Hard Landing

by Thomas Petzinger, Jr.

  The union of devilish details and “godlike power,” as Lindbergh found in the act of flying, makes commercial aviation compelling for yet another reason: the anthropology of the executive suite.

  The men who run the airlines of America are an extreme type; calling them men of ego would be like calling Mount McKinley a rise in the landscape. Airlines demand a single strategic vision, lest the delicate choreography of airplanes, people, timetables, and finance break down. The airlines both attract and promote executives obsessed with control, who flourish at the center of all decision making.

  The marginal economics of the industry—the proximity of success and failure to every decision—also breeds executives who love risk, who crave victory, and who are ruthlessly averse to defeat. The multitude of airline statistics causes chief executives to compete to the decimal point, as if they were comparing batting averages. Commercial aviation is, as Robert Crandall of American Airlines once told a Senate hearing, “intensely, vigorously, bitterly, savagely competitive.” In the Darwinian process of the executive suite, the higher the rank of the executive, the greater his lust for the fight, and the greater the stakes. “Most executives,” says Robert W. Baker, who grew up in an airline family and became a top executive at American, “don’t have the stomach for this stuff.”

  At the highest level, at the airlines that matter, barely a dozen people have played this game in the past 25 years—a small group of white men who made the industry their sandlot from the late 1960s to the mid-1990s. Although it was through their efforts that flying became inexpensive and commonplace, they entered the industry at a time when flying was special and when the men in charge were looked upon as demigods of the industrial world. Thus it was that after leading the first voyage around the moon, astronaut Frank Borman turned down high-ranking job offers from the White House and elsewhere to become one of 43 vice presidents at Eastern Air Lines, in hopes of one day becoming its president.

  For the most part these airline chieftains launched their careers at roughly the same starting point: early in the jet age, a time when flying conferred membership in the “jet set.” Men still boarded airplanes in jackets and ties, while women (if they flew at all) wore white gloves and hats. As middle managers these executives worked with fabulously expensive machines, toy models of which they once played with. They supervised pilots steeped in the chain-of-command culture of the military—men who were trained to salute—and flight attendants chosen for their faces, their figures, and their servility. Conducting sensitive missions for the U.S. government and otherwise fulfilling the national interest, they had access to the power corridors of Washington. It was, in short, a career that went to one’s head.

  Through diverse paths these men rose to become only the third generation of management in the history of the airline industry. They were of an age and of a type. They knew each other well, variously forming alliances and making enemies of one another, all of them stricken with the same infatuation with aviation and all of them committed to achieving personal triumph.

  As they began to reach the top—just as most of them were attaining their hard-fought ambition to “run something,” as they often put it—the rules of the game were utterly transformed by Congress. More precisely, the rules were eliminated. In their heyday as a special industry, the airlines had carried on their business through a tedious, federally supervised process; it was as if the airlines were chess players required to clear their moves in advance with an arbiter committed to taking the contestants to a draw. In short order in 1978, for reasons that few fully understood at the time and that almost no one recognizes now, the airlines were loosed into a capitalistic free-for-all. The name given to this change was deregulation.

  Although most of the airline chieftains resisted deregulation, it did, in fact, play squarely into their win-at-all-costs instincts as businesspeople. Fares plunged, and with them the surfeit of onboard service. It became fashionable (and remains so) to decry deregulation as misguided public policy, but the fact is that deregulation was inevitable. “But,” the nostalgic persist in asking, “was it of net social benefit or detriment?” The answer is neither. Deregulation was a massive exercise in the redistribution of wealth, a zero-sum game in which not billions but trillions of dollars in money, assets, time, convenience, service, and pure human toil shifted among many groups of people, from one economic sector to another.

  The most remarkable aspect of this upheaval is that so few men determined who won and who lost and in what proportions. This book tells the story of those men.

