Who Burst the Braniff Bubble?

|

Splash of Colors: The Self-Destruction of Braniff International, by John J. Nance, New York: William Morrow, 426 pp., $16.95

On the premise that a book worth burning is a book worth reading, commercial success should be assured Braniff pilot John Nance's insider account of his airline's failure. In July 1984, American Airlines bought and destroyed the entire first printing of the book because they objected to numerous allegations that American Airlines used "dirty tricks" to tip Braniff over the edge. But while dirty tricks make good gossipy reading, the book is of particular value because it lays to rest any contention that airline deregulation caused Braniff to fail.

When Congress passed the Deregulation Act of 1978, Braniff chairman Harding Lawrence believed the act would be repealed when Congress realized they'd made a mistake—and Lawrence was convinced that deregulation was a mistake that would lead to chaos. But while routes were up for grabs, Lawrence decided to grab as many as he could. Then when Congress called a halt to free access to markets—as Lawrence was sure they would—Braniff would be "grandfathered" into the routes it had grabbed.

Thus did Braniff set off on a course of willy-nilly, we-don't-care-where, cost-is-no-object expansion. The firm had accumulated a debt of $288 million in its first 30 years. In the three years following deregulation, it borrowed $451 million to finance the expansion. Had the gamble paid off, Braniff would have been transformed from a regional airline into one of America's biggest, and Lawrence would have become an aviation legend.

Everything turned against the Braniff gamble. Fuel prices, which account for about a third of an airline's operating costs, doubled. A deep recession hit, and passenger loads dropped. Interest rates headed for the stratosphere. Unable to fill seats, stuck with paying top dollar for fuel in the spot market (because they didn't have long-term contracts on their new routes), unable to sell airplanes because other carriers were suffering from the same problems, Braniff was losing $400,000 a day by 1981. Braniff executives made frantic efforts to stanch the flow, but they might as well have been dumping bushel baskets of $1,000 bills into the East Texas wind. On May 12, 1982, Braniff brought its airplanes back to company headquarters in Dallas and quit.

Deregulation didn't shoot Braniff down. It was a foolish gamble by a chairman who was accustomed to being coddled by the Civil Aeronautics Board (CAB) and who couldn't imagine that a free market in air transport would work.

Nance, like thousands of his former fellows at Braniff, is an ex-airline employee with almost no chance again of being the employee of a major airline. Those lucky ones who do have a chance must start over at the bottom. Over the years, airline unions have negotiated contracts that provide a degree of security—but what keeps one employee "in" keeps another potential employee "out." For instance, if an airline finds it needs more 747 captains, it is contractually obligated to train pilots for the job from those on the airline's seniority list, even though fully qualified captains might be readily available in the job market.

Employees at a failed carrier, especially those over 35 or so, find their careers ruined, with little chance of continuing with another company, even though a particular individual might be highly competent and almost certainly had nothing to do with the carrier's failure. In sharp contrast, airline managers who aren't represented by unions—even managers who may have participated in the failure of a carrier—routinely shuttle from one airline to another, moving between jobs with similar pay and responsibilities.

Nance likens the situation to a ship with the officers of the corporation making critical decisions on the bridge while the contract employees are locked up in the hold. If the officers make a mess of things, they hit the lifeboats and row for the next ship they see, where they get new jobs. The contract employees go down with the ship, innocent victims. The metaphor is revealing as far as it goes, although Nance might have added that being locked up in the hold was the employees' idea.

Certainly regulation contributed to the evolution of these "pull-up-the-ladder" kinds of labor contracts. Braniff was the first major carrier to fail since the CAB was created in 1938—the CAB kept weak carriers flying by granting them lucrative monopoly routes or merging them with stronger companies. Employees just didn't worry about their companies failing.

That is all changed now, of course. Contract workers are realizing that the linchpin to job security is the health of their own companies, although unions are still light-years from accepting the kind of flexibility in horizontal moves between companies that managers enjoy. But the clear distinction between labor and management is beginning to blur as companies trade stock, profit sharing, and board directorships for work-rule concessions the market is demanding.

None of the carriers that have sprung up since deregulation has the kind of exclusionary contract that the older carriers have. And it is likely that as the supply of skilled airline workers continues to tighten, we'll see employees making horizontal moves as companies bid for each other's workers and as employees seek employers offering the best combination of pay and job security.

Nance offers insight into another change brought by deregulation—the change in workers' attitudes toward their employers and toward the public. In the past, "helping each other for the good of the company was a foreign, laughable concept to too many," as Nance puts it. But in a competitive marketplace, "no single employee, whether he or she happens to be pushing a broom or running the Board of Directors, can afford the luxury of saying, 'That's not my job' when it comes to luring and pampering the individual passenger…neither union contracts nor union work rules can be allowed to eclipse the absolute necessity for each employee to accept eagerly the individual responsibility for the ultimate success or failure of the company."

Finally, the Braniff failure demonstrated the power of the individual consumer. Consumers delivered the coup de grâce to Braniff because, in hundreds of thousands of individual, unconnected decisions, they smelled something wrong and bought tickets elsewhere. As one New York travel agent put it at the time, "The public is very, very smart."

John Doherty, an airline pilot, won the Washington Monthly Journalism Award for his REASON article "Collision Course" (June 1982).

Advertisement