Hard Landing (28 page)

Jim Wright in 1979 finally resolved to remedy the failings of the regulatory system with the fiat of legislation. Wright pushed a new law that would simply ban any airline operating from Love Field from ever flying outside Texas. There would be no deregulation for Southwest Airlines.

Kelleher headed for Washington with his legal assistant and ever-present advisor, Colleen Barrett. He called on his
old pal from New York University Law School, Bob Packwood, now a senator from Oregon and soon to be the chairman of the all-powerful Senate Finance Committee. No one could understand why the senator from Oregon was suddenly attending drafting sessions on obscure legislation involving an airline that nobody outside Texas ever heard of. But Packwood saved the day. Although not entirely defeated, Jim Wright was forced into a compromise. Southwest, the parties agreed, would be permitted to fly from Love Field only to any of the contiguous states—Louisiana, Arkansas, Oklahoma, and New Mexico. American and Braniff signed off on the compromise, codified as the Wright Amendment.

It was the best Kelleher could get. He had exhausted his remedies, had wrung out every redress that the legal and political systems afforded. “The Wright Amendment is a
pain in the ass,” he would explain, “but not every pain in the ass is a constitutional infringement.”

It
did not remotely bother Kelleher that as Southwest slowly expanded, the airline unions had sprung up almost everywhere on company property. Neither did Kelleher have any problem paying market-rate wages to pilots, flight attendants, and other workers. As one of its biggest shareholders, he simply wanted the company to deploy its workforce in the most efficient manner possible.

To help accomplish this Kelleher, wearing his lawyer’s hat, insisted that department heads participate in the contract negotiations involving the employees in their jurisdiction, a practice far from routine in labor relations. More commonly the entire affair of collective bargaining was turned over to lawyers and negotiating specialists. But professional negotiators were principally interested in controlling wages, and wages, so far as Southwest was concerned, were not the main issue. Only the middle managers understood the fine points of a 10-minute airplane turnaround, which was why Kelleher insisted on their presence at the bargaining table.

This was labor strife at Southwest Airlines: Kelleher was out for
dinner and drinks with a group of pilots. The drinks had been numerous enough to dull Kelleher’s wits, so when the pilots offered to fetch his brand-new car from the hotel parking lot and meet him at
the front door, he saw no reason to decline their kindness. As he emerged from the hotel, there were four pilots standing at the corners of his 12-cylinder S-class Jaguar, each one relieving himself on a wire wheel.

There had, however, been a few genuine traumas within the ranks of senior management. Lamar Muse, the white-haired and mustachioed airline veteran so gifted at making the planes run on time, had grown
a little too uppity for some of Southwest’s directors. For one thing Muse had appointed his young son as a senior vice president.

In addition Muse pushed a scheme to bring in a bunch of new airplanes and start an altogether new operation based outside Texas, much as Frank Lorenzo had accomplished with New York Air. Muse proposed to establish this second operating base in Chicago, at the dilapidated old Midway Airport. Muse’s plan would roughly
double the size of the company overnight. Muse wanted what most airline chieftains wanted—more. But overnight expansion was not part of the Southwest formula. Adding too many employees too quickly would dilute the underdog spirit by which Southwest was still flourishing. It would mean taking on unaccustomed debt. As the feuding worsened, Muse finally slapped his keys on a desk and left Southwest Airlines, never to return.

Kelleher was concluding some legal business in Houston when he was notified that the board of Southwest Airlines now wished to make him its chairman. Boarding a flight for Dallas with Colleen Barrett, he had only one suit in his garment bag and knew it would be several days before he could get home to San Antonio. To spare the suit a wrinkling in the overhead bin, Kelleher discreetly went to the back of the plane and hung the garment bag in the crew closet.

A flight attendant politely told him that the closet was not for passengers. “That’s okay,” he whispered. “I’m the president of Southwest.”

“Yeah,” she answered, “and I’m the
king of Siam.”

