“NEW BRANIFF FACES HURDLES”
(Agis Salpukas, The New York Times – February 16, 1984) Powered by a $90 million revival plan, the new, stripped down Braniff will begin its business-oriented service here March 1, facing stiff competition, edgy travel agents and skepticism from industry analysts.
But it will also have lower operating costs, newly cooperative unions and a renewed spirit among its employees, most of whom worked for the airline before it shut down on May 12, 1982, and filed under Chapter 11 of the Federal Bankruptcy Act.
”It’s not the pay that is the issue; It’s a feeling of actually being part of the rebirth of the company.” said Dave Seely, a pilot for Braniff since 1966, who paused while spray-painting parts for the overhaul of Braniff’s 30 planes.
The $7.25 an hour Mr. Seely said he earns is a pittance compared with the pay he said he had been offered to fly corporate planes or for another airline. But he has chosen, as have hundreds of other old employees, to work at the Braniff headquarters at Love Field here in the effort to get the airline off the ground again.
When the painting is done and the airline is ready, Mr. Seely will fly again as one of 2,200 employees rehired by the airline. That’s a significant drop from the 9,200 employed by the airline before the bankruptcy, but if employee enthusiasm were the sole criterion for an airline’s success, Braniff would have no problems.
While the spirit of its employees will be important, the airline’s fate still rests largely on its marketing strategy. It must regain the confidence of travelers and of travel agents, who normally book about 65 percent of an airline’s business.
”Our timing is pretty good; we’re hitting an upswing in travel,” said Jay Pritzker, chairman of the Hyatt Corporation, noting a strong growth in air traffic since September. It was Mr. Pritzker who saw the potential in a new Braniff. Using the financial strength of his Chicago-based hotel company, he struggled with the airline’s creditors to put together a financing package to revive the carrier after previous attempts had failed.
The carrier is hoping to attract the business traveler who pays full fare by offering a separate seating area with more legroom in the front of the airplane, a free newspaper and what it describes as better food. Those traveling on discounts will sit behind a partition in the rear of the airline’s Boeing 727-200’s.
Competing with American
Still, there is considerable skepticism among analysts that such differences will be enough for Braniff to successfully challenge such major airlines as American, which has made Dallas its hub and now accounts for about 65 percent of the traffic at the busy Dallas/Fort Worth Regional Airport. Braniff will also be competing with Delta on many of the routes to the 20 cities it will serve. Both Delta and American have become entrenched in former Braniff routes since the Braniff shutdown nearly two years ago.
”Obviously we are not as large as some competitors,” Mr. Pritzker conceded, also noting, ”They do have more frequency.”
While Braniff will offer four flights daily between Dallas and La Guardia, for example, American offers seven. And since frequency is a major factor in attracting the business traveler, Braniff will be at a disadvantage.
Unhappy About Discounts .
On the other hand, Braniff research has shown that many of the business travelers who pay full fare are not completely happy with major airlines. Some business travelers, for example, say they feel slighted when they fly alongside leisure travelers who bought the same seat and service at a discount.
But other airlines – Midway and Air 1, to name a couple – are also trying to tap this market and have set up special services.
One advantage Braniff will have is lower costs, projected at between 5.9 cents and 6.5 cents per seat for each mile flown. That compares with about 8 cents a seat-mile for American.
The reason for its low costs is a new agreement with Braniff’s five unions. The Airline Pilots Association, the International Association of Machinists, the International Brotherhood of Teamsters, the Association of Flight Attendants and the Air Transport Dispatcher Association have agreed to a five-year contract with wages and benefits that are 30 percent to 40 percent below past levels.
William D. Slattery, who was named president of the new Braniff Inc., said the lower costs would enable the carrier to break even when it was flying with only about half of its seats full, compared with other major carriers who must fill about 55 percent of their seats.
Alfred H. Norling, the airline analyst for Kidder, Peabody & Company, said, however, that ”it remains to be seen how effective this strategy will be, particularly going against a carrier like American, which has a strong image with the business traveler.” He added, ”It also has a market asset in the frequent-travel program.”
For its part, Braniff, has an agreement with United Airlines to allow Braniff customers to gain credits on United’s frequent-traveler program.
Michael Derchin, the airline analyst for the First Boston Corporation, said the trick for Braniff would be to carve out a modest market niche and avoid fare wars with its stronger competitors.
Mr. Slattery concedes, too, that Braniff must mend relations with travel agents. Many agents lost money when they were stuck with unusable tickets after Braniff shut down without warning. A number of others had to cope with the ill will of their customers who were forced to switch flights or had travel plans canceled when the airline failed.
Travel Agents Wary
”I and every other agent will follow very closely Braniff’s monthly financial condition to make sure we don’t get caught again like we did before,” said Earl A. Schackelford, president of American International Travel Inc., an agency in Dallas.
If Braniff does not begin making money soon, he said travel agents would begin warning customers of the vulnerability of the new carrier.
Braniff, so far, has spent $29 million, largely to refurbish its fleet. The planes, which had been a variety of bold, solid colors, are now painted in a red, white and blue pattern. .
Under the reorganization plan approved last fall by the Federal Bankruptcy Court in Fort Worth, the company is leasing the planes from creditors, beginning at $90,000 per month per plane for the first and second years.
The new Braniff itself is a subsidiary of the Dalfort Corporation, which is controlled by the Hyatt Corporation. Hyatt, in turn, is controlled by a trust intended principally for the benefit of members of the Pritzker family in Chicago.
“LEAN BRANIFF TAKES OFF AGAIN THURSDAY”
(Bruce B. Bakke, UPI – February 26, 1984) DALLAS — A newly painted Braniff jetliner will take off Thursday morning from Dallas-Fort Worth Airport on a flight to New Orleans, marking one of the most astounding comeback stories in American corporate history.
After being grounded by bankruptcy foralmost two years, Braniff will return to the skies with new colors and renewed optimism — but the same planes and flight crews.
It will be a much leaner Braniff in every way. Fares are at the low end of the industry level with no luxurious first-class accomodations. Employees will be making about half of their former salaries, in some cases less than half. The airline itself will be much smaller, flying only 30 planes and with only 2,200 employees.
When Braniff went into bankruptcy in May 1982, it had 84 planes and 9,500 employees.
Most of the intervening 22 months was spent in bankruptcy court. Everyone involved lost some hide in the long litigation: employees lost salaries and jobs, retired employees found pension benefits sharply reduced, customers were stuck with worthless tickets, competing airlines were unable to collect funds Braniff owed to them, stockholders ended up with holdings worth a fraction of their former value, and suppliers and financial institutions received stock in the new Braniff instead of cash repayment for their loans.
Braniff’s return to the air was accomplished through a bold gamble by the Hyatt Corp., the hotel chain, which invested $70 million in the airline in exchange for 80 percent of its stock.
It is a gamble because Braniff returns to a hotly competitive environment. All of the 18 destinations to which it will fly from its hub at Dallas-Fort Worth Airport are served by competing airlines.
Since Braniff’s collapse, monolithic American — always an aggressive competitor — has taken over 60 percent of the total flights from DFW Airport. Steady Delta with its faithful following is a solid second. Within Texas and the adjoining states, Southwest and Muse have staked out significant markets. Such major carriers as Northwest, Republic and United entered the DFW market when Braniff collapsed and can be expected to fight like Spartans to hold at least that part of the market they now command.
In the long run, however, the key to Braniff’s fate lies with the customers and with the travel agents. In north Texas, Braniff’s protracted bankruptcy struggle was watched with interest. Every small step in the process received blanket media coverage.
Although both Delta and American have solid roots in the Dallas-Fort Worth community, for four decades Braniff was considered to be the region’s own airline. Hyatt is betting old customers will return to Braniff in significant numbers.
Six out of every 10 airline tickets are sold by travel agents, and Braniff is courting them with costly receptions. At parties last week in San Antonio and Tulsa, Braniff gave each attending travel agent a free ticket to any of its destinations.
Although some travel agents were caught in a squeeze with ticket-holding customers when Braniff went bankrupt, the airline generally had a good relationship with the agents.
‘The feeling I get is that most agents are sort of excited about the return (of Braniff) and have positive feelings about it,’ an agent in north Dallas said. ‘Braniff always treated the agents fairly. For example, Braniff never tried to bypass the agents and go directly to big commercial accounts, like some of the other airlines.’
The agent said many customers already were specifically requesting to be booked on Braniff.
“BRANIFF TAKES ON NEW BEGINNING”
If simplicity is still the root of genius, Braniff’s new approach to air travel should be right on target.
Executives at the new airline say there is nothing secretive or mysterious about their strategy; rather Braniff is built about two things: efficiency and a good, hard working staff. Utilizing these tools, passengers will receive more comfort for their money, both in amenities and through courteous, professional service.
“Efficiency permits flexibility,” says Tom Lagow, senior vice president – marketing. “Businesses that survive are the ones that are more efficient. To be efficient requires lower costs and dedicated, hard working people who care. It’s really very simple.”
Braniff’s decision to capitalize on efficiency through better service evolved from a logical assessment of current competitive practices and passenger needs.
“Flying is a practical not a glamorous experience,” he explained. “In the end it is a means of getting from Point A to Point B.
“So how do you compete? – either with lower prices or more comfort. And if you are really efficient, both.”
To gain an additional edge, Braniff will translate its efficiencies into more comfort at prices comparable to its competition. The airline has reduced the number of seats onboard and, for full fare passengers, has added a number of amenities through a special Business Cabin package.
Lagow said Braniff’s Business Cabin sets the airline apart from everyone else.
“On every other carrier, the only distinction between the person who travels regular fare and one who gets a discount is the price they pay. Most business travelers don’t have the luxury of shopping ticket prices or meeting time requirements usually attached to special rates.
“So what you have are two passengers, seated side by side, who often pay considerably different prices, but are getting the exact same service. We decided to make a distinction between the two.”
Business Cabin accommodations are in the forward section of the aircraft separated by a movable partition. These passengers receive additional amenities such as complimentary newspapers and restaurant-style food service.
An economy section also is available for passengers who can plan ahead and thereby benefit from lower promotional or discount fares.
Lagow noted that the aircraft is designed with leather covered seats spaced approximately three more inches in pitch (distance between rows). The middle seat is different from any other currently in use in U.S. domestic service. When space permits, all middle seats can fold down to provide an executive work area. The seat back remains upright, preserving privacy. Center armrests may be folded back into flaps in the seat backs, thereby increasing the effective width of the two adjacent seats and seat backs.”
“Braniff, like everyone else, will match pries and offer specials. We think it is our total approach that sets us apart.
“This is not some grandiose marketing philosophy; it is something that adapts to the environment. It all goes back to dollars and cents. Because we are more efficient, because our employees are going to be more productive, it doesn’t cost us as much to put a plane in the air. We don’t have to fill as many seats as the next guy, so we can afford to give our customers more comfort for their money.”
Because the new Braniff truly is “new” from an organizational standpoint, Lagow said it has been possible to build from the bottom up. If anything has made it work, he said it has been “the reasonable, realistic position of our employees, who will be about 65 percent more productive than their competitive counterparts.”
Lagow and Braniff President William D. Slattery are both veterans in the airline business, each having more than 15 years experience with another carrier, Trans World Airlines. Literally, rising through the ranks together, it has been their goal for some time to form a new airline.
“Building the new Braniff is a unique experience,” said Lagow. “It not only has given us an opportunity to begin from scratch, but we have a wealth of former Braniff employees to draw from for our staff. These people believe in making Braniff work as much as we do. They are excited, they are committed and they are eager to do whatever has to be done.
“We think this strong, competitive spirit which prevails on every level, and a fundamental honest and respect among everyone, will definitely make a difference.
“Were ‘real’ people, from the top executives on down. We listen and talk to each other. We care about our airline and we run it efficiently so we can pass on benefits to our passengers. This is our ‘magic’ management philosophy, is there is one.”
“MESSAGE FROM THE PRESIDENT”
“Braniff Takes Off March 1 With Latest Passenger Comforts and Convenience”
The new Braniff is up and running. The efforts of the past nine months culminate with the first flights from Dallas-Fort Worth Regional Airport. March 1, 1984, marks the end of Braniff as an airline in transition and the beginning of a new approach in air travel.
Today’s Braniff is a marriage of people and equipment which will provide the highest level of service. Our people are among the most loyal, dedicated and experienced in the sky. We’ve outfitted our Boeing 727-200 fleet with the latest passenger comforts inside and a new look outside. We think you’ll find Braniff to be the most comfortable and convenient air transportation in the United States.
I’d like to dedicate March 1, to the 2,200 employees of Braniff who have made this day possible. With their continued efforts we will fulfill all the promises we make. At Braniff we want your experience to exceed your expectation. And we’ll work hard every flight to make that come true Welcome aboard!
William D. Slattery
President – Braniff, Inc.
“BRANIFF MEANS BUSINESS”
“Business Passengers Reap Schedule Benefits”
Braniff means business with new schedules and destinations tailored to business travelers’ convenience and an advertising campaign designed to attract business travelers’ attention.
With an investment from the Hyatt Corp., Braniff, Inc. plans to commence flight on March 1 to 18 cities with 30 Boeing 727-200s from its Dallas/Fort Worth hub.
Consumer advertising, created by N W Ayer, Inc., in New York, began February 13 to profile the airline’s streamlined new appearance and business philosophy. Trade advertising began February 1 to promote special accommodations and convenient departure times for the business traveler. Travel agents have begun to receive latest flight information from Braniff though both trade advertising and direct mail.
