Book Read Free

Hard Landing

Page 48

by Thomas Petzinger, Jr.


  In the rough-and-tumble environment of the home office, Marshall was as conspicuous, as one of his subordinates would later remark, as “a paste jewel thrust upon the finger of society.” He talked funny. He struck some people as arrogant. He displayed such an uncanny knack for remembering faces and names that people suspected him of maintaining a secret file. Some of his colleagues judged him zealously self-promotional. After Marshall had spent a few years as the number two man in New York, the company published a promotional booklet called The Avis Story, which attributed the company’s international success to “a brilliant management team … beginning with Mr. Colin M. Marshall.” (The next edition of The Avis Story referred instead to “a very capable management team.”)

  A story made the rounds that spoke volumes about Marshall’s keen mind as well as his sometimes off-putting manner. After hiring one of the engineers who had created the original Sabre system at American Airlines, Avis in 1972 was preparing to roll out the first electronic computer reservation network anywhere outside of the airline industry. (It was touted as “The Wizard of Avis.”) During a meeting of top Avis executives, a dummy sample of the system’s statistical reporting power was distributed. As everyone marveled over the detail generated by the computer, Marshall looked at a long string of big numbers and spoke up. “Excuse me,” he said. “That column doesn’t add up.”

  “It doesn’t have to,” someone said.

  “Why not?” Marshall demanded.

  “Well, they’re just nonsense numbers.” This was a dry run, after all.

  Marshall was gravely offended. “Why would you use ‘nonsense numbers?’ ”

  But people nearly always came to judge Marshall in the end as the perfect gentleman. Tough, yes; mean, no. And there was no disputing that Avis flourished under his tutelage; he deserved the credit. But who deserved the blame, when things went awry?

  Avis, owned by International Telephone & Telegraph Corporation, was ordered sold when the Justice Department attacked the conglomerate on antitrust grounds in 1972. But because the gasoline-sensitive car rental industry promptly went into the tank following the Arab oil embargo, ITT had difficulty finding a buyer. While the search dragged on, a federal court put the control of Avis in the hands of an independent trustee. Bud Morrow, still chairman, opposed the trustee’s appointment and came to swords’ points with him. Suddenly, Morrow sensed that his number two executive had designs on the number one job. “I think Marshall’s ambition was tickled,” Morrow would later recall. Marshall, it seemed, was putting himself on friendly terms with the trustees. Morrow felt betrayed.

  Then in November 1976 a committee of three outside directors revealed to the SEC that Avis had made “improper” or “otherwise questionable” payments totaling $425,000, including unlawful U.S. political contributions and payments to officials in foreign countries. Although Avis noted that none of its top executives had personally ordered any of the payments, it did take the trouble to add this one, measured sentence in one of its filings with the SEC: “Several members of senior United States management, including the then-two management directors, had knowledge of some of the foregoing payments and ‘off book’ cash funds at various times.” The two management directors at the time were Bud Morrow and Colin Marshall.

  There was another intriguing matter that drew the attention of the SEC. An Avis subsidiary had written a $470,958 check to a shell company in the tax haven of Jersey, one of the Channel Islands near France. Internal Avis records identified the sum as a consulting fee paid in Italy. Very shortly after making the payment, Avis won a lucrative tax ruling in Italy that added roughly $3.7 million to the company’s bottom line over the course of two otherwise very lean years—a time when Avis urgently needed higher profits to make the company more attractive to potential buyers. In one filing with the SEC, Avis pointedly noted that it was unclear whether the $470,958 payment ultimately reached any government officials “for purposes of influencing official action”—whether, in short, Avis had paid a bribe.

  Morrow left Avis under pressure in the wake of the disclosures, and Marshall ascended to the top position in the company. Ultimately Marshall was held entirely blameless in the affair. Indeed the court-appointed trustee issued a statement expressing “complete confidence in Mr. Marshall as chief executive officer of the company.” The controversy was quickly forgotten, though not by Bud Morrow, who for years harbored resentment over how his protégé had emerged unscathed. “The thing had a very deep odor about it, frankly,” Morrow said later of the Italian tax payment. “It was a very doubtful, doubtful transaction.” When yet another edition of The Avis Story was published, virtually all mention of Bud Morrow’s contributions had been eradicated.

