Hard Landing (58 page)

“The
principal motivation must be to keep the airline a viable enterprise serving the public,” Luce was now saying. “Dick’s program won’t do that.”

As for the directors’ personal misgivings about Ferris, these had never previously been sufficient to act on, usually not troublesome enough even to mention to him. But in Luce’s mind, at least, Ferris appeared to have lost his balance. “Dick was
getting weird,” he later said. Ferris, moreover, had come to symbolize everything that the dissident forces swirling around Allegis had come to resent. If Ferris stayed, the directors would be thrown out and he with them. If Ferris left, there was every chance that at least the directors would survive—to protect the airline, to find an orderly way of mollifying Wall Street and placating the pilots, and to protect their own necks.

Ferris arrived at the meeting prepared to bring the board up-to-date on a series of negotiations with Dubinsky of the pilots’ union. But in a waiting area adjacent to the meeting room he was approached by Frank Olson. “Dick,” he said, “you are
my friend.” And with that Olson told Ferris what the board was about to do to him.

Ferris was called into the boardroom, where Luce informed him it was the board’s will to sell everything but the airline—hotels, cars, everything. And, Luce said, “It’s in the
best interests of the airline, and yourself, that we change management.”

A vote had not yet been taken. Ferris was excused from the room as the directors each spoke one last time. John
McGillicuddy of Manufacturers Hanover Bank suggested that Ferris had not been
given a sufficient opportunity to state his case. So Luce and Andrew F. Brimmer, a former Federal Reserve economist who sat on the board, walked into the anteroom where Ferris waited, his heart pounding. They beckoned him to return to the boardroom, but by this time Ferris wouldn’t have it.

“
There’s no point in my going back in there,” Ferris answered. “You want my resignation.
You got it.”

The news of Ferris’s ouster reached United’s operating centers on the West Coast just as the bank of evening flights was getting ready to depart. Flight attendants spent that evening pouring drinks and passing out movie headsets for free. “We gave everything away,” Kevin Lum, one of those flight attendants, would later say. “The
big bad wolf was dead.”

A few days later Chuck Luce, age 69, was riding his bicycle along South Broadway when he was hit by a bus. He suffered severe internal injuries. He would spend six months recuperating.

Fortunately for United, Luce had already appointed a search committee headed by board member Neil A. Armstrong, the former astronaut. Armstrong prepared a long, detailed, and
fabulously lucrative job offer to the man who was already in the job on a temporary basis, Frank Olson. But Olson, while running the parent company, was also absorbed in the spin-off of Hertz, a transaction intended to help raise the money necessary to make a big cash payment to United’s restive shareholders. Olson and a group of Hertz executives negotiated to buy Hertz for themselves for $1.3 billion with financing provided by Ford Motor Company. (The price received by United was more than twice what Ferris had paid.)

Olson declined Armstrong’s offer, but he was not yet out of the soup. A permanent CEO still had to be found. Although Neil Armstrong remained the chairman of the board’s search committee, Olson decided to take command of the search himself.

Although the candidates themselves would never realize the full scope of the search of which they were a part, Olson’s mission would bring him into contact with the leading protagonists of the global airline world in the twilight of the 1980s. The search would last months longer than Olson had hoped. And no matter how it ended,
it would have profound repercussions not just for United but for the global airline industry as well.

Immediately after leaving New York, Ferris had picked up his wife in Chicago and headed to the
Teton Valley Lodge to meet their friend Travis Reed for some fishing. There were moments when Ferris had to be alone. On other occasions, reviewing the events with Reed, Ferris would turn beet red.

The airline industry had changed Dick Ferris. A chesty, aggressive, and ambitious man, he had gone too far in an effort to make the people in his organization behave with the same submissiveness as the airplanes. “Now you can become a
human being,” Travis Reed told him at one point. A severance package totaling
more than $4 million would certainly be of help in making the transition.

