Braniff International, burdened with $733 million in debts, yesterday suspended all domestic and foreign flights and told employes not to show up for work today.
"We are urging all passengers holding reservations on Braniff to make alternative arrangements," Braniff senior vice president Sam Coats said in Dallas late yesterday afternoon.
"We sincerely regret any inconvenience that this suspension of service is causing our customers," the airline announced, following an emergency meeting of the board of directors.
In Washington, a spokesman for the Air Transport Association said that Braniff tickets written by travel agents would be honored by other airlines under an airline default protection plan approved by the government in March. However, under the plan, airlines may fly the ticketholders of a defaulting airline on a standby basis, he noted.
Tickets written by Braniff itself are not covered by the plan, but individual airlines may choose to honor them as some did in the collapse of Laker Airways.
Civil Aeronautics Board member Elizabeth E. Bailey said last night that she thought consumers would not be hurt if this is a permanent cessation of Braniff service because other carriers have the flexibility and legal authority to fill in on Braniff's domestic routes.
Braniff promised additional information today but there was no immediate indication whether the cancellation of flights meant that the Dallas-based airline's three-year fight against mounting losses had ended in bankruptcy.
Coats declined to say if a formal bankruptcy petition had been or would be filed.
A victim of an ill-fated expansion program under former chairman Harding Lawrence following passage of the 1978 Airline Deregulation Act, the 54-year-old airline has been fighting for its life, almost day by day.
The costly expansion to dozens of cities--18 in the United States and others in Europe, the Far East and Latin America--was not pulled back fast enough when fuel prices turned sharply upward and the downturn in the economy caused passenger traffic to fall off.
The once-profitable airline reported successive net losses for the last three years that totaled $336.4 million. Beginning last July, Braniff's 39 major lenders repeatedly waived principal and interest payments on the airline's $733.2 million in private debt but declined to provide the airline "with one more cent," Howard D. Putnam, Braniff's chairman, noted recently.
Putnam joined Braniff in September, lured away from successful Southwest Airlines by the challenge of saving the troubled airline.
Braniff recently had given lenders a proposed plan to restructure its debt, a proposal which would have had to gain acceptance before Oct. 1. One aviation source said last night there was a possibility that Braniff could fly again if it could get lenders to accept stock in the company for some of their debt, which was one of its proposals.
In an attempt to save the airline from bankruptcy, Braniff's route system was scaled back significantly the last two years, its coach service upgraded and fares lowered. But the airline's cash shortages and continual publicity about problems had resulted in a loss of public confidence, and traffic did not rebound enough.
Putnam complained to shareholders at Braniff's annual meeting last week that travel agency bookings were down 40 to 50 percent from a year ago.
Its problems were exacerbated by strong competition from American Airlines, a well-financed airline that moved corporate headquarters to Dallas and proceeded to compete on all Braniff's routes.
Charges that American might have engaged in illegal tactics to push Braniff into bankruptcy are being investigated by a federal grand jury in Texas.
Last month, the airline won approval from the Civil Aeronautics Board to lease most of its once-lucrative routes to Latin America to Eastern Airlines for at least 18 months for $18 million. The immediate payment of $11 million for the transfer, scheduled for June 1, apparently wasn't enough to keep Braniff going.
Eastern said yesterday that it would act immediately to preserve U.S. flag service on those routes, and would launch its first flight from Miami to Panama City at 5 p.m. today. "Before the weekend is over, we will have a large part of the service under way," Eastern spokesman James Ashlock said yesterday.
Braniff officials had expressed distress the last few days over a threat from their pilots' union to call a strike if a federal court fails to block the lease of the airline's South American routes to Eastern.
The union contends that the arrangement, under which 175 of Braniff's 1,200 pilots would have lost jobs, violates their contract. Their suit is pending in U.S. District Court in New York.
A Braniff statement late yesterday afternoon said its 9,500 employes should not report to work today unless notified to do so.
The announcement caught Braniff workers at Washington's National Airport by surprise. Customer service agent Steven Dunman said that about 6 p.m. a Braniff supervisor told him to "lock up everything and go home."
"It's hard to fathom, hard to believe," said a Braniff pilot who declined to give his name. "You can chalk this up to deregulation."
Walter Hutchinson, who handles ground operations at National for Braniff, said he heard the news on television. "That's not the way we should have found out."