Hard Landing (19 page)

One of the most visible members of the subcommittee was Norman Mineta, a former mayor of San Jose, California, who in only two terms had become one of the leading lights in the House—a member of the post-Watergate class swept into office on the promise of integrity and reform. Bakes, though by this time the general counsel of the CAB, used a return trip to Capitol Hill to lobby Mineta.

“I’d really like some
help raising some money,” Mineta said, as Bakes would later recall it. “You think Senator Kennedy would come to the West Coast to do a fund-raiser for me?”

Bakes traipsed to the Senate side of the Capitol, where he called Kennedy from the floor.

“I think we have Mr. Mineta on board if you’d be willing to do a fund-raiser,” Bakes reported. He deliberately withheld the fact that the fund-raiser would be in California.

“Why don’t you tell him we’d be glad to help him out?” Kennedy cheerfully answered.

Before long Kennedy was on the phone. “Bakes! You never told me the fund-raiser was in San Jose!” But Kennedy lived up to his end of the bargain, as did Mineta.

Victory was so close that the proponents of deregulation were now willing to roll just about anybody’s log. Frontier Airlines, headed by Dick Ferris’s friend Al Feldman, felt it had
a $433,000 tax reimbursement coming from the federal government and decided that the deregulation bill was as good a place as any to have the reimbursement written into law. Bakes considered the payment tantamount to a bribe, but Frontier’s backing of deregulation was essential, and what was a little bit of taxpayers’ money in the context of a massive shift in public policy?

Finally the aviation subcommittee approved the House deregulation bill. When the bill hit the House floor, a beaming Monte Lazarus watched from the gallery as the tote board rolled up the lopsided tally of 363 to 8. He caught the eye of Norm Mineta, who flashed the United lobbyist
a thumbs-up salute.

A short time later Phil
Bakes and Ted Kennedy pressed themselves
into the West Wing elevator at the White House with a crew of Secret Service agents. There stood President Carter. He immediately struck Bakes as uncomfortable in the presence of Ted Kennedy, his avowed rival. Kennedy, who was nothing if not gracious when the situation demanded, immediately called attention to the significance of this day.

“Mr. President, I want you to meet Phil Bakes,” Kennedy said. “He and Mary Schuman are the people responsible for this.” Carter’s lips grew tighter as the group exited.

But by the time he signed the Airline Deregulation Act of 1978, Carter was beaming with pride. Flanking him were Kennedy and Cannon, Monte Lazarus from United, Alfred Kahn, and even the former CAB chief, John Robson. “
For the first time in decades,” Carter said, “we have deregulated a major industry.”

A mile to the north, as Carter spoke, a line had already begun forming outside CAB headquarters. Once the bill was law, more than 2,000 dormant airline routes would be instantly up for grabs. The CAB intended to dole out the unused routes on a first-come, first-served basis. So a
spectacle ensued in which corporate representatives lined up along the Connecticut Avenue entrance to the CAB like rock fans waiting to buy concert tickets. Three days before President Carter had even signed the bill they began showing up, with thermos bottles, walkie-talkies, sleeping bags, folding chairs. Over the next two days the line grew, to 30 long by the time the bill was actually signed. The neighborhood was far from Washington’s safest at night; one delegate was
carrying a gun.

Curiously, however, one airline, Texas International, had
no one holding a place in line. Frank Lorenzo, it appeared, had something else in mind.

CHAPTER 5

START-UPS AND UPSTARTS

W
hen the deregulation bill was rushing toward adoption, the government of the United States committed an act that it had not performed in many years: it allowed Texas International Airlines to add service to a new destination. The lucky metropolis was Kansas City.

Frank Lorenzo and his associates marked the occasion with a circus parade to promote the arrival of peanuts fares to the city. A man dressed in a seven-foot Mister Peanut costume waved to the crowd from a little wagon pulled by a baby elephant rented for the occasion. In the midst of the festivities the
baby elephant defecated, forcing Mister Peanut to dive out of the way.

Though the new route was a success, Lorenzo knew he could not survive the deregulation age on cheesy publicity stunts alone.
Deregulation, in his view, had left room for only two kinds of airlines: very small ones and very large ones. Texas International was neither. On the marketing strength of peanuts fares the company had grown significantly, yes- to four million passengers in 1978. Yet it had ascended by only two positions on the Top 20 chart, to number 16. Texas International could either be crushed by the behemoth likes of United and American, on the one hand, or nibbled to death by the nimble, low-cost Southwest on the other, becoming, as Lorenzo liked to put it, “the ham in
somebody else’s sandwich.”

But how to respond? Everyone in the airline industry seemed to be heading in a different direction. Texas International was even divided against itself, as much as any two airlines might be. Indeed, when the bracing wave of competition washed over the airline industry, Texas International, strangely, became the fount of several radically different airline companies, each representing a different response to the same set of economic forces—each, in its own way, springing from the ambivalent relationship between Don Burr and Frank Lorenzo.

Burr all but worshiped him. Burr would accompany Lorenzo to lobbying sessions, industry functions, and private meetings with top executives, and he would marvel at Lorenzo’s earnest manner, his probing questions, his quick mind. Burr had never met a better thinker. He was also impressed with Lorenzo’s good looks and his accomplishments as a marathoner. Lorenzo even skied passably. Frank, for his part, though circumspect in describing his feelings, would later tell people that he considered Burr a
true soul mate and that he was deeply
impressed by Burr’s ability to pick himself up when the chips were down.

