CHAPTER 5
THE BRANIFF DEBACLE
Deregulation Hits Home
Like the phoenix, that mythological bird that rose from the ashes with new life at each death, Braniff rose from the ashes of its first bankruptcy in 1982, only to fall victim, again, to a second bankruptcy in 1989. General questions concerning ALPA’s role in the double debacle of “Bankruptcy I and II” linger in the minds of most airline pilots. What could (or should) ALPA have done? This question will forever be etched in acid for the Braniff pilots who lived through the bankruptcies.
The story of Braniff’s life, rebirth, and death touches the very core of every working airline pilot’s experience. Every pilot remembers each intimate detail of that first job search, from the initial idea of being an airline pilot (usually during some adolescent fantasy), to that first source of information about a possible job (perhaps during military service, when it dawns on a pilot that there are easier ways to make a living than landing on a carrier in mid-Pacific), to the letters of inquiry written (many letters), to the first return contact from an airline (any airline). Furthermore, the airline pilot who cannot recall the most minute details of the interview process that brought that first job offer from an airline—the challenging written tests, the “friendly” chats with austere Chief Pilots, those conversations in hallways with other equally nervous applicants, the long wait for the verdict of those mysterious corporate decision-makers in personnel departments—is rare indeed.
While all pilots who ever thought they might like to become an airline pilot probably had an idea of which airline he would like to work for, the truth is that most pilots have always taken the first job offered—by any airline.
On May 12, 1982, when Braniff became the first major airline to go bankrupt, throwing 1,200 airline pilots out of work, an almost audible shudder shook through the ranks of the profession. Among airline pilots everywhere, the universal reaction was “There but for the grace of God go I.”
How many pilots working for other airlines had flirted with Braniff during their job search? How many would have taken a job with Braniff, had another airline not called sooner? How many pilots (like young Hank Duffy, a future ALPA president, when he first began contemplating an airline pilot’s career) were admirers of Braniff’s dash, verve, and sleek, sophisticated image?
As the first casualties of the Airline Deregulation Act of 1978, the Braniff pilots are entitled to a special and unenviable place in this history. While other airlines have technically gone bankrupt since the passage of the Civil Aeronautics Act of 1938 (notably Capital Airlines in 1961), the effect of these failures on pilots was minimal. Because the airline industry was a regulated public utility, with management guaranteed a certain fixed return on invested capital, poor management decisions seldom resulted in the total failure of a company. Under the leavening hand of government regulation, managers who proved themselves incompetent to manage found themselves forced out by government regulators, but the airlines themselves survived. Before financial collapse destroyed an airline’s credibility with travel agents and the public, the regulators would intervene. Either by direct subsidy of federal dollars coupled with “crisis supervision” of errant managers, or (if the failures of management were too egregious) by forced merger with another carrier, the old system of direct government regulation preserved the integrity of the air transportation system. The government, after all, had created the system, so the government was responsible for seeing that it survived.
The “shotgun marriages” of forced mergers were seldom pleasant under the pre-1978 system of direct government regulation, but they were a lot better than the fate awaiting Braniff’s pilots. In 1961, the Capital pilots, accustomed to a more relaxed corporate culture, found the transition to United very trying.1 But at least they had jobs. The Braniff pilots would be left with nothing, enmeshed in the first great test flight of the unproven vehicle called deregulation. For the first time since 1938, airline pilots would find themselves almost completely at the mercy of free market economics.
What happened at Braniff? When the airline abruptly quit flying in May 1982, the Braniff pilots (including ALPA’s leaders) were as bewildered as everybody else. In fact, the MEC chairman at Braniff, Joe Baranowski, admitted at the time that lack of information, aside from “rah, rah stuff from management,” nearly drove to distraction MEC members trying to track the company’s real situation. All that Braniff’s pilots really knew was that the company was sending mixed signals, saying things were bad one day, only to announce later that they were pretty good.
The general uncertainty about Braniff’s economic viability caused pilot-room bulletin boards to blossom with offers to do whatever was necessary to keep the airline flying. Many pilots openly offered to fly free for one month. But the company had to come to the pilots with straight facts and requests for help first! Lacking full cooperation from management, the pilots of Braniff of had no way of knowing just how bad the situation was, or what they could do to help.
