Hard Landing (60 page)

To the extent that Bakes wished to make the situation appear hopelessly deadlocked for the benefit of the Mediation Board, Charlie Bryan obliged him. For months Bryan continued refusing even to attend meetings. “
We don’t acknowledge that they’ve given proposals,” he said.

While Bakes parried with Bryan, Lorenzo, realizing he had his hands full at Continental, once again turned to an unlikely outsider for help.

It was more than four years earlier, in 1982, that a lawyer at Braniff had filed away a secret tape recording of a telephone conversation between Braniff chairman Howard Putnam and Bob Crandall of American Airlines. It was inevitable, perhaps, that the tape would not remain secret forever.

In the grand jury investigation following Braniff’s failure, the airlines of Texas, including Braniff, had been blanketed with subpoenas. Braniff had turned over the recording, on which Crandall could be heard commanding his rival to “raise your goddamn fares twenty percent. I’ll raise mine the next morning.” The Justice Department went to court, accusing Crandall of attempting to fix prices and seeking an order to have him banished from the airline industry—as severe a punishment as Bob Crandall could ever have endured. (The fact that Crandall had telephoned Putnam at United Airlines years earlier, urging him to increase prices for drinks and movie headsets, was not made public.)

There was a problem with the federal case against Crandall, however. Even if one assumed the worst of Crandall’s intentions—even if he had wished to importune a rival CEO into a price-fixing conspiracy—he
had, after all, failed in the attempt. There is no such thing as a conspiracy of one. After more than two years of trying to make the case stick, Justice gave up, settling for a token sanction: Crandall would have to keep a
written record of his discussions with other airline chieftains.

The more lasting effect of the Putnam affair was the damage to Crandall’s reputation. Albert Casey, who was still chairman of American when the obscenity-studded tape transcript was made public, considered “
very carefully” whether to fire Crandall.
Crandall himself was mortified. To a group of gathered executives he once sighed, “That’ll be
in my obituary.”

And yet wasn’t life all about fighting? Wasn’t it going from one schoolyard fistfight to another? Crandall pulled himself up. He threw himself more deeply into his grand Growth Plan. He launched an effort to soften his image. He went through a round of
cosmetic dentistry to dull the points on his canine teeth. He deflated his pompadour in favor of a flatter, slicked-back look. “I
rage less,” he said publicly.

Crandall clung to all the top titles at American Airlines long past the point at which he might have begun to share them. Doing so made Crandall the sole leader through some of the greatest triumphs in American’s history, solidifying his standing with a board of directors that had been jarred by the revelation of his intemperate conversation with Howard Putnam. Most conspicuously Crandall retained the title of president after becoming chairman, even though his predecessor, Al Casey, had readily shared the president’s title with him.

Years later, while still serving under the same titles, Crandall would say that he refused to delegate the presidency for operating reasons. “
I’ve never felt an airline should have a [separate] chairman and president, and as long as I’m here, there won’t be,” he explained. “The assets have to be managed centrally. You’ve got to have one boss. To have two is kind of wacko.”

Publicly, however, Crandall had never been so explicit in his intentions. People in the organization were sure that he would one day anoint Tom Plaskett, his most senior associate, as American’s president. Plaskett, the good soldier, remained outwardly solicitous of Crandall and by all appearances was content to wait as long as necessary.
But by 1986 Plaskett was
burning inside; he concluded unhappily that Crandall would never release the presidency.

It would have stunned people in the audience to know that when Bob Crandall and Tom Plaskett had stood before the entire management group of American Airlines poking fun at Frank Lorenzo, Plaskett at that very moment was
discreetly negotiating to become president of Continental Airlines. A few weeks later, in November 1986, it became official: Lorenzo had stolen Crandall’s top man—for the job that Crandall himself had turned down years earlier.

Plaskett assumed the presidency of Continental that Phil Bakes had vacated in going to Eastern. For Lorenzo, Plaskett was every bit the trophy that Bakes had once been. Even at 42 years of age, Plaskett was a ranking member of the aviation establishment, a full member of the club in which Lorenzo himself never felt fully tenured.
Fortune
had recently named Plaskett one of the
10 hottest executives in the country.
Forbes
said that Plaskett “plays a computer reservation system
like a Stradivarius,” noting, “His steady presence may be exactly what Lorenzo needs to convince skeptics that Texas Air can be an airline superpower instead of a bundle of debt.”

