Hard Landing (50 page)

“Mr. Lorenzo, you are known as a
union buster. Are you proud of that title?”

“No—”

“—and he stopped beating his wife yesterday,” the Colonel quickly snapped. “Why don’t we take another question?”

Lorenzo tried to get back to the union busting issue, but the reporters couldn’t hear him in the back.

“Mr. Lorenzo! Please speak up!”

Lorenzo did manage to convey his history as a union truck driver. “You know,” he said, “I remember the day when I carried a Teamsters card in my wallet and worked my way up through school. So any talk of ‘union busting’ is absolute nonsense.”

But what about Borman? What about his contract? the reporters demanded.

“Will we be honoring Mr. Borman’s contract? Absolutely!” Lorenzo said.

“When the takeover is completed?”

“Of course we will,” Lorenzo answered.

Yet it was only days later that Lorenzo stepped into Borman’s office at the top of Building 16 with a different message. Borman still
felt he was in the middle of a crusade to make Eastern profitable. He believed he had a residue of rapport with the Eastern pilots. In truth the
Colonel wanted very much to remain the head of Eastern, even if it was soon to become a wholly owned subsidiary of Texas Air.

No, Lorenzo said. As soon as the deal was concluded, Borman would have to leave. He would have to make room for someone else.

In the great game of executive musical chairs another seat was removed forever. Col. Frank Borman was out of the game, for good.

Phil Bakes stared at Frank Lorenzo over a dinner table at the sumptuous Inn on the Park in Houston.

“You’ve done a great job,” Lorenzo told him, “but Continental is fixed now. We feel you’re the guy to take on Texas Air’s biggest asset, and biggest challenge.” Eastern Air Lines.

Bakes was
sick to his stomach. He had not held up his hand for Eastern. Eastern was
a cesspool, he thought. He had opposed the acquisition to begin with. Continental—his baby!—had barely emerged from Chapter 11. He had battled at every turn to rebuild the market while keeping costs down. He had endured the slings and arrows of Frank Lorenzo.

And there was so much work left to be done. Bakes wanted to rehabilitate his image, to repair the damage his
reputation had suffered in the dark days of Continental’s failure. He wanted to complete his plan to create a “participatory culture” at Continental. Bakes was also now dreaming of a huge international expansion. He was contemplating a complete makeover of the company’s tired logo and its worn aircraft interiors. His “airport of the future” project, with its ticketless operations and self-serve bag check, was well under way.

“Continental really
isn’t
finished,” Bakes corrected Lorenzo. He felt the knot in his stomach tightening.

And besides which, Miami? Who wanted to live in Miami? Bakes had settled in in Houston and loved it. His wife and son were comfortable there. They had a beautiful home in the exclusive Memorial section, near parks, near downtown.

“I really love where I’m at,” Bakes went on.

“Somebody else can do that,” Lorenzo said. “We need you for the really tough challenge.”

Bakes said he wanted to think it over, but there was no point in
trying to bluff Frank. “Obviously,” he said forlornly, “what’s best for the company, I’m going to do.” About three weeks later Texas Air announced that Bakes, age 40, would become the president and chief executive officer of Eastern Air Lines.

The final act in the acquisition of Eastern was a vote of approval by Eastern’s shareholders. There was not much mystery about the outcome of their vote, considering that as part of the merger agreement Texas Air had already locked up the majority of the shares. In fact there were probably good reasons not to have a meeting. Bakes, for one, saw nothing but the potential for disruption.

“But we’ve
got to have a meeting!” one of the Eastern people said. “It’s a legal requirement.”

“Fine,” Bakes said. “Have two lawyers sit in a room and sign some papers.”

The truth was that some of the old directors wanted to have a final meeting, as a kind of send-off.

Fine, Bakes said reluctantly. “You better be prepared for what you get.”

His fears were well-founded. Charlie Bryan, exercising his privileges as a shareholder, took a microphone and went on and on, haranguing about Borman and Lorenzo and other issues until finally a gadfly shareholder named Lewis Gilbert, who had made a career of attending annual meetings all over the country in the name of shareholder democracy, stood up, pointed his finger at Bryan, and shouted, “
Get to the point!”

Bryan turned with a scowl to the distinguished if slightly eccentric older gentleman. “You wouldn’t know a point if it hit you in the head!” he screamed.

Some people laughed and others simply shook their heads in silence as Bryan droned on, refusing to yield the floor. When the votes had been counted and the merger deemed effective, Bryan was still talking, refusing the entreaties of senior director Jack Fallon that he retake his seat. Finally the meeting was simply adjourned, and the people from the company began departing, but Bryan, undeterred, walked from his seat to the front of the auditorium, continuing his speech. Someone from the company had shut down the public address system, but Bryan simply raised his voice. And then they
turned off the lights, leaving Charlie Bryan alone on the stage of the darkened auditorium, still talking.

Although Lorenzo had only begun to consolidate his control over Eastern, the management of the company went out of its way to include him in its deliberations, as was only right and proper. At one point a longtime Eastern planner and marketer named David Kunstler, one of the true brains of the organization,
sat down with Lorenzo in New York to brief him on the company’s competitive challenges and opportunities. Kunstler had a great deal of credibility with the Eastern organization for having opposed some of the more disastrous moves in the years after deregulation.

Kunstler felt Eastern should concentrate its resources rather than disperse them, and now, he told Lorenzo, was the perfect time for Eastern to put everything it could into Newark. There were strong indications that People Express, after making life so miserable for Eastern for so long, was vulnerable. Perhaps under Lorenzo a focused and revitalized Eastern could finish it off. And if People Express were gone, Eastern, by making the proper moves in advance, could position itself as a dominant carrier in Newark.