With the frequent business passenger as the target, the ads emphasize Braniff’s new separate Business Cabin service in the forward cabin. The interior configuration of the aircraft will feature more legroom than regular coach, all leather seats, and more overhead and carry-on storage. Middle seats fold down when space permits to create an executive work area. Business Cabin passengers also will receive a complimentary newspaper and a choice of entrees on meal flights.
Business Cabin is, of course, available to any passenger paying full coach fare. Leisure travelers planning ahead may qualify for special fares.
Consumer advertising announced that Braniff is “Up and Running” on February 13 with newspaper and radio placements running in the 19 markets Braniff will serve. On February 20, television advertising began featuring the new routes with footage of Braniff personnel preparing for the first flights.
After several weeks, the first phase of ads will be replaced by a second phase focusing on the airline’s new attitude toward serving the business traveler. The theme of “Building a new airline around you,” will be illustrated with blueprint interpretations for all media.. The copy will translate the graphic image in terms of attitude, service, cabin configuration and routes.
A large part of the touted new attitude will come from Braniff staff. The airline has sent teams of inflight service crews back to school for special training in serving the business flier. Whether greeted by a reservationist or baggage handler, travelers can expect a friendly, knowledgeable, efficient response.
As an added bonus, Braniff has joined United Airlines’ Mileage Plus progran with additional access to Lufthansa, SAS and Air New Zealand, connecting to such exotic destinations as Honolulu, London, Tokyo or Hong Kong. Royal Viking Lines cruises to worldwide destinations are also included.
Trade advertising placements give the facts on flying the new Braniff, including its consumer benefits and reasons why the trade can be confident in a partnership with the airline.
Trade ads are particularly important to Braniff because President William Slattery expects more than 75 percent of ticket sales to come from travel agents.
Agents should use 004 designator and not 002 when coding a Braniff ticket. Braniff will be shipping new airline identification plates in February to all appointed agents. Travel agents with automated reservations systems will be able to auto validate tickets using the Braniff 004 designation.
Braniff is also participating in a co-host relationship with the SABRE ad APOLLO systems and is pursuing co-host arrangements with other automated vendors. Braniff space is also available for booking through most other carriers’ reservations systems or by calling 1-800-BRANIFF. In Dallas, agents can call (214) 357-9511; in Fort Worth, (817) 261-2442.
Braniff is part of the Area Settlement Plan and is a member of the Air Traffic Conference, A.T.C.
Cities Braniff will serve from Dallas/Fort Worth are: Austin, Chicago, Denver, Detroit, Houston, Kansas City, Los Angeles, Las Vegas, Miami, New Orleans, New York/Newark, Oklahoma City, Philadelphia, San Francisco, Tulsa and Washington, D.C.
“NEW FLIGHT SCHEDULES ACCOMMODATE 19 CITIES”
Braniff begins service to 19 U.S. cities on March 1. Headquartered in Dallas, Braniff will operate a hub-and-spoke system out of Dallas/Fort Worth Regional Airport.
From D/FW, Braniff will have 82 daily non-stops to include Austin, 7; Chicago, 5; Denver, 5; Detroit, 2; Houston, 7; Kansas City, 3; Las Vegas, 4; Los Angeles, 5; Miami, 4; New Orleans, 5; New York, 4; Newark, 3; Oklahoma City, 6; Philadelphia, 2; San Antonio, 7; San Francisco, 4; Tulsa, 5; and Washington, D.C, 4.
Braniff flights originating daily from each of its other cities to Dallas/Fort Worth and beyond include:
• Austin, 7, with one-stop service to Chicago, New York, and Washington, D.C.;
• Chicago, 5, with one-stop service to Austin and San Antonio;
• Denver, 5, with one-stop service to Miami and San Antonop;
• Detroit, 2, with one-stop service to Las Vegas ad Tulsa;
• Houston, 8, with one-stop service to Kansas City, Oklahoma City, Philadelphia and Washington, D.C.;
• Kansas City, 3, with one-stop service to Houston;
• Las Vegas, 4, with one-stop service to Houston, New York, Newark and Washington, D.C.;
• Los Angeles, 5, with one-stop service to Oklahoma City, San Antonio and Tulsa;
• Miami, 4, with one-stop service to Denver and Kansas City;
• New Orleans, 5, with one-stop service to Denver, San Francisco/Oakland and Tulsa;
• New York, 4, with one-stop service to Austin, Las Vegas, San Antonio and Tulsa;
• Newark, 3, with one-stop service to
• Oklahoma City, 6, with one-stop service to Houston, Los Angeles and San Francisco;
• Philadelphia, 2, with one-stop service to Houston and Las Vegas;
• San Antonio, 7, with one-stop service to Chicago, Detroit, Los Angeles, New York, Newark and Washington, D.C.;
• San Francisco, 4, with one-stop service to New Orleans and Oklahoma City;
• Tulsa, 5, with one-stop service to Detroit, Los Angles and New Orleans;
• Washington, D.C., 4, with one-stop service to Austin, Denver, Las Vegas and Oklahoma City.
Other than these one-stop flights, connections between cities are all through D/FW Airport.
Fares will be competitive with similar carriers flying the same routes. However, to inaugurate service Braniff will offer a five percent refund based on the pre-tax price of a Braniff ticket to those passengers completing a March of Dimes coupon.
If so indicated, five percent also may be donated in the passenger’s name to the March of Dimes with Braniff matching the donation for a total 10 percent gift. The promotion will run March 1 through June 15, 1984.
“BRANIFF INTRODUCES UNIFORMS WITH FLAIR, PROFESSIONALISM”
Braniff’s new apparel collection, characterized by conservative, finely tailored suits of navy poly/wool trimmed in scarlet and cream, says professionalism and excellence.
Designed exclusively for Braniff by Dallas-based Brenner, Inc., the fashion collection is said to exceed industry standards in styling, fabric, construction and fit.
Brenner, Inc. owner Gary Eschelbrenner explained, “Braniff wanted more than a uniform. They wanted an image that would be classic yet refined. They wanted uniforms their passengers could identify with, not something trendy or fadish.”
Never having designed a uniform collection before, Eschelbrenner said his first move was to study other airline apparel. Keeping the best features in mind, he, Brenner designer Kathy Gesell and Braniff Senior Vice President – Sales and Service Jeff Warner next met with 20 senior flight attendants and management representatives at the airline.
“From a design standpoint, we wanted the uniforms to flow with the interior and exterior aircraft designs. They needed to have the same color feeling but they also had to be functional. We spent a lot of time determining their wearability needs, incorporating reinforced pockets and seams. We also had some fabrics treated for water resistance.”
The Braniff collection includes apparel for flight attendants, pilots and customer service personnel. Accessories, all personalized for Braniff, also were designed.
Prepared with preliminary information, Brenner and Gesell set out to create Braniff’s new apparel image. First came the female flight attendant uniforms. For variety, eleven interchangeable pieces were developed. With the fitted, classic navy jacket comes a matching navy vest, split skirt and classic straight skirt.
“The split skirt substitutes for a pant and is a favorite among the flight attendants,” said Gesell. “It is a culotte design that gives a lot of freedom of movement.”
Added to the women’s navy coordinates is a 100 percent navy wool sweater vest.
For a dressier look, a poly/silk skirt and blouse also is included. Both pieces are in cream with thin navy stripes running vertically through the fabric. The blouse is double breasted and has three-quarter length sleeves.
The female flight attendant grouping also includes a solid cream dress blouse and a solid cream oxford cloth blouse (for summer). Both have three-quarter length sleeves and can be worn with a scarlet scarf.
Gesell explained that the three-quarter length sleeves were requested because the flight attendants say long sleeves get in the way when they are preparing and serving meals.
A serving apron, one of the most functional pieces in the collection, emerged as the designer’s personal favorite.
“Most standard flight attendant aprons are butcher style,” she explained. “We didn’t think this would add to the business look Braniff wanted, so instead we designed an apron that wraps to the front and buttons to the waist, giving a jacket effect. A scarlet silk handkerchief adorns the pocket, where attendants also will pin their wings.”
Accessories include a navy blue belt stamped with the Braniff logo, a navy purse and a small, carry-on navy suitcase trimmed in the matching leather. Pewter-plated wings are provided for the pockets on all jackets, vests and aprons. Shoes include a classic navy street pump (the heel height can vary from one-and-one-half to three inches).
Male flight attendants will wear navy trousers with jackets and vests. Cream broadcloth shirts and a navy tie with slanted cream and scarlet stripes will complete the uniforms. The sweater vest, also 100 percent navy wool, is pullover style and the men will also wear a serving vest with lapels.
Gesell said the pilot uniforms follow the navy suit design but are personalized according to rank. Captains have four pewter stripes on their coat sleeves, first and second officers have three stripes.
The captain’s military hat has pewter embroidery on the bill; the first and second officers wear military hats with solid black bills. Specially-designed wings are worn on the outer pocket of the jacket; the captain’s is characterized by more ornate tooling.
All pilots will wear cream shirts and solid navy ties with a small Braniff logo embroidered in scarlet on the bottom. The captain will have pewter, four-striped epaulettes (military bars) clipped to his shirt shoulders.
For Braniff’s one female pilot, Brenner, Inc. has designed fitted trousers and a scarlet bow tie.
All flight attendants and pilots also will be furnished a navy London Fog overcoat.
Customer service personnel (ticket agents, skycaps and cargo employees) will wear the same navy suits but with scarlet vests. Women will wear cream blouses with scarlet silk bow ties. To create a sportier appearance, they also may wear a navy leather belt stamped with the Braniff logo over their red vests.
Men will wear cream broadcloth shirts with a striped navy, scarlet and cream tie.
All customer service personnel will wear pewter-plated nametags on the front pocket of their suit jackets. Skycaps (employees who check baggage at outside entrances) will wear military hats with plain black bills.
Brenner, Inc. began designing and manufacturing Braniff’s new uniforms in November, 1993. They say uniform design projects of the same caliber usually take nine months to a year to develop.
“A great deal of design detailing has gone into the uniforms in a very short amount of time,” Eschelbrenner said. “For instance, even the buttons on the jackets are personalized with an enamel and pewter Braniff ‘B’. The nameplates and wings also are original designs and all fabrics have been dyed for Braniff, adding to the uniqueness of the look.”
Eschelbrenner has 19 years experience in the apparel business. Less than two years ago he formed Brenner, Inc. Already his clothing lines are represented in every state in the nation.
Kathy Gesell, designer of the Braniff, Inc. collection, has 12 years experience in apparel design. “This is truly a unique collection,” said Eschelbrenner. “It is a proud reflection of a proud company.”
Said Gesell, “When Braniff employees suit up to greet passengers we don’t want them to look good, we want them to look great.”
“BRANIFF’S BOARD OF DIRECTORS REFLECTS NEW PROFESSIONALISM”
New board directors are:
• J. Patrick Foley, president of Hyatt Hotels Corp. (domestic hotel management) since 1977.
• Bruce C. Leadbetter, chairman of the executive committee and a private investor and management consultant. Leadbetter also is director of Levitz Furniture Co.
• Troy V. Post, chairman of the board of Ammest Life Insurance Co. since 1972. Post also is director of Academy Insurance Group, Inc. From June, 1983 until December 15, 1983, he served as interim chairman of the board of Braniff International and Braniff Airways. He has served on Braniff boards since 1964.
• Robert A. Pritzker, president and director of the companies that comprise the Marmon Group, Inc. since 1953. Pritzker also is a director of Peoples Energy Corp., the RegO Group, Inc., Salem Corp., Union Tank Car Co. and Dalfort Corp.
• Thomas J. Pritzker, an employee in various management positions with Hyatt Corp. since 1977. Since April, 1980, Pritzker has been president of Hyatt Corp. Pritzker also is director of Dalfort.
• Glenn Shoop, an airline pilot employed by Braniff Airways before September, 1980. Shoop is a private investor.
All of the directors of the company were appointed on November 29, 1983, or December 14, 1983, and will serve until the next annual meeting of stockholders or until their successors are duly elected and qualified. Executive officers of the company serve at the discretion of the Board of Directors. (Jay A. Pritzker and Robert A. Pritzker are brothers. Thomas J. Pritzker is the son of Jay A. Pritzker.)
“FLIGHTS CONTAIN NUTRITIONAL MEALS”
A new kind of attention to the culinary tastes and nutritional needs of the frequent airline traveler is being given to the food service to be provided by Braniff.
Foods prepared from fresh ingredients (rather than pre-processed or frozen items), presented in the manner of fine restaurant service, await travelers n the new airline which begins service in March, 1984.
Michael Allen, director – dining service, uses such words as fresh, nutritious and quality when he describes meals aboard the new Braniff. The airline’s goal, he reported, is to provide good, well-served food and beverages to travelers, making their flights enjoyable and healthful.
Braniff’s new meal program is designed around its Business Cabin service which focuses on the business traveler who usually, because of the time factor, pays full fare.
“We envision this class of passengers as business people (although anyone can travel Business Cabin), who fly often and will especially appreciate a good meal.
“We’ve thought about their special needs. They consume many of their meals on airplanes and they want and need something nutritious. During the day, because they will be working, they may want a lighter, less filling meal. When they get on the plane, whether it be first thing in the morning or after a hectic day, they don’t want to wait to be served a beverage.”
All this has been considered and incorporated into the Business Cabin package. Business Cabin passengers also will be separated from the Economy section via a movable partition, and they will have access, loads permitting, to a convertible center seat which folds down to provide a work table.
Allen added that many of the same amenities provided in Business Cabin, are passed on to the travelers flying at a discount. They receive the same food and the same beverages, the main difference is in the presentation.