  Each of them reacted differently to the same set of economic forces. Some, such as Bob Crandall of American, used technology to create new competitive weapons; others relied on more conventional weaponry, such as the 9 mm handgun that Frank Borman strapped to his ankle as labor strife mounted at Eastern. Some, such as Donald Burr of People Express, sought to manipulate their workers with promises of love and trust in the workplace; others, such as Richard Ferris of United Airlines, told his workers to do things his way or not at all. One, Frank Lorenzo, borrowed enough money to seize control of the greatest flying armada ever assembled to that time; another, Herbert Kelleher of Southwest Airlines, borrowed almost no money and procured as few planes as necessary. The globalization of the industry added another dimension to the range of strategic responses: Ed Acker of Pan American abandoned some of the most storied and valuable airline routes in the world, while Stephen Wolf of United Airlines and Sir Colin Marshall of British Airways created two of the world’s first global megacarriers, defining the shape of the airline industry into the next century.

  In the end most of these men were exiled from the executive suite. Though many had made themselves fabulously rich before departing, most were not in the game principally for the money.

  The story of their entwined careers reveals many of the larger laws of the business world: that the same overweening ambition that drives so many executives to the top also assures their failure; that when executives form emotional attachments in business, whether to people, markets, or machinery, they deprive themselves of their best business judgment; that those who know an industry best are the most likely to take for granted, and ultimately ignore, its most inviolate principles; that although the rebuke may be slow in coming, greed, in the end, is almost always punished; that economics, in short, overpowers ego.

  Just as they reflect the excesses of business in so many other respects, the airlines bespeak these lessons in spades.

  CHAPTER 1

  TAKEOFF

  In 1923, two decades after the Wright brothers’ triumph at Kitty Hawk, flying remained a godlike act of derring-do. People in small towns across North America eagerly awaited visits by barnstorming pilots traveling in troupes called flying circuses. The barnstormers would draw people into an open field with a show of looping and wing walking, then work the crowd for paying passengers; the going rate was $5 for a 10-minute ride. Families traveled miles by oxcart to witness the display; the schools would let out. In the era of Grant Wood’s American Gothic, the barnstormers introduced a generation of rural America to the modern age. The intrepid who actually went up for a ride experienced a thrill they never forgot.

  Among the busiest of these aviation entrepreneurs was a quiet 21-year-old from Minnesota named Charles A. Lindbergh. Standing six foot two, he was known to his friends as Slim. Lindbergh was peculiar among the barnstormers. The others were mostly World War I air veterans who taunted death and lived high. Lindbergh, however, analyzed the risk of a stunt against its value in drawing a crowd. He resisted anything that might unsteady his hand or dull his reflexes, including the pilot stock-in-trade of liquor and coffee. Plainly, Lindbergh was in the game for something else. He studied the wind currents of the Rockies, the storm schedules of the Mississippi Valley, and the technical vagaries of his airfoils and engine. He scouted the countryside for well-drained fields where he imagined the airports of the future would rise, giving birth, as he enjoyed imagining, to “airl
ines radiating in every direction.”

  Intent on buying an airplane more advanced than his fabric-covered biplane, Lindbergh took unusual care to shepherd his expenses. He also worked diligently to maintain his income, particularly when other showmen began offering discounts. “I barnstormed over into Wisconsin but found that someone had been carrying passengers for half-price there,” he wrote as a young man. “So I left southern Wisconsin and turned toward Illinois.” Happily, Lindbergh soon landed steady pay, flying the airmail between St. Louis and Chicago.

  His decision to undertake the fabled New York-to-Paris flight was financial, motivated by a $25,000 prize. Likewise did his backers have commerce in mind. A St. Louis banker, handing Lindbergh $15,000 in financing for his transatlantic airplane, used the occasion to ask, “What would you think of naming it the Spirit of St. Louis?” On another occasion the same banker made it plain that men of finance, not pilots, had the larger role in the capital-intensive world of aviation. “You’ve only a life to lose, Slim,” he told Lindbergh. “I’ve got a reputation to lose.”

