The Texas Airline War

...But Gerald Ford disagrees, as do a good many experts outside the airline industry, including the Brookings Institution...

...Southwest also flies people from the valley to Houston for less than Greyhound charges...

...Like Love Field in Dallas, Hobby was close to the center of town compared to Houston’s Intercontinental Airport, and thus more attractive to commuters...

...But Southwest won% bankrupt Braniff...

...Even full, these flights could not possibly make a profit at that fare...

...We’re an airline, not a saloon...

...He has spent over $2 million on legal fees to keep his airline flying, and the total is still growing...

...Everyone in the Texas air transport business has political influence, but King also had business acumen...

...to fly .empty DC-9s...

...All airplanes can be of the same type, which results in considerable savings...

...I “We’ve got...

...Southwest made its maiden flight on June 18, 1971, and the War shifted into high gear, this time in full public view...

...Even Braniff, which has a relatively weak route structure, serving only some 30 cities, can absorb losses from unprofitable routes...

...the CAB permits airlines to reduce intrastate fares), but it maintahed them at the old, high level...

...That was in 1970-the year before Southwest’s operational debut...

...The pilots and mechanics all got the best training available, under contract from United Air Lines, to the tune of $265,000 for a five-week course for the pilots alone...

...Aside from the normal snafus one might expect from opening a giant facility like D/FW, it suffers from the fact that it is a long way from either city center...

...They’re’ telling the CAB 6ur operations have,caused, them to lose $2.17 million in the last six months...

...Among Texas’ upwardly mobile population, Chivas Regal had just the proper touch of class...

...The CAB also tells the airlines where they can fly, when, and how much they can charge for doing it...

...Building its whole pitch around the twin themes of thrift and sex appeal, Southwest did remarkably well in its first 18 months of operation, losing only $5 million...

...I know- exactly -what they’re domg,” Muse argues: ‘‘They want to make things‘look as bad as possible so’s the...

...When he was offered the chance to oversee the creation of a new airline in 1971, Muse jumped at it, partly to show his old employers they had been wrong...

...Fearing that Southwest’s continued operation at Love may jeopardize the success of D/FW, Dallas’ city fathers have actually considered closing Love Field altogether...

...Stupid TIA-boek’t know what it’s doing...

...Passengers occasionally got “love stamps” from the hostesses, good for a free mixed drink on any subsequent flight, and for awhile everyone got a $5 ticket good at swanky Houston and Dallas nightclubs...

...Profitable routes like these we awarded to interstate carriers, too, but for every profitable Dallas-to-Houston run which the CAB gives to Braniff, there is another route with lower density and lower profit that Braniff must agree .to fly...

...In the meantime, Lamar Muse took charge, displacing Rollin King...

...The CAB paid TIA $560,000 to subsidize service to the lower Rio Grande valley as recently as 1973...

...Much of Southwest’s share of the market had come from new passengers, and the spur of competition forced Braniff and TIA into more aggressive marketing of their services, thus stimulating overall growth...

...Has the Texas Airline War proven him right...

...Early in February 1973, splashy full page ads in Dallas newspapers declared: “Nobody’s going to shoot Southwest Airlines out of the sky for a lousy $13...

...Once airborne, Southwest’s hostesses shed their micro-mini-skirts in favor of tangerine hot pants and side-laced go-go boots...

...It began with curvaceous, mini-skirted reservationists dispensing tickets from cash registers (called “love machines”) with a wink and a reminder that it was “A Fare to Remember...

...Love” became Southwest’s recurrent advertising theme, a deliberate play on the name of its airfield in Dallas-Love Field...

...While there was an element of improvisation in these early, pioneering airline experiments, there is nothing improvised or haphazard about Southwest Airlinesit is a slick operation, well conceived, lavishly financed, and expertly managed...

...Love Stamps’ Some powerful people bought King’s idea, and with their backing he moved to obtain approval for the airline from the Texas Aeronautics Commission (TAC), which has the power to issue state “certificates of public convenience and necessity...