Braniff’s menu includes mixed vegetable salads, fresh fruits and dishes featuring grilled chicken, tenderloin, sirloin roast, veal and grilled sword fish with accompanying fresh vegetables. Allen said travelers can expect such dishes as Chateaulacroix and Chicken Florentine. Seafood dishes – including red snapper and filet of sole – also will be offered.
Deserts will consist of fresh fruit, cheeses and assorted light pastries.
Business Cabin will be treated to free beverages before departure. On longer flights (more than two and one-half hours flight time), they will also receive their meals in several servings. After take-off, seat tables are are lined with linen and a linen-draped tray with a napkin, glassware, silverware and china presented.
For breakfast, after meal orders are taken, flight attendants will serve fresh fruit and fresh-squeezed juices, coffee and champagne. This is followed by a second cart of breads, pastries, assorted preserves and additional beverage selections. Following the second cart, a hot entree is served to passengers directly from the galley.
Economy passengers are served from the same menu with all components on the same tray.
On longer flights, lunch and dinner in Business Cabin are served in much the same way, with wine accompanying both meals. During the noon hour, cocktails are presented after take-off. A two-cart presentation begins with a salad and is followed by a deli buffet and desert. Allen said this is a lighter meal than is normally offered by other airlines.
Business Cabin dinners on longer flights include cocktails and appetizers. A first cart of salads precedes the main course. A second cart follows with desserts, fresh fruit, cheese, with liqueurs and coffee ending the meals with a flair.
To maintain quality on short to medium-length flights (between one and one-and-a-half hours), hot and cold entrees are served on pre-set trays.
Dobbs House will cater flights originating from Dallas/Fort Worth Airport and departing from Kansas City, Chicago, San Antonio, Philadelphia and New York’s LaGuardia Airport. Marriott will serve flights departing from Denver, Washington, D.C., Newark, Houston, Las Vegas, Los Angeles, Miami, New Orleans, Oklahoma City, San Francisco and Detroit ad Royale will service Austin.
Allen is experienced in catering to the needs of airline passengers. Originally joining Braniff in 1965 as a flight attendant, he took charge of the airline’s catering service in 1971. Between 1972 and 1982 he was responsible for catering and cabin serving planning on all U.S. flights and those to Europe, South America and the Orient. Before joining Braniff in December 1983, he was food and beverage director of the Las Colinas Sports Club in Irving, Texas.
In keeping with the Braniff philosophy, cost consciousness without sacrificing quality has been part of the dining serving planning process.
“By working closely with Dobbs and the other suppliers we feel we’ve been able to do this. Our meals are planned to be nutritious and appealing.”
“BRANIFF, MARCH OF DIMES JOIN IN PROMITION”
When travelers fly Braniff beginning in March they can save dollars and support the March of Dimes Birth Defects Foundation. Braniff and the March of Dimes have joined together, through a special coupon campaign, to offer travelers a five percent savings off the pre-tax price of tickets while donating another five percent to charity.
Bob Russell, executive vice president of the March of Dimes, and William D. Slattery, president of Braniff, Inc., announced the campaign to reporters at a joint press conference Thursday, February 9 at Dallas/Fort Worth Airport. At the news gathering the two executives explained how the program will work.
During March, April, May and June, 1984, the March of Dimes will distribute special discount coupons through the volunteers and supporters of the March of Dimes and business and travel agencies in the 19 cities Braniff will serve. The coupons, when attached to a passenger’s flight segment coupon, will trigger a five percent refund to the passenger as well as a five percent donation to the March of Dimes.
Braniff and the March of Dimes also will provide passengers with the option to donate the full ten percent to the charity.
Coupons will be honored only o the Braniff portion of a flight and only on the non-tax portion of Braniff travel. They will be honored at all fare levels on a percentage basis.
More than 3 million coupons will be distributed during the first month.
“FREQUENT FLER IDEA GOOD FOR TWO”
Braniff and United Airlines believe their frequent flier program is points ahead of the competition. With more than 130 cities, domestic and international, covered between the two, their Mileage Plus program offers a wide array of benefits and travel prizes.
George Massie, director-advertising at Braniff, says the program offers something for everyone. People who frequently fly coast to coast or short flights in-between, can fly Braniff or United to just about anywhere, continuously earning Mileage Plus credits.
When travelers join Mileage Plus they immediately earn 3,000 start-up points. If they take their first trip within 60 days, another 2,000 points are added to their credit. At 10,000 miles that can collect their first prize, a free class upgrade. Or they can continue to build mileage for free trips anywhere Braniff, United, Lufthansa, SAS or Air New Zealand fly. Cruises on Royal Viking Line also are available, with other benefits including discounts on Hertz and Budget rental cars and accommodations at Westin Hotels.
After accumulating 30,000 miles, Mileage Plus members qualify for additional mileage bonuses, becoming Premier members.
The Premier membership increases credits earned on a percentage basis. Specifically, Premier members earn 25 percent more points after 30,000 miles, 50 percent more after 50,000 miles or 100 percent more after 100,000 miles.
Premier benefits include special rental car rates with Budget and Hertz and access to a Premier-members-only information hotline.
Mileage Plus members must follow rules and regulations of the program to qualify for benefits. For more information call Mileage Plus at 1-800-421-4655.
“Frequent flier programs make a big difference in ticket sales, says Robert Fornaro, vice president – marketing planning. Fornaro was instrumental in developing the Braniff portion of the program and says Mileage Plus is “very thorough.”
“Mileage Plus is geared toward making flying conditions more comfortable and offering better than average travel prizes.
“With well over one million Mileage Plus members, United has more planes flying to more states and ore of the country’s top 100 business centers than anyone else.
“Now that Braniff is linked to their program this makes the total service they offer even more extensive. There isn’t another frequent flier program anywhere that can match this.”
“TEAMING TOGETHER TO MAKE BRANIFF WORK”
“BRANIFF SPREADS ITS WINGS AGAIN”
(Peter Behr, The Washington Post – March 1, 1984) A reborn Braniff takes to the air Thursday, beginning service between Dallas-Fort Worth and 18 U.S. cities, not quite two years after it appeared dead and buried.
An unlikely combination of circumstances enabled Braniff to fly again after its May 1982 bankruptcy: There was a calculated gamble by financier Jay Pritzker, chairman of the Hyatt Corp., whose family put up $20 million to take control of the old Braniff Airways and helped secure $50 million in other financing. And there was the backing of 2,200 former employes of the old Braniff–one quarter of the old work force–who were willing to take pay cuts of 30 percent to 40 percent to work for the new airline. Then there was the decision by Braniff’s secured creditors, who owned the Braniff fleet, to go along with Pritzker on his gamble.
From its Dallas hub, Braniff will operate 172 daily nonstop flights to the cities on its system, including Washington, New York and Miami on the East Coast and Los Angeles and San Francisco on the West. Unlike the old Braniff, whose headlong rate-cutting helped ruin it, the new Braniff Inc. says it will charge the going rate, hoping to win a base of business customers by offering something close to first class service for full-fare coach passengers. To succeed, it must go head-to-head with its old nemesis, American Airlines, which has built a powerful hub-and-spoke route system out of Dallas-Fort Worth with 275 daily departures, which is more than three times the initial 82 daily flights planned by Braniff.
“It is a gamble,” the 61-year-old Pritzker said, “but the risk and reward rate is reasonable. And there was so much enthusiasm here you couldn’t just ignore it.”
Call it enthusiasm, loyalty, or a desire to erase the pain of the 1982 bankrupcty, there is a visible determination among Braniff veterans who joined the venture.
Jerry Wolfe, a Braniff pilot for 24 years, was selling real estate when the chance came to fly again for Braniff. He came, for a top pay of $44,000, one-third to one-half of what top-paid pilots make elsewhere. “As long as I make enough to feed my family, make the house payments and have a little left . . . it doesn’t matter what the other cats are making. Our airline was dead and now it’s revived.”
Monika Lysakowski, a flight attendant for nearly 20 years, spent the past weeks with other cabin crew members laying carpets and bolting down seats in the 30 Boeing 727-200 jets that Braniff will use. “I even sewed curtains and pouches for the life vests,” she said. Would her crew mates have done that five years ago? “It would have been impossible.”
“Our total labor costs will be half that of the industry average, but more important than that is the productivity,” said Vice President W. Thomas Lagow. “Our pilots and attendants will be working 80 hours a month. The industry practice is in the 50s.”
Roberts says he and the mechanics have been assured by Braniff’s new president, William D. Slattery, that his door is open. There was good esprit d’corps at the Alamo, too, it is said, and Braniff’s new employes are hoping theirs isn’t the loyalty of those in hopeless causes.
Some outside experts share the confidence that Slattery expresses about the airline’s prospects. The concessions by employes and other savings should lower Braniff’s operating costs to between 5.9 cents and 6.5 cents per seat-mile, Slattery says (a calculation that takes in the number of miles flown by all of the 146-seat aircraft). That figure is comparable to those of the low-cost airlines like People Express and Southwest, and is well below the 8 cents per seat-mile figure of older carriers such as American, says Alfred H. Norling, an analyst with Kidder, Peabody.
If Braniff is able to charge fares competitive with American and Delta while maintaining lower cost, it can succeed, said Norling. “I assume the new Braniff is here to stay for awhile,” Norling said. “If they have the will, they certainly have the wherewithal” in the backing of the Pritzkers and the Hyatt group.
The greatest unknown is how passengers will regard Braniff. And a key to that may be the attitudes of travel agents. In a survey of agents by the Dallas Morning News, 78 percent of those responding said Braniff would get another chance.
But when Braniff’s first flights depart Thursday, they will be about one-quarter full. To make it, the employees’ enthusiasm must prove to be catching.
“NEW BRANIFF UP AND RUNNING 20 MINUTES LATE”
(Mary Jo Nelson, The Oklahoman – March 2, 1984)
It was a day of joyous birthdays for the Braniff family.
John Paul Braniff Jr., born March 1, 1952, turned 32 on Thursday. A seminarian, he celebrated quietly at his priestly studies in Indiana.
The airline founded by his grandfather was reborn the same day. The new Braniff Inc. resurrected its tradition with 19 inaugural flights from as many cities.
Among the most honored passengers from Oklahoma City to the Dallas/Fort Worth Airport and back were John Paul Braniff, son of founder Paul R. Braniff, and another of John Paul’s sons Michael, 28.
“I’m so glad you were on my flight,” bubbled Lynn Fox Lyon, attendant on Flight 102 which carried John and Michael from Dallas to Oklahoma City.
“I was praying to Tom Braniff up in heaven every day. “Braniff just can’t be dead.’ I never gave up hope,” the stewardess said. Tom Braniff co-founded the airline with his brother, Paul, in 1928 in Oklahoma City. The two men died a few months apart in 1954.
As the inaugural flight 103 soared out of Will Rogers World Airport to begin the exciting day, the airline was running true to its new slogan, “Braniff is Up and Running.”
It was running late by 20 minutes.
Several of the 72 new flights also were delayed by minor first-day problems, but nobody seemed to mind as scores turned out at Will Rogers and elsewhere, just to wish the carrier “welcome back.”
Spirits were bubbling over with the champagne at D/FW, where hundreds showed up to jubilantly celebrate the day with Braniff employees.
Ray Barnett, who was Braniff terminal manager until the airline filed bankruptcy on May 13, 1982, was the first to greet the Braniff father and son in Dallas.
“What an honor,” he almost shouted. “Wait ’til I tell my wife.”
Inside the D/FW hospitality room, off-duty pilot Bob Ganss grabbed the elder Braniff. “I just want to shake your hand,” he told him. “We’re so delighted they kept the Braniff name. That makes us family.”
Like unknown numbers of other off-duty Braniff employees, former employees and their families, Ganss volunteered to personally greet passengers at Dallas. Similar Braniff armies staffed terminals throughout the system.
“I worked here 20 years and never met a Braniff,” said one former employee. “I’m tickled to death.”
“I think every single Braniff employee in the world volunteered today,” said Pat Zart, former long-time employee. She said hundreds of retired and unemployed Braniff people have volunteered for months to get the carrier back in the air.
At Will Rogers, more than 150 persons milling about wore “Welcome Back” stickers. The crowd munched on doughnuts provided by the airline, cheered when the plane rolled up to the ramp, again when Miss Oklahoma Susan Powell snipped a ribbon and gave the travelers a warm sendoff.
Before Flight 103 lifted off a Will Rogers runway, John Doyle walked up to shake the Braniff men’s hands. “I just came to see a little history being made,” he explained.
It was a historic and euphoric day for the Braniff father and son.
John Braniff was delighted with the new interiors of the Boeing 727-200. Looking over the understated elegance of soft silver, blues and beiges, he declared, “Thank goodness the pistachio is gone.”
The old Braniff International interiors used to be orange, red, purple, brown and assorted other colors.
John Braniff almost was overcome on a few occasions, the first when his name was announced as a VIP passenger. From that point on to Dallas, he spent the time autographing inaugural certificates Braniff furnished its passengers. He sent his own schedule to the cabin to be signed by Capt. T.E. Warkins and the whole crew.
In Dallas, the Braniffs were greeted by the airline’s new president, William D. Slattery, and scores of other employees. Taken for a tour of the operating control room, he was introduced to employee Charles Hynes.
“I knew your father,” Hynes told Braniff.
Delivering one of several impromptu speeches he made throughout the day, John Braniff’s voice quivered as he told the D/FW control crew, “This is a very touching scene, a very touching time.”
In the ground crew’s locker room, he said, “Keep ’em flying.”
“I sure am glad to see some Braniffs around here,” one of the crew responded.
“It’s the spirit I’ve seen today that will make Braniff a success,” Braniff told a flight attendant. It was a speech he delivered to many Braniff workers.