In time an oil portrait of Ferris, in keeping with company tradition, would be hung in the United boardroom in Elk Grove Village. Along one wall, in the glare of recessed light against an expanse of rich rosewood paneling, the Ferris portrait became the fifth of the group, right next to Eddie Carlson’s. But the style of the Ferris portrait was different. The others were traditional, earnest, distinguished—older gentlemen posed at ease. The image of youthful, square-jawed Ferris showed him smiling and leaning forward, as if ready to jump through the frame, with a Boeing 767 careening across the foreground, making the entire painting as extraordinary as Richard Ferris’s years had been.

CHAPTER 15

FLY NOW, PAY LATER

A
round the time of Dick Ferris’s ouster, commercial aviation was settling into a state of equanimity for the first time since the advent of deregulation. The three-ring circus in Denver was over. Frank Borman and his hypercompetitive impulses had vanished. Braniff II was failing as surely as Braniff I had. Above all, People Express had been safely disposed of. Though the low-fare impulse lived on at Southwest Airlines, Herb Kelleher continued confining the company to short-haul niche markets that reached nowhere east of Michigan.

The airline industry had become a club of giants. Towering over them all was Francisco A. Lorenzo.

Takeovers had elevated Lorenzo into the aviation equivalent of John D. Rockefeller. Nearly 20 percent of the seats flying over America at any moment now belonged to him. In addition to owning Continental, Eastern, and the remnants of People Express and Frontier, he controlled 15 regional
feeder airlines, many flying under his colors, each operating at the mercy of his schedules. He controlled the nation’s third-largest computer reservations network, System One, hardwired into
17,000 travel agency terminals from coast to coast. No one could now dispute Lorenzo’s oft-repeated claim, “We are airline builders.”

The empire had been
assembled with debt, rapidly approaching $5 billion worth. Frank Lorenzo treated the borrowing markets like a drive-up window; his publicly traded issues alone would soon number 24. At the height of Lorenzo’s borrowing, the cash that Lorenzo laid out in interest alone—more than $600 million a year—exceeded the annual sales for nearly 100 members of the Fortune 500.

Alas for him, Lorenzo’s size also made him more visible, and more inviting, as a target. For the moment United Airlines was not the grave threat it had once been. Recovering from the ouster of Dick Ferris, preoccupied with the search for a successor, shedding its various units in order to appease Wall Street, United at best was marching in place. The contest for survival at the top was therefore down to just two companies, and two men. Only one would last.

The ballroom chandeliers dimmed. The merrymakers fell silent, settling back to await the evening’s presentation. On a projection screen at the front of the ballroom the film began.

Images of powerful bodybuilders filled the screen, their pectorals gleaming and biceps bulging. A deep, booming voice filled the ballroom.

“He is tough,” the announcer said. “Mean … relentless …”

A United Airlines jet passed across the screen. “He is taking on the Big U!” the announcer exclaimed.

Another jet, this one in the markings of Delta Air Lines, appeared next. “He is fighting the Delta forces!”

Next appeared a Continental Airlines plane. “He looks the South Texas gang straight in the eye, ready to take them on—anytime, any place.”

Who was this man?

“He is
Crando!”

And at that moment on the screen appeared Robert Lloyd Crandall, the chairman, president, and chief executive officer of American Airlines, not in his usual broadcloth shirt, with his tie bar perfectly placed and his cuffs rolled precisely halfway up his forearm. No, for this little video presentation, to a meeting of company sales executives, Bob Crandall was in costume as Rambo, war paint on his 51-year-old face, a headband around his temples, a sleeveless tee shirt exposing his sinewy arms. He was stalking through a jungle set, a machine gun in his hands. The crowd went wild.

“He is
Crando!”

As the lights came up, the live Bob Crandall took the stage in his civilian clothing, approaching the podium with a smirk on his face and the light glinting on his wire-rimmed glasses. When the cheering sales executives finally began to quiet for Crandall’s speech—a serious speech, no doubt, for Crandall’s speeches were always serious—Crandall leaned toward the microphone, threw his fists over his head, shook his arms, and roared.