But from the minute he walked into Continental headquarters in Houston, Plaskett found himself the odd man out, just as Stephen Wolf once had. If Plaskett ordered a
slide show prepared, his new underlings would look at him as if he were from another planet. Lorenzo’s people remarked that Plaskett always tried to go
by the book, failing to recognize there was no book at Continental. People put in 12- and 14-hour days working for Lorenzo, but Plaskett liked to get in a
round of golf now and then.

The cultural estrangement went both ways. In Plaskett’s experience marketing was a highly sophisticated, computer-driven enterprise. Certainly Lorenzo’s capture of the System One network from Eastern was a big step toward endowing Continental with that capability. But Lorenzo’s team of madcap marketers—the same people who had staged the baby elephant stunt to promote peanuts fares in Kansas City and who camped out under the Frontier billboard in Denver—were now working for the fourth-largest individual airline in the country, and they had not lost their passion for the cute. When Continental became the largest airline in New York City, they announced
the “
biggest airline ticket giveaway ever”: a free airline ticket to the first million comers. Lorenzo’s people tried to stage the spectacle at Madison Square Garden, but the city obtained a court order blocking them. “They
wanted a scene, a circus, and we don’t want to put on a circus,” a police spokesman said.

Plaskett may have been embarrassed by such brutish marketing tactics, but that embarrassment was nothing compared with the humiliation that followed his involvement in the biggest one-day merger in airline history.

On Lorenzo’s orders Plaskett, on February 1, 1987, mashed together Continental, New York Air, People Express, Frontier, and all of their many subsidiaries into one giant airline operating under a single schedule. Only Eastern, with its poisonous labor problems, would remain a separate airline. Plaskett and others urged a go-slow approach, but as Plaskett would later comment, “
Frank was adamant; it had to be done.” Inside Lorenzo’s shop some people called the merger
the “big bang.”

Suddenly Continental had
32 different galley configurations in its fleet. Continental meal trays wouldn’t fit into Frontier warming carts. People with tickets on Continental found themselves boarding bright red New York Air planes. Passengers at Newark were herded from gate to gate as cancellations mounted. People Express employees were assigned to Continental flights with no idea how to operate Jetways. Golf bags, skis, and luggage of every shape and variety began to accumulate in a warehouse of lost bags in Houston. The entire system ran late all day long.

Lorenzo had not foreseen the worst problem of all: scheduling the newly swollen and far-flung workforce. As with so much else in airlines, crew scheduling creates a reverse economy of scale: the bigger the operation, the more difficult, costly, and inefficient it becomes. Pilots and flight attendants, calling in for new assignments as flight cancellations worsened, encountered busy signals, meaning they could not be reassigned, causing still more flights to be canceled. There’s no such thing as a half-broken airline.

Morale plunged. People Express pilots accustomed to flying in the captain’s seat—men who had flown for the original Braniff before
it
failed, for instance—found themselves junior to Continental pilots who were barely shaving. Continental could ill afford to make its pilots
so unhappy; every airline in the country was now trying to recruit pilots, to keep up with the surging demand caused by low fares and to staff all those airplanes rolling off the assembly line in Seattle. As if eating seed corn, Continental began assigning training pilots to line flying, which meant that fewer new pilots could be trained, which meant that the trainers had to fly that much more often. Continental’s pilot schedules began pushing federal safety standards. As noted in one internal memo, “We
never
intentionally
overcommit on flying hours. Yes, we do push it to the maximum.” The memo chalked this practice up to “the axioms of operating in a deregulated environment.”

