Hard Landing (5 page)

The outrage generated by exposure of the spoils conference had caused Congress to institute a radical reform: contracts would go to the lowest bidder, regardless of other considerations. Quickly bids plunged.

In one case, when the Roosevelt administration offered an airmail contract between Houston and San Antonio, Eddie Rickenbacker, eager to push west in order to diversify Eastern’s north-south service, vowed to get the route even at a steep loss. Texas-based Braniff, intent on defending its territory against the Big Four, caught wind that Eastern was planning to bid less than a cent a mile. When the postmaster general opened Braniff’s bid, he stunned the room by reading the figure of $0.00001907378 a mile. As everyone shook his head, he opened another envelope. “Eastern,” he said, “bids zero-zero-zero cents.”

“
That’s illegal!” cried Tom Braniff.

“The hell it is!” cried Eddie Rickenbacker.

Because Congress had put a time limit on every airmail contract, the incumbent airlines were forced continually to defend their routes against the encroachment of upstarts, intensifying the downward spiral of rates. On occasion C. R. Smith had to gamble in the
commodity markets with his meager postal payments in order to make the payroll at American Airlines.

The major airlines were trapped in a conundrum. How could they buy more of the DC-3S that had so captivated the public (at a cost of nearly $100,000 per plane) unless they were assured of protection
from rate wars? Yet how could they avoid rate wars when buying these costly new machines required them to defend their routes from upstarts and interlopers? The only answer, C. R. Smith and his colleagues insisted, was government administration of rates and routes. The irony of their pleading for protection from their own behavior did not deter them. Without regulation, industry’s chief lobbyist declared, “There is nothing to
prevent the entire air-carrier system from crashing to earth under the impact of cutthroat and destructive practices.”

The timing of their plea was propitious. Roosevelt was in the throes of erecting government regulation on a scale unseen in American history. Congress had just been stricken with grief and outrage over the death of a beloved member, Sen. Bronson Cutter, in a plane crash and was eager to intensify safety regulation. Riding this momentum, the airlines got precisely what they wanted. The Civil Aeronautics Act of 1938 was readily adopted; it preserved all existing airmail contracts in perpetuity. The airlines had turned themselves into public utilities.

The price paid for this sinecure was the involvement of the federal government in every financial aspect of the industry’s business—every route, every rate—through a new bureaucracy, eventually to be called the Civil Aeronautics Board. The Big Four had exposed themselves to the full weight of an old-fashioned statist controller, which established its headquarters in a pillared edifice directly across Constitution Avenue from the Washington Monument. C. R. Smith and his peers had yielded this authority precisely when their businesses were poised to take off in an exciting new direction, with passengers at last beginning to overtake airmail as the majority of the business. In their panic they had traded the future against the past.

In the name of blocking “destructive competition,” the CAB simply prevented competition. Charter operators were whacked down. Regional airlines, known as “local service operators,” were allowed to serve small locales in carefully circumscribed regions, all in the interest of delivering “feeder” traffic from outlying cities to connecting flights on the major airlines. Price competition vanished; any fare change required a tedious administrative and judicial review—a process derived from the principles framing the
Interstate Commerce Act of 1887, which itself had been largely cribbed from the British
Railway Act of 1845. The bureaucratic compulsion for consensus caused CAB proceedings to drag on endlessly and yield random results. The role of presidential appointment in filling the five-member board heaped political pressures on top of whimsy and laboriousness.

At one point
Louis J. Hector, a young lawyer from Florida, arrived at the CAB as a newly appointed board member and was immediately engulfed in a case involving the selection of a few small Midwestern towns for new air service. When the hearing examiner assembled the documents over which the board would deliberate, they stood nine feet tall. The reports were ordered condensed, after which the material spanned a mere 658 pages. Hearings were held, at which 38 members of Congress and 68 mayors and local boosters spoke. When they were over, the individual commissioners threw out the staff reports and gathered in a room with a map and some colored pencils to settle the matter. Purely to see what would happen, Hector insisted that the commission order air service to his father’s home town of Clarinda, Iowa—a town that had not been mentioned anywhere in those nine feet of documents, whose mayor had not testified, and whose citizenry had not requested air service.