“We’ve put the legacy back. We’ve made lemonades out of lemons,” Roger Weston, new director of schedules, assured Braniff.
One gift to Braniff was a bottle of the specially labeled champagne that Braniff passed out to “toast our passengers” all day long.
“It’s not every day you get a bottle of champagne with your name on it,” he said.
Back home in Oklahoma City late Thursday, Braniff gave up his original plans of going to work for a while. “I’m not about to concentrate after all this. I would not part for this day for anything.”
“I know one thing,” chimed in son Michael, an Oklahoma State University student. “I’m gonna make an A in history.”
“ON THE COMEBACK TRAIL”
(John S. Demott, Time Magazine – March 2, 1984) Braniff Flight 200 from Dallas/Fort Worth to New Orleans last Thursday morning was by far the most important in the airline’s turbulent history. After being grounded in bankruptcy for almost two years, Braniff was back in business. It took off with freshly painted red-white-and-blue jets, a new major stockholder in the Hyatt Corp., competitive fares, fewer employees and a slimmed-down route system serving 19 cities, vs. 49 before. Said William Slattery, 41, the former TWA executive who heads Braniff: “We are looking to direct ourselves in ways that are so basic that they can’t be easily countered by any competing airline. We want to project a staid, comfortable, conservative image that is nothing like the freewheeling one Braniff had in the past.”
The airline’s new self-confidence is typical of several major companies that are bouncing back after being given up for dead. All were victims of external economic problems and their own excesses:
too much diversification or too swift expansion or poor relations with their unions. Nonetheless, they managed to find the money and talent to keep going.
They are, say Wall Street watchers, the beneficiaries of hard work, luck, a rapidly reviving economy and, above all, a will to survive.
Braniff’s plight was worse than that of most U.S. airlines. Nearly all were ravaged in the late 1970s and early ’80s by problems ranging from rising fuel costs to competition from upstart cut-rate carriers. Under the brash leadership of former Chairman Harding Lawrence, Braniff began to add planes and expand routes just as the economy was dropping into recession and oil prices were heading for another sharp increase.
By 1982 Braniff was $1 billion in debt and snarled in a suicidal fare war with its archrival and fellow Dallas-based carrier, American Airlines. At one point Braniff asked its employees to forgo temporarily $8 million in pay to help meet other expenses. Then in May 1982, lacking cash for food, fuel and salaries, Braniff became the first U.S. trunk airline to file for bankruptcy. Its planes were flown to Dallas and stored, while its management searched for ways to bring Braniff back to life.
The airline’s savior was Chairman Jay Pritzker, 61, of Hyatt, the hotel-operating company. Pritzker and Braniff put together a deal that gave the carrier $70 million to get back into business, while Hyatt got control of 80% of the airline’s stock. Everyone, it seems, gave up something. Braniff s workers saw their ranks dwindle from 9,400 to 2,200 and their pay shrivel: pilots agreed to annual salaries of $38,000, vs. an industry average of $68,900. Creditors approved the revival plan, as did most of Braniff’s unions. Slattery was recruited from TWA. In December the final details were worked out, and the carrier got ready for last week’s rebirth.
The new Braniff will again square off against prosperous American, which last week announced that it will begin taking delivery next year of at least 67 new McDonnell Douglas twin-jet airliners. The 142-passenger DC-9 Super 80s are part of a major American expansion drive. The carrier also plans an aggressive program to cut costs and keep ticket prices low. Renewed fare wars and an economic downturn could hurt Braniff, but owning an airline has long been one of Pritzker’s ambitions and he intends to stick by the venture. Says he: “I’ve always flirted with airplanes. It’s an exciting thing.”
“BRANIFF AIR ADDS SERVICE”
(The New York Times – June 4, 1984) Braniff Inc., citing substantial gains in air traffic, has added its first new destination since resuming operations on March 1.
The Dallas-based carrier on Friday began flying to Phoenix, increasing the number of cities it serves to 20.
Braniff had also planned to inaugurate service to Boston on Friday, but officials said landing space there was not available.
Braniff suspended operations in May, 1982 under a $1 billion debt and reorganized under Federal bankruptcy laws. Its parent is the Dalfort Corporation.
“BRANIFF HALTING SERVICE TO OKLAHOMA CITY, 9 OTHER STOPS”
(The Oklahoman – October 25, 1984) DALLAS Braniff announced Wednesday that it is eliminating service to Oklahoma City and nine other cities and reducing its fleet by two-thirds to “secure the survival” of the airline.
The reductions are expected to result in the layoffs of hundreds of Braniff employees.
The announcement, made after a hastily arranged meeting with employees, was accompanied by the resignation of Braniff President William Slattery.
Braniff said it intends to reduce its fleet of 30 Boeing 727s to 10 aircraft and has agreed in principle to contract 10 of the 20 idled aircraft to another, unidentified air carrier. Braniff has been negotiating in recent weeks to lease planes to Continental Airlines of Houston.
In addition, Braniff said it has arranged to sell nine of its 12 boarding gates at Dallas-Fort Worth Regional Airport to competitor American Airlines for $20.5 million.
“WHO GAINS WHEN BRANIFF PULLS OUT?”
(Kevin Laval, The Oklahoman – October 28, 1984) Airline spokesmen are uncertain how Braniff’s return to Oklahoma City affected market shares at Will Rogers World Airport and are equally uncertain about what to expect when the struggling carrier leaves.
Southwest Airlines’ share of boardings at Will Rogers suffered most when reoganized Braniff re-entered the Oklahoma City market, in March.
Southwest’s share fell 5.1 percent from February to March, according to data from the Oklahoma City Department of Airports.
For the same months, American Airlines’ share fell only 1.6 percent.
Southwest is not considered a significant Braniff competitor from Oklahoma City; American is thought to be Braniff’s principal competition.
Southwest’s Oklahoma City station manager, Jan Heinsius, said the airline has noticed a decline in its market share. But he said the airline thinks most of the decrease is the result of competition for service other than that to Dallas.
Joe Stroop, spokesman for American, said the effect on that carrier’s share at Will Rogers might have been less than would be expected.
“There has been some impact, notably here at Dallas-Fort Worth (International Airport),” he said. “But I think it would be difficult to say a two-point swing in the market share in Oklahoma City is especially significant.”
Dallas-based Braniff announced Wednesday that it will end service to 10 cities, including Oklahoma City, on Nov. 5. The reborn carrier said the streamlining also would involve layoffs and sale, lease or grounding of 20 of its 30 jets.
The company is trying to reduce Braniff’s operating losses. The airline has operated at a loss every month since its return to the sky.
Braniff’s propects dimmed in September, when its share of boardings at its base, DFW, declined from August’s percentage. Until then, the share at that airport had increased each month.
Airlines are hesitant to publicly discuss market shares; some refuse any comment on the matter. Historically, at the request of the airlines, the Oklahoma City Department of Airports has not released boardings counts for individual carriers.
The companies argue that boardings are confidential trade information that competitors can use to harm them.
Instead of reporting separate figures, the department has released monthly boardings totals for all airlines serving Will Rogers. Last week, however, the department, which is an agency of city government, began providing boardings totals for each of the 15 airlines serving Will Rogers.
For September, the airlines and their percentage share of boardings at Will Rogers were: American, 21.5; Southwest, 20.0; Delta, 10; TWA, 9.7; United, 7.5; Braniff, 6.2; Frontier, 6.1; Western, 5.1; Eastern, 4.4; Sunworld, 3.0; America West, 2.8; Northeastern, 1.3; Air Midwest, .4; Metro, .2; and Altus, .1.
The total of the 15 percentage computations is slightly less than 100 because fractions beyond tenths were not included. Moreover, the share for Continental, which suspended Oklahoma City service early in September, is not used in the comparison.
The boardings numbers and shares are a compilation of the department’s raw data by The Oklahoman and could not be confirmed by the airlines.
Braniff’s share at Will Rogers may not have been enough to justify continuing service to Oklahoma City, but it was increasing. After garnering 4.6 percent in March, the firm’s boardings share at Will Rogers was 5.1 percent in April and 5.9 percent in May.
The carrier’s share slipped in June and July, to 5.8 percent and 5.6 percent, respectively. But it improved during the next two months, to 5.9 percent in August and 6.2 percent in September.
October share data should be available in a few weeks.
Braniff spokesman Barbara Potter said the streamlining pitted the carrier’s cities against each other. She said an increase in share at Will Rogers may not have been enough reason preserve service here.
“When you get down to where you only have 10 aircraft in your fleet, you have to get down to which cities do you keep,” Potter said.
“You can only do so much with 10 airplanes.”
Southwest would not appear a likely candidate to be affected by Braniff’s return. Although also based in Dallas, Southwest operates from Love Field, the area’s smaller commercial airport, which is generally thought to serve a different market.
Potter agreed that Love Field’s being nearer to Dallas than DFW makes it more attractive to Dallas travelers who are well served by Southwest’s frequent flights to business centers in the region. But she said she would not be surprised if Braniff pirated some of Southwest’s customers.
“I think there are business travelers who want more than Southwest offers,” Potter said. “But I don’t think of us as being in head-to-head competition because we don’t sell the same product.”
Southwest is a no-frills, low-fare carrier that offers all coach seats and does not connect with other airlines. Braniff offers work areas and wider seats for its business travelers at a higher price and connects with other lines.
Although it has retained its business class and fares, Braniff blamed its heavy reliance on those sales for failure to operate profitably through August. In September, it announced that the other seats on its planes would be priced similarily to the low-fare system pioneered by Southwest and since adopted by Continental and Frontier.
Heinsius said the decline in Southwest’s boardings share at Will Rogers is due in part to the carrier’s operating one fewer flight to Dallas than a year ago. But he said the company, a tough competitor that has been consistently profitable, is not displeased with its performance here.
“Really, I see my market share has dropped off to the point where I’m not filling up all my seats through standby passengers as I had been,” Heinsius said. But he also said his estimates indicate the carrier’s share has not been less than 23 percent at Will Rogers since March.
Heinsius said he suspects Southwest’s decline in market share is more because of airlines other than Braniff. He said Southwest’s business to Albuquerque declined with the entry of America West on that route in December.
Sunworld and Western airlines also may be competing with Southwest.
Those carriers, also new to the market within the last year, offer direct service to western destinations that Southwest serves with flights that go through Dallas.
Southwest figures to regain some customers lost to America West, however, as that carrier suspended its Oklahoma service this week.
Glenn Bozarth, spokesman for Los Angeles-based Western, said that company considers its principal competitors to be TWA, United and Frontier. He said that firm’s near doubling of its boardings share at Will Rogers since July is probably because it doubled its number of daily flights, from two to four, in that month.
Heinsius said Southwest also is battling more competition for travelers to the south and east. Within the last year, Eastern airlines has begun serving Kansas City, a route on which Southwest offered the only jet service until Eastern’s flights began.
Heinsius said Delta and Northeastern, two other carriers new to the market during the last two years, have increased competition for business to Houston and New Orleans.
“OWNERS OF BRANIFF’S FLEET OF 727 FILE SUIT TO STOP AIRLINE FROM SUBLEASING AIRCRAFT”
(UPI – November 1, 1984) FORT WORTH, Texas — The owners of Braniff Inc.’s fleet of Boeing 727 airplanes have filed suit seeking to stop the financially troubled airline from subleasing two-thirds of its planes to other carriers.
The trustees of the Wilmington, Del., -based Braniff Liquidating Trust, formed to protect the interests of secured creditors of the once bankrupt airline, filed the suit in U.S. bankruptcy court this week.
Bankruptcy Judge Michael McConnell scheduled a hearing Thursday to consider the trust’s request for a temporary restraining order that would keep the airline from subleasing the planes until a creditors’ meeting on Nov 19.
The restraining order would halt Braniff’s proposed lease this month of 10 airplanes to Northeastern International Airlines of Fort Lauderdale, Fla., and to any other carrier.
Branniff announced last week a plan to lease 20 of its 30 727s to other carriers and slash its already discounted fares by as much as 38 percent in an effort to stay afloat.
The trust, which leases the planes to Braniff, claims that renting the planes to other companies violates an agreement prohibiting the aircraft from being re-leased.
The suit seeks to stop Braniff from pursuing any rental deals until the court determines the rights of the creditors under the present leasing agreements. It also asks that any aircraft Braniff leases to other carriers be considered in default and returned to the trust.
Braniff, which returned to the air in March after receiving a $70 million investment from Chicago-based Hyatt Corp., has lost nearly $80 million in its first six months of flying.
“THE INCREDIBLE SHRINKING AIRLINE”
(Time Magazine – November 5, 1984) There were smiles and handshakes and promises of success aplenty last March when Braniff airlines resumed flying after being grounded in bankruptcy proceedings for more than l½ years. But the Dallas-based carrier, which converted to a discount airline last September, has not regained its cruising speed. Last week, in an apparent act of desperation, Braniff said it would cut its fleet of 30 jetliners to ten and indicated that it may lay off as many as 1,200 of its 2,100 workers. The carrier will halt service on Nov. 5 to ten cities now on its route map, including Detroit, Houston and Philadelphia. Braniff also announced that its president, William Slattery, had left the airline to become head of Air Via, a new California carrier.
Braniff hopes that its retrenchment will stanch losses of about $80 million that have piled up since the airline returned to the skies. To raise additional cash, the company will sell leases on nine of its twelve gates at Dallas-Fort Worth Airport for $20.5 million to archrival American, and plans to lease ten of its jets to Northeastern International Airways. Braniff Chairman Jay Pritzker hopes that the slimmed-down carrier will now be able to fly out of trouble, but the cuts may be the beginning of the end for the new Braniff.