  In 1977 Avis finally was sold to Norton Simon, Incorporated, a conglomerate built up by the mercurial king of the consumer goods takeover, David Mahoney. Marshall was put in charge of a new division that included not only Avis but Hunt-Wesson Foods. Marshall devoted himself to the work of “refreshing” the prosaic brands of Wesson Oil and Hunts canned tomatoes—essentially taking the same goods and making them appear to be something altogether new and improved. But Marshall chafed under David Mahoney, complaining to others that he could not tolerate working under such autocratic and tempestuous leadership. Nor was Colin Marshall’s heart in edible oils. Gravely unhappy after a short time at Norton Simon, Marshall journeyed back to London. And when yet another edition of The Avis Story rolled off the presses there would be virtually no mention of Colin Marshall anywhere in its pages.

  As they were leaving New York, Marshall’s wife asked him what job he would most like in the world. “I would like to be the chairman of British Airways,” he answered. A short time later, as if the management gods had been eavesdropping, the call came. In January 1983 Marshall joined British Airways as chief executive, though not as chairman.

  • • •

  Marshall came to British Airways knowing as much about airlines as anybody could without ever having worked for one. For nearly two decades, ever since the mid-1960s, he had spent 65 percent of his time traveling internationally, flying into every nook and cranny of the globe to plant the flag of Avis Rent A Car. In addition to being one of the world’s most frequent fliers, Marshall negotiated contracts with the airlines—“fly-drive” deals in which an airline and a rental car company, within the boundaries of a particular country, would try to increase their respective sales by promoting the other’s products.

  When his old boss at Avis, Bud Morrow, heard the news that Marshall was joining British Airways as the number two man, his first thought was that the number one man had better watch out. But the chairman of British Airways was entirely capable, it appeared, of taking care of himself. He was Sir John King, soon to become Lord King. He was vaguely noble, the result of his having married the daughter of the 8th Viscount Galway (if anyone was counting). He hunted in Leicestershire, fished in Scotland, and painted in oils. He was acerbic and sarcastic.

  Lord King was also active in Conservative Party politics and was close to Prime Minister Margaret Thatcher, who wanted British Airways primped for sale to private investors, assuming that it could ever be made attractive enough for anyone to want. This was where King came in. Thatcher instructed her friend to shake the airline to its very foundations to endow it with a semblance of efficiency and marketing.

  In the two years before Marshall arrived, King attacked British Airways with abandon. He sold a million square feet of office space in London, got rid of 80 superfluous airplanes and wiped out dozens of routes. With the more than $500 million in cash generated by these moves, King offered early retirement and severance to a veritable legion of employees—nearly 20,000 in all—thereby reducing employment to 36,000 in the course of two years. Soon the bleeding had stopped. King’s turnaround moves did little, however, for the biggest challenge: filling the company’s mostly empty airplanes.

  Marshall felt like an archaeologist arriving at British Airways, shovel and brush in hand, cle
aring away decades of bad attitude in search of a treasure. The hidden treasure was the world’s most extensive route system (Marshall himself had flown on most of it) and an operating base at Heathrow, the world’s richest multinational gateway. Although he knew firsthand about the grubby aircraft, curmudgeonly employees, and poor schedules of British Airways, Marshall now had an insider’s view. He could see that internal politics had corrupted the organization and that morale remained in ruins, and nothing, he knew from his Hertz and Avis years, was more essential in a service business than morale. In Marshall’s view customers had the memories of elephants for bad experiences. And worse, they talked, and talked, and talked, about poor service, particularly when it involved so conversation-worthy a topic as air travel. “In war,” Marshall began telling people, paraphrasing Napoleon, “morale outweighs matériel by three to one.”