No problem, the other board members said. Clarinda was immediately added. (Hector had the gumption to explain that he was joking.)

As one would expect of strong-willed American business executives, the airline chieftains began to complain about bureaucratic delays and decisions that went against them individually, but they found the system to be addictingly comfortable. Though denying the airlines significant profits, regulation at least protected them against loss, regardless of economic conditions. Airline shareholders never had to fret over bankruptcy; failure was impossible. The system freed the airlines from worrying about the cost of doing business. The airlines, creating vast internal bureaucracies of their own, told the CAB how much money they required to run their businesses, while the CAB, using the airlines’ numbers, merrily calculated the fares necessary to cover those costs, plus a modest profit.

With so little incentive to control costs, fares, predictably, remained beyond the reach of anyone but the expense account traveler or the well-to-do vacationer. International fares, regulated not only
by the CAB but by a monstrous apparatus of foreign regulation, were likewise prohibitive. For the would-be passengers of the middle class, Pan Am introduced a marketing program called “Fly Now, Pay Later,” in which the Household Finance Corporation provided an
installment loan contract. Flying, in short, was like purchasing a car.

Even amid a tremendous postwar passenger boom, the airlines were still carrying just a million passengers a year, barely 1 percent of the population of the United States. As a group of Cabinet agencies dryly concluded in a 1947 report to President Truman, “
Present rates remain a limiting factor on the growth of traffic.”

But why should the airlines have cared? They could continue to grow simply by stimulating the huge, untapped market of people who had the means to fly and had not yet done so. Advances in aviation technology brought these people out in droves. The speed of the four-engine aircraft introduced after World War II-the Lockheed Constellation and the McDonnell Douglas DC-7—cut in half the time spent crossing the continent and the ocean. People abandoned ocean liners in droves to fly on Pan Am, and trains in even greater numbers to fly on American and other domestic airlines. The innovation of pressurized cabins enabled planes to fly over most inclement weather, encouraging more among the faint of heart to board. (Pressurized planes also made it possible to cook meat onboard without the fat oozing to the surface, widening airline menus.) These postwar planes were big 60 seats, as against the 21 in the DC-3 but there were still only a few hundred airplanes aloft in the entire country, all of them nearly full of men in suits and women in hats and white gloves.

The system of cost-based pricing had another salutary effect for the airline chieftains. Relieved of the worldly miseries that consumed executives in other industries, they could devote their energies to the infinitely more exciting pursuits of further improving passenger comforts, lobbying for more and bigger airports, hobnobbing with political and entertainment celebrities who flew in great numbers, and above all the activity they cherished most—designing and buying even bigger, faster, and more exciting airplanes.

Thus in 1959 did the jet age come to the airlines. Travel times were cut in half yet again. C. R. Smith, introducing the Boeing 707, made the cover of
Time
. C.R. told
Forbes
, “We’re going to make
the best
impression on the traveling public, and we’re going to make a pile of extra dough just from being first.” Internationally the first jets went into service for Juan Trippe at Pan Am. “This is the
most important aviation development since Lindbergh’s flight,” Trippe declared. “In one fell swoop, we have shrunken the earth.”

In 1968, approaching age 70, Juan Trippe stood before the annual meeting of Pan Am shareholders and announced his retirement. The lines of the Pan Am route map now reached to some 60 countries—a living network that would convey more people among more lands than anything in history. Just one Pan Am route, from San Juan to New York, accounted for the vast majority of the five million
Puerto Ricans who moved to the United States in the postwar years, roughly equaling, by way of comparison, the number of African Americans who migrated from the southern United States to the North in the same period.
Second only to Coca-Cola in worldwide recognition, the Pan Am trademark had become a fixture of popular culture, symbolizing the exotic. James Bond flew on Pan Am in
From Russia with Love
. A
spaceship bore the Pan Am trademark in
2001: A Space Odyssey
. When the Beatles first landed on American soil, they held a press conference with the Pan Am logo conspicuously hanging behind them. Pan Am built the
largest commercial office building in the world, a hulking structure defiantly set perpendicular to every other building in midtown Manhattan; Yves Montand, his arms stretched wide, serenaded midtown Manhattan from the roof of that familiar landmark in
On a Clear Day You Can See Forever
.