“Everything we knew, we got from the newspapers,” Baranowski declared.
This information deficit confirmed an ancient gripe among Braniff’s “Old Guys.” Braniff never told line pilots anything, and middle managers at the point of operational contact seemed to take perverse pleasure in ignoring any suggestion for improvement, particularly if it came from a pilot! Former Braniff pilot John Nance, whose book Splash of Colors chronicles the airline’s downfall, attributes many of the airline’s problems to these managers, whom he calls “empty suits,” who were “confused, ill-trained,” and working in a corporate atmosphere that was “disastrously ineffective.”
John Giberson, the veteran ALPA activist and former IFALPA vice-president whose service dates back to 1947, agrees with Nance. A World War II Marine pilot, Giberson came to Braniff via merger with Kansas City-based Mid-Continent Airlines in 1952. Having gone through it all with Braniff, including the initial 1982 bankruptcy, Giberson returned to line flying and retired in 1984, before what came to be called “Bankruptcy II” in 1989.
“The vast majority of our middle management were idiots,” Giberson says bluntly. “It was often said that Harding Lawrence had a drinking problem. Well, if so, it was those idiots who drove him to drink.”
In fact, one lesson pilots would learn, collectively, from the Braniff debacle was that corporate incompetence was something that they could not ignore. ALPA would have to develop its own sources of information about events transpiring in corporate suites. To do otherwise, when jobs and careers were at stake, would mean that ALPA would enter the brave new world of deregulation blind. Because of Braniff, most MECs would begin learning how to track the business side of their airlines, acting almost as “shadow” managements. Corporate analysis done at ALPA National in support of these “shadow managements” would grow steadily during the 1980s. Pilots on many airlines, particularly those whose situation was most precarious, like TWA and Eastern, would spend their days anxiously monitoring corporate decisions instead of flying. After all, the pilots of an airline had infinitely more at stake than the managers running the airlines, what with “golden parachutes” guaranteeing these executives a soft landing, no matter how poorly they performed.
If history teaches any lessons at all, it is that surface explanations for great events seldom reveal the real truth. But in Braniff’s case, the surface explanations are plausible enough. If fuel prices hadn’t skyrocketed in 1979, just as Harding Lawrence, Braniff’s president, began his spectacular postderegulation expansion plan, maybe Braniff today would be one of the “megacarriers.” If rising fuel prices and economic recession had not ravaged the airline industry in 1982, maybe we would today think of Braniff the same way we think of Delta, which in some respects was Braniff’s historical twin. If Harding Lawrence had not agreed to finance his rapid fleet expansion with a sickening burden of debt (at 2 percent over the prime rate, whatever it was!), Braniff might have become Delta.
Are rising fuel prices, unmanageable debt, and drastic reduction in passenger traffic owing to the worst economic recession since the Great Depression of 1929, sufficient to explain Braniff’s failure? Other airlines survived under similar circumstances. Why didn’t Braniff?
Braniff was an historical anomaly from the start, with a weak route structure and a powerful direct competitor, American Airlines. The reasons for Braniff’s weakness lay in the circumstances of its birth. Two Oklahoma brothers, Paul and Tom Braniff, founded the first incarnation of Braniff in 1928, primarily to serve oilmen who needed rapid transportation. Of the two brothers, Paul Braniff was the flyer, Tom the businessman. Beginning with four Stinson “Detroiter” aircraft, they eventually served a route that included Tulsa and Oklahoma City Okla., and Wichita Falls and Dallas/Ft. Worth, Texas. In 1929, shortly before the great Wall Street crash, they sold out to Universal Airlines.
The Braniff brothers’ real business was insurance, not aviation, but their brief experience with running an airline had intrigued them. After the Great Depression began, airplanes were cheap and pilots plentiful. So, using two six-passenger Lockheed Vegas, the Braniffs promptly got back into the business in 1930, christening the second version of their airline “Braniff Airways.” But they were surprised to learn that the Post Office had already awarded all the airmail contracts to large corporations at a conference held in Washington, D.C., in 1930. These conferences, while not exactly secret, were certainly low profile and restricted to selected inside bidders, among whom the Braniffs weren’t included.