“A LOW-KEY, LOW-COST BRANIFF”
(Agis Salpukas, The New York Times – March 23, 1985) A shrunken and leaner Braniff airline is beginning to cut its losses through a strategy of low fares and frugal service.
The number of passengers on Braniff Inc.’s planes has increased by some 20 percent in the last few months, and the carrier has reduced its costs by more than $1 million a month. Although Braniff continues to report losses, it expects to see its first operating profit ever in its current fiscal quarter ending April 30.
The new strategy is proving successful, Braniff executives say, because it is low-key, as well as low- cost. By moving cautiously, and limiting its no-frills flights, Braniff so far has not provoked retaliation from its powerful rivals at the highly competitive Dallas-Fort Worth International Airport, where it has its hub. But, Braniff officials concede, if large carriers such as American or Delta should decided to match Braniff’s cheap, unrestricted fares, the carrier could be in trouble again.
May Have Found Niche
According to Paul Schlesinger, an analyst for Donaldson, Lufkin & Jenrette, the battered Braniff may have found its niche at last. The airline, he said, ”seems to have demonstrated that there may be a position where they can be big enough to be viable and small enough that they don’t constitute a threat to American.”
Braniff came into being as a scaled- down carrier after the former Braniff International filed for bankruptcy in May 1982. Last November, after suffering $81.9 million in losses in its first eight months, the new Braniff decided to seek survival by cutting back still further and becoming a budget carrier.
Patrick Foley, the vice chairman of Braniff, grounded 20 of 30 planes and cut the work force back by more than half of its 2,400 employees. He also brought in as president Ron Ridgeway, a former senior vice president of customer services with the old Braniff, to revamp the smaller carrier.
A $70 Million Kitty
This lean approach was in contrast to the ambitious strategy begun on March 1, 1984, when the new Braniff began service with 30 refurbished 727 Boeing aircraft to 20 cities. It had a kitty of $70 million, put together by Jay A. Pritzker, chairman of the Hyatt Corporation. After months of haggling, Mr. Pritzker persuaded creditor groups to rent the planes and take a chance on the new carrier.
The goal was primarily to attract the business traveler, by offering better food and roomier seats at regular coach prices – while also selling some discount seats in the back of the plane for leisure travelers.
That strategy failed dismally. The business travelers the airline had hoped to attract remained with the larger airlines, such as American and Delta, which offered more frequent flights and had gained the loyalty of many through ”frequent traveler” programs. ”There were no other options” but to try a different approach, Mr. Foley recalled in a recent interview. ”We’d given the concept enough time to see if it would work. We decided to make a change.”
So Far, It’s Working
So far, it has been working. Under the old strategy, the load factor, which measures how many available seats are occupied, averaged 42.3 percent from March through October. In contrast, Mr. Ridgeway said, the loads from November through February averaged 64 percent, with a high of 65 percent in February.
At the same time, he added, Braniff has been able to reduce its costs. By May, he predicted, its break-even load factor will be below 60 percent. Now, it is about 65 percent.
A major expense that the airline has shed is the cost of 10 of the 20 planes that were grounded last November and remained parked at Love Field in Dallas, where Braniff has its headquarters. The company had to continue to make lease payments of $90,000 a month on each to BRNF Liquidating Trust, which represents the airline’s creditors. Braniff also had to spend $30,000 a month on maintenance per plane.
”With all 10 of them parked out there,” Mr. Ridgeway said, ”that was $1.2 million of unproductive costs going out the front door each month.”
He said that the carrier had now returned the planes to BRNF.
Also, the lease rentals of $90,000 a month on the remaining fleet has become a bargain. The price of used Boeing 727’s has risen from about $5 million a plane to more than $8 million. The rise is mainly ascribed to falling aviation fuel prices, which have made the used planes less costly to operate.
The airline, which has put 10 more planes in service, has also built up its route system, and is flying 15 planes to 13 cities, with the other five planes being used for charter service. Still, it remains a shadow of its former self. At its height, Braniff International had 70 planes flying to more than 50 domestic locations and an extensive network in Latin America.
Mr. Ridgeway concedes that Braniff faces stiff competition from such powerful rivals as American Airlines, which accounts for 65 percent of the travel at Dallas-Fort Worth,
Braniff is keeping the number of flights limited, so that the large carriers, so far, have not felt threatened and matched Braniff’s lower, no restriction fares.
It also is seeking to spread its operations to areas where the competition is less fierce. On April 28, Mr. Ridgeway said, Braniff will put three to five of its planes into Kansas City, Mo., from where it will fly to Los Angeles, Phoenix and Las Vegas, Nev., in the West, and to New York, at La Guardia Airport, and Washington, at National Airport, in the East.
He noted that Trans World Airlines was cutting back its flights at Kansas City as part of a domestic operations cutback. Eastern Airlines, however, is building up a hub there, and Mr. Ridgeway believes the carrier will match Braniff’s fares on a restricted basis, setting aside a limited number of discount seats on each flight.
‘A More Humble Approach’
”It’s a more humble approach,” Robert Fornaro, the vice president of marketing for Braniff, said in an interview. ”We’re not looking to be a large hub-dominating airline.”
Thus, while American has 11 nonstop flights daily from Dallas to New York, and Delta has seven, Braniff has limited itself to two.
American tolerates Braniff because it would lose more money by matching Braniff’s fares than by letting the smaller airline have a limited fare advantage. Braniff’s one-way, unrestricted coach fare from Dallas to La Guardia in New York, for example, is $135, compared with $344 for the large carriers.
Large carriers do offer some much lower fares, but with restrictions, such as a 30-day advance purchase requirement. Such restrictions make these fares less attractive to travelers who cannot plan far ahead.
Thus, Braniff, according to Mr. Fornaro, has found that it can appeal to customers of travel agents, who account for about 70 percent of airline bookings, and who became disillusioned with the initial high-priced Braniff. Donald Peterson, the manager of American International Travel, a large travel agency in Dallas, said: ”A lot of people are booking Braniff because its fares have no restrictions – and it’s causing Braniff planes to be full sometimes.”
“COMMUTER AIR SERVICE TO BEGIN”
(The Oklahoman – July 1, 1987) Altus Airlines becomes Braniff Express today in a switch that will leave the commuter line Braniff’s only service to Will Rogers World Airport.
Braniff, which has been operating two early jet flights a day from Oklahoma City to Dallas and Las Vegas, will end them July 14.
Termination of jet operations will mean Braniff’s name will carried on by the four-plane Altus Airlines operating as Braniff Express.
Flying twin-engined Cessna 202s, Braniff Express will serve Will Rogers, Tulsa, Wichita, Dallas-Fort Worth, Lawton and Altus with up to nine flights a day.
Although affiliated with Braniff, Braniff Express will continue to be owned by Oklahoma Airways Inc., a company spokesman in Altus said.
“We strongly believe in the potential of commuter services that tie in to the Braniff system in ways that will offer our excellent low fares to a wider variety of markets,” said J. Patrick Foley, Braniff chief executive.
“FLORIDA EXPRESS AND BRANIFF PLAN MERGER”
“IN-THE-RED ORLANDO AIRLINE PUTS BRANIFF IN RICH MARKET”
(Adam Yeomans, The Orlando Sentinel – October 28, 1987) Braniff Inc. will acquire Florida Express Inc., the financially struggling Orlando-based airline, in a stock swap valued at about $20 million, the airlines announced Wednesday.
Gordon Linkon, chairman and chief executive officer of Florida Express, said the airline agreed to the merger because it has been losing money and soon could be in danger of going out of business.
“I didn’t want to find out if it would come to that. We are not doing well and we have not done well,” he said. “I was concerned about our future in a highly competitive environment.”
Florida Express has been in the red since posting a $2.8 million loss on revenue of $80.3 million in its fiscal year that ended June 30.
The Dallas-based carrier has not decided how many of the 800 employees of Florida Express it will keep, Linkon said. About 600 employees work at Orlando International Airport and the company’s headquarters at 8500 Parkline Drive in south Orlando. The airline had employed as many as 900 people earlier this year.
Employees had a “bittersweet” reaction when informed of the proposed merger Wednesday, Linkon said. “Some of them feel like it should remain an independent company. Others feel like it will be strengthened with Braniff.” Florida Express began flying in January 1984 with three planes that served eight cities. It built to a peak earlier this year of 20 planes and 23 destinations. The airline began scaling back its operations during the summer because of financial difficulties.
Linkon said he and Braniff officials have not discussed what role, if any, Florida Express executives would have with Braniff. He said details still had to be worked out on a plan to provide employment protection for some non- management Florida Express workers.
Patrick Foley, vice chairman and chief executive officer of Braniff, will be in Orlando today to meet with Florida Express managers and to continue to work out details of the acquisition.
Braniff officials in Dallas could not be reached to expound on their plans for Florida Express beyond the contents of a prepared statement.
In the statement, Foley said, “We have been seeking opportunities like this to solidify our market niche, and Florida Express appears to be a very good fit for us.”
Braniff had approached several Central Florida airports to obtain gate space so it could resume service. Orlando International had no gates available, so Braniff had to negotiate with individual airlines to acquire gates.
The proposed buyout, subject to approval from shareholders and the U.S. Department of Transportation, would allow Braniff to expand into the lucrative Orlando market, airline analysts said.
Braniff filed for bankruptcy protection in 1982 nearly $1 billion in debt and started flying again in 1984 as a low-cost, no-frills carrier. The airline served Orlando for several months in 1985 before suspending service.
“I think strategically it makes sense for Florida Express. It makes a lot of sense for both airlines,” said Jerry Falkner, an analyst with the brokerage Lovett Mitchell Webb & Garrison in Houston. “Braniff wanted to get into Florida and its vacation market.”
In acquiring Florida Express, Braniff would get 19 British Aerospace Co. BAC-111 jet aircraft and two gates at Orlando International.
Braniff probably would continue to serve Florida Express’ routes, analysts said. Florida Express operates a hub-and-spoke system, flying between 10 mid-sized cities in the eastern United States and six Florida destinations through its hub in Orlando. The airline also serves Nassau, Bahamas.
“I’d be surprised if there’s any shrinkage,” Linkon said. “I would not be surprised if they added more cities.”
Braniff serves 19 cities, including Miami, and operates hubs in Dallas and Kansas City, Mo. The airline reported a profit of $2.6 million on revenue of $74.7 million in its latest quarter. It lost $9 million on revenue of $239.4 million in fiscal 1986.
Linkon said he would discuss the stock swap with shareholders at the company’s annual meeting Nov. 17. A special shareholders’ meeting will be held in December to approve the deal, he said.
Barry Carroll, a Florida Express director and vice president of International Metals and Machines Inc., said he believes the stock swap proposed by the airlines “is a fair deal” for shareholders. With 30 percent of the airline’s stock, IMM is the company’s largest shareholder.
Carroll said he hoped the merger would increase the value of shares held by Florida Express stockholders. “The two airlines are stronger together than they would be individually,” he said.
Under the agreement each share of Florida Express stock would be exchanged for one-sixth of a share of Braniff common stock and one share of a new series of 10-year cumulative convertible preferred stock.
The Braniff preferred stock would have an estimated value of $2 a share, a 7 percent annual cumulative dividend and would be convertible into Braniff common stock at a price based on 125 percent of the average market price for Braniff common stock for January 1988. However, it would be convertible at no less than $7.50 a share and no greater than $9 a share of Braniff common stock.
The stock swap had been developed before the stock market’s crash Oct. 19, Linkon said. The share value of both airlines has dropped significantly since then.
Falkner said he expected Braniff’s shares to recover because the merger gives the airline a much larger market. Whether the deal is a good one for Florida Express depends on the performance of Braniff’s stock, he said.
On Wednesday, Florida Express closed at $2 a share, down from $3 a share before Oct. 19. Braniff closed at $3.875, down from $6 a share before the crash.
“BRANIFF INC. HAS ANNOUNCED IT WILL DROP MORE THAN HALF OF ITS DAILY FLIGHTS FROM DFW AIRPORT”
(Los Angeles Times – July 25, 1988) Braniff Inc. has announced it will drop more than half of its daily flights from Dallas-Ft. Worth International Airport to focus operations at its hub in Kansas City, Mo. Braniff, which is based at Dallas-Ft. Worth, is expected to announce major service increases at Kansas City today. Beginning Sept. 12, Braniff will suspend direct service between Dallas and Chicago, Miami, New York, Phoenix, San Francisco and Washington. The reduction in service at Dallas-Fort Worth had been anticipated since Dalfort Corp. sold Braniff to BIA-COR Holdings last month.
“BRANIFF PLANS IN KANSAS CITY”
(The New York Times – July 26, 1988) Braniff Airlines Inc. announced today that it would expand its service in Kansas City, Mo., adding flights to four additional cities and more flights to 14 others.
Beginning Sept. 12, Braniff plans to increase its daily departures from Kansas City’s Mid-Continent International Airport to 76 flights, the most by any airline, from 50. On Friday, Eastern Airlines
Inc. announced that it would cut all but six of its 53 departures from Kansas City.
Braniff officials said the timing of their announcement was unrelated to Eastern’s cutbacks. ”This expansion has been in the planning for quite a while,” said Susan Lomelino, a spokeswoman for Braniff.
”Eastern had nothing to do with it.”
Braniff has said it plans to reduce service in Dallas, where it is based, and may move its headquarters to Kansas City.
Braniff was bought last month by an investor group led by the Paine Webber Group and four senior officers of Piedmont Aviation were brought in to run the airline. Braniff will benefit from Eastern’s cutbacks, analysts said, noting that it would get a share of the advanced bookings on Eastern that could no longer be met. And Braniff will be spared a price war to build market share, they said.