In April 1987, three months after the big bang, consumer complaints against the entire airline industry more than doubled, with units of Texas Air accounting for more than half of all complaints against all airlines. It was just a temporary public relations setback, Lorenzo thought, and he could lick it, he was sure—just as
Johnson & Johnson through brilliant public posturing had overcome the marketing crisis following the Tylenol poisonings. In a letter Lorenzo appealed for understanding from the Continental pilots, expressing the closest thing to contrition that he was capable of: “We have
lived through a lot together. We survived the bankruptcy, completed the airline consolidations, saved thousands of jobs, and emerged as one of the biggest airlines in America.… However, I know it has not been easy for any of us, and we are still fine-tuning and continually improving our operations, a fact which will continue to benefit you.”

But in all the parsing of blame for the big bang debacle of 1987 there was only one president of Continental Airlines, and that was Tom Plaskett. Vainly Plaskett
tried to overcome the cataclysmic operating problems, but he had no capital: no money to tear out galleys, for instance, or to purchase the software by which to knit together the various in-house computer systems of People Express, Frontier, and Continental itself. So it was only a matter of time—nine months was all it took—before Lorenzo unceremoniously
dumped Tom Plaskett. Plaskett’s résumé would later put the best face possible on his months at Continental, noting that he had introduced a measure of organization to “a complex cultural and operating environment.”

And throughout those months of carnage, nobody followed the
disaster at Continental with more interest than Plaskett’s former boss, Bob Crandall.

Doing all he could to compete with Frank Lorenzo on schedules and flights, Bob Crandall resolved to conduct a new tactic: he would make Lorenzo look bad.

Just as Continental was falling to pieces, Crandall’s people went to the Department of Transportation and demanded a monthly public announcement of every airline’s on-time performance—a policy
they knew would hurt Continental disproportionately. As Crandall explained to his assembled managers: “I think it’s entirely possible that we are confronted by a unique—and short-lived—
window of opportunity. For eight long years, ever since deregulation, we have had to compete with our low-cost rivals on the basis of price and price alone. Today, thanks to growing public unhappiness, we have an opportunity to put quality back where it belongs: front and center.… It’s going to be harder and harder for carriers to hide shoddy performance. The public is going to have an opportunity to know who’s good and who’s not.”

Crandall also personalized the attack. When
Texas Monthly
published a scathing cover story on Lorenzo, Crandall ordered
15,000 reprints to assure even wider distribution. Crandall called on the government to deny international routes to Continental as punishment for “
abusing employees.” “They
treat their people dreadfully,” Crandall told
Business Week
.

Lorenzo’s campaign to slash wages at Eastern moved Crandall to even greater histrionics. “The employees
have no chance,” Crandall said in
Airline Executive
magazine. “How do you think an employee will feel if you’re 51 years old, you’re a baggage handler, you’ve worked yourself up to $30,000 a year, and they come in and say, ‘I’m going to cut your salary to $18,000. If you don’t like it, you’re fired.’ They’ve deprived you of the ability to make a living.”

“The cruel irony,” Crandall said in a speech, “is that
it wasn’t success, it wasn’t good management or a superior product that created the Texas Air empire. It was failure.” One of Lorenzo’s people offered a rejoinder that deliciously recalled Crandall’s encounter with the tape recorder: “Since Crandall
can’t fix prices,” a Continental spokesman told
Travel Weekly
, “he’ll try to fix costs.”

Lorenzo even provoked Crandall to abandon his declared policy against takeovers. The major airlines by late 1986 had largely re-carved the route map of the United States, though the process was far from complete in California. Lorenzo had started a shuttlelike operation called Continental West and was scoring impressive early gains against United, the longtime market leader in California. American, by contrast, was a small player within the boundaries of California. Crandall
had a problem. As more Californians accumulated frequent-flier miles flying on other airlines inside California, they were more likely to use those same airlines to travel across the United States.

Crandall might have painstakingly built up a major presence in California, as United and Continental had done. But Crandall learned that Lorenzo was preparing a possible bid for AirCal, the last surviving California independent. If Lorenzo succeeded,
Crandall feared, the door would slam shut on California, with Lorenzo, of all people, doing the slamming. Crandall moved with dispatch, agreeing to pay a quarter-billion dollars for AirCal and adding yet another hub, in San Jose, to the American route map. Lorenzo, though bested, would sniff that Crandall had
overpaid for AirCal.