi Ann Dubin, James Ellis, Pete Engardio, Chuck Hawkins, and Jim Norman; at Aviation Week, James T. McKenna, James Ott, and Carole A. Shifrin; at Crain’s Chicago Business, Mark Hornung; at the Chicago Tribune, Carol Jouzaitis and Jim Warren; at The New York Times, Adam Bryant and Agis Salpukis; at Air Transport World, Joan Feldman; at The Washington Post, Richard Weintraub; and writing in Texas Monthly, William P. Barrett, James Fallows, and Jan Jarobe.

  Anyone who writes a book about commercial aviation owes an incalculable debt to Robert Daley, R.E.G. Davies, Robert Serling, and Carl Solberg, who have written outstanding histories. Two other authors—Dan Reed, who has written a biography of Robert Crandall, and Capt. John J. Nance, who wrote an account of Braniff’s failure—generously shared insights with me.

  I cannot mention everyone in the airline industry who provided help, but I would like to single out a few: at American Airlines, Al Becker, Iain Burns, Lizanne Peppard, and the infinitely patient and helpful John Hotard; at British Airways, Sandy Gardner, Peter Jones, John Lampi, Derek Ross, and David Snelling; at Southwest Airlines, Helen Bordelon, Ginger Hardage, Kristie Kerr, and Ed Stewart; at the Air Line Pilots Association, John Mazor and Kathy White; at United Airlines, Millie Borkowski and Jan Johnson. Thanks also to one of the greatest knowledge resources in the airline industry, Marion Mistrik, chief librarian at the Air Transport Association in Washington, D.C.

  A number of my friends and associates read all or part of the manuscript and provided valuable comments; my thanks to Bob Cross, Katherine Field, Stephen Holter, Joe Meier, Bridget O’Brian, Carolyn Phillips, and Babak Varzandeh. Dick Tofel found bloopers that no one else would have caught. The toughest copy editor I know—my mother, Jean Petzinger—read every word a couple of times and improved more of them than I can count.

  I have been blessed with intelligent and dedicated researchers. Cortney Murdoch rounded up records across the country. Babak Varzandeh endured the frustrations of the SEC. John Whittier joined me for countless hours over photocopiers. Jennifer Reingold, Colin Cowles, and Cass DuRant helped me accumulate a massive library of clippings.

  Friends, family, and associates provided assistance in many other ways. Ed Upton, a model of virtue, helped me understand how the airline industry works and how an airplane flies. Lisa Petzinger helped me understand how reservation networks operate. I received valuable insights and information from Steve Frazier, Harry Litwin, Dina Long, and Bob Schettino; introductions from Karen Ceremsak, Henry Griggs, and Joe Jamail; and vital favors from Patrick Forte, Al Gibson, Chris Long, Robert Meeks, Jan Norris, Susan Purseley, Beth Shannon, Dominic Suprenant, Shelly Winebold, and the crew at Pan Atlas Travel Service.

  At Random House and Times Books, Peter Osnos was a true believer in this book and never seemed to doubt the outcome, even when he probably should have. Miranda Brooks, Henry Ferris, Carie Freimuth, Diane Henry, Lesley Oelsner, Beth Pearson, Mary Beth Roche, and Laura Taylor also were great allies. Copy editor Peg Haller made more spectacular catches than I wish to admit. But my deepest thanks go to Steve Wasserman, the editorial director of Times Books, who took on this project midway through the process and gave it the attention an adopted child requires. It will horrify the reader to know that at one point the manuscript of this book was nearly double its present length; the guidance, spirit, and talent of Steve Wasserman helped turn it into a real book.

  I wish also to acknowledge my literary agent, Alice Fried Martell, the epitome of integrity and good humor, and a wonderful friend.

  For their toleration and inspiration I thank my children, Beatrice, Eva, and Janis. And mostly I thank my wife, Paulette Thomas, who covered the story, nurtured the manuscript, defended my sanity, and kept our family whole. Though I deserved less, she never for a minute let me down.