...So anxious was Boeing to sell its aircraft that it financed them itself on exceptionally favorable terms...

...Braniff and TIA promptly cut their fares to match Southwest’s...

...Together, the two airlines either cancelled or were late on over 30 per cent of their scheduled flights...

...The unregulated new entrant immediately began cutting prices-to as low as half of what the other two airlines were charging...

...Many experts think not...

...We’ll pay our -@Us, but, TIA will just use itstlegal expenses to pad’ its ’losses, and the taxpayer is sure as hell.gonna pay for it.,” , When ‘Southwest began servihg *the valley in early 197.5...

...King struck a sympathetic chord, for his listeners knew that Braniff and TIA had a poor public image with many commuters, largely owing to lackadaisical “on time” performance and frequent cancellations...

...it‘ and they’re worth it...

...The commuter traffic they fly does not result in the passenger imbalancemore people going one way than there are corning back-which for most airlines requires costly ferrying of aircraft...

...Even the high-priced advertising campaigns of the giants-with their talk about “friendly skies” and their airplanes painted by famous artists-cannot entirely assuage the irritation caused by high fares, bad schedules, delays, and lost baggage...

...Chivas Regal Campaign Then the Red Baron struck...

...A preliminary study he had commissioned indicated that there was enormous profit potential in a commuter airline connecting Texas’ three largest metropolitan areas-Dallas, Houston, and San Antonio...

...The director of flight, for instance, was Donald W. Ogden, who had just retired from American Airlines after a distinguished 35-year career...

...Braniff‘s $13 fare, if continued long enough, would drive Southwest hopelessly into the red...

...TIA&% imply refused to .compete...

...Predictably, Southwest got all the...

...In the early 1960s, the CAB decreed that Dallas and Fort Worth, which lie only 31 air miles apart, must combine their scheduled airline operations...

...Southwest wasn’t about to abandon Love Field without a fight, and it has managed to stay there, despite a round of legal battles against the DJFW authorities and the City of Dallas...

...TIA has lost $20 million since 1966, and about the only thing it has going for it is a monopoly of service from the Gladewaters, Harlingens, and McAllens to the Texas Triangle...

...The familiar pattern has repeated itself, for after Southwest began offering low-cost service, the number of passengers to the valley increased dramatically...

...As consolation, King became executive vice president and chief pilot-which meant he would fly the airline’s Boeing 737s regularly...

...TIA argues thht the CAB requires it to %sefye unprofitable routes, and t,hat Southwest is competing, unfairly by skimming off ‘the cream while ignoring ‘the “service” aspects of a& service...

...D/FW planneis recognized this problem and secured prior agreement from allethe airlines to abandon their Love and Meacham operations in favor of D/FW exclusively...

...Moreover, the uniform commuter traffic means that the intrastate carrier’s airplanes can be standardized...

...His proposed commuter airline would compete with the bus lines, attracting whole new classes of airline passengers, including blacks and Mexican-Americans, who rarely patronized airlines...

...There’s enough business down’ there for everybody...

...a’ loss somewhere, ‘ they’re goma have to...

...Also, they believe interstate airlines are too prone to litigate, largely because the nature ‘ of the CAB’s bureaucracy encourages a legidistic approach and tfie maintenance of large legal departments...

...Whether offering reduced fares on certain flights, or $1.05 in change for a dollar (to counter the new Dallas/ Fort Worth Airport’s change machines, which return only 95 cents for $1 .OO), Southwest had proven itself quick, flexible, and innovative...

...Other factors favor the intrastates...

...Carr lost, but King came up a winner, for his association with Carr helped to open doors which ultimately made possible his dream of starting a real airline...

...If Southwest can serve these feeder routes profitably, why can’t the interstate airlines do the same thing...

...The opening round went to Southwest...

...Any thoughts Braniff and TIA might have had about citing the “safety factor” against Southwest were quickly deterred...

