Hard Landing (65 page)

Marshall felt
like an archaeologist arriving at British Airways, shovel and brush in hand, clearing away decades of bad attitude in
search of a treasure. The hidden treasure was the world’s most extensive route system (Marshall himself had flown on most of it) and an operating base at Heathrow, the world’s richest multinational gateway. Although he knew firsthand about the grubby aircraft, curmudgeonly employees, and poor schedules of British Airways, Marshall now had an insider’s view. He could see that
internal politics had corrupted the organization and that morale remained in ruins, and nothing, he knew from his Hertz and Avis years, was more essential in a service business than morale. In Marshall’s view customers had the memories of elephants for bad experiences. And worse, they talked, and talked, and talked, about poor service, particularly when it involved so conversation-worthy a topic as air travel. “In war,” Marshall began telling people, paraphrasing Napoleon, “
morale outweighs matériel by three to one.”

Marshall’s first step, anachronistically enough, was sensitivity training—a regimen of classes with the agonizingly off-putting name “
Putting People First.” In groups of 150, employees were dragged
groaning and shrugging into classes for a few days at a time, but as one would predict with any expensive and well-designed mass-indoctrination program, they emerged from the experience saying that it was, well,
okay
 … pretty interesting, in fact. Employees were guided through role playing and exercises in imagination, all to educate them in how the customer felt and how to accept responsibility for solving a passenger’s problems. They were trained to think of themselves as “emotional laborers,” no different from nurses or welfare workers, for among the 450 passengers checking in for a fully loaded 747 flight, they were told,

there will be a businessman, tired and obsessed by a particular problem; a woman with two children joining her husband abroad, anxious about going to a new country, perhaps worried about the house, schools, and so on. There will be a granny who has never flown before.… Every human or emotional state you can think of will be there: euphoric, depressed, anxious, happy, excited. And all will be suffused by a level of preflight anxiety.

While the courses were under way, Marshall began distributing lapel buttons that said,
I FLY THE WORLD’S FAVOURITE AIRLINE
, as if
repeating the phrase often enough might actually begin to make it true. (Having learned visible management at the foot of a master at Avis, Marshall naturally wore one of the lapel buttons himself, even if it was a little conspicuous on his immaculate British tailoring.)

British Airways’s poor service was evident not only over the North Atlantic but within the United Kingdom itself, where a much smaller airline named British Caledonian was making severe inroads. “BCal” hired flight attendants for appearance and outfitted them in tartan skirts, airing commercials that showed a chorus of male passengers singing, “We wish they all could be
Caledonian girls.” British Airways was under pressure to put not only spit and polish but also sensuality into its rusty, surly product.

An
emphasis was placed on youth in hiring, facilitated by age discrimination statutes that were far less onerous in Europe than in the United States. At the same time educational
requirements for flight attendants were reduced. Marketing executives used the word “sparkly” to describe the kind of personality they wanted employees to project. The employee newsletter promoted a “
grooming room,” conveniently located in Terminal One at Heathrow, where employees were urged to schedule a consultation if they suffered from “a weight problem,” or “difficult hair,” or “ugly hands,” or “spotty skin.” Even electrolysis was available for unsightly hairs. Any uniformed employee who did not “
look right” would be “taken away from the job.”

Before long, British Air’s in-flight magazine was calling attention to the new look, in case anyone had missed it: “Passengers checking in at the airport can’t fail to have noticed the
warmth of the welcome from the smiling BA girls behind the desks, and the freshness of their looks, their complexions smooth, their make-up alive with colour and gloss.”

Marshall also demanded a makeover for the airplanes. He hired the
same design firm he had used at Avis, causing a hue and cry over the use of a foreign firm by the state-owned airline, but this was only the beginning of Marshall’s refusal to play by old rules. (He would, for instance, place some of the biggest airplane orders in history with America’s Boeing instead of the state-supported European Airbus.) Many expected the Yankee design contractor to come up with a
horrible and garish new paint scheme, but to their surprise the look was elegance itself: an angular, high-tech arrow that conveyed precision,
accompanied on the tail by a classic coat of arms fit for Pall Mall. Under the insignia was a ribbon bearing a four-word inscription that summarized Marshall’s marketing philosophy: “To Fly, To Serve.”