The Airline Deregulation Act of 1978 ended a statutory system embodied in the Civil Aeronautics Act of 1938. However, the idea of regulation began not with Franklin D. Roosevelt’s New Deal, but with his predecessor, Herbert Hoover. As Secretary of Commerce in the Harding and Coolidge administrations, Hoover worried that the same fragmented system that bedeviled rail transportation would cripple the new airlines. Owing to the lack of planning, the nation’s rail system was inefficient and irrational. In fact, to cope with the emergency mobilization of World War I, President Woodrow Wilson had to nationalize the railroads to introduce some order among them.
Hoover, a noted efficiency expert, seized control of the budding airlines through his Department of Commerce in the 1920s and set out to build them into a system that would be efficient, safe, and self-sustaining without government subsidy. Once Hoover became president, he ordered his postmaster general, Walter Folger Brown, a Toledo, Ohio, lawyer, to use airmail contracts to force the gaggle of fiercely competing airlines into a series of mergers that would turn their operation into a real “system” serving the whole nation.
From the beginning, Brown intended to force the small fry (like the Braniff brothers) out of the airline business. Brown’s reasoning was that only large, well-financed corporations could afford the initial capital outlays that would make passenger operations successful. Brown figured that, eventually, passenger service would subsidize mail operations—and the government could get out of the business altogether. But before this could happen, the airlines would need a good, heavy dose of old-fashioned cartelization—under government guidance.
Angry at being excluded from this system, Tom Braniff, who was well-connected politically, led a public assault on Brown’s policies. The Braniff brothers, to prove they could fly more cheaply, extended their airline to serve Kansas City and Chicago—which, with grave portents for the future, put them directly at odds with powerful American.
Sensing that he might yet come out of this business with a hefty profit, Tom Braniff used his resources and the venture capital of wealthy Oklahoma oilmen to keep Paul’s airline alive while waiting for political fortune to smile. He made much of the greater speed of Braniff’s Vegas, which could whisk deal-making oilmen from Tulsa to Ft. Worth more quickly than the subsidized competition’s lumbering Fords and Fokkers.
Ultimately, Brown would be fully vindicated. The courts found that he had done nothing improper in laying the groundwork for the regulated mail and passenger system that FDR and the New Dealers copied almost totally. But at first, when they swept into power on March 3, 1933, they tried to dismantle Brown’s national airline system. A series of spectacular Senate hearings chaired by an Alabama Democrat named Hugo A. Black, whom Roosevelt would soon appoint to the Supreme Court, offered the Braniff brothers a forum. Senators bought their tales of fraud and chicanery in the awarding of the 1930 airmail routes. In February 1934, Roosevelt canceled the contracts and ordered the Army to fly the mail. This experiment lasted only a few months, whereupon the new postmaster general, James A. Farley (an old style New York politician who knew how to reward friends and punish enemies) reopened the mail contracts for bidding. The Braniff brothers snatched away American’s prime Chicago-to-Dallas/Ft. Worth route. Thus, almost from the beginning, Braniff faced a powerful enemy nursing an ancient grudge.
Between 1934 and 1965, when Harding Lawrence took over, Braniff was a steady, unspectacular performer. As one of the smallest “majors,” Braniff cultivated an intense “family” feeling, promoted its executives from within, and did reasonably well in the competition with American for the Texas trade. Profiting from its identification with the Lone Star state (which American would negate when it moved its corporate offices there from New York in the early 1970s), Braniff pioneered the “hub and spoke” concept at its Dallas base, much as Delta (its historical cousin) had done at Atlanta. This approach was a necessity at Braniff and Delta, because neither could compete with the more prestigious “Big Four” (American, Eastern, TWA, and United). When the nature of the business shifted in the 1960s, the older “transcontinentals” would have to adapt to the hub-and-spoke system pioneered by Delta and Braniff, but they also had their lucrative and extensive old “city pair” markets to fall back on. Aside from its Chicago–Dallas city pair, Braniff was a poor relation in this arena.