Kelleher did not, however, consider himself competent to run the day-to-day affairs of an airline. He needed an experienced executive to fill the void left by Lamar Muse. With Southwest spreading its wings, with Braniff flying willy-nilly, and with American building a powerful machine, someone new was headed to Dallas.

• • •

Growing up in Iowa, Howard
Putnam learned to fly when he was nine; his father strapped blocks of wood to the foot pedals of the family’s little Piper Cub. Putnam went on to aeronautical school and put in time as a baggage handler, but he was a sharp kid with a stout personality. Putnam wound up on the fast track at United Airlines, where he became one of the top marketing executives under Eddie Carlson and later under Dick Ferris.

That was the problem—Dick Ferris. He and Putnam were about the same age, but Ferris was one long step ahead of Putnam on the organization chart. Putnam
wanted to run something, but he would never have the chance at United so long as Ferris remained. His big chance came with the recruiting call from Herb Kelleher.

Hired as the president of Southwest, Putnam saw it as
his mission to guide the company from a quaint and quirky organization into the billion-dollar airline it seemed destined under deregulation to become. Putnam installed new financial controls, personnel policies, and planning procedures. But he also recognized that the company’s culture accounted for much of its commercial success. To avoid smothering the family feeling, Putnam engaged an industrial psychologist to help keep check on the reforms.

Awash in profits, Southwest eventually began to plan a huge order of airplanes, something like $1 billion worth. Other airlines, ordering whatever happened to be the new or sexy or cool plane of the moment, invariably wound up with many species of aircraft in their fleets. Southwest, by contrast, flew only 737s, requiring it to stockpile parts and train pilots and mechanics for only one kind of plane. The efficiencies were huge. Now, instead of rushing out to buy something altogether new, Southwest persuaded Boeing simply to update the old reliable 737.

The Southwest board, unaccustomed to dealing in the 10-figure range, asked Putnam to engage an independent expert to evaluate the order. Putnam called a retired maintenance executive he had known at United, where hundreds of people might work for months evaluating a new aircraft design. For a $600 fee and a few free flying passes, the consultant spent two weeks studying the matter, then filed a handwritten
three-page report. The plane was just fine, he had concluded; Southwest’s order was economically sound. Before long, on
the basis of this analysis, Southwest had a new generation of 737s on the way, with many more to follow.

On another front, Southwest’s female-only flight attendant policy was getting the company into trouble. When the issue came before the courts, one judge acknowledged that Southwest had a “
unique, feminized image” that “continues to play an important role” in the airline’s success. But he struck down the ban on male flight attendants by noting that “Southwest is not in a business where vicarious sex entertainment is the primary service provided.” Uniforms also
became an issue. It was 1981, for Pete’s sake, and flight attendants were still required to wear hot pants, which had become not only demeaning but appallingly out of fashion. Nevertheless Howard Putnam held firm in contract talks, arguing that hot pants were a trademark of sorts. (A Southwest TV ad showed rows of passengers flashing
Olympic scorecards as a scantily clad flight attendant passed through the aisle.) Putnam also looked at Southwest’s dress code as a kind of employment screening device, which assured that women who “
felt good” about themselves in revealing costumes, such as cheerleaders and baton twirlers, would number among those seeking to become flight attendants on Southwest. Putnam came dangerously close to provoking war with the flight attendants.

Kelleher, the corporate chairman, intervened. Hot pants became optional.

Putnam’s tenure at Southwest was to be brief. Another Dallas airline soon found itself in need of a new chief executive. With losses swelling, with creditors panicking, and with the American juggernaut advancing, Braniff had fired Harding Lawrence. In the final showdown between Braniff and American, it would be Howard Putnam facing Bob Crandall.

As for Southwest, the board of directors decided enough was enough. It was time for Herb Kelleher, still the titular head of the company, to quit his law practice, move into the corporate headquarters full-time, and assume complete control of Southwest Airlines.

“
No one expects Braniff to go broke,”
The Wall Street Journal
remarked. “No major U.S. carrier ever has.”