It was an eminent if dastardly proposal, but Kunstler would never get the chance to bring it off. Only days earlier, Frank Lorenzo had been talking to his old friend and old enemy, Don Burr. Lorenzo had something else in store for People Express.

CHAPTER 12

NOSEDIVE

I
t was a proud moment: the arrival of the first 747 in the People Express fleet. As the plane neared Newark Airport, Donald Burr, fascinated from adolescence with watching planes come in, excitedly climbed to the roof of the North Terminal for a better view.

The voice of a Port Authority police officer bellowed from below. “If you don’t get off the roof right now,” he shouted, “
I’ll shoot you!”

Burr would later tell the story as proof of the Port Authority’s ingratitude. People Express, after all, had by 1984 transformed the godforsaken Newark Airport into the eighth largest airport in the country, bigger even than LaGuardia, handling 2 million passengers a month. Yet the Port Authority still treated People Express with contempt, refusing to allow Burr to install a People Express sign on the terminal, falling down in its commitment to keep the airport bathrooms clean. Burr, who had a compulsion about clean bathrooms, ordered his employees to clean them themselves.

But the story of Burr’s gunpoint confrontation was much more revealing of Burr than of the Port Authority. To Burr aviation was romance. Managing people was variously an exercise in love and obedience instruction. Transporting passengers was like an act of New Testament good works. An airplane bearing the double profile of People Express was an object of genuine affection.

Burr had created a stunningly large airline—and a successful one—from nothing. After barely three years in operation, People Express was equivalent in size to Braniff before its demise.
In the New York area People Express had become the number one airline, with more departures than even Eastern with all its shuttle flights. To an entire generation of backpacking students—kids who either lived on the East Coast, went to college there, or had girlfriends or boyfriends there—passage through the North Terminal had become a postadolescent ritual.

The melee at the North Terminal reached its height after Burr put his newly arrived 747 into service flying to London for $149 each way.
Hundreds of passengers eagerly jammed into a corner of the terminal for the announcement listing the lucky passengers who had cleared the standby list. People leaned, crouched, sat, and laid themselves out dead asleep, some having been there for days, until the public address system crackled and the entire crowd snapped to attention, heads craning to hear each name. Screams of pleasure and anguish variously rang through the terminal as, passenger by passenger, the standbys were called.

Four years from its first dicey days in business, People Express was serving 50 cities, each of which, little by little, had stretched the niche formula upon which the company had been based. There were the Florida destinations added during the controllers’ crisis, the major cities with big passenger markets (Boston and Baltimore), the personal favorites (such as Hartford, where Burr had grown up watching the fiery Lockheed Constellations land), and of course destinations that tweaked Frank Lorenzo (not only Continental’s turf in Houston, but New York Air’s in Washington). To his London destination Burr later added Brussels.

To that point Burr’s expansion had brought him head-to-head with moderate competition at best. In Florida, for instance, he was up against the weakest sisters in the family of airlines: Pan Am and Eastern. Over the Atlantic to Europe, Burr was up against Pan Am and TWA, relics of the past struggling for breath, with punishingly high costs and a need for cash so desperate that they gave away their seats to wholesalers and tour operators.

To the pundits of commercial aviation it was an article of faith that People Express would remain profitable so long as Burr continued
picking on the weaklings and the other upstarts—in other words, so long as he steered clear of the industry giants. Yet Burr knew that failing to grow in a market in which all your competitors
were
growing meant that he would soon fall behind. The whole airline industry had become a living expression of the S-curve of yore: he who has the most planes gets
more
than his proportion of the passengers.

Regardless of the economic imperative to continue growing, Burr did not know where or when to stop—or even how; whenever an airplane bared a little shoulder, Burr had to have it. He was soon bringing in planes at the rate of one every three weeks or less. Burr, it began to appear, knew how to manage only growth. People Express was like a Ponzi scheme of emotions, in which everything would remain fine so long as each day brought more thrills and chills than the last. “
High growth is important to hotshot people,” he told a reporter. “It’s where you get your excitement and your learning. It makes for commitment and high levels of energy.” People Express
needed
growth. Don Burr needed it.

In June 1984, with more 747s in the fleet, Burr attacked United and American in the transcontinental market, where Frank Borman had flamed out a few years earlier. Then in August 1984 he stunned the airline world by announcing a dozen flights a day from Newark to O’Hare Airport, not only the heart of the United operation but the secondary outpost (after Dallas) of American’s huge Growth Plan expansion. “You have
two bull elephants out there,” Burr said publicly. “But we have built a powerful hub at Newark, we can carry people from cities all over the East through Newark to Chicago, and so nobody can drive us out of that market.” Burr charged as little as $59 one way to Chicago, less than one quarter the prevailing fare. In addition he began offering a $6 connecting flight along his spokes into Newark—from Pittsburgh, say, or Hartford—for anyone flying on to Chicago.

Six days after Chicago it was Miami; no longer would People Express serve only the secondary markets in Florida. On the same day Burr announced service to Detroit, the same destination where an earlier invasion by New York Air had caused Bob Crandall of American such consternation. The following month, in September, it was a second transcontinental route, this time to San Francisco, a United
stronghold. Days later Burr was off to Denver, where the three-way war was raging among United, Continental, and Frontier. And finally, in November 1984, in a departure from the Newark script, Burr launched direct service to several Florida cities from Minneapolis, Detroit, Chicago, and Cleveland, stealing passengers from just about everyone else in the industry as the height of the tourist season hit.