Why did Delta make it work so well at Atlanta, and Braniff fail so miserably at Dallas? Much of the answer lies in the character of the strange, contradictory, and occasionally brilliant man who took over Braniff in 1965. Harding L. Lawrence learned his trade under the tutelage of Bob Six at Continental. Lawrence was a splendid deputy—bright, adventurous, constantly enthusiastic, hard working. Yet, something about Lawrence bothered people who worked with him—a certain imperiousness, a wild, sometimes irrational streak that identified him as a man who might lose his moorings in the game of high-stakes poker that was the airline business. As Bob Six’s No. 2 man at Continental, Lawrence was the kind of guy who had a dozen ideas a day, one of which might be good, the rest disasters.
John Giberson, a close friend of Braniff’s MEC chairman, Butch Poole, concedes that these criticisms of Braniff’s new boss have some justification.
“I watched the way Harding Lawrence ran the company,” Giberson says, “and when you’re talking to me about him, you’re talking to the choir. He was brilliant, astute, and completely open about where he wanted to take Braniff.
“His basic problem,” Giberson says, “was that his middle managers were so incompetent they couldn’t carry out his plans, and he was incapable of firing these idiots. Instead, he kicked them upstairs.”
Although Lawrence had undeniable gifts and charm, there was something cranky about him. What can you say about a man who would name his son in honor of an outworn political slogan with racist overtones? States Rights Lawrence! One might logically conclude that any father, no matter how brilliant, who would stick a kid with a name like that had a cog missing.
Howard Cole, a Braniff pilot since 1958, served as MEC chairman during and just after Bankruptcy I. Like Giberson and many other pilots who had dealings with Lawrence during these years, Cole remains an admirer.
“If it weren’t for the alcohol,” Cole believes, “Mr. Lawrence would never have allowed himself to be run off, more or less in the middle of the night. If he had stayed and fought, I will always believe he could have flown Braniff through bankruptcy. One thing is for sure, he would never have parked those airplanes in 1982. He would have kept them and us flying.”
Another view of Harding Lawrence is that he was a living embodiment of the “Peter Principle.” A success until he reached the final rung of the corporate ladder, Lawrence would reach his level of “creative incompetence” as Braniff’s president. At Continental, he had Bob Six’s steady hand to keep him on track—at Braniff, nobody was there to rein him in.
But in the beginning, things were fine between Braniff’s pilots and Harding Lawrence. His aggressive expansion of routes and purchase of new equipment put money in pilots’ pockets. Eschewing the traditional distance from the pilot group that old Tom Braniff had left as his managerial legacy, Lawrence sought out MEC chairmen for “insider” chats.
Howard Cole, who served (along with Chuck Goduti and Charles Bohanon) as “custodial representative” in holding the Braniff pilots together during the difficult days between Bankruptcy I and the airline’s rebirth in 1984, remembers how shocking it was to see Lawrence buddying up to Butch Poole, the MEC chairman in 1965–66.
“He really won the pilot group over,” Cole remembers. “I’d see Mr. Lawrence and Butch with their heads together, and I’d think we really had it going.”
John Giberson likewise remembers the early Lawrence days fondly.
“I can still remember personally seeing Mr. Lawrence take charge, like a breath of fresh air,” Giberson says. “We pilots would see things wrong and complain, but those idiots who were in charge would simply ignore us and nothing would be done. Mr. Lawrence, if he’d had more people like himself, instead of the people he inherited, would have succeeded. But handicapped as he was by inferior middle managers, it was a struggle. I think eventually, they just wore him down.”
“Harding Lawrence was one of the better communicators among airline management people,” said J.J. O’Donnell in his 1991 interview. “I was like a lot of the Braniff people, a fan of his. I knew he was in trouble about a year before Braniff went bankrupt, because he called me and we talked about it. I remember he told me that his interest costs, just on the two Boeing 747s he had running back and forth to Honolulu, required each plane to have 280 people on it. He said, ‘We’re averaging 160, and that’s not counting you pilots, labor, repair, maintenance, depreciation. That’s just my interest costs.’”
But other, much earlier signs that something might be amiss with Harding
Lawrence’s stewardship at Braniff had appeared. His choice of members for the
Board of Directors, for example, raised eyebrows among many close observers.
