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Hard Landing

Page 17

by Thomas Petzinger, Jr.


  Burr then had to find the airplanes with which to launch People Express. Lufthansa, it turned out, was getting rid of the 737s in its fleet and agreed to refurbish them in the colors and logo of People Express. The tail of each plane would be emblazoned with two squiggly lines representing two faces in profile. The design reminded Burr of two human forms making love.

  A week before the People Express stock offering was scheduled for market, Burr noticed that the Lufthansa people were not returning his calls. The deal had been negotiated, but the closing hadn’t occurred. Burr began snooping around. Boeing, it appeared, was offering Lufthansa top dollar to buy back the same planes, which it intended to turn over to American Airlines as loaners against a major purchase of new aircraft.

  Burr, still working out of the little office he had set up in Houston, boarded the next flight to the West Coast, where he confronted a Boeing executive. “What’s going on with these Lufthansa planes?” Burr demanded.

  The Boeing man demurred and stonewalled.

  “You’re a bunch of whores and bastards!” Burr screamed. “I didn’t think Boeing could operate this way. This is outrageous! If you won’t tell us what’s going on, we’ll buy DC-9s [from McDonnell Douglas] and never buy a Boeing product again!” Burr stalked away.

  With the stock offering a few days away, People Express still had no airplanes to its name. Burr heard that Ansett Airlines of Australia, controlled by financier Rupert Murdoch, might have some planes available. He flew to New York and begged his way into an appointment with Murdoch, owner of the New York Post. Burr was shown into an office so expansive he could barely tell that the man at the other end was Murdoch himself. It seemed to take Murdoch half the afternoon to walk across the office to greet him. This being election day in 1980, all that Murdoch could talk about was the apparent landslide victory in the making for Ronald Reagan over Jimmy Carter—the last thing in the world Burr cared about or wanted to discuss at the moment.

  Those planes … what about those planes?

  Murdoch, it turned out, had no idea whether he had planes on the market or not. “Come to Australia next month,” he cheerfully instructed him.

  Burr arrived back in Houston, dejected. Walking into the office, however, he noticed a message from Lufthansa. Boeing had backed down. The 737s would be painted with People Express faces on their tails after all.

  People Express went to market a few days later at $8.50 a share. Burr had purchased 710,000 founder’s shares six months earlier at 500 each; they had just increased in value 1,700 percent. Frank Lorenzo, it appeared, wasn’t the only one who could engineer a killing on a stock sale.

  On New Year’s Eve in 1980 Burr and his fellow People Express executives held their last meeting in Houston before moving their office and their families to Newark. They met at their principal conference location, a Tex-Mex place called Ninfa’s on the edge of the city’s exclusive River Oaks neighborhood. Within a few days they were in Newark for good. Burr wound up in a corner room on the top floor of the Howard Johnson Motor Lodge across the highway from the airport, where he had a clear view of the runways. Burr would enjoy watching the planes taking off and landing from the privacy of his bedroom. Soon he would be watching his own planes.

  Lorenzo and Bakes were thrilled to announce that Alfred Kahn would become a member of the New York Air board of directors. Kahn, however misleadingly identified as the father of deregulation, was nonetheless good copy and a bona fide media darling. He enthusiastically backed New York Air, itself the very embodiment of deregulation. Plus Kahn was a New Yorker. Bakes liked that: a brash New Yorker for a brash new airline. To further strengthen the New York marketing theme, one of the planes, with great fanfare, was rechristened The Little Flower, the nickname of the great former mayor, Fiorello La Guardia.

  But among the union pilots of America, New York Air overnight transformed Frank Lorenzo into public enemy number one. “Runaway shop!” the pilots’ union cried. “Rotten to the core,” said Air Line Pilot magazine. The pilots’ outrage was understandable: here were a half-dozen airplanes, with many more to arrive in the months ahead, representing dozens of opportunities for copilots at Texas International to step up to the captain’s seat, to earn a fourth stripe on their sleeves, to get a significant raise in pay—all being switched to a subsidiary where their wage rates, work rules, and seniority provisions did not apply.