...Misconceived, disruptive, and confusing,” said the Air Transport Association (the industry’s lobby), and a number of presidents warned against “tampering” with the system...

...Southwest’s management decided it had no choice except to meet Braniff s price-but with a twist...

...So on the dingy third floor of Austin’s county courthouse, District Judge Jim Meyers is patiently reviewing the whole months-long process of hearings and evidence which the TAC accumulated for the record during 1974...

...As one observer put it when plans for Southwest Airlines began firming up : “It’s no wonder that Southwest Airlines thinks it can offer cheaper service than anyone else...

...In addition, it has expanded into the secondary market of the lower Rio Grande valley, offering the only direct service into the area from San Antonio...

...Unless, that is, you consider “little guys” such folks as George Brown (the Houston construction magnate and former LBJ bankroller), the Murchisons, and Texas governor Dolph Briscoe, all early financial backers of Southwest...

...Braniff and Texas International appealed TAC’s decision to the courts, taking the case all the way to the Supreme Court, where it was finally dismissed...

...They argue that the taxpayer is getting a very poor return for his subsidies, particularly where “regional” airlines like TIA are concerned, and that deregulation in certain markets could hardly make things worse...

...The “regionals,” which the CAB created shortly after World War I1 to serve as feeders for the trunk airlines, have been consistent money losers...

...It is a murky species of economic activity called “controlled competition,” which means that real competition is pretty much limited to hostess costumes, personal services, and advertising...

...dqn’t‘ begrudgk .our’, lahyes, a dime,” he...

...He is articulate, direct, witty, and he looks like a down-home Cary Grant, self-assuredly sporting the kind of go-to-hell mustache it used to take courage to wear in Texas...

...What’s been happening in the unfriendly skies of Texas has obvious relevance for the debate on deregulation which has been going on in Washington...

...It was the perfect gimmick...

...His experience with the small airline convinced King that there was no future in it, so he converted it into a charter service and started studying the possibility of a Pacific Southwesttype operation between Dallas and Houston, using second-hand Lockheed Electra prop-jets...

...We ain’t hurt ’em ‘a bit...

...In expectation of early losses, Southwest began operations with a cool $6 million in cash on hand...

...We haven’t hurt them one bit,” Muse contends, “It’s D/FW that’s killing them...

...King is in some ways a throwback to the dawn of aviation, for he loves to fly...

...But then Southwest doesn’t fly to Austin...

...So far, TIA has refused the offer, ’ . ’ (For a further discussion of the &sues raised by the...

...King argued that this was because Braniff and TIA offered inferior, indifferent service, and that the protected position they enjoyed in these markets had made their managements complacent and unimaginative...

...He would not get it without a fight however, for when the hearing convened before the TAC in early 1968, Continental Airlines as well as Braniff and TIA showed up with some very high-powered lawyers to argue against Southwest’s application...

...Besides, most of them were traveling on expense accounts...

...Naturally, the subsidy bogy being what it is, the CAB prefers to give an airline plenty of profitable routes so that it will earn enough money to overcome any losses it might sustain serving unprofitable “city pairs...

...Southwest has joined the suit on the TAC’s side, and its lawyers have stalked their -defense on the unusual premise that any prejudice TAC exhibited against TIA was justified because of the airline’s wretched service and high fares...

...These cities contained in excess of five million people, with rapidly growing economies of staggering potential...

...In 1971, Southwest began serving the heavily traveled Dallas-HoustonSan Antonio triangle with a small fleet of new red and gold Boeing 737s...

...From his foray into Texas politics flowed contacts with such powerful Connally barons as Herbert D. Kelleher, the San Antonio lawyer who has brilliantly guided Southwest through its multifarious legal battles, and Robert Strauss, Connally’s appointee to the State Banking Board before he went on to greater things as Democratic National Chairman...

...T1.A seemed content, meanwhile...