Howard
Putnam, then 44, certainly had no reason to think otherwise when he left Southwest and walked through the doors at Braniff
in September 1981. He personally moved his belongings in a pickup truck in order to dramatize the need to control costs. He walked into the Braniff headquarters and saw works by Calder from one wall to the next. He ceremoniously removed one such painting from his own office and replaced it with something to inspire him in his new job: a photograph of a Southwest 737 christened
The Herbert D. Kelleher
.

What Putnam did not realize, until he took his first close look at the company’s books, was that Braniff had precisely
10 days’ worth of cash remaining. Harsh measures alone were insufficient: Braniff required desperate measures. Putnam fell back on the success formula with which he was most familiar. He went before the board and declared that although Braniff was four times larger, he would in short order transform the company into the transcontinental equivalent of Southwest Airlines.

Putnam immediately ripped out the first-class section from every airplane in Braniff’s domestic fleet and made the entire cabin coach class, just like Southwest. Appealing to Braniff’s hometown popularity, he called it “Texas class.” As Don Burr was doing at People Express, Putnam installed extra-large overhead racks so people were less inclined to check luggage. He began eliminating jobs and bureaucracy and simplifying work rules, and even the hard-nosed unions, taken in by his enthusiasm, went along.

Most significantly, Putnam decided that Braniff would allow no more passengers to switch to American’s newly swollen service from DFW. He was drawing the line. Almost immediately after becoming chairman, Putnam stood up at a press conference and announced that on every competing flight, Braniff would undercut American by 50 percent. Instead of bleeding red, white, and blue, as Crandall demanded of his employees, American would simply bleed red.

Bob Crandall
flew into a rage over Putnam’s fare slashing. So carefully, so gingerly had Crandall been nurturing American back to health that in barely a year of Crandall’s presidency the airline had finally amounted to something. Now Braniff was ruining everything. American, of course, would match those fares even though doing so would wipe
$7 million from its bottom line every month, just like that.

Yes, American would match Braniff dollar for dollar and passenger by passenger, and it would do much more than that. It would swamp Braniff’s routes with still more new flights, to the extent it had the planes to serve them. The bias built into the Sabre system, already such a powerful marketing tool, would be supplemented with instructions prompting American reservationists to steer people
away from Braniff.

The mission was clear. Years later Tom Plaskett, Crandall’s highest-ranking associate, would remember the kind of admonition that went around the executive offices. “We’ve got to maximize the economic pressure,” the executives said to each other. “We’ve got to
make them go away.” As Plaskett would recall, “It was
not good-spirited competition.”

There were
strange things happening at Braniff. Flights to Dallas would be booked full right to the last minute, then dozens of passengers would no-show; Braniff was turning away reservations, only to find its planes unexpectedly flying half-empty. Top officials at American swore that these tales were exaggerated and that if anyone at American ever used any such dirty tricks against Braniff, they were lower-level employees acting out of overzealousness. If so, perhaps they were employees who had been told, from the lips of Crandall himself, that American had to “steal” passengers from Braniff, that nothing must stand in the way of “the victory that we simply must have.” American’s scheduling department was also doing its part, adding service to still more of Braniff’s destinations. It was as if American were overlaying a
whole new route system on top of Braniff’s, Putnam thought.

Putnam tried a new tack. Radio spots were prepared to convince passengers that any virtue in flying American existed only because of Braniff. “Normally
American only gives you low, unrestricted fares when they face low-fare competition,” one of the ads declared, “and it’s usually competition from Braniff.”

The anti-American campaign spread to print advertising with an ad claiming that Braniff had a better on-time record than American.
Crandall, just returned from his early morning run, saw the ad during breakfast and blew his stack. He raced to American headquarters, stormed into Plaskett’s office, and reached for the phone. It was time to give Howard Putnam a piece of his mind.

• • •

About five years earlier, when he was still the marketing chief at United, Putnam had received a telephone call from Bob Crandall, then in the marketing job at American. The conversation was never made public.

“Howard,” Crandall told him, “if you
raise your drink prices, we’ll raise ours tomorrow.”