But just as in their first days together in the Blue Barn, Burr’s awe and admiration were accompanied by fear and resentment. While he was Frankie Smooth Talk to the outside world, Lorenzo, in Burr’s view, was
Idi Amin to the people closest to him. Lorenzo picked away at people, trashing their work, identifying their weak spot and making it hurt, Burr thought, almost as if he were a Third World dictator in a torture chamber. Although he could raise his voice, Lorenzo did not particularly fit the screamer profile; he was too controlled. But the glare would intensify, the face would grow red, and the
veins in his temples would begin to bulge, particularly as he assumed over the years the gauntness of a marathoner. When the officers of Texas International lined up for the Monday staff meeting, Lorenzo’s secretary would watch them march in as if they were going to Bataan.
Who’s going to get it today? they would ask each other. One staffer walked into the office one day with a puncture wound in his hand and a streak of blood along his arm; he had stabbed himself with a pen during a three-hour plane trip with Frank.

Burr—Frank’s best man, best friend, and top aide—thought he got the worst treatment of all. Burr periodically scheduled management
retreats at a conference center in the woods north of Houston, to which Burr and Lorenzo would drive together. On the way back Burr, while behind the wheel, had to listen to Lorenzo rail about how poorly Burr had put together the meeting.

Burr did everything possible to commandeer the day-to-day control of the airline from Lorenzo, a maneuver Lorenzo himself facilitated by moving his personal office out of the Blue Barn and into a new suite of executive offices in the steel-and-glass shimmer of downtown Houston. Burr, left back at Hobby Airport with the operating staff, was convinced that Lorenzo had no sense of how an airline actually operated, of how the pieces fit together. As Burr later put it, “I didn’t think Frank could
run a lawn mower.” But nobody else had Lorenzo’s skill at schmoozing creditors, to the point of repeatedly postponing their claims. Lorenzo, to his credit, had also quickly grasped the potential of peanuts fares and had made them the cornerstone of the company’s marketing.

But however vital Lorenzo’s financial hijinks, Burr thought the future of the airline would be decided on other issues. With deregulation becoming law, any airline could offer peanuts fares or the equivalent without bowing and scraping before the CAB. Texas International had to find a new way to distinguish itself. The solution, Burr decided, was to transform the culture of the company.

In his youth Burr
had been wrapped up in a book called
The Greatest Thing in the World
, in which a 19th-century Scottish clergyman named Henry Drummond called on people to establish love at the foundation of every activity in their lives. Burr still adored the book and kept it within reach. The same principle, he decided, could apply in the workplace—by trusting people, eliminating time clocks, reducing supervision, and giving employees the freedom to do the best job possible. Working with Texas International’s chief of service, a man named Edwin Cathell, Jr., Burr spent months analyzing everything from Abraham H. Maslow’s theory of the hierarchy of needs to the personnel policies at Bank of America, a company known for progressive employee relations.

The result was a “people’s program” for Texas International, compiled in a set of black three-ring binders distributed to the officers of the company. A meeting on the plan was scheduled for a morning in April 1978, the week after the Senate had passed the Deregulation Act.

To soften up Lorenzo, Burr made a point of leavening the presentation with windy tributes to the financial turnaround for which Lorenzo was principally responsible. “We are a highly financially successful airline, and the focus of the entire airline industry, the public, and the legislators in Washington,” the presentation read. “Maximization of the financial (e.g., cost cutting, marketing, peanuts fares, debt structure, etc.) was historically correct and absolutely essential for this company’s survival at one time in our history.

“But when low fares become universal,” the report went on, “we will be left in large part with the ‘people’ equation as the chief component of competitive leverage.” Success and failure in the airline business, the report said, would be decided on customer service.

Happily, Burr went on, the workforce at Texas International abounded with “friendly, Southern types,” but relying on regional characteristics alone would be insufficient. Texas International had to begin taking account of “every emotional and psychological need of the human animal.” There were many variables in managing a successful airline, the report noted, but “manipulation of this variable can make it the most productive.”

The black binders laid out a program of “leadership and love,” which Burr proposed to effect through psychological indoctrination, open work spaces, jogging trails, and other steps to persuade employees that they were not only cared about but trusted. The Blue Barn would be abandoned in favor of a headquarters campus Burr proposed to construct in the woods north of Houston. The scheme would cost money, yes—that was where Frank would no doubt object—but every 1 percent increase in business attributable to newly happy and productive employees, Burr determined, would be worth $1,441,660 of additional revenue to the company. “All in all, those bucks buy a lot of people’s programs,” Burr’s report concluded.

Having distributed the big black books in advance, Burr trooped from the Blue Barn to Lorenzo’s newly established downtown executive offices to present the people’s program to Lorenzo and other officers of the company. Burr was petrified. The plan meant everything to him. He had been thinking about these issues for years. He desperately wanted Lorenzo’s approval.

After about 10 minutes Lorenzo interrupted the presentation.
“
Don, come here a minute,” he said. The meeting ground to a halt as Burr walked out with Lorenzo. The two men entered Lorenzo’s office.

“This is complete bullshit!” Lorenzo snarled, slamming the book on his desk.

The fact was that Lorenzo at that moment was involved in an altogether different strategy with Bob Carney, his most tenured associate.

Carney, although thrown over by Lorenzo when Burr had made the scene, remained part of the action at Texas International. Carney was still a partner in Jet Capital, the company that he and Lorenzo had established nearly a decade earlier, in 1969, and Jet Capital in turn continued to control Texas International. Some people thought that even Lorenzo did not share Carney’s gift for numbers. Nobody could pick apart a set of financial statements with greater insight. “
Carney rolls the spitballs,” Sam Coats, the general counsel of Texas International, liked to tell people, “and Frank shoots them.”

Shortly after rejecting Don Burr’s people program, Lorenzo traveled with Carney to Cambridge for the 15th reunion of the Harvard M.B.A. class in which they had first become friends. The time away from the office enabled them to discuss the future in earnest. They knew that Texas International had to get big fast, and that meant buying another airline. But which one?