  The pilots would launch a $1-million publicity campaign to vilify Lorenzo. They rented a billboard near the Blue Barn at Hobby Airport showing a Texas International jet transforming itself into the colors of New York Air, with a devilish caricature of Lorenzo in a cowboy hat tearing a union contract in half. Union leaders threatened a boycott of Pepsi products because a Pepsi bottler happened to sit on the Texas Air board. They persuaded the widow of Fiorello La Guardia to boycott the festivities commemorating the first flight; the late mayor, it turned out, had been a champion of the pilots’ union, once marching at the head of the New York State Labor Day parade alongside Air Line Pilots Association founder Dave Behncke at a time, in the early 1930s, when the union was battling a hated nonunion operator.

  The pilots’ union would litigate and threaten and cajole, and none of it would hurt New York Air in the slightest. Lorenzo had vanquished them. If anything, the more loudly the pilots’ union railed against New York Air, the more successful the airline became. The public was increasingly fed up with labor unions and was drifting to the right, a fact most evident at this moment in the Reagan landslide. ALPA’s boisterous campaign only made people take notice that there was a new airline in New York that offered halfway decent service at a low price. It was free publicity, just like the pooping baby elephant in Kansas City. Even in an old-line union town like New York, people couldn’t have cared less about the whinings of a few union pilots down in Texas—particularly when New York Air was offering Gotham one of the best bargains in air travel it had ever seen.

  Service to Washington was inaugurated at $49 ($29 on weekends), compared with Eastern’s $60, plus a passenger got a free drink on New York Air, and, for a time, a free bottle of champagne, borrowing from the Southwest Airline liquor giveaway of seven years earlier. Texas Air drove home its message in newspaper ads showing people drowning themselves in champagne. “Celebrate, New York!” they said. “You’ll never have to fly the Eastern shuttle again.”

  Eastern fought back valiantly, handing out 50-percent-off coupons to anyone flying the shuttle; Lorenzo responded by offering $15 to anyone who turned in one of the Eastern coupons to New York Air. (A rash of counterfeit coupons came into circulation.) Before long New York Air was flying close to 100,000 people a month. Practically overnight New York Air had captured one quarter of the market held by Eastern’s shuttle in one of the world’s busiest and most important airline markets. New York Air was the most successful airline start-up in history.

  Don Burr had at last secured four planes from Lufthansa, with at least a dozen scheduled to come in. Hiring the people to staff People Express turned out to be much easier than finding the airplanes.

  A hard recession was still on, with 8 million Americans unemployed and new college graduates among the hardest hit. An ad for flight personnel in Buffalo drew 12,000 eager applicants. The pay was meager—about $17,000 to start, except for pilots, who received twice that—and everyone had to buy stock, even if doing so required borrowing money from the company. Anyone who came into People Express, Burr decreed, would have to invest a substantial portion of his or her net worth in the company. That way if the company failed, they would all go down with it.

  Candidates were administered a variety of tests to assure they were compatible with the culture Burr had in mind. The employment rolls swelled, mostly with people from marginal colleges; in profiling recruits, some of the company’s executives considered an IQ of 105 to be ideal. Certainly Burr had his standards—very specific ones. His employees had to be friendly, and passionate about serving the customer. In the interest of low fares People Expre
ss passengers would be asked to carry their bags on board or pay three dollars. Anyone who wanted coffee would pay fifty cents. Burr was linking the ticket price to the lowest common denominator of service demanded by the customer—pure transportation. The ticket price had to be lower than the cost of driving, or forget it. (“There’s no potholes up here,” one of the company’s early ads would observe.) But even if the company could not provide extensive service, Burr thought, it could offer warm service. Southwest Airlines had proved the everlasting value of that. Warm service cost nothing to provide, but it made a deep impression on the customer. So what if People Express was a no-frills airline? The friendly attitudes of his employees, Burr decided, would be the ultimate frill.