Lawrence liked
to select Board members less for their business acumen than for the impression
they made. Several were Texas
oilmen whose principal claim to fame was that they had been lucky at picking
spots to sink wells. Others were “nice ladies” who met the
Maybe that was the way Lawrence wanted it. He had big ideas that were going to take Braniff on a wild ride, and he didn’t want a Board that might exercise a restraining influence upon him, which Bob Six had done at Continental. Suave, debonair Harding Lawrence, he of the expensive silk suits and carefully coiffed hair, would charm the socks off these well-heeled rubes while he launched Braniff into the stratosphere and they rubber-stamped his every move.
To begin, Lawrence hired a classy New York advertising agency headed by blonde, beautiful Mary Wells, whom he subsequently married (after divorcing his wife of 37 years). Under his new wife’s stylish tutelage, Lawrence completely reshaped Braniff’s image. First, he outfitted Braniff’s flight attendants, who were predominantly female and referred to as “stewardesses” in those days, in wild, high-fashion outfits. (He would have had the pilots don similar garb; but except for new double-breasted uniform coats, they successfully resisted Lawrence’s wilder wardrobe renovations. In any case, the idea of Butch Poole, a heavy-set bear of a man, in an Italian designer airline pilot uniform, inspired more hilarity than outrage.)
Lawrence hired internationally famous artist Alexander Calder to paint the exterior of a Braniff DC-8. Calder’s unique, avant-garde paint schemes made Braniff instantly recognizable, even famous, an airline curiosity, situated at the cutting edge of style and fashion. Lawrence inaugurated “ultra service,” which took first-class passengers into the realm of chef-prepared French cuisine and fine wines, all served in high style, supposedly, although critics scoffed that this wing-ding pampering was more hype than performance. Lawrence’s ideas about luxury service were geared to the Texas elite’s notions of that concept, which Mary Wells deftly adapted into an advertising blitz featuring slick, internationalist themes. At her urging, Lawrence had the interiors of Braniff’s aircraft redesigned, featuring first-class seats of soft leather.
The corporate headquarters at “Braniff Place,” just outside Dallas, featured an indoor-outdoor swimming pool, tennis courts, a miniature lake, and a hotel. Most striking of all, through an interchange agreement with Air France and British Airways, Braniff flew the supersonic Concorde—the ultimate “statement” about where Harding Lawrence was taking his airline.
And Braniff grew—prodigiously. Under the old system of direct government regulation, Lawrence could expand his airline only by acquiring another carrier or by competing for new route awards from the CAB. He was successful at both. Braniff had acquired the “international,” which allowed it to use the initials “BI,” in 1948, when it began limited DC-6 service to South America. Lawrence sought expansion with a vengeance. Like the born plunger he was, he gambled heavily in 1967, engineering the acquisition of Panagra. This bold movement into the Latin American market, which gave Braniff about half of all U.S. service to the region, mainly through its Miami base, only whetted Lawrence’s appetite. Braniff pilots from those heady days remember Lawrence boasting that they would soon be flying into every European capital, and they even heard talk that the airline would absorb Pan American!
For the pilots, those were the best of times. The rapid expansion of the 1970s, and especially the postderegulation period following 1978, made Braniff a wonderland of rapid promotion. A pilot who hired on just before the boom in 1964 would attain the left seat in a scant five years. Junior captains were common in the cockpits of the airline’s “fastback” BAC 1-11 jets, and Braniff’s pilot force grew to levels that left veterans of the old, stodgy pre-Lawrentian era stunned.
“I caught a little bow wave on promotion, “says Duane Woerth (elected ALPA’s first vice-president beginning in 1990 and president in 1999), who hired on at Braniff in 1977. He would later catch on at Northwest after the first Braniff bankruptcy. “At the Kansas City base,” Woerth says, “the pilots of every airline would ride the crew busses, and it was embarrassing. By the time of our first furlough, in 1981, I was a first officer only about 150 numbers away from holding a captain bid. Sitting right across from me on the crew bus would be guys from TWA who’d been second officers for 18 years!”
