Seven days before the Airline Deregulation Act was signed into law in October 1978, a line of airline representatives formed at the Civil Aeronautics Board, waiting for the day they could begin asking for the unused domestic routes that would be up for grabs.
United Airlines was first in line and surprised everyone a week later by asking for just one route when the CAB accepted applications. Braniff International, farther down the line, also surprised everyone by asking for--and getting--the most new routes.
On a single day two months later, the Dallas-based airline added 16 new cities to its domestic route system and, by linking them with flights to cities already served, had a total of 32 new routes. And there was more to come, both domestically and internationally. It was the most ambitious expansion program the airline industry had ever seen and, in hindsight, sowed the seeds of the airline's destruction.
If an airline was going to step out in front like that, it probably was going to be Braniff under the stewardship of the flamboyant Harding L. Lawrence.
With Lawrence as its chief executive officer, beginning in 1965, Braniff showed a flair that hadn't been seen much in the one-time silk-scarf-and-goggles industry. Lawrence was a leader in taking his flight attendants out of military-style uniforms and putting them into Halston-designed wardrobes. Passengers in both first class and coach were treated to the elegance and comfort of leather seats, which Lawrence said were practical, too.
Under Lawrence, Braniff began painting its entire airplanes different bright colors instead of continuing the industry practice of leaving most of the aircraft polished metal. Braniff's distinctive "flying colors" included bright greens and blues and a 747 dubbed "big orange." When the styles changed and softer colors were popular, Braniff's new planes were painted in mauves and taupes, burgundies and chocolates.
Lawrence had artist Alexander Calder create designs for some Braniff planes, and in the process do 50 paintings and 15 plane models that graced the $75-million modern world headquarters Braniff opened at the Dallas/Fort Worth Regional Airport in 1979. The Calder collection, said to be worth more than $1.5 million now, is reportedly one of the few unsecured assets of the shutdown carrier.
Braniff also was the only U.S. airline to fly the French-Anglo Concorde--albeit at subsonic speeds--between Washington's Dulles International and Dallas. It didn't make money, but it made Texans proud--as did Braniff's other innovations--that their home-grown airline was a step ahead of others, an airline with class.
Braniff could, it appeared, afford those things. Despite the beating Lawrence has taken for Braniff's ill-fated expansion plan, he had been good for Braniff. The airline had an admirable, sustained earnings record in an industry that generally didn't. Between 1965 and 1977, Braniff was profitable each year, except in 1970 when it lost $3 million. Before things went sour in 1979, Braniff's cumulative net earnings totaled almost $250 million under Lawrence's tutelage, including record earnings of $45.2 million in 1978.
Braniff's borrowing ability appeared almost golden. Every month--or so it seemed--Braniff was announcing the purchase of more planes or that it had been granted a new line of credit. During the deregulation hearings, Lawrence drew laughs when he replied to a question by Sen. Howard W. Cannon (D-Nev.) about how it was that Braniff could get money from lenders when other airlines couldn't. "I guess I am just a fast talker," the husky-voiced Lawrence said.
In what turned out to be his swan song--his last annual meeting as Braniff chairman in May 1980--Lawrence illustrated graphically the advances the once-regional airline had made since 1965. When he came on, Braniff had 54 planes, only 10 of them jets. Now, Braniff had one of the world's most modern aircraft fleets--second newest in the nation only to Delta's. In 1965, Braniff was ranked 10th of 11 airlines by Forbes magazine in five-year growth and seventh in five-year return on equity. In 1980, Braniff was first in growth, second in return on equity. Assets grew over the period at an annual compound rate of nearly 18 percent. Braniff had doubled its share of the passenger trunk market, sustaining growth when the industry didn't. Operating revenues grew at an annual rate of 18 percent. Braniff showed an operating profit--which is exclusive of certain expenses such as interest payments and taxes--each year except 1979, with the cumulative profits topping $462 million, and so on.
Braniff in turn was good to Lawrence, rewarding him handsomely for his efforts. His salary and benefits reportedly made him the highest paid executive in the airline industry. At the time Braniff filed for reorganization under the bankruptcy laws, Lawrence's pension benefits amounted to more than $300,000 a year; he had terminated an employment agreement under which he would have been entitled to lots more.
After Lawrence's marriage to advertising executive Mary Wells, the couple was referred to in print as "America's corporate sweethearts." They maintained residences in New York, where she worked, and Dallas, where he worked. When Braniff's new offices opened, Lawrence moved into an apartment that had been installed adjacent to his office; he was known to put in 18-hour days. The couple also had a ranch in Arizona and a villa on the French Riviera--places Lawrence once said they didn't get to spend much time at because of the demands of their jobs.
