National Airlines: Eight Wings And A Prayer
For Michael J. Conway, the 53-year-old founder of startup National Airlines, nothing has ever come easily. The son of a New York City taxi driver, Conway grew up in a tough Brooklyn neighborhood where winning a street fight counted more than doing well in school. Years later, as an airline executive, he has endured more than his share of professional black eyes. But Conway always seems to get up swinging.
Now, five years after his ouster from America West Airlines Inc. in a bitter power struggle, Conway is resurfacing with an ambitious plan for Las Vegas-based National, scheduled to begin flying early next year. He intends to start with a fleet of four Boeing 757 jets, flying to such cities as Miami, Los Angeles, and New York. It's a risky venture, though. As a tourist destination, Las Vegas fares run 30% below average domestic rates. And Conway will be competing against major carriers that have the muscle to squash new entrants.
PERSISTENT. Still, Conway knows the hazards of the market well. During his 12 years at America West, he helped build Las Vegas into one of two hubs for the Phoenix-based carrier, which was then expanding quickly. Later, he had to all but abandon the Las Vegas market after America West's 1991 bankruptcy.
This time, Conway insists he's back to stay. And some big casinos, worried about luring new tourists, are also placing their bets with him. A construction boom is adding some 20,000 new hotel rooms to the market at the same time that major airlines are raising prices and cutting back flights in favor of more lucrative routes elsewhere. That's helped Conway raise $50 million--$30 million from Harrah's Entertainment Inc. and Rio Hotel & Casino Inc. Wexford Capital, a Greenwich (Conn.) investment firm, put in another $7 million, with the rest coming from private investors.
Finding the money, though, was no small feat. Conway set up shop in 1995 and began pounding the Strip for investors. But casinos weren't biting, telling Conway that airline seats always tend to grow in tandem with growth in hotel rooms. Conway, though, wouldn't take no for an answer. After such carriers as American Airlines Inc. and Delta Air Lines Inc. scaled back, the casinos came around.
Persistence, if not subtlety, has always been Conway's strong suit. The eldest of three kids, Conway grew up in a cramped house on a noisy street. His dad was more likely to discipline him with a belt than offer encouragement, says his sister, Kathy Jaeger. At 17, Conway got into Queensborough Community College. But his five Fs and a D combined for a grade-point average of 0.18. "My mother said, `At least you could have gotten one full point,"' Conway recalls.
BRUTAL BATTLES. After working in the mail room at a local construction company, Conway went back to college, graduating from Baruch College in New York in 1969 with a degree in accounting and finance. This time he did well and got a job with Price Waterhouse, where he worked on the Eastern Airlines account. "It's fast-paced," says Conway, explaining his gusto for the airline industry. "It's capital- and labor-intensive, and it's also a service industry. It's a little bit of everything," he says.
And brutal, too. After leaving the accounting firm to join Continental Airlines Inc. as controller in 1980, Conway got crossways with Frank Lorenzo by opposing the takeover ace's bid for the airline. He soon lost his job. In 1981, Conway joined then-tiny America West and quickly rose to president. Over the next dozen years, he and founder Edward R. Beauvais built the airline into a $1 billion carrier, with flights from its Phoenix and Las Vegas hubs stretching from New York to Japan.
But as the carrier grew, the pair clashed. Beauvais backed aggressive expansion. But during the gulf war recession, Conway sided with creditors, who wanted the airline, by then bleeding red ink, to cut its costs. When the carrier declared bankruptcy in 1991, Conway and Beauvais became bitter enemies. Insiders say Beauvais felt Conway betrayed him, though Conway insists he fought the creditors on Beauvais' behalf. Beauvais, now retired, won't publicly comment on the rift except to say of his old partner: "I don't have a very high regard for him as a businessman."
With Beauvais out and Conway the new CEO, his real troubles were just beginning. Conway now had to deal with William A. Franke, appointed by creditors as a nonexecutive chairman. Franke, an austere and formal Arizona investment banker who made his name turning around retail chain Circle K. Co., took an immediate dislike to Conway and his backslapping ways, according to several company insiders. "Once Franke was in, he was de facto running the company and emasculating Mike," says a former adviser. Franke declined to comment for this story.
Conway plotted to rid himself of Franke in 1993 by courting a $250 million takeover from investor Michael Steinhardt. With the airline making money again, Conway counted on backing from the board. But he miscalculated badly. A competing bid from Texas financier David Bonderman, favored by Franke, won. Once again, Conway was out. "He's got a fine mind," says lawyer Penn Ayers Butler, a former member of the creditors committee. "It's just that when his emotions overtake his reason, Mike loses his ability to be a dispassionate judge of circumstances."
Will Conway's third time prove the charm? Though the risks are high, Conway is nothing if not a fighter. And this time around--for better or for worse--he's on his own.