Braniff, at its peak strength in 1979, employed more than 2,700 pilots, 125 of whom were captains who were flying B-747s. Harding Lawrence had applied for almost every route in sight, and he bought new equipment and hired new pilots with what seemed reckless abandon. Braniff’s logo became familiar on several continents.
In a regulated environment, as a mid-level carrier, Braniff got just the touch of panache from Lawrence it needed and dominated the Dallas/Ft. Worth “metroplex.” But Lawrence was no fool; and he knew that, once the Airline Deregulation Act of 1978 took effect, Braniff could not survive unless it expanded. Wiser heads figured that Lawrence was overdoing it, that this massive expansion would lead to trouble unless all the breaks went Braniff’s way.
But there was a certain method to Harding Lawrence’s madness. Probably because he misunderstood history, Lawrence plunged. He knew that the last time the government flirted with deregulation, after the 1934 airmail cancellations crisis, those entrepreneurs bold enough to expand their operations to serve unprofitable routes had come out on top. Deregulation hadn’t worked, so when the government reregulated the system, the airlines actually serving routes had an advantage over the competition. Many of them were, in effect, “grandfathered in.”
Harding Lawrence, studying this episode from aviation’s past, probably concluded that the future would belong to the bold. So he rushed to serve unprofitable routes, hoping that he could hang on long enough for reregulation to save him. Lawrence made no secret of his plans—he told dozens of people when he began his rapid expansion that within a couple of years Braniff would be either “as big as United or gone.”2
“During the first phase of deregulation, we could pick up only routes that other airlines had abandoned,” recalls Jack Morton, a retired Braniff captain. “Pan American gave up Seattle–Honolulu, and Mr. Lawrence rushed to pick it up. He should have been asking, ‘Why did they give it up?’ They must have had a reason. We began flying every place and no place, with no way to feed those routes. So we were flying half empty a lot of the time.”
History is a tricky teacher, and Lawrence got its lessons badly wrong. Many people, including ALPA’s leadership, opposed deregulation. Lawrence, like ALPA President J.J. O’Donnell, figured that an unregulated airline industry would never make sense and that eventually the government would have to reregulate to preserve safety standards. But in the interim, while the government was coming to its senses, rapid expansion made sense. If the banks were willing to lend him the money to expand, Lawrence was willing to take the gamble. From his point of view, he really had no choice. In the deregulated environment, only two kinds of airlines would survive—very large and very small. Braniff would either become a “megacarrier” or be merged out of existence—a fate worse than death to a man with Harding Lawrence’s towering ego.
There were problems with this analysis, as we can see through hindsight. First, the political climate, conservative and free-market in orientation, was running against the concept of government regulation. Ronald Reagan, who would win election in 1980, believed passionately that government was the problem, not the solution. Reagan’s promise to “get the government off the backs of the American people” meant that reregulation would not be an option during the 1980s.
Secondly, the banks urging Lawrence toward ever greater indebtedness to finance his expansion were themselves engaged in some dubious lending practices. Loan officers received promotion and bonuses not for making good loans, but for the volume of loans they engineered. The banks, flush with “petro dollars” deposited by price-gouging OPEC nations (the oil embargoes of 1973 and 1979 had made them rich beyond imagining), had to lend money out—they couldn’t eat the deposits. So the banks encouraged young loan officers to pressure applicants to “over borrow.”
Farmers in the Midwest, Third World nations, and Harding Lawrence were among the notable takers of this bait. Loans gone sour to Latin American nations would be made whole by U.S. taxpayers (the government’s conception of “national interest” would dictate this outcome, since the days of sending in the Marines to collect debts were over). But the farmers and Braniff, whose assets were mostly in land and airplanes, not only could be foreclosed, they would almost have to be foreclosed, partly to appease angry taxpayers, but mostly as a symbolic gesture. In short, somebody was going to have to go down the drain to serve as an object “lesson” about “traditional values.” And no help would come from the government.