...Our federally regulated and subsidized system of air transportation is complex and defies every free enterprise shibboleth...

...The judge must decide if a pattern of “bias, prejudice, and hostility” influenced the TAC‘s decision...

...The whole system works tolerably well for the airlinesuntil an unregulated intrastate carrier (which doesn’t need to make up losses on CAB-mandated, uneconomical routes) enters the market...

...As a kid he hung around airfields, got his license early, and made flying a fulltime hobby after he settled in San Antonio to work as an investment analyst...

...With dramatic suddenness, early in 1973, Braniff unleashed the $13 War, offering non-stop service from Dallas to Houston’s Hobby airport on Boeing 720s...

...Southwest is now carrying 70 per cent of all the passengers flown in the Texas Triangle...

...Thrift and Sex Appeal Fortune, if not profits, smiled on Southwest almost from the beginning, for the severe slump of 1970-71 in the airline industry worked to its advantage, allowing it to draw from a large pool of experienced but laid-off pilots and mechanics...

...Back in 1970 it cost twice as muchbut that was before Southwest began operating...

...While this problem is bearable when traveling to Los Angeles or New York, it is a great annoyance for the intrastate commuter, who could save time and trouble by using the old centrally located airports, Meacham and Love Fields...

...Southwest could offer such cheap service for a number of reasons, which apply equally to other unregulated intrastate airlines, like Pacific Southwest in California...

...The best thing they’ve got going for them is Lamar Muse-the guy comes on like a hick, but he never misses a trick...

...Indeed, during 1967 Braniff cancelled 471 flights altogether, and was late on 2,477 others (thus earning the unhappy nickname “World’s Largest Unscheduled Airline” among many travel-wise patrons...

...me their CAB subsidy and I’ll serve their Abilenes and Longviews for ’em and .still make money...

...If they paid the full $26 fare, however, Southwest offered them a gift-a bottle of Chivas Regal scotch, or an equivalent present worth about $13...

...I’ll trade places with ’em...

...He would also introduce streamlined “cash register” ticketing, which would appeal to businessmen put off by the ticketing delays involved in dealing with airlines specializing in long-haul flights...

...Upon sober reflection however, both Braniff and TIA officials admitted that Southwest was doing a good job...

...The Chivas Regal campaign was a perfect reflection of Southwest’s guerrilla action against the CAB carriers...

...Big money was at stake and it was no game for novices...

...Political Fuel Southwest Airlines was actually the brain child of a transplanted Ohioan named Rollin W. King, who came to Texas in the late 1950s to use his B.S...

...These men in turn opened doors to the likes of George Brown of Houston’s mammoth Brown and Root Construction firm, and John Murchison of the Dallas-based Murchison Brothe’rs...

...After a good deal of controversy they settled on a site near Grapevine, which more or less split the distance between them...

...The aircraft were spanking new, designed to domestic airline specifications but unclaimed owing to the general airline slump...

...The courts have ruled that for as long as+it is open, Southwest may stay...

...An opportunity to turn his hobby into an occupation came in the early 196Os, when he bought out a fin an cially troubled “third-level” carrier which served such metropolises as Marfa, Alpine, and Junction on a more or less regular basis with small twin-engine aircraft...

...Since they lack extensive penetration in profitable “city pair“ markets, the regionals have always been heavily dependent on federal subsidies...

...It does fly over Austin enroute to San Antonio, for which it charges (at certain times of the day), the same old $15 fare...

...Theoretically, the CAB determines the need of “city pairs” for service, figures out what the traffic should be, and then lets the airlines start flying...

...Losses on the uneconomical routes are made up with high fares (approved by the CAB) on the big-city commuter runs...

...The Texas establishment has never cared much about surface polish, however (indeed some wealthy oilmen seem to prefer the other extreme), and Muse’s rough edges were easily outweighed by his practical experience with airline operations...

...But in the valley case, the CAB has intermit ten tl y subsidized TIA’s “service...