“BRANIFF PLANS TO TOUCH DOWN IN OKLAHOMA CITY AGAIN”
(Mary Jo Nelson, The Oklahoman – July 26, 1988) Braniff Inc. is coming home to Oklahoma City again.
The airline, founded here in 1928 and based in Oklahoma City until 1942, will return to Will Rogers World Airport on Sept. 12 with three daily departures to its Kansas City hub.
It will mark the second return to Oklahoma City since Braniff filed bankruptcy May 12, 1982, and was reborn under the founders’ names on March 1, 1984.
The added service will offset the loss of three flights to Kansas City operated by Eastern Airlines. Eastern announced last week it is pulling out of Oklahoma City and 13 other markets as part of a major restructuring.
Braniff’s new owners said Monday the airline will enter three new markets in addition to Oklahoma City and expand service to 14 destinations.
The changes will result in an additional 26 daily departures from Kansas City’s Mid-Continent International Airport.
Richard L. James, a Braniff vice president, said the additional service will bring to 76 the number of daily Kansas City departures _ the most of any single airline operating out of Mid-Continent.
Braniff’s plans were set months before Eastern’s announcement, James said.
LeRoy Hansen, Oklahoma City airports director, said he hasn’t met with Braniff and doesn’t know what Will Rogers space might be assigned the airline.
It is possible Braniff could take over facilities to be vacated Aug. 31 by Eastern.
James said Braniff is taking service out of Dallas-Fort Worth, where it has been operating 20 flights a day.
“In Dallas, we would always be the third largest carrier,” James said. “In Kansas City, we have a chance to build and develop a significant national hub. Braniff has got to control its own destiny, and we could not in DFW.
“We’re trying to give (the Kansas City airport) enough synergy and focus to make it a major mid-continent hub,” James said Monday.
Braniff was founded by the late Paul R. Braniff, a pilot, and his brother, Thomas E. Braniff, a wealthy Oklahoma City insurance man who financed the venture. Paul Braniff learned to fly during World War I and was the airline’s first pilot.
Air mail contracts kept the carrier flying during the 1930s. Through merger and expansion, it became the first all-jet airline in the early 1960s, and was the nation’s eighth-largest carrier when it collapsed in bankruptcy in 1982.
The Braniff downfall began in the 1970s, when deregulation encouraged its management to acquire routes other carriers had abandoned. It expanded to Asian capitals and to 16 American cities other airlines had found unprofitable.
After several years of expansion, Braniff International ceased operations, reporting $732 million in debt. The airline was resurrected when Hyatt Corp. acquired its physical assets.
Braniff served Oklahoma City for a brief period in 1986-87.
Braniff was sold again last month, with controlling interest now held by BIA-COR Holdings, headed by Jeffrey R. Chodorow of New York, chairman of CoreGroup. Dalfort Corp., controlled by the Pritzker family, continues to own a substantial interest.
“BRANIFF REPORTS NET THIRD QUARTER LOSS OF $7.8 MILLION”
(UPI – Deceber 16, 1988) DALLAS — Braniff, Inc., under new ownership since June, Friday reported a net loss of $7.8 million on revenues of $127.5 million for the third quarter of fiscal 1988 ended Oct. 31. In the same period of last year, the airline earned $1.6 million, or 13 cents a share, on revenues of $82.1 million.
For the nine months ended Oct. 31, Braniff had a net loss of $11.4 million on revenues of $354 million, compared with a net loss of $7.8 million on revenues of $218.2 million in 1987.
W. Howard Mackinnon, Braniff’s chief financial officer, said the 1988 losses largely reflected the costs associated with the development of Braniff’snew structure in the Kansas City, Mo. and Orlando, Fla. hubs. The airline’s earnings were also affected by costs for integrating the operations of Florida Express which Braniff acquired in the Spring.
Dalfort Corp. sold its controlling interest in Braniff to a Paine Webber-led investor group, BIA-COR Holdings for $102 million in June. Dalfort is controlled by the Pritzker family of Chicago which also owns the Hyatt hotel chain. The Pritzker interests retains a 6 percent non-voting interest in the new Braniff.
Mackinnon said the new restructuring should have a positive long-term effect on Braniff’s operating results.
Braniff’s yield rose to 9.96 cents per revenue passenger mile in the latest quarter, up from 7.45 cents in the year-ago period. For the nine months of fiscal 1988, the yield grew to 9.39 cents, up from 7.12 cents in 1987.
Since the acquisition, Braniff’s new owners have sold the airline’s gates at the Dallas-Fort Worth International Airport and other assets to American Airlines. Competition from American was one of the causes that drove the former Braniff Airways into Chapter 11 bankruptcy in May 1982. It emerged from bankruptcy in 1984.
The sale of assets to American, including a hangar at Chicago, are expected to net Braniff some $40 million. Braniff currently operates six flights out of the DFW airport through gates leased from American.
At the time of the acquisition, the airline’s new owners indicated they might move their entire operations to Kansas City. Although much of those are now concentrated in Kansas City and Orlando, Braniff continues to maintain its headquarters in the Dallas area and officials said they have no immediate plans to move out. The headquarters employs about 800 people out of Braniff’s total work force of more than 4,000.
Braniff has a fleet of 53 planes which includes Boeing 727-200s, 737-200 and BAC1-11.
“BRANIFF DECLARES BANKRUPTCY, CANCELS MOST FLIGHTS”
(AP – September 28, 1989) Braniff Inc. filed for bankruptcy protection and laid off 2,700 employees early today, a day after canceling flights through its major Kansas City hub and its Orlando home base for several hours, a spokesman said.
Braniff sought protection from creditors to allow it to reorganize under Chapter 11 of the U.S. Bankruptcy Code in the Florida city, said Don McGuire, the airline’s vice president for corporate communications.
“We expect to operate four flight segments, that’s non-stop services, between two cities today and we want to raise that to more than 40 by Monday,” McGuire said. “We’ll gradually expand the service.”
The flights will be between Kansas City and Orlando and Kansas City and Dallas, the company said.
The employee layoffs were to begin today, the company said.
The airline issued a terse statement late in the day saying it began canceling “selected flights” at 2:45 p.m. EDT and some additional flights would be scrubbed later.
Braniff had given no explanation for the action or the state of the airline in general.
As of last May, Braniff served 31 destinations from Kansas City and 16 from Orlando. It has more than 4,000 employees, including 440 pilots.
Braniff’s work force includes an estimated 2,000 employees in Kansas City, 1,165 in Orlando and 450 in Dallas.
Among the scrubbed trips Wednesday was a 4:30 p.m. flight from Los Angeles International Airport to Kansas City. Braniff operates five flights daily from LAX and two from Ontario Airport.
Telephone reservation clerks Wednesday night told callers that all of Thursday’s flights from Los Angeles had been canceled and that the company was “going bankrupt.” At Ontario, a Braniff employee dismantled the ticket booth Wednesday night. “They told us to pull the equipment,” the man said, as he carted away telephones and paper work. “This station is closed.”
Earlier Wednesday, according to a memo obtained by the Times, ticket agents were instructed not to issue Braniff tickets or to pay delayed baggage claims. The ticket agents were also instructed not to deposit the money received from customers Wednesday night.
Braniff canceled most of its afternoon and evening flights in Kansas City, Miami and Orlando and informed airport authorities in Kansas City that an unusually large number of aircraft would remain there overnight.
In Orlando, radio station WWNZ reported that Braniff employees were seen leaving the Orlando airport Wednesday afternoon with tears in their eyes, as the airline’s executives met to discuss the carrier’s future.
Braniff filed for Chapter 11 bankruptcy protection in May, 1982, and was grounded for nearly two years after that. It was resurrected by Jay A. Pritzker, chairman of Chicago-based Hyatt Corp., who paid $70 million for 80% of the company’s stock.
Fifteen months ago, after a failed attempt to merge with Pan Am Corp., Pritzker sold 64% of Braniff’s shares to an investment group formed by Paine Webber that included Jeffrey R. Chodorow, chairman of Coregroup, a Philadelphia investment firm, and New York real estate developer Arthur G. Cohen. At that time, four top officers from Piedmont Airlines joined Braniff, including Chairman William G. McGee.
The new owners moved Braniff’s headquarters to Orlando and shifted its hub from intensely competitive Dallas-Ft. Worth International Airport to Kansas City.
When Eastern Airlines, Braniff’s major competitor in Kansas City, filed for bankruptcy protection earlier this year, many expected Braniff to benefit. Just nine months ago, the attitude at the company was upbeat. In January, Braniff placed an order for 50 Airbus A320 aircraft and took options on 50 more. The deal, valued at $3.5 billion, would have more than doubled Braniff’s fleet to 171 from 71 by 1995.
In May, McGee announced an aggressive program that included expanding the work force by 35% companywide and constructing new maintenance facilities in Orlando and Kansas City.
In June, however, the company reported a loss of $21.2 million, or $1.44 a share, for the first quarter, leading to speculation that the airline might be expanding too quickly. The company cited the costs of expansion in Kansas City and elsewhere, as well as the higher costs of operating newly acquired aircraft as the reasons for the wider loss.
“BANKRUPTCY PETITION BY BRANIFF”
(Agis Salpukas, The New York Times – September 29, 1989) Braniff Inc., the nation’s 15th-largest airline, filed for bankruptcy protection yesterday, caught between the high cost of an aggressive expansion and the difficulty of securing financing in a troubled ”junk bond” market.
The airline, which has its central operations in Kansas City, Mo., and Orlando, Fla., said it would try to rebuild as a smaller carrier serving 11 cities, down from 36. The airline also said it would cut its work force by more than half, to 2,000 from 4,791. It said it hopes to offer 40 flights by Monday, down from 256 before it suspended flights, leaving thousands of passengers stranded at airports or worried about future flights.
The carrier said unused tickets could be used on Braniff flights until Sept. 27, 1990. Other carriers were divided about the use of Braniff tickets on their flights. As part of an attempt to attract customers despite its troubles, the airline also said it would offer $49 one-way fares between any of the 11 cities it will serve beginning on Monday, through Oct. 4.
Protected From Creditors
With its filing under Chapter 11 of the Federal Bankruptcy Code, Braniff is protected from its creditors while it tries to reorganize. Some industry executives who asked not to be identified said Braniff might squeak through and rebuild because it has valuable assets against which it might be able to borrow.
Braniff’s stock closed at $1.875 in over-the-counter trading yesterday, down $1.125 from the previous day and down from $6.125 Monday.
Braniff was in bankruptcy before, in 1982, resuming operations in March 1984. The airline, bought last year by a group represented by Paine Webber Inc., gambled this year that it could build up quickly in the vacuum left by Eastern Airlines when it pulled out of Kansas City about a year ago. Since March, Eastern has been crippled by a strike.
Braniff has moved its headquarters from Dallas to Orlando and established Kansas City and Orlando as its hubs in the last year. It added many cities to its route network and ordered about $3.5 billion in new planes. The idea was to rebuild as a major national airline at a time when larger carriers, with their computer reservation systems, frequent-flier programs and wide route networks, were gaining increasing dominance.
Analysts said yesterday that a main reason for Braniff’s troubles was that it sought to grow too quickly, adding greatly to expenses at a time when the carrier was already beset by losses. It lost $46 million in the first six months of this year.
The troubles were worsened by a industrywide slowdown in traffic at the end of the summer.
”They were walking right near the edge,” said one analyst who did not want to be identified. ”Everything had to go right for them to succeed.”
The analyst said the company had hoped to ride out the crisis with $25 million in new financing to be raised by the investment banking firm of Drexel Burnham Lambert Inc., but Drexel’s effort was not successful.
Officials at Drexel were said to be still exploring the options for Braniff when they were told that the airline had chosen to file for bankruptcy.
The attempt at new financing came at a particularly difficult time. After the investor group bought control, Braniff was already a highly leveraged company. Moreover, the high-yield junk bond market has been in turmoil since the financial problems at the Campeau Corporation came to light. Leasing Company Backs Off
The analyst said the failure to obtain financing led GPA Group Ltd., the world’s leading aircraft leasing company, to back off from lending Braniff $65 million. In return, GPA would have received 16 of Braniff’s 50 commitments from Airbus Industrie to deliver A320 jets, as well as 50 options to buy that model.
The carrier filed for protection in Federal Bankruptcy Court at about 2 A.M. yesterday in Orlando.
William G. McGee, the chairman, president and chief executive, said that although Braniff’s Airbus A320 delivery positions ”have substantial value, the company has suffered a liquidity problem as a result of a delay in completing recently announced financing and a softening of airline traffic and yields in recent months.”
Braniff last year carried 4.3 million passengers, accounting for less than 1 percent of the domestic airline market. American with 64.3 million passengers carried the largest number.
Braniff accounted for about 30 percent of the departures at Kansas City International Airport, with about 90 flights a day there. But Robert R. Jones, the operations manager of the airport, said Braniff’s traffic could be picked up easily by other carriers.
Braniff had been a far larger carrier before its first reorganization under bankruptcy than it is now.
No Consistent Strategy
Because of concessions from its unions, Braniff’s labor costs were among the lowest in the industry. But it could not devise a consistent strategy to compete with giants like American Airlines and Delta Air Lines, which dominated the Dallas/Fort Worth hub.
The Paine Webber Group Inc. acted as a financial adviser to the group that bought the airline last year, which was led by real estate investors including Jeffrey R. Chodorow of Philadelphia and Arthur G. Cohen of New York. Paine Webber said yesterday that it had no investment in Braniff and that it had not exercised rights and warrants to acquire 8 percent of Braniff’s common stock.