Relentlessly Marshall’s people began to survey passenger attitudes, down to what they thought of each individual flight and each individual check-in agent, eventually accumulating a massive database on what people wanted when flying and what they were willing to pay for. Surveying passenger preferences enabled the company to estimate whether adding $4 in perfumes or candies to an amenities kit or a meal tray would enable the company to charge an additional $5 for the ticket.
Marshall instructed his people to run a complete profit-and-loss analysis on every element of service, as if it were a capital construction project. Almost invariably the research showed that any modest improvement in service registered as a major breakthrough with the customer.

To address the problem of full-fare business travelers flying alongside tourists on discounts, Marshall invented something called “business class.” There
would be three classes of service aboard a single airplane (coach, business, and first), each of which, Marshall decreed, should become a product, a “brand,” all by itself. Marshall brought in brand specialists from Mars candies and other consumer product companies to explore ways of distinguishing and promoting each class of service, knowing that as the airline placed a larger proportion of passengers into the premium classes, its revenues would swell on only a slight increase in cost. His first- and business-class sales soaring, Marshall was delighted to leave the low-fare tourists to fly on Pan Am and TWA.

By 1986 British Airways was in fat city, ready to fulfill Prime Minister Thatcher’s goal of privatization. As the preparations were being made in the spring of 1986, however, financial disaster struck in the North Atlantic.

A U.S. Navy diver had been shot by Lebanese extremists who had hijacked a TWA flight from Athens. Palestinian terrorists had seized the Italian cruise ship
Achille Lauro
. Fifteen people were gunned down at an airport ticket counter in Rome. A bomb exploded on a TWA flight from Rome to Athens, killing four. After President Reagan had ordered the bombing of Libya, few passengers wanted to take the chance of flying on whichever transatlantic flight Col.
Muammar Qaddafi would happen to choose as a target for reprisal. The nuclear accident at Chernobyl only elevated the apprehension of flying anywhere near Europe.

British Airways suffered the most severe plunge in business in the company’s long history. In the week after the Libyan bombing—a week in which it could have expected 50,000 reservations in any remotely normal market—the airline recorded only 20,000. Colin Marshall’s people had to come up with something fast or simply accept that their most important and profitable route would be moribund.

Marshall had immersed himself in the intricacies of
American behavior in his years with Avis and Hunt-Wesson. He knew something about what made American consumers tick. He knew that Americans were suckers for freebies and that the American media were suckers for a story. Since it was a media event that had chilled transatlantic travel, Marshall determined that British Airways would stage a media event to bring it back.

After a crash study British Airways announced that it would
give away
every one of its seats over the Atlantic for a day, a total of 5,000 free seats. “Go for It, America!” the promotional headlines trumpeted. The seats would be awarded in a drawing; a few of the lucky 5,000 would be chosen for the additional prize of tea with Prime Minister Margaret Thatcher at No. 10 Downing Street. British Airways was suddenly a news story in which thousands of people were seen shedding the dread of terrorism to clamor for an airline seat over the North Atlantic. An instantaneous surge in reservations occurred.

While catching the publicity wave, Marshall and his people moved to sustain the recovery; investors would balk at buying British Air’s shares unless they were convinced that the revenue stream had stabilized. So Marshall and his people kept the sweepstakes spirit alive by scheduling an additional series of contests and prizes through the summer months of 1986. They lowered themselves even to scratch-off prize coupons, with prizes carefully chosen to appeal to the Anglophile in every American. Scratch and win a free Rolls-Royce! Win a £100,000 shopping spree at Harrods!

The scheme worked. While no barn burner, the summer was at least salvaged. A few months later, in February 1987, Her Majesty’s
Government sold British Airways for a total of $1.4 billion. Before the year was out Queen Elizabeth II had rewarded Colin Marshall with knighthood.