...Controlled Competition’ Why can’t the CAB carriers compete successfully with the intrastate airlines...

...Chances were its hourly flights would soon attract the 40 passengers which was the “break-even” point on the 112 seat Boeing 737...

...The price was “insane,” Muse told the press, “but if they fly ’em free, we’ll fly ’em free...

...Unlike its competitors, Braniff and Texas International, Southwest was flying only this intrastate route and was thus exempt from the Civil Aeronautics Board fare regulations which apply to interstate carriers like Braniff and TIA...

...The Airport Location The new Dallas/Fort Worth Airport (D/FW), spreading over the vast north Texas plains like some phantom out of the movie 2001, is in reality the child of a shotgun wedding imposed by the CAB...

...Flying Empty Planes On this poht, Southwest’s Muse certainly agrees...

...Thejr’ve never had to compete wit$ anybody...

...Citing the possibility of reducing airline fares by up to 40 per cent, the President has called for deregulation of domestic airlines through drastic curbs on the CAB’S “long years of excessive regulation...

...As is usually the case in such matters, no one seemed to have a very clear idea what costs and benefits economic competition had wrought in Texas...

...George Hopkins teaches history at Western Illinois University and writes often about aviation...

...The latest round is under way in’ a Texas court, with TIA challenging the Texas Aeronautics Commission’s decision to allow Southwest to serve the lower Rio Grander valley...

...Thus was Southwest relieved of the public relations image problem which second-hand airplanes would have caused...

...His solution is to open things up for new interstate carriers modeled on Southwest Airlines...

...Of course this means another whopping ’ Mgal '.'hili , for ‘Southwest...

...Because he lacks a college degree and speaks countrified Texas English, Muse never rose very high during the 20 years he worked for a number of airlines, including American...

...A Poor Return on His Subsidy This form of “controlled competition” works reasonably well for large airlines with extensive interstate route structures...

...There has been nothing like it since the days when Ford and Fokker trimotors bearing such names as Maddux Airlines, Varney Speedways, and Southwest Air ~ Fast Express (S.A.F.E.-get it...

...Southwest knew its market-on some flights 95 per cent of the passengers chose the scotch option...

...Aviation people love to talk about the Texas Airline War-a mixture of advertising blitzes, gimmicky promotional ventures, leggy hostesses, and an endless run of lawsuits...

...As .for other off-thebeatentrack .cities, Muse says: “You give...

...Despite its image as it kind of merry guerrilla of the airways, playing Snoopy to Braniff‘s Red Baron, Southwest is hardly your average “little guy” waging hopeless but valiant battle against soulless corporate giants...

...King came to the conclusion that he would need powerful friends, for his potential competitors, Braniff and TIA, had deep roots in the Texas establishment...

...But what they’re not telling the public ii thAt if they don’t come up with...

...They let their company pay the fare and kept the bottle of scotch for themselves...

...Yet the growth rate in air travel lagged substantially behind the national average...

...says...

...degree in finance...

...we’ve pr’oved that...

...The CAB’s willingness to allow airlines to raise’ fares has also made managers too cautious, and frequently unwilling to offer the innovative approaches (like single-class, nofood service), which the intrastates pioneered...

...A majority of the six TAC members were Connally appointees...

...As a TIA executive (who refuses to be identified) put it: “Southwest is a damn good airline, lean, and hungry...

...They also believe that airline managements are top-heavy, inefficient, and complacent, largely because the relationship between the CAB and the airlines is too cozy...

...Guerrilla of the Airways You can fly from Dallas to Houston for a mere $15 nowadays...

...But Southwest is cutting into that market with its lower Rio Grande valley service, and Muse is considering expanding into TIA’s other CABprotected markets...

...If customers asked for it, Southwest would fly them for $13...

...Why should they...

...Texas Airline War, see ‘Waco, Wilt and the A,M, ” by ;lambs Fallows, in this issue...

...Muse is philosophicd about t6e cdsts...