  CONTENTS

  Cover

  Other Books by This Author

  Title Page

  Copyright

  Dedication

  Epigraph

  Acknowledgments

  Prologue: The Tightrope

  1. Takeoff

  2. Cheap Thrills, Low Fares

  3. Network Warriors

  4. “In the Public Interest”

  5. Start-ups and Upstarts

  6. The Empire Strikes Back

  7. Workingman’s Blues

  8. Stormy Weather

  9. Continental Divide

  10. Breaking Ranks

  11. Gloom over Miami

  12. Nosedive

  13. The Southwest Shuffle

  14. Operation Stealthco

  15. Fly Now, Pay Later

  16. “To Fly, to Serve”

  17. The Gilded Cockpit

  18. London Calling

  19. Hard Landing

  Postscript: Magic Act

  Postscript to the Paperback Edition

  Notes

  Bibliography

  About the Author

  PROLOGUE: THE TIGHTROPE

  Flying is an act of conquest, of defeating the most basic and powerful forces of nature. It unites the violent rage and brute power of jet engines with the infinitesimal tolerances of the cockpit. Airlines take their measurements from the ton to the milligram, from the mile to the millimeter, endowing any careless move—an engine setting, a flap position, a training failure—with the power to wipe out hundreds of lives. “A wink, a single gesture, is enough to topple you from the tightrope,” wrote Antoine de Saint-Exupéry, the great French author and aviator.

  This book is about the men who try to earn a profit from the tightrope act.

  Like jet flight itself, the business of transporting people from city to city by air unites the massive with the microscopic. At the beginning of each day 4,500 giant aluminum vessels start their engines and fling themselves into the air over the United States. With paying passengers aboard, they fly at nearly the speed of sound to their destinations, disgorge themselves, fill up again, and fly on. They repeat this process through the day a total of 20,000 times, lacing the skies over America with a canopy of exhaust trails. Airline technicians monitor every cubic foot of atmosphere via satellite, to the point of logging each individual lightning bolt over the continental United States. At the end of the day the airplanes cool down for an evening of gentle inspection and intricate care, like thoroughbreds after a hard day of training, having carried well over one million riders.

  Repetitiveness on this scale means that success and doom occur in the margins of the airline business: bad business decisions have a way of becoming catastrophic; good calls look in retrospect like acts of genius. It costs anywhere from seven to fourteen cents to fly one passenger a mile, and with nearly a half-billion passengers a year flying nearly a half-trillion miles, the pennies have a way of disappearing quickly.

  This frenetic daily exercise is repeated with such consistency and efficiency that the failures of the system call attention to its reliability. Many flights arrive late, of course, but in the majority of cases they do so in order to assure that an even greater number of passengers will arrive on time. Tragically, airliners do crash, although this happens so infrequently that a person is statistically less likely to die on a jet flight than by choking on a meal.

  The airline industry reached this level of ubiquity within the space of human memory, making it younger than telecommunications, moviemaking, or automobile manufacturing. Yet already flying has become part of the furniture of modern-day American life, taken as much for granted as running water or interstate highways. Previously accessible only to the comfortably fixed or to those traveling on expense accounts, flying, in barely a decade’s time, has become more affordable than driving. Although cars arc often called the foundation of American culture, by the mid-1990s more adult Americans had flown in airplanes than owned automobiles.


  Yet behind the commonplace routine of an airplane flight today arc 25 years of pandemonium and confrontation-bankruptcies, labor strikes, lawsuits, liquidations, fare wars, firings, fines, mergers, divestitures, and congressional showdowns—any of which may reappear at any moment. The airlines have experienced more than their share of traumas, to be sure, but every crisis is rooted in a larger pressure bearing down on global culture or economics. The airlines of America (and a few overseas) provide an uncommonly clear window through which to view the social and economic upheavals sweeping the globe.

  They cannot help revealing these changes, often in exaggerated ways. Airlines are service, information, and capital goods businesses all in one. They sell one of the few products consumed while it is being produced, right before the eyes of the customer. They exploit technology on a scale exceeded by no industry except perhaps medicine. They form the vital core of the world’s biggest industry—travel and tourism, which accounts for one out of every 15 jobs. Airlines are managed as information systems and operated as networks. They embody, and can help us understand, some of the vexing paradoxes of modern economic life—why the value pricing revolution has given consumers unparalleled economic power, for instance, while at the same time causing the living standards of so many to decline.

  The airlines also provide vivid case studies in corporate strategy. The terrific sums of capital at stake and the numbing repetitiveness of their operations make airlines uniquely sensitive to the commands of management. Even a question of substituting chicken Parmesan for chicken divan becomes a vital corporate matter—to say nothing of deciding to which continents an airline should fly, what fares it should charge, how many jets it should buy, or whether it should assent to the demands of a union or instead allow employees to go on strike. The thinness of the industry’s margin of error is evident in how many names have vanished from the roster: Eastern, Pan Am, People Express, Frontier, Braniff, and Air Florida, to name some whose unhappy fates we will follow in this book. But we will also chart some sagas of achievement made possible by the leverage of the airline business—Southwest Airlines, for one, whose success formula has enabled it to earn fabulous profits from rock-bottom fares.