• • •
About five years earlier, when he was still the marketing chief at United, Putnam had received a telephone call from Bob Crandall, then in the marketing job at American. The conversation was never made public.
“Howard,” Crandall told him, “if you raise your drink prices, we’ll raise ours tomorrow.”
Putnam couldn’t believe his ears. Crandall went on, “If you raise your movie price, I’ll raise ours.”
“Bob!” Putnam said. “We can’t talk about that!”
Putnam went to inform United chief Dick Ferris. Ferris too was dismayed at Crandall’s suggestion.
Putnam flashed back to that conversation on the February morning in 1982 when he stared at a telephone message from Bob Crandall. Putnam checked with Braniff’s in-house counsel. The fight with American had grown very ugly. For Braniff’s protection Putnam, the lawyer thought, might be wise to return the call with a tape recorder running. Putnam did.
“I think it’s dumb as hell, for Christ’s sake all right, to sit here and pound the shit out of each other and neither one of us making a fucking dime,” Crandall said.
“Well—”
“I mean, goddamn! What the fuck is the point of it?”
“Nobody asked American to serve Harlingen,” Putnam shot back. “Nobody asked American to serve Kansas City.… If you’re going to overlay every route of American’s on top of every route that Braniff has, I can’t just sit here and allow you to bury us without giving you our best effort.”
“Oh, sure, but Eastern and Delta do the same thing in Atlanta and have for years.”
Putnam could sense what was coming. “Do you have a suggestion for me?” he asked.
“Yes, I have a suggestion for you,” Crandall answered. “Raise your goddamn fares twenty percent. I’ll raise mine the next morning. You’ll make more money and I will too.”
“Robert, we can’t talk about pricing.”
“Oh, bullshit, Howard. We can talk about any goddamn thing we want to talk about.”
The conversation ended. Putnam’s lawyer popped the tape from the recorder and filed it away.
Putnam tried other desperation moves. A two-for-one sale. The Great Escape sale. Anything to get a few more people into Braniff’s Easter-colored airplanes. But each promotion was less successful than the last.
And then, just as Braniff appeared to be breathing its last, all of Dallas, it seemed, rallied to resuscitate it. Putnam, weary, haggard, yet perpetually smiling for the television cameras, was becoming a local celebrity, a role he played to the hilt. He began appearing in powerful television spots, displaying a firm and earnest manner. “Texas, we need your support,” he pleaded. “Fly Braniff now!” Tom Landry, the beloved coach of the Cowboys, filmed another television spot. “Fly Braniff,” Landry begged. “The Cowboys do!” And suddenly the M.B.A.s and computer programmers and sales executives who had transferred from New York with American a few years earlier were the outsiders, the upstarts. They were Yankees—carpetbaggers. Presenting their employee IDs to write checks, some were sneered at by salesclerks. Bob Crandall’s children were harassed at school. A local media war intensified newspaper and broadcast coverage of the fight, with the coverage heavily tilted, as it invariably is in such cases, toward the underdog. American’s shareholders were exposed to the spectacle of television cameras chasing executives around a ballroom at the annual meeting.
Crandall himself was responsible for drawing the worst PR. He casually remarked within earshot of the press that he would be perfectly happy to see Braniff “go out of business.” That way, he explained, American would be up against “healthier airlines” less inclined to slash fares out of “desperation.” The Dallas business establishment was appalled.
Later a Braniff official said publicly that he thought American was using Sabre to cancel Braniff reservations outright—something that almost certainly never happened. But truth didn’t matter anymore. People in Dallas now believed American to be capable of any ruthlessness. The power of Sabre had taken on mythically monstrous proportions. As a consequence of Braniff’s exaggerated allegations, the U.S. Justice Department commenced its first look at the potentially disruptive powers of computer reservation systems.