The new owners bought the airline in a leveraged transaction that increased the debt of the carrier from $53.5 million to $95.5 million, adding sharply to its interest costs.
The group brought in new management made up mostly of former executives of Piedmont Airlines, led by Mr. McGee.
“EX-CHIEF OF BRANIFF BLAMES LATER LEADERS FOR BANKRUPTCY”
(AP – September 29, 1989) The former head of Braniff Inc., who piloted the airline through bankruptcy court seven years ago, blamed changes by subsequent management for landing the company back in Chapter 11.
“You could see it coming,” Howard D. Putnam, Bran-iff’s former chief executive, said in an interview Thursday.”They took on a lot of debt,” he said. “They began a gigantic expansion in Kansas City, and they began to lose money. They had been known as a low-fare airline and became a high-fare airline. They got out of their niche.”
Putnam said he tried to remake Braniff in the style of Southwest Airlines Co., a Dallas airline he led as president. Southwest stressed high employee productivity, high utilization of planes, low fares and high-quality service.
Braniff handled the charter flights between Salt Lake City and Los Angeles and San Francisco for locally based Morris Air Service. But upon hearing of the impending bankruptcy, Morris Air quickly arranged to have Amer-icaWest and Continental airlines handle the charter flights until a contract with another charter service is signed.
Chicago businessman and hotelier Jay Pritzker bought Braniff in 1983 as it was emerging from bankruptcy court and altered that strategy, Putnam said. Pritzker sold the Orlando, Fla.-based airline in 1988 to investors led by Jeffrey Chodorow of Philadelphia.
“They in turn brought in new senior management,” Putnam said. “Some of the management were from Piedmont (Airlines), which is in a different part of the country with little competition and higher rates.
“They had first class, and it seems logical, I’m assuming, to management that since it worked back there it should work for Braniff,” he said.
But Braniff early Thursday filed for protection from creditors under federal brankruptcy laws, off 2,700 employees and sharply reduced its flying schedule.
The airline said that while it believes assets have “substantial value,” it was suffering a liquidity problem because of delays in completing recently announced financing and a dropoff in airline traffic in recent months.
Putnam, who was in town to address University of Pittsburgh graduate business students on ethics, said Braniff now must “restructure their way out of it.”
“The saddest part about Braniff is the employees,” Putnam said. “When we reorganized, the employees took wage cuts of 40 to 50 percent for five years in order for the company to come back. They’ve done their part.”
Upon filing under Chapter 11 in May 1982, Braniff suspended operations, laying off about 10,000 employees and leaving only 225 on the job, he said. Within two weeks, the company also laid off 22 vice presidents and eliminated two levels of management.
A bankruptcy judge gave the company permission to dissolve its labor contracts and seek concessions from workers. Putnam said the pay cuts were easier to achieve because the employees were laid off.
“I had no problems with that ethically . . . because we were already in (Chapter) 11 and the only way we could come out is if we had some more productive labor rates,” he said.
“I got them to understand that I was their last hope,” Putnam added. “I didn’t tell them I was going to cut their salaries any more. I just said we needed more productivity.”
“BARGAIN FLIGHTS TO LIFT HOBBLED BRANIFF”
ORLANDO, FLA (AP – October 2, 1989) Braniff, Inc., which made an emergency landing in bankruptcy court last week and grounded nearly all its 256 daily flights, said Sunday it would have 46 back in the air today.
It offered seats on the flights at $49 each, one way from 11 cities.
The airline increased service from four flights Thursday, after filing for Chapter 11 protection in federal bankruptcy court in Orlando, to eight daily departures Saturday and Sunday.
“We believe the routes we are operating with these highly competitive fares will provide a solid foundation for further expansion,” Tom Volz, senior vice president for marketing, said in a release.
The $49 one-way fares will be offered through Thursday to attract passengers, Braniff said. It will then offer $99 one-way fares for the remainder of October.
Today’s flights will serve Orlando, Kansas City, Los Angeles, San Francisco, San Diego, Chicago, Newark, Washington National Airport, LaGuardia in New York, Dallas and Phoenix.
Before Wednesday, the airline operated 55 jets and flew to 39 U.S. cities and Nassau in the Bahamas.
Braniff spokesman Don McGuire said the discount fares appear to be attracting travelers.
“The flights are booking very, very well,” he said.
Braniff is using Boeing 727-200 jets to operate its reduced schedule this weekend and next week.
Meantime, laid-off workers were looking for other jobs and applying for unemployment compensation, worrying about how they can earn their next paycheck while the airline starts rebuilding.
The Teamsters, representing about 2,250 customer service agents, clerical workers and other Braniff personnel, planned meetings today in Orlando to discuss strategy and relief.
“AIRLINES HAVEN’T PICKED UP MANY ABANDONED BRANIFF FLIGHTS”
KANSAS CITY, Mo. (AP – October 10, 1989) Only a few airlines serving Kansas City International Airport have stepped in to provide service lost when Braniff Inc. cut its routes drastically almost two weeks ago.
America West has added flights to Las Vegas, Nev., and Omaha, Neb., while USAir has added two flights to Indianapolis.
All three cities were eliminated from Braniff’s schedule when the bankrupt carrier decided to operate with 20 departures out of the Kansas City airport. Braniff had 93 flights in and out of Kansas City International daily before filing for bankruptcy protection.
But airlines have not responded by adding flights to Boston, Philadelphia and at least 15 other cities where Braniff had direct service.
Braniff filed for protection from creditors under Chapter 11 of the federal bankruptcy laws in Orlando, Fla., less than two weeks ago. About 2,800 of the company’s 4,800 workers were laid off as part of Braniff’s attempt to reorganize as a small carrier.
Additional cities that Braniff dropped as destinations from Kansas City include Albuquerque, N.M.; Atlanta; Cleveland; Denver; Detroit; Houston; Miami; Milwaukee; Minneapolis-St. Paul; Oklahoma City; San Antonio, Texas; St. Louis; Seattle; Tampa, Fla.; Tucson, Ariz.; Tulsa, Okla.; and Wichita, Kan.
Many of those cities have direct flights from Kansas City by other airlines, but some of the other cities can only be reached by changing planes.
For example, there now is no direct flight out of Kansas City to Boston, said Kathy Sudeikis, executive vice president of Overland Park, Kan., travel agency Brennco Travel Inc.
″People get used to having those direct flights,″ she said. ″It just gets to be a pain when they’re not available any more.″
Given that most airlines have a limited number of aircraft already used in other routes, it appears unlikely that the other cities dropped by Braniff will be picked up soon by another carrier, Ms. Sudeikis said.
William Hill, president of Trans-Mark Travel, said carriers that had direct flights to some of the cities eliminated by Braniff had not experienced shortages.
″The other airlines have easily absorbed the demand,″ Hill said, noting that this is an off-season for air travel.
Hill added that Braniff’s cutbacks had not had an impact on air fares, either.
″It’s probably too early for that,″ he said.
Cities to which Braniff retained its service but that have been the targets of expansion by other carriers are Los Angeles and San Francisco. Both USAir and United Airlines have added flights to both of those destinations since Braniff’s bankruptcy.
“CASH-STARVED BRANIFF HALTS ALL FLIGHTS”
ORLANDO, Fla. (AP – November 7, 1989) Cash-starved Braniff Inc. has suspended all regular passenger flights, jeopardizing some 1,800 jobs and angering employees who had stuck with the airline during two bankruptcy proceedings.
″These people that bought Braniff, they need to be put on trial by Braniff employees and taken out for a public flogging,″ Leo Bailey, a laid-off customer service agent, said when he heard the news in Kansas City, Mo.
In a statement issued at midnight Monday, Braniff said the action was taken to preserve assets while a reorganization plan is developed and a sale of the airline is considered.
There were no immediate reports of passengers being stranded by the suspension of Braniff’s 46 daily passenger flights.
In Orlando today, Braniff’s headquarter offices and ticket counters were empty and no passengers were seen.
″I think the impact is not going to be that severe in that many people have booked on other airlines. I think the word was out and people were booking elsewhere,″ said Dave Napoli, assistant general manager at Kansas City International Airport, where Braniff had operated 20 daily flights.
About 30 Braniff planes were parked at the airport this morning, Napoli said.
The company advised ticketholders to check if other airlines would honor the tickets. People who bought tickets with a credit card were told to consult with the card company, and those who purchased tickets with cash or a check after Sept. 28 were given a toll-free number to call for a refund.
The suspension of flights came as a surprise to many of the employees who remained with the airline after it filed for protection from its creditors under Chapter 11 of the U.S. bankruptcy code Sept. 28 for the second time.
″We’re all in shock,″ said Jim Hamilton, a Braniff pilot based in Dallas. ″We were hoping that someone would buy Braniff and want to run it, but maybe there was nothing left to buy. It’s just a case of complete mismanagement.″
Braniff didn’t address the possibility of layoffs other than to say employees would be notified of their status, a prospect that left union officials frustrated.
″What a mess,″ said V.O. Delle-Femine, executive director of the Aircraft Mechanics Fraternal Association, upon hearing the news in Rhode Island.
″Ever since the bankruptcy, upper management has given no response, no answer to the employees of the company,″ said Charlie Stitz of Gladstone, Mo., a Braniff flight attendant who was called back to work Nov. 1.
BIA Acquisitions, an investor group formed by PaineWebber Inc., bought Braniff in June for about $100 million and became the airline’s third owner since its 1982 bankruptcy reorganization.
Braniff had 4,800 employees when it filed for bankruptcy again in September. At the time, it said it was cutting the number of cities served from 36 to 11: San Diego; Los Angeles; San Francisco; Phoenix; Dallas; Chicago; Kansas City; Orlando; New York; Newark, N.J., and Washington.
The airline had a workforce of about 1,800 before the suspension of service.
Under a court-administered reorganization plan, the company had put 46 of its 256 pre-Sept. 28 flights back in the air by Friday, said Sandy Smith, a spokeswoman at Braniff headquarters in Orlando. But the effort was doomed by a cash shortage, she said.
″We didn’t come up with any other alternative financing and options like that. There just wasn’t any more cash,″ Smith said.
The last flights were arriving at about the time of the announcement and the planes would remain at their destinations indefinitely, Smith said.
Braniff will try to expand its charter service while studying its options, including sale of the company, said William G. McGee, chairman, president and chief executive officer.
The airline lost $31.8 million during the first six months of this year on sales of $293 million.
On Friday, Braniff laid off about 100 mostly administrative employees.
“BRANIFF, CITING LACK OF CASH, CEASES PASSENGER SERVICE”
(AP – November 7, 1989) Braniff Inc. said today that it was ceasing all passenger service immediately because a severe cash shortage doomed its bankruptcy reorganization plan.
William G. McGee, the company’s chairman, president and chief executive, said the action was taken to preserve assets while Braniff continues to develop alternatives, which might include selling the airline.
”We didn’t come up with any other alternative financing and options like that,” said Sandy Smith, a Braniff spokeswoman in Orlando, where the board of directors met today. ”There just wasn’t any more cash.”
Braniff a subsidiary of the Dalfort Corporation of Dallas, decided it would halt all passenger service at midnight tonight but would continue to expand its charter airline service while Merrill Lynch Capital Markets explores strategic alternatives, Mr. McGee said in a short statement released just before midnight tonight. The airline had been operating 46 flights a day.
The last flights were arriving around midnight, and the planes would remain at their destinations indefinitely, Ms. Smith said.
Mr. McGee said employees at the Orlando-based Braniff would be notified individually about their status.
Persons holding Braniff tickets should check with other airlines, which may honor Braniff tickets in some cases, the statement said.
People holding tickets bought with a credit card were told to consult the card company, and those who purchased tickets with cash or a check after Sept. 28 were advised to call a toll-free number for a refund.
Braniff was the first big carrier to file for bankruptcy following airline deregulation in the early 1980’s. It emerged as a smaller carrier in 1984, but claimed weekly losses of about $1.5 million before filing for Chapter 11 bankruptcy again on Sept. 28. It lost $31.8 million on revenue of $293 million in the first half of this year.
On Friday, Braniff laid off about 100 mostly administrative employees. It was scheduled to submit salary plans for its top executives in bankruptcy court Nov. 17.
“BRANIFF ENDS PASSENGER AIR FLIGHTS”
(Martha M. Hamilton, The Washington Post – November 8, 1989) Braniff Inc., strapped for cash and unable to find additional financing, yesterday ceased all its passenger service but vowed to return as a charter carrier. Yesterday’s announcement, which is expected to result in the layoff of most of Braniff’s remaining 1,800 workers, appeared to spell the end of Braniff as a competitor in an industry increasingly dominated by a few major carriers. Sources familiar with the situation said that the charter operation essentially is a fig leaf for the sale of the airline’s major assets.
A telephone recording at the home of a senior Braniff official invited callers “to the interment and burial of Braniff Three.” Braniff, assisted by Merrill Lynch Capital Markets, has been exploring — so far unsuccessfully — new ways of raising capital and is considering a sale of the airline, the company said yesterday.
Once a major carrier, Braniff operated as a regional carrier with a hub in Kansas City until September when it filed for protection from its creditors under Chapter 11 of the federal bankruptcy law. But even after the carrier reduced its scheduled flights to 47 and laid off half of its workers, it continued to bleed cash. Last week, attorneys for Braniff had indicated that the airline could not afford to continue operations beyond the end of this week unless additional financing could be arranged.
William G. McGee, chairman and chief executive officer of Braniff, said yesterday that the airline ended scheduled service in an attempt to conserve cash and develop a reorganization plan. A committee made up of the airline’s largest unsecured creditors met yesterday to determine what course of action to pursue. Some creditors have been pushing to liquidate the airline by selling its assets, even before the announcement of the end of scheduled service, sources said.