In the same year that Trippe announced his retirement C. R. Smith, also approaching 70, left American Airlines to become Lyndon Johnson’s secretary of commerce. Smith retired at a time when his company no longer had bragging rights as the biggest airline in the free world. That distinction had passed to United Airlines, which was building itself into a colossus on the strength of acquisitions and the most successful marketing jingle in transportation history: “Fly the friendly skies.”

Smith and Trippe did not know it at the time of their retirements in 1968, but after coming so far in only 30 years, their great companies were now on the edge of an abyss. The lockstep march of technology and economic progress was about to break formation. And
the regulatory system they had created to guide this march would now suffocate the airlines instead.

On January 15, 1970, First Lady Patricia Nixon stepped on the frozen, windswept tarmac at Dulles International Airport near Washington and peered up. “My goodness!” she exclaimed. “Look how high it is!” Towering before her stood a bulb-headed 747 jumbo jet, trimmed in the trademark sky blue of Pan American World Airways—“the ark,” as the dignitaries on hand pronounced it. “The potential impact of the 747 upon the
future of mankind is so great,” said a CAB official, “that it is difficult to identify another incident with which it may be compared in the entire history of transportation.”

Climbing the dedication platform in a belted blue coat and white leather gloves, Mrs. Nixon came nose to nose with the leviathan jet. Because a sophisticated radar system was tucked into the tip of the plane, there was no way she could be permitted to heave a magnum of Dom Perignon against it. So instead Mrs. Nixon pulled a lever intended to release a spray of red, white, and blue water against the jet. The lever, unfortunately, got stuck, and the intended spangle did not materialize.

A few
days later in New York, with the plane fueled and ready for its first commercial flight, a small clutch of picketers thronged the terminal at Kennedy Airport. “No more dirty planes!” “Clean air now!” “You can’t get to heaven on a 747!” Tourists and gawkers further crowded the gate area. The delicate operation of ticketing and boarding several hundred people broke down in the pandemonium. Just as bad, mechanics could not shut the rear door of the plane. The maiden voyage of
Clipper Young America
was already hopelessly late.

Finally, as the London-bound 747 pulled away from the gate, Capt. Robert Weeks watched a cockpit thermometer cross the red line at 1,000 degrees. Engine number four was overheating. Back to the gate the aircraft rolled and ingloriously disgorged all the passengers and baggage loaded into her with such difficulty. “It’s marvelous,” the wife of TV producer David Susskind, one of the unlucky passengers, muttered sarcastically. “
A dozen bathrooms and no engines.” By the time an alternate 747 had been loaded,
the orchids pinned to the flight attendants were dead.

The Boeing 747—and to a lesser degree its brethren widebodies, the McDonnell Douglas DC-10 and the Lockheed L-1011—would devastate the airline industry, bringing it as close to disaster as the government had ever permitted. The planes were simply too big. Although there had been airplane gluts in the past, each generation of new and bigger planes was always ultimately filled with newly converted passengers coaxed into the air by the latest breakthrough in speed or comfort. This time it was different. Most everyone who had the means to fly was already doing so. A threefold increase in airplane size was too much airplane by a factor of at least two.

The financial stakes too had increased by orders of magnitude. Pan Am’s $550 million order of 747s in 1965 ranked as the
largest single commercial purchase ever conducted by a private corporation; other airlines’ orders for 747s and other jumbos were nearly as large. It might not have been quite so bad except that the first 747s were delivered smack in the face of the deepest recession to hit the United States since World War II. Soon the Arab oil embargo made the gas-guzzling jumbo jets all the more uneconomical. National Airlines got rid of its first two 747s within a year. At least one airline parked a 747 and rented it out for business meetings, on the ground. Pan Am tried to borrow money from the Shah of Iran.