The local outpouring in Braniff’s behalf was touchingly evident on a Sunday night at Billy Bob’s, a barnlike country dancing place that hosted a free party to buck up the morale of the Braniff workforce. The band members sank to their knees and bowed as Putnam came up on the stage and took the microphone, and heartfelt applause went up from the Braniff employees who filled the dance floor. But Putnam was muted and the crowd sullen too. People knew. Travel agents were now treating Braniff like the plague. A rumor swept the dance floor that a Braniff flight from Miami had just landed at DFW with only six passengers aboard.
“We’re gonna do it,” Putnam told the crowd with strained enthusiasm and a limp wave of his fist, and no one, including him, believed it.
The dust-up at DFW caused the Justice Department to empanel a grand jury. Crandall was uncomfortable with the whole situation. “I get nervous when I get a parking ticket,” he was quoted as saying in Business Week. “I don’t like the notion that some ‘authority’ is interested in anything I did.”
In no mood to take chances, Crandall and one of his lawyers climbed aboard an American flight for Los Angeles for consultations at the law firm representing American in the federal investigation. But the flight was stuck on the tarmac. A torrential spring thunderstorm had moved into the area and remained squarely over DFW. Lightning filled the sky. Tornadoes were sighted. Crandall and the lawyer sat in their seats and waited.
Then a pilot emerged from the cockpit and approached Crandall. He bent over, whispered something in the president’s ear, and departed.
“We’re getting off,” Crandall told his companion, rising from his seat. “Braniff has just shut down.”
Crandall led the lawyer to the rear stairs, which were lowered to allow the two men to deplane. In the great expanse of concrete, ankle-deep in water, the rain pounding and the wind swirling, Bob Crandall and his lawyer, soaked to the bone, stood with their briefcases, waiting for an American Airlines vehicle to pick them up.
Putnam had ordered a Chapter 11 bankruptcy filing, a move that in his judgment demanded the strictest secrecy in advance. Braniff’s assets, principally its airplanes, were scattered all over the world. Anyone owed money by Braniff, including foreign governments or lending institutions, might well seize any Braniff airplanes within their jurisdiction if they knew a bankruptcy filing was imminent. Putnam wanted every last plane back in Dallas before the papers were filed.
Preserving the element of surprise before the shutdown meant that thousands were severely inconvenienced. At DFW people stared at the TV monitors. “Newark: canceled … Lubbock: canceled … Houston … San Antonio … San Francisco … Orlando … Los Angeles … Toronto …” all canceled. Initially passengers assumed the violent weather was to blame, but later they began to notice that the doors to Braniff’s premises in the airport were strapped and bolted shut. The Braniff planes began parking, forming long conga lines in lime, cranberry, and other festive colors.
Howard Putnam, dabbing his eyes, his voice cracking, finally went public before a forest of microphones with the announcement that Braniff would fly no more. “The checks that are out there now will not go through,” he said. “There’s no cash to support them.”
Deregulation had claimed its first victim.
The stock prices of other airlines went through the roof, none more so than American. People were suddenly thronging American’s ticket counters. All those new routes laid over Braniff’s system were in place to pick up the slack. American was soon carrying 64.7 percent of the passengers at DFW, up from 45.7 percent before Braniff failed. Some 96 percent of all the connecting passengers who arrived at DFW on American flights were soon also leaving on American flights, up from 65 percent two years before.
But in the hour
s following Braniff’s failure there was a small technical problem for American to contend with. At Sabre headquarters officials realized that thousands of Braniff flights were still listed as available for sale in travel agents’ computers across the country. Braniff’s schedule had to be removed immediately, but such a major revision required something on the order of a system restart, a kind of rebooting operation. A major airline had never failed. There was evidently no easy way to eradicate its flights from the computers.
Actually, it turned out, there was. Somebody remembered the incident a few years earlier at American’s old headquarters in New York, when Bob Crandall had pulled the Venetian blinds down on his head while staring angrily at TWA headquarters across the street. Crandall had ordered his aides to design a series of instructions that would enable American to blow every TWA flight out of Sabre instantly. Although the instructions were never used, they remained on the shelf.
