Hard Landing (14 page)

He was not, however, an academic standout. Although
his father had scraped for his boys to attend college, Dick Ferris’s mediocre grades ruled out that possibility in his case. So he had enlisted in the army, in Japan, working as a lifeguard. Being good at relationships, Ferris hit it off with the son of a colonel in the First Cavalry Division. Through him
Ferris in 1957 landed an assignment as the manager
of a club in Tokyo for noncommissioned officers—not just any NCO club but the
Rocker Four Club, one of the biggest in the world, with two great ballrooms, slot machines, a mammoth kitchen, wall-to-wall bars, and space enough for a 16-piece orchestra—filled with American servicemen escaping from Korea for R&R in Japan. Corporal Ferris suddenly had 150 people working under him, including enlisted men with more stripes than he. He was 20 years old.

A few years later Ferris was at the Cornell University School of Hotel Management, the most famous school of its kind in the country, applying himself as he hadn’t in high school and performing at the top of his class. He worked as a sommelier, and spent a glorious summer as a transatlantic cabin steward for Pan Am. (“What a job,” he would later say. “Me and six flight attendants.”) In 1962, as the chairman of a senior honors project, Ferris used the occasion to write a letter to the hotelier he most admired in the world—the
legendary Dan London of San Francisco’s St. Francis Hotel, where President Eisenhower had stayed, where MacArthur had stayed when returning from the Far East—“Mr. San Francisco,” as he was locally known. Ferris asked London to serve as the toastmaster for the banquet held in conjunction with the honors project and seized the chance to make a job pitch for himself.

London could not have avoided recognizing Ferris as a stunningly turned out and ambitious young man, more mature and worldly than the average college senior. But London had a better idea for Ferris than working at the St. Francis, only one hotel in a big chain operated by Western International. Western maintained its corporate headquarters on the top floor of the Olympic Hotel, in Seattle.

“Go to
work at the Olympic Hotel,” London told Ferris. “If you do well, they’ll notice you.”

Ferris followed the advice, writing a disarmingly
brash letter to Eddie Carlson, then still the chairman of Western Hotels. “I believe that the financial structure of the industry is becoming more complex each year,” wrote the graduating senior. “There seems to be a special need for men who know the hotel business from the bottom up, and who are also expertly trained in finance and taxation.” Carlson was so startled by Ferris’s presumptuousness that Ferris soon had a job.

Ferris began work as a manager of the Olympic Grille, studying
food and wine and wage levels, all the while going to graduate school and falling in love with and marrying a staff member. And precisely as London had predicted, Eddie Carlson soon took notice.

Ferris found himself on the fast track, transferred in higher positions to bigger and more important hotels year by year. Over a decade he would serve Western in six cities—Seattle, New York, Anchorage, Chicago, Johannesburg, Seattle again, Kansas City, and Chicago again. The high point was rising to manager of the massive and prestigious Continental Plaza, operated by Western along North Michigan Avenue in Chicago, next to the site where the towering John Hancock Center was under construction.

Hotels were everything to Dick Ferris. “In a way it’s
show business,” he once explained, an image business, bright and exciting and important, yet small enough that a hotel manager could have complete profit-and-loss responsibility: his own people, his own budget, his own little corporation. Hotels gave an ambitious young executive the chance to run something at an unusually early stage in his business career, and Ferris left little doubt about his eagerness to be in charge. He was cocksure, always ready with an order, convinced that management consisted of leadership and that he had it. “Boy, was I
full of myself,” he later remarked.

Ferris, in any case, had paid his dues. With each move he had uprooted his wife and three children, reckoning that each new assignment was another step following the footsteps of Eddie Carlson himself, perhaps even to the top.

Then suddenly in late 1970 Ferris and other executives were summoned to an urgent meeting with Carlson. Western Hotels, the chairman told them, was being sold to United Airlines. Ferris was sick to his stomach.

