WILBUR AND ORVILLE THEY AIN'T
The Epic Contest for Power and Profits That Plunged the Airlines into Chaos
By Thomas Petzinger Jr.
Times Business 520pp $30
It's spring, 1977, and recently elected President Jimmy Carter wants to deregulate the airlines. American Airlines Chairman Albert Casey is testifying before the Senate subcommittee on aviation, explaining why deregulation won't work, while a mean-looking man with pointed teeth and slicked-back hair is turning pages for him. When the hearing ends, the mean-looking guy approaches a congressional staffer and declares: "You f---ing academic eggheads! You're going to ruin this industry."
Robert L. Crandall, now chairman of American, was wrong, of course. Deregulation didn't ruin the industry. In fact, it fostered a horde of new competitors who cut fares to the point that flying was sometimes cheaper than driving. But the skies haven't been friendly. As they have attempted to adjust to new realities, even the largest U.S. carriers, such as United Airlines Inc. and American, have been battered by labor discord and billions in losses since the late 1980s. A flock of airlines, including Eastern, Pan Am, and People Express, didn't survive.
Of course, a lot more than free-market dynamics lies behind their demise. Many carriers were victims of the arrogance and drive of the executives who shaped the industry. In Hard Landing, veteran Wall Street Journal reporter Thomas Petzinger Jr. lays out in masterful detail the wild ride the industry has taken.
Petzinger builds the story around colorful portraits of men such as Crandall, Frank Lorenzo, and Herbert Kelleher. Only Kelleher, the chain-smoking, Wild Turkey-drinking character who single-handedly created Dallas-based Southwest Airlines Co., comes off as much of a hero. While fighting off competitors' legal threats and political maneuverings, he keeps his sense of humor, dressing up as the Easter bunny or settling a lawsuit via an arm-wrestling match.
Across town, American rises to be No.1 under Crandall, a brilliant executive who created such consumer boons as Super Saver fares and frequent-flier programs. But he's also depicted as a mean-spirited manager and brutal adversary who happily stoops to such dirty tricks as blocking travel agents' view of competitors' fares on his Sabre computer-reservation system. Former United Airlines Chairman Stephen M. Wolf is portrayed as aloof and obsessive. And he never misses a trick, negotiating fat stock options that he cashes in after sprucing up and then selling Republic Airlines, Flying Tiger, and United.
Then there's the infamous Lorenzo. Bouncing from one highly leveraged hostile takeover to the next, Lorenzo built tiny Texas International into an empire that included Continental Airlines, New York Air, Eastern Air Lines, and People Express. Lorenzo's real legacy: the hatred he engendered in employees through such tactics as putting a still solvent Continental into bankruptcy in order to abrogate union contracts. Petzinger adds new dimension to the Lorenzo slash-and-burn stereotype: "What he did was, if anything, even lower. He walked away and let [his underlings] do it for him."
Petzinger's insights and his ability to tell riveting stories make Hard Landing a good read as well as a valuable resource. But the book disappoints in several key ways. It lacks analysis of why the industry keeps careening between near-disaster and record profits. And it offers little insight into where the industry is heading. The book also places too much emphasis on the Texas airlines, neglecting such important players as Delta, Northwest, and TWA. And Hard Landing barely remarks on such recent developments as last year's $5 billion employee buyout at United or the current fiery battle in California between feisty Southwest and United's Shuttle. In his defense, Petzinger says that he actually wrote 800 pages that the publisher condensed to around 400, any reporter's nightmare.
Even if Hard Landing fails to connect all the dots, the airline industry's tribulations fall into a clear pattern. Hard-driving, incredibly ambitious men such as Crandall and former astronaut Frank Borman, who headed up Eastern, are drawn to an industry that seems to have an almost erotic hold on their imaginations. While such men are often great builders of fleets and systems, they too often end up in pitched battles with employees. As recently as two years ago, Crandall provoked a strike by flight attendants, convinced he could intimidate them into crossing picket lines.
As with deregulation, Crandall was wrong. The picket lines held, and American's service was completely disrupted during the important Thanksgiving holiday. Two years later, after binding federal arbitration, American's flight attendants walked away with twice the raise the company had offered. Now that American is posting record profits, Crandall's call for wage concessions from other unions appears doomed.
Why can't there be more Kellehers and fewer Lorenzos in the U.S. airline industry? You can't blame the bellicose management style on entrenched unions: Southwest's employees are unionized and happy, enabling Kelleher's financially healthy airline to keep expanding at the expense of the majors. Maybe all airline chief executive officers should be required to dress up as the Easter bunny once a year.BY SUSAN CHANDLER