  The success of Lindbergh’s 1927 flight to Paris “Well, I made it,” he announced, before being absorbed by the throng—sparked the Beatlemania of its time, except that it was much bigger. Major league baseball games came to a halt. Radio announcers sobbed. A skywriter emblazoned the Manhattan horizon with the words “Hail Lindy.” The New York Evening World nominated the flight for “the greatest feat of a solitary man in the records of the human race.” A new dance called the Lindy hop was born. Such a crowd followed Lindbergh into an elevator that his jacket sleeve was ripped off by the human pressure. By some estimates half of the population of the United States would physically lay eyes on him at one time or another. Time magazine, naming him its Man of the Year for 1927, declared, “Lindbergh is the most cherished citizen since Theodore Roosevelt.”

  A relationship that would alter the course of commercial aviation took off less than one month after the Paris flight. On that day nearly four million New Yorkers, more than half the population of the city, were thronged from the Battery to Central Park for Lindbergh’s ticker-tape parade. At the uptown end of the parade, taking in the spectacle through a window in the Union Club at 51st Street and Fifth Avenue, was Juan Trippe, a wealthy 28-year-old aviation enthusiast. Trippe resolved to see Lindbergh that very day.

  Their paths were already loosely entwined, for Lindbergh owed his job as an airmail pilot to Trippe. Born in 1899 and graduated from Yale in 1921, Trippe was a large man who radiated charm. He forged enduring friendships with the scions of some of America’s great family fortunes—Sonny Whitney and Bill Rockefeller, to name two. Two years before the Lindbergh flight, Trippe had prevailed on one of his fraternity brothers, who had married into the Mellon family of Pittsburgh, to arrange a meeting with the congressman from that city, who was chairman of the House Post Office Committee. Trippe promoted a plan to shift the responsibility for carrying the airmail away from the United States Army to hired contractors. Trippe’s scheme was soon adopted, an early display of a practice later called privatization.

  When bids were solicited for the first airmail routes, more than 5,000 fortune seekers inundated the Post Office, but only 12 emerged victorious. A timber magnate in Seattle named William E. Boeing, bidding low because he built his own airplanes, won the line from Chicago to San Francisco, giving birth to what would become United Airlines. Florida Airways, created by World War I flying ace Eddie Rickenbacker, picked up the Atlanta-Miami run; it later became part of Eastern Air Lines. It was also thanks to Trippe’s action that a company called Robertson Aviation received the St. Louis-Chicago airmail route, on which Charles Lindbergh served as chief pilot.

  For Trippe himself, the airmail plan was fraught with unhappy irony. Though his company, Colonial Aviation, won the prized route between New York and Boston, Trippe wanted more: to bid for the route between New York and Chicago. But the cautious financiers on his board of directors feared overextension. Trippe narrowly lost a proxy fight and was thrown out of his own company.

  It was only a week later, in June 1927, that Trippe found himself watching Lindbergh’s riotous welcome from the comforts of the Union Club. Despite his defeat in the boardroom, Trippe was already thinking bigger than ever. He wanted to recruit Lindbergh to his new plan, involving a company called Pan American World Airways.

  Trippe broke a date with his fiancée and went to the Hotel Commodore, where 4,000 guests were attending a private party for Lindbergh following the ticker-tape parade. The young hero was already besieged with employment and endorsement invitations, eventually to total 7,000 offers. Trippe, miraculously wangling a few private moments with Lindbergh, distinguished himself from other opportunists by urging the 25-year-old aviator to accept no offers—not even from Trippe himself—until Lindbergh had hired a lawyer. Lindbergh, grateful at the display of gallantry, ultimately signed on as Pan Am’s “technical advisor” at a rather modest retainer of $10,000 a year, plus stock options.

  Trippe’s fiancée, Betty Stettinius, nearly broke off the engagement after being stood up that night, but they were soon reconciled. When they married a short time later, Trippe became the brother-in-law of Edward Stettinius, a politically prominent steel executive on his way to becoming the U.S. secretary of state. Trippe had cemented his position in the three power structures that controlled success or failure in commercial flying: politics, public opinion, and finance. All he needed now were the places to fly and the payloads to carry.