  Marshall’s first step, anachronistically enough, was sensitivity training—a regimen of classes with the agonizingly off-putting name “Putting People First.” In groups of 150, employees were dragged groaning and shrugging into classes for a few days at a time, but as one would predict with any expensive and well-designed mass-indoctrination program, they emerged from the experience saying that it was, well, okay … pretty interesting, in fact. Employees were guided through role playing and exercises in imagination, all to educate them in how the customer felt and how to accept responsibility for solving a passenger’s problems. They were trained to think of themselves as “emotional laborers,” no different from nurses or welfare workers, for among the 450 passengers checking in for a fully loaded 747 flight, they were told,

  there will be a businessman, tired and obsessed by a particular problem; a woman with two children joining her husband abroad, anxious about going to a new country, perhaps worried about the house, schools, and so on. There will be a granny who has never flown before.… Every human or emotional state you can think of will be there: euphoric, depressed, anxious, happy, excited. And all will be suffused by a level of preflight anxiety.

  While the courses were under way, Marshall began distributing lapel buttons that said, I FLY THE WORLD’S FAVOURITE AIRLINE, as if repeating the phrase often enough might actually begin to make it true. (Having learned visible management at the foot of a master at Avis, Marshall naturally wore one of the lapel buttons himself, even if it was a little conspicuous on his immaculate British tailoring.)

  British Airways’s poor service was evident not only over the North Atlantic but within the United Kingdom itself, where a much smaller airline named British Caledonian was making severe inroads. “BCal” hired flight attendants for appearance and outfitted them in tartan skirts, airing commercials that showed a chorus of male passengers singing, “We wish they all could be Caledonian girls.” British Airways was under pressure to put not only spit and polish but also sensuality into its rusty, surly product.

  An emphasis was placed on youth in hiring, facilitated by age discrimination statutes that were far less onerous in Europe than in the United States. At the same time educational requirements for flight attendants were reduced. Marketing executives used the word “sparkly” to describe the kind of personality they wanted employees to project. The employee newsletter promoted a “grooming room,” conveniently located in Terminal One at Heathrow, where employees were urged to schedule a consultation if they suffered from “a weight problem,” or “difficult hair,” or “ugly hands,” or “spotty skin.” Even electrolysis was available for unsightly hairs. Any uniformed employee who did not “look right” would be “taken away from the job.”

  Before long, British Air’s in-flight magazine was calling attention to the new look, in case anyone had missed it: “Passengers checking in at the airport can’t fail to have noticed the warmth of the welcome from the smiling BA girls behind the desks, and the freshness of their looks, their complexions smooth, their make-up alive with colour and gloss.”

  Marshall also demanded a makeover for the airplanes. He hired the same design firm he had used at Avis, causing a hue and cry over the use of a foreign firm by the state-owned airline, but this was only the beginning of Marshall’s refusal to play by old rules. (He would, for instance, place some of the biggest airplane orders in history with America’s Boeing instead of the state-supported European Airbus.) Many expected the Yankee design contractor to come up with a horrible and garish new paint scheme, but to their surprise the look was elegance itself: an angular, high-tech arrow that conveyed precision, accompanied on the tail by a classic coat of arms fit for Pall Mall. Under the insignia was a ribbon bearing a four-word inscription that summarized Marshall’s marketing philosophy: “To Fly, To Serve.”

  Relentlessly Marshall’s people began to survey passenger attitudes, down to what they thought of each individual flight and each individual check-in agent, eventually accumulating a massive database on what people wanted when flying and what they were willing to pay for. Surveying passenger preferences enabled the company to estimate whether adding $4 in perfumes or candies to an amenities kit or a meal tray would enable the company to charge an additional $5 for the ticket. Marshall instructed his people to run a complete profit-and-loss analysis on every element of service, as if it were a capital construction project. Almost invariably the research showed that any modest improvement in service registered as a major breakthrough with the customer.