In the wave of deregulation that swept the country, beginning during the 1970s and culminating with the excesses of the 1980s, the government was willing to let the big banks loan themselves silly. A bank as big as Continental Illinois, up to its eyebrows in “nonperforming loans” to Third World countries, was (like Lockheed and Chrysler) too big and important to be allowed to fail. Such a catastrophe might pull down the entire financial and banking structure. But Braniff was small potatoes. No significant national interest would be affected if Braniff failed. Massive failure of a really big company might warrant government intervention, but Braniff’s tragedy would affect only its own employees, not the nation at large. In fact, half the existing airlines could go out of business without significantly affecting the nation’s economic health. And in truth, the deregulators, like Alfred Kahn, believed that a certain number of airline failures were a necessary “corrective” on the road to a free market airline system.
Braniff was the Christmas turkey at this particular banquet. The banks, which had so blatantly overexpanded loans to unworthy borrowers, played a role in the accumulating troubles that engulfed Harding Lawrence. In an impossible conflict of interest, one of the banks that had loaned Braniff money also had one of its officers on the airline’s Board. This Board member, who was in a position to second-guess Lawrence, essentially had veto power over management decisions. By threatening to deny an extension of credit unless things were done the way the bank thought proper, Braniff’s management was thus denied its basic prerogatives. Put simply, when the airplanes securing the loans became more valuable to the bank on the open market than the interest they earned on the airline’s loan, the bank could force a sale—regardless of the effect upon Braniff’s operations.
Under these circumstances, Harding Lawrence did what any self-respecting executive would do—he resigned. But Braniff’s floundering only got worse. Under John Casey, who had served as Lawrence’s chief of operations, boardroom skirmishing reached new heights. The Board members, increasingly worried about their fiduciary responsibility (the possibility of stockholder lawsuits), cut ever more deeply into managerial functions. They didn’t want Casey in any case, because they figured Braniff’s problems were in the marketing area, and they wanted a slick salesman instead of an old-fashioned operations guy.
At this point, things were serious but not desperate. As usual, the pilots were told little or nothing of the Board’s infighting. But the Braniff pilots’ respect for Casey was strong, and they stood ready to provide whatever contract concessions were necessary to help him succeed.
“John Casey knew his stuff, and he was a man of absolute integrity,” John Giberson remembers. “The problem was getting them to ask us for help, to tell us what they wanted.”
In retrospect, Casey’s hands were clearly tied. The Board wanted somebody else, and they would shortly get him in the person of Howard Putnam. In a surprising move that Braniff’s pilots could only watch helplessly, the Board lured Putnam away from Southwest Airlines, a non-ALPA carrier. The Board’s thinking was that Braniff’s future under deregulation was as a low-budget carrier, and Putnam, having worked at the prototype cheap airline, was the man to ramrod that transition. Closer analysis by the Board would surely have revealed that Putnam’s career at Southwest hardly suited him to cope with Braniff’s problems.
Southwest Airlines was something of a freak. It originated in the forced merger of the Dallas and Ft. Worth airports. The authorities extracted written promises from all existing airlines that they would discontinue scheduled service to Dallas Love Field and Ft. Worth Amon Carter airport once the FAA-mandated construction of new combined Dallas/Ft.Worth International Airport (DFW) was complete. Because passengers prefer close-in fields, any airline that continued to serve the old airports, instead of the new one being built miles away out in the boonies between the two cities, would beat the pants off any competitors who moved. The FAA did its part by forbidding any interstate carrier from serving the old airports, which were supposed to become general aviation fields. Furthermore, in what came to be known as the “Love Field Compact,” all the existing carriers agreed that they would not serve the “Metroplex” at the old airports (eventually, only Dallas’ Love Field would stay open) on their intrastate routes, over which the FAA had no control. Because Texas has 3 of the 10 largest U.S. cities within its borders (Dallas, Houston, and San Antonio), an intrastate commuter airline modeled on California’s Pacific Southwest Airlines (PSA), could do the established carriers (and DFW) considerable damage. Hence the “Love Field Compact.”