With the clouds billowing and the lightning still striking, the program was quickly modified; TWA’s designator codes were replaced with Braniff’s. And with a few keystrokes every trace of Braniff Airways evaporated from the computer reservation mainframes of American Airlines.
CHAPTER 7
WORKINGMAN’S BLUES
It is the curse of the airline chieftains: though fleets and schedules respond readily to the manipulations of management, airline finances do not.
To a degree unusual in business, the costs of running an airline are outside management’s control. Fuel, for instance, accounts for roughly 20 percent of the cost of doing business—sometimes much more, depending upon the machinations occurring in the Middle East and the state of balance in the delicate global petroleum markets. Landing fees and airport rentals are another huge and mostly nonnegotiable expense. The cost of borrowing money, set principally by the Federal Reserve Board, is still another significant item, controllable only to the degree that management resists buying the newest and hottest airplanes. In the history of commercial aviation, only Southwest Airlines and one or two others have ever displayed such self-control.
Travel agency commissions became another huge item of expense. For years they had been fixed at 5 percent of the ticket price, but in the deregulation era, with the airlines courting the affections of travel agents both to steal and to protect market share, commissions were spiraling higher, eventually to reach 10 percent, with agents writing an ever larger proportion of the airlines’ tickets.
That left only one big-ticket item under management’s control, and at most airlines it was the biggest of all: labor represented as much as 40 percent of the expense in running an airline.
Airline employees had been in fat city for years. Although a few airlines took brave stands against big wage increases, most agreed to pay their union workers whatever it took to preserve peace on the flight line. The airline bosses were pushovers because they knew that the contracts each of them signed were always quickly matched by every other airline, fixing costs on an equal footing. It was no concern to the airlines that these costs marched higher and higher, as long as the regulators in Washington simply waved through the fare increases necessary to cover them.
When the starting gun of deregulation launched the race to cut costs, the fun was over. A few airlines, such as Delta, held out against the pressure, reasoning that a motivated and experienced workforce was more important to the marketing mix than a reduction in costs. American, and eventually some imitators, tried to lower costs by flooding the flight lines with newly hired b-scale employees, protecting tenured employees from the trauma of a wage cut. But every airline came to feel the same pressure: cut costs in order to cut fares or say good-bye to a franchise that had taken decades to build.
Nowhere was this change more painful than at Eastern Air Lines. Eastern’s labor costs to begin with were slightly higher than average, owing in part to the company’s high proportion of takeoffs and landings to miles flown. Another source of trouble was the fact that Eastern’s bundle of north-south routes made it a vacation airline, with price-sensitive markets that low-cost upstarts were bound to attack. Eastern could defend its market share only by reducing the living standards of its workforce.
But ultimately the labor upheavals at Eastern became violent because this struggle became a contest between two men, each of whom, alas for Eastern, was singularly unsuited to accommodating the other.
One was Col. Frank Borman, who as a former fighter pilot and astronaut knew better than anyone the sensitivity of an aircraft to one’s hands. As a corporate leader also, Borman needed to feel the instant response of the people under his control. The “command approach to management” was how one of his most loyal aides would describe his style. Borman—the Colonel, to his subordinates—referred to Eastern’s operations center as “mission control.” His column in the employee newsletter was titled “View from the Top.” He used a rubber stamp to brand documents with instructions to RUSH.
His adversary, Charles E. Bryan of the International Association of Machinists and Aerospace Workers, would not be rushed. Bryan delighted in resisting authority. A short, square-shouldered man with a pug face not unlike Edward G. Robinson’s, Bryan in a way suffered from Frank Borman’s disease: he too had a need to be in charge. Bryan drew his power from a local union organization 13,000 strong, representing nearly everyone who touched an Eastern airplane without flying in it, from the lowliest cabin cleaners to the most skilled engine mechanics.
At issue between the men was the control of the company that carried more passengers than any other airline in America.
