Authors: Thomas Petzinger Jr.
Tags: #Business & Money, #Biography & History, #Company Profiles, #Economics, #Macroeconomics, #Engineering & Transportation, #Transportation, #Aviation, #Company Histories, #Professional & Technical
Hard Landing (2 page)
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
Postscript: Magic Act
Postscript to the Paperback Edition
Notes
Bibliography
About the Author
PROLOGUE: THE TIGHTROPE
F
lying 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.
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.