Braniff wasn't trouble-free under Lawrence, however. In 1976, Braniff paid a $300,000 civil fine to settle charges brought by the CAB arising out of an illegal contribution to former president Richard Nixon's reelection campaign. Braniff had been charged with violating federal law by failing to report the 1972 campaign contribution and by juggling its books to hide the cash funds used. Later, the airline paid a $100,000 fine after pleading no contest to federal criminal antitrust charges that it had tried, along with Texas International Airlines, to block service by Southwest Airlines at some Texas airports. Last year, it paid $400,000 to settle earlier Federal Aviation Administration charges that Braniff violated safety regulations.
Nevertheless, the airline had come a long way since 1928 when it was started by Tom Braniff with flights between Oklahoma City and Tulsa. In 1976, before its bold domestic and foreign route expansion program, Braniff's routes spanned much of the United States but were concentrated in the Southwest and in Latin America; in that year, it served 45 domestic cities and 14 cities in nine Latin countries, with 85 planes and 10,700 employes.
Three years later--at its high point--Braniff served 75 airports in 19 nations, had 116 jets and 15,200 employes. Its routes had been stretched across the Atlantic to London, Paris, Frankfurt, Brussels, Amsterdam; across the Pacific with flights to Guam, Seoul, Hong Kong and Singapore; and to more cities and countries in Latin America.
The expansion was partly based on the premise that the smaller airlines like Braniff had to grow or be swallowed up by larger carriers; that was a prevalent view among officials of the smaller airlines who succeeded in winning protection from Congress in the deregulation law for some of their routes.
Though ambitious, the expansion plan was well-thought out and made sense, Lawrence told the New York Airline Security Analysts in early March 1979. "We know where we are going and we have a plan to get there," he said. The plan for "growth and profit" was to seek foreign and domestic routes that allowed the airline to collect passengers who would flow to and through the rest of the system--to feed domestic passengers to its international routes through hub cities and vice versa--and to balance routes that are poor some parts of the year with routes that were good then, and to operate them with a standardized fleet of modern jets. "If we are successful in all our efforts, we would be selling all the world on Braniff and selling Braniff to all the world," he said.
Braniff's plan, of course, backfired, with rising fuel costs the first important and devastating factor. Fuel prices, which had appeared to stabilize after exploding with the fuel crisis of 1973, began to skyrocket again. In the four quarters of 1978, Braniff paid successively 39.4 cents, then 39.3 cents, 39.7 cents and 40.6 cents per gallon of jet fuel. In the first quarter of 1979 Braniff paid 42.4 cents a gallon, 54.7 cents the second quarter, 72.3 cents the third quarter, and 77.6 cents the fourth quarter. In the first quarter of 1980, Braniff was paying 86.6 cents a gallon, more than double what it paid in the same quarter the year before.
The airline's fuel bill quickly surpassed labor costs as its major expense. With all its new cities to serve, Braniff often had to pay higher spot prices for some of its fuel. Although it historically had one of the lowest break-even load factors in the industry, that began to rise significantly with the fuel increases.
It had cost millions to buy planes, start new stations in new cities, train new employes. Braniff's passenger traffic swelled at first, although not on every route. Many of Braniff's new routes were to areas it hadn't served before, so name recognition and a clientele had to build. New routes, especially foreign ones, aren't usually profitable overnight, sometimes taking years to cultivate. Then the economy worsened and passenger traffic began to fall industrywide; fuel prices continued to escalate; fare inceases weren't keeping up with cost increases; competition from American Airlines and others stiffened. Profits eroded, losses mounted, borrowing increased and interest rates were rising.
Braniff began to pull back, further and further. After having set in motion a program to cut back on its route system, employe ranks and employe pay in the fall of 1980, Lawrence resigned at the end of that year, to be replaced as chairman by John J. Casey in 1981 and by Howard D. Putnam in 1982.
Although Lawrence was clearly the architect and salesman for the bold expansion, Putnam, who was lured from Southwest in September to try to save Braniff, refused to blame the former head of the airline for its financial collapse, noting that Lawrence had sought to take advantage of deregulation. "If the economy hadn't gone bad, and if the fuel costs hadn't gone up, Lawrence might have been standing here today as a hero," Putnam told a press conference 10 days ago when he announced Braniff's demise.