A few weeks later Ferris was further crestfallen when Carlson took him aside at a company Christmas party to share the news that he, Carlson, was leaving his Western post to become the chairman of United itself. Before long, Carlson asked him to take charge of the food service operation at United.

As unsettling as it was, the offer was undeniably attractive. United’s food operation was
a fabled enterprise, launched in 1937—the first “flight kitchen” in the industry, pioneering the use of standardized trays aboard the newly introduced DC-3S and serving up
French pastries, finger sandwiches, and fried chicken, all in furtherance of its market-share battle against American. By the summer of 1971 United’s food service operation was nearly large enough to qualify in its own right for
membership in the Fortune 500, cooking up something like $200 million in meals a year-enough food to feed the city of Saratoga Springs, New York, three meals a day. The kitchens provided meals not only for United but under contract for other airlines as well. Ferris would have full profit-and-loss responsibility at the food service operation, just as he did at the Crown Center in Kansas City or any other hotel he might manage, only the food kitchens at United constituted a business many times bigger than even a large hotel. Ferris, confident and brash and hugely ambitious, agreed to take the job.

He annoyed and outraged people all over the system,
jabbing his finger at the chest of anyone who didn’t get the message that he was in charge, and he performed brilliantly. He cut costs by
reducing the use of steak and chicken, but passengers didn’t particularly miss it when he replaced them with something novel in the way of airline food—Chinese, for instance, and pasta, which were uncustomary offerings in the meat-and-potatoes era. Fish was affordable; he concocted ways to make it seem elegant, such as sole bonne femme and sweet-and-sour halibut and cioppino. To cultivate sales to other airlines he went on the road, making elaborate and successful—sales presentations. Before long, Ferris was promoted to the top marketing job for the entire airline.

In November 1974 Eddie Carlson could tell the board of directors that United expected to report the highest profits in its history. At the same board meeting Carlson also
shared his thinking about his own succession. Although he had spent only four years at United, Carlson was now 63. Now was the time to anoint a successor who could grow into the position of chairman while Carlson was still on the scene. An orderly transition was essential; after the ill-starred reign of George Keck, United could not tolerate another traumatic change in management.

Carlson had
spent weeks agonizing over the succession, isolating himself on his 40-foot ketch with a yellow legal pad and an evaluation checklist that a banker friend had developed in choosing his own successor. United, he knew, would need an aggressive competitor
as well as an excellent manager at the top. Once again, he thought of Dick Ferris. True, Ferris was only 38 years old, much less experienced than other worthy contenders. But Ferris, he believed, could grow into the job.

When Carlson nominated Ferris as his successor, the United board kept him waiting for two hours while deliberating over the choice. Finally Director Justin Dart, a California industrialist serving in Gov. Ronald Reagan’s “kitchen cabinet,” emerged from the boardroom. “Some of the fellows have some
reservations about Ferris,” Dart said. “We like his drive.… We just wish he were a little older.” In the end the directors decided to go along with Carlson’s choice. While Carlson would remain head of the holding company, known as UAL, Inc., Dick Ferris would become president of United Airlines itself, assuming responsibility for the task of preserving United’s hard-won trophy as the biggest carrier in America.

“So far,” the
Chicago Tribune
noted at one point, “Ferris has kept on course, and his story of
‘boy wonder’ success seems destined for a happy ending. But in the airline industry even a smooth flight can run into unexpected turbulence.”

While Ferris was taking the controls at United, Bob Crandall was burrowing more deeply into the bowels of the computer system at American Airlines. Though the company remained in perilous financial condition, he demanded the funds to resuscitate the Sabre system. With all airlines charging identical prices on competing routes, a fast and reliable reservations operation remained critical in the battle for passengers, nowhere more so than in American’s continuing battles with United. United, for its part, had bounced back from its early missteps in its own effort to automate. Under Carlson and Ferris, United’s in-house computer reservation system, called Apollo, had quickly become the jewel of the airline industry.