  Burr also wanted employees who were something to look at. People Express was going to introduce the radical notion of cross-employment, in which everyone would have a secondary job. (Lorenzo resolved to attempt the same at New York Air.) Every single employee of People Express would be required to put in time at a job with customer contacts; many, including the chief financial officer of the company, would hold second jobs as flight attendants. Everybody would have to be good-looking. Burr told his personnel people that although he didn’t demand Rock Hudson looks, every employee at least had to have a “quality of attractiveness.” Burr, in fact, made it the policy to train everyone as a flight attendant, even if many would never actually perform the role, meaning that no one with a disability could be hired. No one would be coming to work in the North Terminal in a wheelchair.

  The idea of job rotation had another virtue: it would prevent the pilots of People Express from becoming aloof and independent, as they were at every other airline. Burr, at bottom, mistrusted pilots. “Pilots have a character flaw,” he once explained. “They have an innate sense of superiority and entitlement. Aggressive males are drawn to piloting.… It’s heavily left-brain dominant, very well toilet trained.” Rotating pilots into other jobs—accounting, customer service, scheduling, whatever—would keep them focused on the company as well as the cockpit. “It’s very disruptive to have them only fly planes. It doesn’t fully use their talents. Therefore, they get unhappy.… They become bad employees.” It went without saying that engaging pilots in the affairs of the company would also make them less prone to unionization.

  The recruits received unremitting hours of indoctrination, in which Burr himself conducted much of the training. His tie pulled low, his arms flailing, his feet madly scurrying around the classroom, Burr went on for hours. He would fill the chalkboard with diagrams that looked like football plays. “The guy thinks he’s John Madden!” one of the skeptics in his class told himself. Drawings of dragons and dragon slayers hung at the front of the class. Business, Burr explained, involved a struggle between good and evil, in which People Express was cast by destiny as a force of good against the evildoers of the airline industry—such as Frank Lorenzo of Texas Air. “Be Luke Skywalker,” he told them, “not Darth Vader. Ultimately love is stronger than evil.” His training concepts swung from Spielberg to Freud. He would tell people about the glow he felt as a boy walking from his mother’s kitchen after she had said something approving. “When your mother gave you that unconditional love,” he would ask managers, “did it make you want to do more, or less?”

  They all worked ungodly hours, seventy or eighty a week, to get the airline started. Burr actively promoted office romances. “The greatest thing that can happen to you is to fall in love at work,” he told them. Some employees thought that Burr, a married father of four, wanted people to conduct extramarital affairs at work in order to loosen their connections to the distraction of home life. He told people that wasn’t what he meant, but office romance became so commonplace that people ultimately began calling People Express the Love Boat.

  The company threw a party in a ballroom at the nearby Newark Sheraton the night that the FAA finally awarded People Express its operating certificate, removing the last obstacle to the commencement of operations. It was a raucous event. The alcohol flowed freely. People sneaked off to the second floor of the hotel to find dark spots to have sex. Others wept with joy. “It was just a huge emotional release,” Burr would recall of the occasion. And in the midst of it, Don Burr presided like their king, hoisted over the crowd and carried around on their shoulders. They were his followers. They were his flock. They were almost his disciples.

  On August 3, 1981, three months after People Express had conducted its maiden flight, 13,000 of the nation’s air traffic controllers walked off the job.

  Under federal law the strike was illegal. President Ronald Reagan ordered the controllers’ union, PATCO, to call off the walkout. The union refused, He ordered the strikers, as individuals, back to work. They refused. Two days later the president fired every last one of them. Reagan’s action would utterly transform relations between organized labor and managements in the United States. Hollywood would take a hard new line against its unionized writers, professional football against its players. Trucking and other gritty industries would take their most aggressive stands ever against workers. On the day that President Reagan fired the controllers, organized labor began to lose its fangs, and in no industry would that become more apparent than in aviation.