...The major “trunk” airlines are image consciousthey prefer Southern California smoothies like Dwight Chapin, the former Nixon appointments secretary, who went to work for United Air Lines after leaving the White House (and before his Watergate conviction...

...Actually they say they can, but not while simultaneously serving unprofitable routes...

...L . Southwest has steadfastly refused to commit itself to D/FW;preferring to maintain its operations at Love And serve Houston’s close-in Hobby Airport to boot...

...Southwest’s competition has reduced Braniffs overall profitability, since nearly half of Braniffs passengers are either coming from or going to the Texas Triangle, and nearly 20 per cent are carried between two of its cities...

...Carried to its logical extreme, the CAB carriers argue a “purely economic” route structure will make airline service resemble train service-scrambled, irrational, effective only between major markets, and sometimes not even then...

...In relative terms, TIA’s record was even more appalling189 cancelled and 844 late...

...Ever since Southwest Airlines, a sleek, aggressive unregulated carrier, entered the local air transport market, life has been miserable for the regulated fat-cat airlines and delightful for most Texas airline consumers...

...If an airline loses money, the CAB has the option of either paying it a subsidy (to bring it up to its 12-percent “return requirement”) or giving it additional, more profitable routes so that it can make up losses elsewhere...

...We’re not...

...give back almost that much @ federal subsidies...

...Southwest countered with the kind of lavish personal attention to passengers that had lately fallen out of fashion...

...Then fate smiled-Rollin King landed a job as Waggoner Cm’s cam paign pilot during his ill-fated run for John Tower’s Senate seat in 1966...

...Its success has confirmed the industry’s suspicion that short-haul commuters much prefer the older airport-*Midway rather than O’Hare in Chicago, National 1 rather than Dulles in Washington...

...the TAC ruled unanimously in its favor, dismissing the opposition’s argument that there was simply no need for the service Southwest proposed...

...Braniff and TIA charge $30 to haul people from Dallas to Austin, which is half as far as Houston...

...Southwest’s president is a genial, fiftyish, chain-smoker named M. Lamar Muse...

...In the first place, the intrastates usually provide service only between cities where there is high traffic, and therefore high “load factors,” such as Dallas and Houston or San Francisco and Los Angeles...

...The CAB issues “certificates” to carriers permitting them to fly interstate passengers on the basis of “need”-the public’s need, not the airlines’-and it is notoriously stingy with these certificates...

...The fare was potentially ruinous to Southwest, which had raised its prices slightly and by the end of 1972 was showing signs of edging into the black...

...Braniff insisted that it was merely letting folks “get acquainted” with its Hobby Airport service and was willing to eat its losses for a limited period...

...TIA “was free to reduce its ‘fares in this market...

...CAB will bail “em out...

...Southwest just might destroy TIA, however...

...The regulated airlines can’t have been suffering too much under the shackles of government bureaucracy, for they have denounced the Ford deregulation proposal...

...needless to say, the opposition’s hired legal gunslingers all had lines of power into the Connally camp...

...The critics argue that the CAB is entirely too willing to bail out airline managers when they make poor decisions, and that the cost of air travelahas risen because of it...

...Critics believe that the regionals have invested too heavily in jets (largely for reasolis of prestige), and that lighter, propeller-driven aircraft (which the “third level” commuter lines have used effectively), would save everybody money and probably lead to an improvement in service...

...Gerald Ford is quite right when he says “for many Americans the cost of air travel has become a luxury too expensive to afford...

...Finally, because they are small, the intrastates often can offer more attentive and reliable service, in addition to their low fares...

...passengers with its new low’fares, ai~dit s aggrekive marketing dramatically increased traffic...

...competed for the loyalty of the few hardy souls willing to fly...

...Basically the system operates this way...

...Or will free enterprise lead to the destruction of an integrated passenger system...

...It won’t use aviation fuel-just political power...

...We’re not going to start giving away liquor,” a Braniff spokesman responded sourly...