While warily watching United’s efforts,
Crandall was jarred by the disturbing news that the travel agents of the United States were taking steps to build a giant computer network, like nothing ever seen, a mechanism to display flight schedules and reserve seats on the airlines of the United States from any travel agency location in the country.

The travel agents’ motive was plain enough. By the mid-1970s
travel agents sold nearly half of all airline tickets. (The airlines sold the rest directly to corporate accounts and individual passengers—by phone, by mail, at airports, and at downtown ticket offices.) Travel agents had been multiplying like delis in Brooklyn, and in some cases they were assuming the same mom-and-pop look. Entrepreneurs, retired couples, wives of the wealthy—almost anyone could start a travel agency merely by stocking the
Official Airline Guide
and leasing some storefront space or a cubbyhole in a suburban shopping strip. Some people went into the business simply because they enjoyed traveling themselves.

The romance of travel was one thing, making a living from it another. Owning a travel agency was a tedious, detail-ridden vocation in which the profit margins were minuscule, particularly on air travel. Making an airline reservation required a travel agent to thumb through the
OAG
, which by now, 15 years into the jet age, was the size of the Manhattan phone book, with tissue-thin pages. Having identified the most appropriate flight for a customer, the agent would then telephone the airline—or multiple airlines, perhaps, in the case of connecting flights—and make the appropriate reservations. The agent wrote each ticket by hand or wheeled it through a typewriter, compiled a written itinerary, collected the fare, and sent the money (less the commission, then fixed by the CAB at 5 percent) to a central clearinghouse, which in turn disbursed it to the airlines. Travel agents had to maintain a bundle of phone lines and a stable of clerks, typists, and reservationists while managing a library of travel literature to advise clients on vacation destinations and business arrangements. But what if the travel agents could go on-line? With a few keystrokes they would have instant electronic access to the schedules, eliminating the need to turn all those pages in the
OAG
. With a few more keystrokes perhaps they could actually place and confirm a reservation, eliminating unproductive telephone talk time.

The agents’ proposal struck terror in the heart of Bob Crandall. In addition to losing control of the distribution system, the airlines, Crandall feared, would undoubtedly have to pay a transaction fee for every reservation they received through an independent computer network—on top of the commissions they already paid to travel agents. That was how any such network was bound to work; the electronic age presented profitable and exciting new ways to distribute
products, but the unwary were sure to wind up on the losing end of the fee structure. Crandall vowed that in this case the losers would not be the airlines; with more than 200 million tickets written each year in the mid-1970s, a small fee could quickly add up to hundreds of millions of dollars in expenses for the airlines. The agents’ project, Crandall decided, had to be stopped. A big meeting of the American Society of Travel Agents, scheduled to begin only a few days later in Rio de Janiero, was the place to start.

Arriving in Rio, Crandall proposed to turn the travel agents’ plan on its head. Instead of their establishing a reservations network, Crandall said, they should allow the airlines to create one—a single giant communication system reaching into the office of any travel agent anywhere, owned and operated by a consortium of the major airlines.

In a perfect world Crandall would never have pushed for a system jointly owned by all airlines. He would instead have made his own system, Sabre, available to individual travel agents for subscription. But Sabre was still recovering from its years of neglect, and American’s finances remained lackluster at best. Moreover, if American began hooking travel agencies up to Sabre, United undoubtedly would begin doing the same, but with its more powerful system and financial resources that Crandall could only dream about. By urging the creation of an industrywide network, Crandall would score two victories, blocking the travel agents from establishing their own system while preventing United from forging a proprietary link with them. And for good measure, in the creation of a single system, United, as the largest airline in the industry by far, could be expected to shoulder the greatest share of the development expense.

Of course many of the expenses incurred in the use of this system—ticket printers, for instance, and computer screens—would be borne by the travel agents. But, Crandall argued, the agents would receive tremendous benefits from the network, not only in making reservations and issuing tickets but in printing itineraries and maintaining their books. Crandall managed to convince the agents that at least a joint study should go forward.