  Banished from his pioneering airmail company, Trippe forswore any postal contracts within the United States. If he could not get in on the ground floor, he would fly elsewhere: he would fly the U.S. mail outside U.S. borders. Ultimately he had the choice of three destinations: Latin America, Asia, or Europe. With Lindbergh at his side, Trippe resolved to conquer all three, like three great arms stretching from America.

  First came the pioneering flights to the south. In seeking the first international airmail route, from Miami to Havana, Pan Am had to bid against a more experienced aviation company, but listing Lindbergh as a participant in the project guaranteed the contract for Trippe. Lindbergh was at the controls for the maiden flight to Havana, causing a mile-long traffic jam on every road radiating from Miami Airport.

  The venture was hardly lucrative, alas. Even with generous payments from the Post Office, Pan Am could not cover the extraordinary cost of buying and flying its airplanes. Though never one to brood over accounting intricacies, Trippe studied the problem and realized that he could dramatically improve the economics of airmail by coaxing a few paying passengers onto each flight. Pan Am installed wicker chairs in the rear of the airmail plane, posted a $100 fare, and promoted the Prohibition-era flight as the passage to a legal drink. “Fly with us to Havana,” went the pitch, “and you can bathe in Bacardi rum four hours from now.”

  Trippe had discovered what might be called the First Rule of Airline Economics: If a plane is going to take off anyway—once the fuel is purchased and the pilot paid and the interest rendered on the money borrowed to buy the plane in the first place—any paying passenger or payload recruited to the flight is almost pure profit. The fare paid by the last passenger taken on board represents a fabulously lucrative rate of return. But in Pan Am’s case, Trippe had proved ahead of his time. Though Pan Am sold a Havana ticket to Al Capone, the wicker chairs flew mostly empty.

  More interested in power than profit, Trippe remained undeterred. He continued flying the airmail to Cuba and, with Lindbergh, departed Miami in September 1929 to blaze a trail more deeply into Latin America. The commercial imperative was strong: U.S. investment was surging in South America, Wall Street was racking up bond underwriting fees there, and Washington was anxiously noting an outbreak of German influence on the continent (thanks partly to the birth of European air service to South America, via West Africa). Along the Pacific coast of South America Trippe and Lindbergh flew accompanied by their brides—the hemisphere’s most romantic celebrity
newlyweds. Wearing elegant civilian clothes instead of flying breeches, they drew torch-bearing and flag-waving crowds so great that at one point Lindbergh could not find enough clearing to land. Local political figures welcomed them not only as dignitaries but as saviors: Pan Am’s service would enable much of South America to skip past the costly development of a railroad industry. (Neither did it hurt that Trippe’s first name, taken from an aunt named Juanita, gave him a vaguely Latin air.)

  At every stop on the South American journey Trippe dispatched a report to a public relations operative in Miami, whose florid press releases would help fix Pan Am in the public mind as the most important airline in the world.

  While Trippe pursued his lofty ambitions overseas, the mail contractors operating inside the United States absorbed themselves in the more worldly concern of making a buck. The Post Office paid the airlines by the ounce but charged the customer by the envelope. Thus Eastern Air Lines found it profitable to stuff envelopes with wet blotters and send them by airmail; the shipping fees from the Post Office exceeded the cost of buying the stamps. Similarly did Varney Speed Lines (later Continental Airlines) introduce a line of Christmas cards weighing a full ounce in its principal hub city of Boise. Other airlines began conducting internal correspondence by registered airmail, as regulations required the Post Office to secure even a single registered letter in a sack with a 16-ounce lock.

  Though costly to the government, airmail soon became smashingly popular, fostered in part by the spread of telephones and other instant communication devices, which pressured businesses to speed up their paperwork. A 23¢ airmail stamp made it possible to post a document in Peoria on Thursday afternoon and have it on someone’s desk in New York Friday morning. As the economy of the late 1920s swelled on a tide of credit, banks realized that airmail paid for itself many times over when shipping money drafts and other interest-sensitive instruments. Manufacturers and distributors found that sending samples by airmail drew more attention to their products.