Hard Landing (64 page)

Twice since World War II, meeting on both occasions in Bermuda, diplomats from the United States and United Kingdom have reached uneasy truces to regulate flights between their territories. Periodically there have been amendments to the Bermuda agreements, but enough restrictions on American service have always been maintained to ensure that British Airways was protected.

Then in the early 1980s, with deregulation taking hold in the United States, some extraordinary developments occurred on the British side of this relationship. The conservative government of Prime Minister Margaret Thatcher declared that Britain would cut loose its long-held industrial interests—British Gas, British Telecom,
and British Airways among them. There would be no more free ride from Whitehall.

As “privatisation” drew near, British Airways—the “Bloody Awful” of yore—transformed itself into a real airline. Everything about the airline changed: its fleet, its pricing, its schedules, its advertising. This metamorphosis, moreover, had repercussions far beyond Britain. The rebirth of British Airways would send shudders throughout, and permanently alter, the airline markets of the world.

Perhaps most surprising of all, the changes would be introduced by an executive who had spent his life in the service business, without ever working for an airline.

His name rang with a distinctly Anglican tone: Colin Marsh Marshall. He was born in 1933 on the outskirts of London; his grammar school years were punctuated with the sounds of warfare. As a teenager he found the bombed-out city to be
a drab, depressing place, so he ran away to sea, becoming a purser for the Orient Steam Navigation Company. In the next seven years he
sailed 21 voyages between the United Kingdom and Australia.

At age 25 Marshall left the oceans but remained in the business of serving people, joining Hertz. Marshall washed cars and put in time behind the rental counters, not as a lowly entry-level employee,
as he would later suggest, but as a management trainee, first in Chicago and
then in Toronto. In barely a year he was Hertz’s general manager in Mexico City, and within a year of that the assistant to the president in New York City. By 1961 he was general manager in London; the following year he had added much of Europe to his territory as well. He was not yet 30.

From London Marshall pondered a Europe undergoing a subtle yet significant change. The early 1960s witnessed the spread of multinational corporations every bit as much in Europe as in the United States, particularly with the birth of the European Common Market. Marshall observed that alongside these changes,
a pan-European market was emerging for travel. An increasing number of business people renting cars in Paris, for instance, were from countries other than France. A British company that sent employees to France, moreover, might also have employees traveling to Geneva, say, or Brussels.

Although this phenomenon would be taken for granted in later
years, the transnational behavior of Europe’s markets was not conspicuous to everyone in the business world of the early 1960s—not to Colin Marshall’s bosses, in any case. Hertz’s European operation was Balkanized into six divisions (“
fiefdoms,” as Marshall thought of them), each reporting to New York. Each fiefdom had its own country manager and its own sales organization. Every country manager was out for himself.

Sitting in London, from which the greatest number of multinational customers traveled, Colin Marshall found this system maddeningly limiting. He thought Europe needed a czar to rule over the lords—someone with the authority to make a deal for the wider benefit of Hertz. If Marshall himself became this czar, his career would take another giant leap forward. In 1964 Marshall traveled to Hertz’s headquarters in New York to pitch his idea. He was thanked and told nicely to
get lost.

Marshall jumped ship to Hertz’s mortal enemy, Avis. His boss there was the legendary Winston “Bud” Morrow, a backslapping salesman of the first order. Morrow popularized a 1960s corporate fad known as “visible management,” in which every executive in the company spent at least part of the year working alongside the rank and file, which in Avis’s case meant behind the rental counters and underneath the automobile hoods. Thus did Colin Marshall again get the chance to learn customer service at ground level.

Morrow put Marshall in charge of Avis’s European operation—a scant empire, to be sure, with
barely a dozen cars in London and the same in Scotland. Marshall quickly built the operation, taking dead aim at Hertz by offering corporations and major travel operators special discounts across the continent. Transcending geographical divisions, Marshall outfitted employees across Europe in matching red blazers. More significantly he adapted the roaringly successful advertising campaign that Doyle Dane Bernbach had developed for Avis a few years earlier, in 1962—“We’re No. 2. We Try Harder”—and turned it into an expression of Avis’s internationalism, translating “We Try Harder” into more than a dozen languages and listing each in a single display advertisement.
(Nos esforzamos más … Nous faisons plus pour vous satisfaire … Wir geben uns mehr Mühe …)
Marshall thus announced to the world that Avis was a unified worldwide brand, asked for in many languages. The campaign flew in the
face of conventional multinational marketing, which held that a company distinguished its product for a local market, not an international one. But Marshall’s strategy succeeded: by the early 1970s Marshall had overtaken Hertz in Europe and had done so with methods that Hertz itself had rejected.

Marshall was soon called to Avis world headquarters in Garden City, New York, to become the number two executive under Bud Morrow. Avis was a down-and-dirty organization, literally and figuratively. The corporate headquarters was filled with people who had started out with
dirty knuckles, turning gaskets and replacing oil filters. Sales were still promoted according to the old-boy rules: politicians received
free cars, competitors were railroaded out of airports in collusion with Hertz, illegal campaign contributions were made.

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.