Despite these precautions, some savvy operators with plenty of money were determined to skim the cream off the Texas commuter trade, specifically the Dallas–Houston market. They were definitely not “little guys” competing against the corporate barons, although Rollin W. King, who originally conceived of Southwest, might fit that description. The airline began flying in June 1971, backed by Murchison money and several influential Texas politicians, among them Herbert D. Kelleher (an associate of Governor John C. Connally), and future Democratic Party National Chairman Robert Strauss. This kind of backing caused one editorial observer to comment during the company’s formative stage: “Southwest Airlines won’t use aviation fuel—just political power.”
Because Southwest had not existed at the time of the “Love Field Compact,” it was not bound by it. Following extensive legal challenges, the airline took to the air, complicating life for every airline that served the Texas market from brand-new DFW. Although it would be an overstatement to say that Southwest did Braniff irreparable harm, nevertheless the damage was substantial (as it was to other ALPA carriers).
So it didn’t take a genius to make money at Southwest, and anyway, Howard Putnam had nothing to do with it. During the airline’s formative stage, tough, curmudgeonly old T. Lamar Muse, who had learned the business at American, made Southwest a success. Muse, figuring that anybody smart enough to pay pilots half the going wage could make money, eventually left Southwest to form his own airline, MuseAir, thus opening the way to Putnam.3
Putnam, whose career had been unremarkable to this point, found himself, inexplicably, tapped as Braniff’s savior. It was a poor choice. No Braniff pilot who lived though this era has a good word to say about Putnam; and in fact, a majority of them suspect deep conspiratorial involvement of other airlines in his choice. Put bluntly, they believe that Putnam never had any intention of making a success at Braniff. They sneer at his idea, which ultimately proved unworkable, of converting Braniff into a cheap, jumbo-sized version of Southwest. Many Braniff pilots also believed that Putnam was hired by somebody (a shadowy, illusive “them”) to be the airline’s undertaker. Putnam himself, by his own admission, couldn’t understand why Braniff’s Board wanted him, but since they were offering big money and a no-risk challenge (he had a “golden parachute”), Putnam left his comfortable berth at Southwest for the listing deck at Braniff. Upon arriving, Putnam said publicly that he doubted Braniff’s ability to survive! It was hardly a Churchillian moment.
So Putnam, who took over Braniff in September 1981, cut fares as the “Reagan Recession” deepened. Braniff’s cash-flow problems only got worse, as American matched fares in a deepening spiral. Only one thing would have saved Braniff—some sort of direct federal assistance. The most obvious regulatory move would have been for the CAB (then approaching “sunset” itself and quite incapable of taking action) to guarantee Braniff’s tickets. Travel agents, who were crucial to any airline’s success, could then have sold Braniff tickets without fear of getting burned. More important, American, Braniff’s chief competitor, would have had less incentive to put the airline under. A federal edict requiring other airlines to honor a failed Braniff’s tickets (and American would have had to redeem more of them than any other airline) would have been a powerful incentive to help Braniff survive.
In the last analysis, American did offer to help. American’s CEO, Robert Crandall, impetuously telephoned Howard Putnam, hoping to put an end to the ruinous price war. On some routes, Braniff and American were both losing money flying airplanes with full loads of passengers. Incredibly, Putnam resisted the efforts to reach an accommodation. Instead of grasping at this last life preserver American was throwing Braniff’s way, Putnam secretly tape-recorded the conversations with Crandall, hoping to prove a violation of antitrust law. These putative “criminal” conversations, even had they resulted in stiff jail sentences and fines for every last American executive, would not have saved Braniff.
On May 12, 1982, a teary-eyed Howard Putnam, still barely familiar with his job, announced that Braniff was shutting down. The Braniff pilots faced a crisis no other pilot group had ever confronted. The first hatchlings of the deregulation chicken had come home to roost squarely upon them.
All eyes were now upon ALPA.
1 See George Hopkins, Flying the Line,
Ch. 23, “Jets and Thin Ice.”
2 In
1967, when Braniff was growing rapidly, I interviewed Harding Lawrence about
making Braniff the subject of my doctoral dissertation in history. While he
delayed making a decision, ALPA offered to cooperate fully in my project, thus
leading me to write The Airline Pilots: A Study in Elite Unionization
(Harvard University Press, 1971).
3 I
interviewed Muse in 1975. Those interviews became the basis of “The Texas
Airline War,” The Washington Monthly (March 1976).