Like United, which began life as an affiliate of Boeing, Eastern came into the world as the progeny of an aircraft manufacturer. With eight open-cockpit biplanes called Mailwings, the company won one of the earliest postal contracts, in 1928. By the early 1930s it was conducting the first passenger service between New York and Washington, as well as a vacation flight to Florida. (“From frost to flowers in 14 hours!” Eastern promised.) Flying to Florida via Atlanta broadened Eastern’s reach into the interior of the Southeast.
Eastern before long came under the control of General Motors Corporation, which installed a new take-charge potentate. He was Capt. Eddie Rickenbacker, a race car driver who had once owned the Indianapolis Speedway but who was best known as the greatest of America’s flying aces in the dogfights of World War I. When General Motors put Eastern on the block a few years later, in 1938, Rickenbacker stopped at nothing to get control, once even getting GM chairman Alfred P Sloan, Jr., out of bed for a late-night bargaining session.
Rickenbacker won and handily raised the $3.5 million in necessary capital. Rickenbacker was held in awe by the generation of boys who had grown up in the years following World War I to become stockbrokers and investment bankers. One of Rickenbacker’s idolaters was the young Laurance Rockefeller, grandson of the Standard Oil magnate. Laurance became Rickenbacker’s principal financial backer, playing a vital though largely unseen role in Eastern’s affairs for more than 50 years, practically to the bitter end.
In keeping the company of Wall Street’s leading financiers, Rickenbacker became determined to extract the maximum amount of revenue possible from every airplane in Eastern’s fleet. The airline business was a matter of “putting bums on seats,” as Rickenbacker described it, and he saw it as his mission to keep as many of those backsides in the air for the greatest number of hours feasible per day. Restricted by the CAB largely (though not entirely) to the East Coast, Eastern connected the nation’s densest population areas with short-haul flights, principally to Boston, New York, and Washington, along with the Atlanta and Florida routes. It was these populous markets, combined with Rickenbacker’s commitment to his bum count, that distinguished Eastern for much of its history not as the airline that flew the most miles or made the most money, but as the one that carried the greatest number of people.
Keeping planes in the air demanded quick turnarounds and many flights per day. In the late 1930s these principles moved Rickenba
cker to establish a service called the Merry-Go-Round, with 20 round trips a day between New York and Washington. (It was aboard the Merry-Go-Round that regular passengers qualified for the Eighty Minute Man Club, a precursor of the frequent-flier programs of the 1980s.) The Merry-Go-Round operated successfully for years, but by the early 1960s Eastern needed something extra, a new gimmick. There was a recession on, and while benefiting from the constant use of its planes, Eastern also paid dearly in fuel, airport fees, and maintenance for its high proportion of takeoffs and landings. Eastern needed a higher load factor—a higher ratio of backsides to seats—to remain viable.
An Eastern executive named Frank Sharpe, newly hired from American, proposed a no-reservation Merry-Go-Round service with a guaranteed seat for anyone who showed up. Any passenger could race to LaGuardia and step on a plane bound for Boston or Washington, any hour on the hour. The trick was that Eastern would have to keep planes standing by at all times to make certain that everyone showing up for a flight got a seat. In exchange for the freedom to fly so spontaneously, the customer, it was reckoned, would gladly save Eastern money by sacrificing his cocktails, his chicken divan, and his “social calls by the stewardess,” as noted in one account.
The idea was a winner, and on April 30, 1961, the Eastern Air-Shuttle was born. The New York Times, rarely so prone to overstatement, hailed the shuttle’s birth as “the greatest advance in aviation since the Wright brothers.” On the few occasions that Eastern actually had to put a backup plane into service, such as when the entire Boston Symphony showed up for a shuttle flight one evening after a performance in New York, the resulting goodwill and publicity more than compensated for the cost. As the fastest link between the nation’s political and financial capitals, the shuttle became the highway of the highbrow, a fabled celebrity-spotting venue: Henry Kissinger! Felix Rohatyn! It became a storied enabler of intercity romance; Carl Bernstein of Washington Post Watergate fame and his wife, writer Nora Ephron, developed a script concept called Eastern Shuttle.
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