Every passenger flying on British Airways represented an empty seat on Pan Am or TWA. Though no one competed as aggressively on price as the Americans, Marshall would always need a certain number of low-fare passengers to fill up his airplanes, so he would always try to meet the lowest coach price in the market. As time passed, however, an increasing portion of British Airways passenger cabins were given over to premium classes, at huge price markups. Soon British Airways was bringing in
15 percent more revenue than the average airline on the same number of passengers—money that went almost entirely to the bottom line.

Marshall was delighted to watch Pan Am and TWA chase each other’s tails for the marginal passenger, while driving business travelers and the well-to-do into the arms of British Airways. But Marshall was also aware that he would not always have it so easy against the Americans. Bob Crandall, alas, was taking baby steps into Europe.

It was the failure of Braniff in 1982 that put American into Europe, when
American picked up Braniff’s route authority from Dallas to London’s Gatwick Airport. It was the sole international route in American’s empire then, but it was a lucrative one—the “oilman’s route,” linking the oilpatch of Texas with the burgeoning fields of the North Sea. In time Crandall’s planners began studying whether American should do more, including, typically, whether American might kill off some other player to benefit itself. In this case the target was not a company but an airplane: the 747, that lumbering leviathan.

The 747 was the workhorse of the transatlantic, and even in the early 1980s it was too much airplane for the job. Pan Am and TWA could fill their eastbound 747s only by forcing airline passengers from cities all across America to fly to the East Coast, most often to JFK, where a jumbo jet hungrily awaited its fill of connecting passengers.

In stepping into the market, American had the advantages of the newcomer. Instead of using 747s, it would fly over the Atlantic with
the newer, smaller, and vastly more economical 767, which had two engines instead of four and two pilots instead of three. American as a result did not have to fly through New York or any of the other traditional, high-cost East Coast gateways. Using the
power of the hub, American could assemble all the passengers it needed to fill a 767 in the middle of the United States—in Dallas or Chicago.

“We can
fragment the market,” Crandall’s brainy scheduler, Mel Olsen, told his colleagues. “We can make the 747s die.”
Crandall instantly grasped the beauty of the strategy.

What’s more, Crandall’s people realized, they could apply the same strategy on the other side of the ocean by landing in a heartland airport. The British were extremely prickly about letting anyone fly into London, but surely, Crandall’s people thought,
they would allow a new foreign airline to serve an outlying city—Manchester, say.

They were right. The British were only too happy to let American gamble on a flight between two secondary cities like Chicago and Manchester. A flight like that couldn’t begin to hurt British Airways, could it?

Before long American applied the same strategy with the French. Though no less protective than Britain, France was only too happy to let American fly from a two-bit city such as Dallas to Orly, the secondary airport serving Paris. Next American sought authority to serve the industrial city of Lyon. The same strategy was applied to Germany.

These moves were slow and tentative, limited by the rate at which Crandall’s lobbyists could persuade U.S. diplomats to bargain for the new landing rights and by the rate at which the diplomats, in turn, succeeded in winning those rights. As the end of the 1980s approached, with Crandall’s Growth Plan at its peak, American had still more incentive to look overseas. “We were
betting on the come,” one of Crandall’s top analysts, Gerard Arpey, would later recall. “We ordered a lot of airplanes in the mid-1980s, and we had to have a place to put them.” Cumulatively, city by city, the strategy worked. By 1988, when Crandall and his people were also plotting their assault on Eastern’s territory in South America, American Airlines was serving 13 cities in Europe. In passenger terms it was still way behind British Airways, Pan Am, and TWA. Crandall was a long way from killing the 747. But it was a start.

• • •

Through the years British Airways had flown to the United States under frequently shifting terms and conditions. For all the landing authorizations it won from the U.S. government, one restriction had never loosened: once a British Airways plane landed in the United States, it could fly nowhere except back out. It was unlawful for any foreign airline to fly passengers (or cargo) between any two U.S. cities. British Airways could pick up transatlantic passengers in 18 “gateway” cities in America, but it still relied on United States carriers to deliver
nearly half its passengers to those gateways.