  The more immediate effect of the PATCO walkout, however, was disarray, undoubtedly the worst turbulence to hit the airways of America since FDR canceled the postal contracts fifty years earlier. Travel ground to a halt. The government began planning measures to ration airspace—slots—as never before. The government said things would return to normal in a few weeks; then it said the damage would take months to repair. In truth, the airways would never return to normal, not any time in the 20th century.

  At the moment the controllers went out, Don Burr and Gerry Gitner, the president of People Express, were in Germany with their wives, closing the purchase of their second round of refurbished Lufthansa 737s. Burr remained in Germany with his wife while Gitner and his wife boarded one of the newly purchased planes and headed for Newark, the only passengers on board. “Come up with a new plan,” Burr told him, “or we’re dead.”

  Newark was closed due to the strike when the plane arrived; the plane was permitted to land only because it was a ferry flight. The next day, a Sunday, 35-year-old Gitner cleared off the dining room table at his home in Morristown, New Jersey, and with a few other executives began to consider a way out of the disaster. In addition to coping with a cutback of their already meager, four-plane operation at Newark, he had to find a way to deal with the new incoming airplanes. Refusing the airplane deliveries was no option; People Express had a $7-million letter of credit in Lufthansa’s hands, serving as a performance bond; if the planes were not received on schedule, People Express would have to make good for the full amount. In that case a bankruptcy filing would not be out of the question.

  There was only one solution, Gitner realized: “bypass routes,” as he called them, flying not into Newark but to altogether different cities where slot restrictions had not taken hold. But where?

  Gitner wanted to fly to places that fit the People Express formula: markets that could be stimulated by low fares. Florida, the ultimate discretionary destination, as price-sensitive a market as existed anywhere, was as good a place as any to try—not Miami, obviously, because it was a busy airport suffering along with the other major airports in the country. But what about Jacksonville? Sarasota?

  Where to fly from? Buffalo, Gitner declared; Canadians loved Florida, and People Express could capture Toronto traffic from there. And why not Columbus? No airline had ever flown nonstop from Columbus to Florida.

  There were a few small technical problems with Gitner’s bypass scheme. For one thing it was August, not exactly the height of the tourist season in Florida. For another the incoming airplanes were configured all wrong for the flights. Florida was a three-hour trip, not the one-hour jaunt the planes had been ordered for. The ratio of lavatories to seats was inadequate. The People Express no-free-food formula did
n’t work nearly so well on a flight three times longer than the founders had planned.

  But those were details, and this was a desperate case. The plan went into action—and worked, like a miracle. The people of Columbus and Buffalo and Toronto loved the idea of an ultracheap nonstop flight to Florida, even if it wasn’t Miami, even if the sun was at its most unbearable intensity of the year. It was still Florida. Gitner had saved the day. And even though Newark service was gradually restored, Don Burr quickly learned, to the everlasting chagrin of a few other airlines, that Florida was a People Express kind of market.

  • • •

  People Express promoted itself as the way to “fly smart,” taking some inspiration from the Volkswagen as the car with cachet. It worked. Ted Kennedy and his niece Caroline, the daughter of John Kennedy, flew People Express. Actor Christopher Reeve, at the height of his Superman fame, was another conspicuous customer. The masses followed.

  In Columbus, Ohio, the company drew so many baggage-laden passengers—because there was no free baggage checking on People Express—that they actually wore the airport carpet threadbare. When service was added to Burlington, Vermont, thousands of Montreal residents, balking at the prohibitive fares charged by heavily regulated Canadian airlines, began driving the 100 miles to Burlington in order to catch People Express to Newark or Florida. People Express was consistently filling its planes and doing so without the benefit of a computer reservations system, a stunning feat. Burr, in fact, stubbornly eschewed such technology, relegating it to the category of high-cost indulgences. If someone wanted to make a reservation on People Express, he or she could call People Express, bypassing travel agents and computer reservation systems altogether.

 

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