“G-R-R-R-R-R-R-AGH!”
And the crowd went wild again.

Crandall, in displaying his lighter side, had transformed himself into a parody of himself, like a Saturday morning superhero. Yet this was what his people had come to expect. It was what they
needed
in order to attain higher and higher operating results—which they were now delivering, like clockwork, year after year. Aided by the magnetism of its hubs and the passenger-collecting power of the Sabre network, American’s torrent of red ink had turned into a stream of profits—$228 million in 1983, $234 million in 1984, and $346 million in 1985, by which time Crandall had well over $1 billion in cash on hand.

With the kind of leverage that Frank Lorenzo was employing, Crandall probably had the equity at his command to take over the entire U.S. airline industry. But Crandall had chosen a different course. By purchasing individual airplanes rather than whole companies, Crandall was able to hire his own people instead of taking on someone else’s, and each new hire was another employee working at cut-rate, b-scale wages.

“We do not expect to join the great
merger escapades of the 1980s,” Crandall told his assembled managers at one point. “As far as I’m concerned, they can
all
merge into one giant airline. And we’ll
still
beat them!”

Everyone in the audience knew that “merger escapades” was synonymous with Texas Air and Frank Lorenzo. It was a shock to people at American that after years of struggling to become number one against United Airlines, they had suddenly been eclipsed by such an outfit as Texas Air. But even if Texas Air was a joke by Crandall standards, he refused to let his people take Lorenzo frivolously. More than ever Texas Air was the enemy.

This much was evident when Crandall and his top aide, Tom Plaskett, took the rostrum at American’s 1986 Fall Planning Conference
in Dallas to report on competitive conditions in the industry. “As Chairman Bob likes to say,” Plaskett noted, warming up the audience, “it’s the nearest thing to
legalized warfare.”

Plaskett continued:

When we think a minute about the new king of the hill, at least in terms of size, it should tell us that anything is possible. Some of you who grew up in this state will remember Trans-Texas Airlines, which flew its DC-3S to Waco, Abilene, and Beaumont. People said the “TTA” logo stood for Tree-Top Airlines, and they laughed. Then the airline got a route to a Mexican border town on the south bank of the Rio Grande and had the audacity to change its name to Texas International, and people laughed again. Next Frank Lorenzo took it over and tried to buy National and TWA, and everyone had still another good laugh.

“Well,” Plaskett concluded, “no one is laughing anymore.”

Miami International Airport, where Eastern was based, was known to some as Cockroach Corner, not so much for the ubiquitousness of the six-legged vermin (although that was reason enough) but for the presence of so many dilapidated old airplanes. Nowhere else in America could one see such a collection of ancient DC-3S and Boeing 707s, some of them broken-down and long ago raided for parts, an engine missing from one, a tail section from another, like war veterans waiting to be fitted for prostheses. Many of the planes landing at Cockroach Corner flew the colors of some obscure Latin American airline or freight operator.

Phil Bakes entered Eastern headquarters on the perimeter of Miami International and felt as if he were walking
into a mausoleum. The fountain at the front entrance was still dry. The bronze Rickenbacker medallion was so oxidized that Bakes could not recognize the founder’s image. Entering Frank Borman’s old office on the ninth floor of Building 16, Bakes was depressed to find dark, paneled walls. There were even ashtrays in evidence.

But Bakes was constitutionally incapable of staying depressed for long. Though he had resisted leaving Continental, he was now the president of Eastern and thought he might as well make the most of it. Almost immediately he ordered the fountain refilled and switched
back to life. The long-tarnished Rickenbacker medallion was freshly gilded and buffed. Bakes threw away the ashtrays in his office, had a fluorescent light installed, and had the walls painted white. Soon, Bakes was displaying his old swagger.