  To address the problem of full-fare business travelers flying alongside tourists on discounts, Marshall invented something called “business class.” There would be three classes of service aboard a single airplane (coach, business, and first), each of which, Marshall decreed, should become a product, a “brand,” all by itself. Marshall brought in brand specialists from Mars candies and other consumer product companies to explore ways of distinguishing and promoting each class of service, knowing that as the airline placed a larger proportion of passengers into the premium classes, its revenues would swell on only a slight increase in cost. His first- and business-class sales soaring, Marshall was delighted to leave the low-fare tourists to fly on Pan Am and TWA.

  By 1986 British Airways was in fat city, ready to fulfill Prime Minister Thatcher’s goal of privatization. As the preparations were being made in the spring of 1986, however, financial disaster struck in the North Atlantic.

  A U.S. Navy diver had been shot by Lebanese extremists who had hijacked a TWA flight from Athens. Palestinian terrorists had seized the Italian cruise ship Achille Lauro. Fifteen people were gunned down at an airport ticket counter in Rome. A bomb exploded on a TWA flight from Rome to Athens, killing four. After President Reagan had ordered the bombing of Libya, few passengers wanted to take the chance of flying on whichever transatlantic flight Col. Muammar Qaddafi would happen to choose as a target for reprisal. The nuclear accident at Chernobyl only elevated the apprehension of flying anywhere near Europe.

  British Airways suffered the most severe plunge in business in the company’s long history. In the week after the Libyan bombing—a week in which it could have expected 50,000 reservations in any remotely normal market—the airline recorded only 20,000. Colin Marshall’s people had to come up with something fast or simply accept that their most important and profitable route would be moribund.

  Marshall had immersed himself in the intricacies of American behavior in his years with Avis and Hunt-Wesson. He knew something about what made American consumers tick. He knew that Americans were suckers for freebies and that the American media were suckers for a story. Since it was a media event that had chilled transatlantic travel, Marshall determined that British Airways would stage a media event to bring it back.

  After a crash study British Airways announced that it would give away every one of its seats over the Atlantic for a day, a total of 5,000 free seats. “Go for It, America!” the promotional headlines trumpeted. The seats would be awarded in a drawing; a few of the lucky 5,000 would be chosen for the additional prize of tea with Prime Minister Margaret Thatcher at No. 10 Downing Street. British Airw
ays was suddenly a news story in which thousands of people were seen shedding the dread of terrorism to clamor for an airline seat over the North Atlantic. An instantaneous surge in reservations occurred.

  While catching the publicity wave, Marshall and his people moved to sustain the recovery; investors would balk at buying British Air’s shares unless they were convinced that the revenue stream had stabilized. So Marshall and his people kept the sweepstakes spirit alive by scheduling an additional series of contests and prizes through the summer months of 1986. They lowered themselves even to scratch-off prize coupons, with prizes carefully chosen to appeal to the Anglophile in every American. Scratch and win a free Rolls-Royce! Win a £100,000 shopping spree at Harrods!

  The scheme worked. While no barn burner, the summer was at least salvaged. A few months later, in February 1987, Her Majesty’s Government sold British Airways for a total of $1.4 billion. Before the year was out Queen Elizabeth II had rewarded Colin Marshall with knighthood.

  Every passenger flying on British Airways represented an empty seat on Pan Am or TWA. Though no one competed as aggressively on price as the Americans, Marshall would always need a certain number of low-fare passengers to fill up his airplanes, so he would always try to meet the lowest coach price in the market. As time passed, however, an increasing portion of British Airways passenger cabins were given over to premium classes, at huge price markups. Soon British Airways was bringing in 15 percent more revenue than the average airline on the same number of passengers—money that went almost entirely to the bottom line.

  Marshall was delighted to watch Pan Am and TWA chase each other’s tails for the marginal passenger, while driving business travelers and the well-to-do into the arms of British Airways. But Marshall was also aware that he would not always have it so easy against the Americans. Bob Crandall, alas, was taking baby steps into Europe.

 

‹ Prev