Last Friday, Braniff laid off approximately 100 workers; that was in addition to the more than 2,000 workers who lost their jobs in September with the bankruptcy filing and cutback in service. Sandy Smith, a spokeswoman for Braniff, said a majority of the remaining employees would be furloughed with a core of perhaps 150 left.
Even if the company continues to operate charters under its federal certificate, most of Braniff’s assets are likely to be sold, sources said. The company’s charter business consists of flying the New Orleans Saints and the Kansas City Chiefs to out-of-town games, spokeswoman Smith said. Smith said that the company has no plans to file for bankruptcy under Chapter 7, which amounts to liquidation.
Braniff said that passengers holding tickets on the canceled flights should check with other carriers to determine whether they would honor Braniff tickets. Continental Airlines said yesterday that it will accept most Braniff tickets on some basis.
Braniff’s McGee blamed the losses that led to the company’s Chapter 11 filing on barriers to competition within the increasingly concentrated airline industry. But observers said the losses resulted from inadequate capital for operations and a series of strategic mistakes.
It was the second time Braniff sought protection in federal bankruptcy court. In 1982, the company’s filing resulted from a failure to withstand the competitive pressures that airline deregulation had unleashed.
The airline was reorganized as a smaller carrier in 1984, under new ownership by the Pritzker family, which also owns Hyatt Hotel Corp. In 1988, the Pritzkers’ company, Dalfort Corp., sold the airline to BIA-COR, a Philadelphia company owned by investor Jefferey R. Chodorow and real estate developer Arthur G. Cohen. Under the new ownership, Braniff pulled out of the Dallas-Fort Worth Airport, where it had made money, to expand its hub in Kansas City and move its headquarters to Orlando, Fla. Competitor American Airlines bought Braniff’s facilities in Dallas.
Howard Putnam, Braniff’s chairman at the time of its first Chapter 11 filing, said that the carrier suffered most recently from too much expansion and too much overhead.
“BRANIFF EXECUTIVES ANSWER CREDITORS”
ORLANDO, Fla. (AP – November 28, 1989) Executives of Braniff Inc. told a roomful of disgruntled creditors Tuesday the airline was limping along as a ″limited charter carrier″ while seeking a buyer and continues to run up expenses under bankruptcy proceedings.
″We have a number of alternate plans, but each plan requires investments,″ said Howard McKinnon, the company’s chief operating officer, who along with Braniff Chairman Bill McGee has been talking to potential investors or outright buyers for the Orlando-based airline.
The lack of adequate funding ″prevents us from having any meaningful discussion or planning,″ McKinnon said, adding that pressure from creditors ″clouds this whole issue.″
Howard T. Glassman, a Philadelphia lawyer representing Braniff, told the creditors in one of a series of meetings conducted by the bankruptcy trustee that there was no clear picture of the airline’s future.
But officials said they do not expect Braniff to go into liquidation and sell its assets.
The company, which filed for Chapter 11 protection from creditors Sept. 28, has 275 to 300 employees left from a total of about 4,800, the officials said. It is losing money on a charter operation run by 15 pilots.
Mark Osterberg, Braniff’s senior vice president for finance, said in response to questions from creditors’ lawyers that the company had about $500,000 cash in hand and monthly expenses of about $1.7 million, including $1 million in payroll for remaining employees. The figures do not include hefty legal fees, the charter operation and other non-scheduled expenses, he said.
Osterberg also said the company pays $1 million in rental costs every month. Braniff anticipates some $3 million to $4 million in credit card fees and another $1.5 million from other sources this coming month, he said.
Osterberg was unable to estimate how long the airline could continue to operate in this manner.
Braniff executives acknowledged they were behind on bills, including payments due airports in Kansas City, Mo., and Dallas.
Glassman has been fighting attempts by a group of aviation companies to cancel Braniff’s long-term lease and purchase agreements for 50 Airbus A320 jets. He reported that Braniff had received a favorable ruling on what he called ″our major assets.″
U.S. Bankruptcy Judge C. Timothy Corcoran concluded last Saturday that Braniff’s contracts are valid and that the aviation companies have to deliver the planes.
Braniff has an option to buy another 50 Airbuses, in addition to the complex agreements to lease 26 Airbuses from Ireland’s GPA Group Ltd., buy another 24 from Avsa SARL and finance the transaction.
Braniff considers those contracts ″the linchpin to enable the debtor to go forward,″ Glassman said, meaning the airline can sublease the planes or sell the contracts. The agreements for the jets also make Braniff more attractive to potential buyers.
Braniff, however, failed to come up with $3 million in lease payments for five Airbuses it has already received from GPA, and it may have to return the aircraft.
Under terms of another ruling issued Monday, GPA would be free to sue Braniff to get the five jets if Braniff did not make the $3 million payment by midnight Monday.
Glassman said Braniff may appeal the ruling, hoping to extend the payment deadline by 60 days.
″But that’s a totally separate issue,″ he told reporters. ″If I lost the planes on the ground because we couldn’t pay the $3 million, that doesn’t impact the other 95 planes. The five are not critical, as much as we’d like to have them.″
What’s crucial, he said, is the judge ruled that Braniff’s contracts for the total number of planes are valid, despite the bankruptcy proceedings.
″All we want is to market this position and raise money based on these planes,″ he said.
“MIDCONTINENT AIRLINES CEASES OPERATIONS”
KANSAS CITY, Mo. (AP – December 8, 1989) Midcontinent Airlines Inc., a regional carrier that had been scaled down since Braniff Inc.’s bankruptcy filing, has ceased operations indefinitely.
About 35 Midcontinent employees in Kansas City have been laid off, Chairman Steve Gillette said Thursday. The carrier had nearly 50 workers in its system, he said.
Midcontinent had been a commuter carrier feeding passengers to Braniff flights out of Kansas City International Airport, using the name Braniff Express.
Braniff, based in Orlando, Fla., filed for Chapter 11 bankruptcy protection in late September – its second such filing in seven years. The airline has ceased operations.
Midcontinent, using a dozen planes at its peak with 46 departures from the Kansas City airport, could not recover from Braniff’s shutdown, Gillette said.
He said few travelers would be affected by Midcontinent’s shutdown. The carrier has had small passenger loads in its 19-seat planes since attempting to operate independently. Midcontinent halted all flights after Braniff’s reorganization filing but started up again using three planes in mid-October.
With about 15 flights a day to six cities, Midcontinent had filled only about 30 percent of its seats since restarting, Gillette said.
Midcontinent will try to start back up early next year after a restructuring that will require more capital, Gillette said. The airline does not intend to file for bankruptcy protection at this point, he said.
Midcontinent plans to come back as a regional carrier and serve Midwestern cities that need more flights to and from Kansas City, Gillette said.
He declined to release information about the company’s assets or liabilities.
Air Midwest Inc., another feeder carrier to Braniff hurt by its shutdown, has continued to operate and now has about 50 departures daily to many Midwestern cities.
“ODD TWISTS IN BRANIFF’S TALE”
(Martha M. Hamilton, The Washington Post – December 10, 1989) When Braniff Inc.’s new owners took control of the airline last year, the deal was initiated by an unlikely source — Scot M. Spencer, a 24-year-old with no real credentials in the industry but with a drive to be a player. He had something else: a record of run-ins with the law.
If the genesis of the deal was unusual, so was some of the financing. A major competitor, American Airlines, provided Braniff’s new owners with $40 million for a deal that resulted in the removal of Braniff as a low-cost competitor in one of American’s major markets. As such, the deal was quintessential American, say industry observers — an adroit grab at an unusual business opportunity that allowed American to collect higher fares at Dallas-Fort Worth Airport.
A little over a year after Spencer and American entered the picture, Braniff is all but out of business — a casualty of management missteps, financing problems and stiff competition. Forced by a cash shortage into federal bankruptcy court, the carrier has canceled its scheduled flights, laid off thousands of workers and grounded most of its planes.
American downplays any benefits it may have received from the Braniff deal.
“The answer is that there really is no one who kept track of any numbers. I don’t know that there was any benefit,” said airline spokesman Al Becker.
But an analysis of fares in markets where Braniff once competed with American suggests otherwise. So do knowledgeable sources in the airline industry.
“There is nothing that helps you more than taking a route from three to two carriers or two to one carrier, particularly if the one that gets out is the low-fare impetus,” said a senior executive for another major airline. “To be able to, under the guise of being a good Samaritan and doing somebody a favor, to grease the way out of town for a low-cost competitor — I wish I had a way todo that. That’s brilliant.”
U.S. Department of Transportation data suggests that both American and Delta, which also operates a hub at Dallas-Fort Worth, benefited substantially in markets that Braniff abandoned. Although Braniff had only a small percentage of the Dallas-Fort Worth market, it had a larger presence on a few popular routes and helped hold ticket prices down with its low fares.
After Braniff left, fares paid by passengers who traveled from DFW to New York’s LaGuardia Airport went up 42.5 percent between the fourth quarter of 1987 and fourth quarter of 1988. In that market, Braniff had offered a one-way, non-stop unrestricted coach fare of $248, which American and Delta had matched on a limited basis. After Braniff left, Delta and American offered only an unrestricted one-way coach fare of $463.
The story was the same in other markets: Average fares paid from DFW to Chicago went up 41 percent; to San Francisco, 44 percent; to Washington Dulles International Airport, 64 percent. Fares on other routes of comparable length, where Braniff was not a factor, increased minimally in comparison.
The deal with American was “unusual only in that it essentially got rid of Braniff as any kind of major competition in Dallas,” said one source familiar with the transaction. American paid Braniff $19 million for facilities at DFW, a maintenance hangar in Chicago and valuable takeoff and departure rights at airports where flights are restricted and lent the carrier the balance of the $40 million.
“Maybe it was a good investment even if they don’t get any of the $21 million,” the source said. “I don’t think American lost anything in this deal, and they even managed to unload some old aircraft,” said Paul A. Turk of Avmark Inc., an aviation management service firm that is serving as a consultant to the creditors committee in the bankruptcy.
Braniff’s new investors also bought four aging and in-need-of-repair American Airlines jets and leased them to Braniff.
The chain of events that led Braniff back to bankruptcy court started with Spencer. His involvement with airlines dates to 1984, when Spencer promised a carrier called Air One enough cash to keep it out of bankruptcy court. Spencer, who was 19 at the time, never delivered the cash, and the airline ended up in court. But Spencer maintained his interest in the airline industry, and it was Spencer who brought together Braniff’s new owners with former owner Jay Pritzker, the Chicago businessman whose family owns Hyatt Corp.
He “was the guy who brought the idea to Chodorow to put it together,” said John Pincavage of the Transportation Group, who worked at PaineWebber when the company was handling the Braniff transaction. Jeffrey R. Chodorow is a Philadelphia real estate entrepreneur, who along with New York real estate investor Arthur Cohen formed BIA-COR Holdings to buy Braniff.
The 1988 deal wasn’t the first transaction involving Braniff and American that young Spencer had attempted. In December 1986, according to court records, Spencer tried to cash a stolen Braniff ticket at American Airlines’ DFW ticket counter for its $610 value. Convicted of a misdemeanor, Spencer paid a $250 fine. But county records quote the officer who investigated as saying that Braniff, American and Delta Airlines all “had extensive files on the defendant involving ticket fraud schemes perpetrated on their respective airlines.”
The same month he got in trouble at DFW, Spencer was also detained by police at Washington National Airport on suspicion of check fraud, although he was not prosecuted. He was also convicted in March 1988 in Union County, N.J., of writing bad checks, an offense for which he is still on probation.
Spencer was never on Braniff’s payroll but occupied an office and served as an “adviser” until after the bankruptcy. He left Braniff Nov. 1, after a senior executive raised questions about his role there. Spencer did not return repeated telephone calls but issued a statement Nov. 1, saying that he believed — “and management and ownership agreed — that my resources and contribution could be best made elsewhere. For that reason, I chose to step aside and remove myself from the scene in order that Braniff could get on with the important issues at hand.”
According to several former and current Braniff employees, Spencer sometimes represented himself as the president of the airline. They said his role appeared to be the owners’ agent, advising a team recruited from Piedmont Aviation to run the airline.
“He wasn’t on the payroll, but I think he wielded a club over management,” said one Braniff pilot.
Other former colleagues at Braniff describe him as an unstoppable talker, with enough knowledge of the industry to sound convincing and a compulsion to be the center of attention. He also sometimes described himself as close to American Airlines Chairman Robert Crandall, according to former and current Braniff employees.
“He’d get on an airplane and hold court. He’d get the flight attendants into a little covey in the galley and would come into the pilots crew room,” said the pilot. “At least with employees, without throwing his weight around he surrounded himself with the aura that suggested he could.”
When he left Braniff, Spencer also resigned as president of two Braniff-related subsidiaries of BIA-COR — Core Leasing, which acquired and leased aircraft to Braniff, and Core Capitol Consultants, which has billed Braniff for $700,000 in administrative services. He remains a shareholder in BIA-COR Holdings.
Chodorow said that Spencer’s role at Braniff has been exaggerated.
“His role has been so overblown, and truthfully, if I listened to everything people have said I would think he catered the planes, flew them, unloaded the baggage and took the tickets at the ticket counter, plus made every decision,” said Chodorow. “Scot is a very bright, intelligent individual when it comes to airline matters,” said Chodorow. “Anybody in the profession who ever talked to him about airline matters came away saying, ‘That kid is really bright.’ He did act in an advisory manner. He put his two cents in, and if his two cents were worth two cents or 20 cents, management might have followed or utilized it. If they thought his two cents were worth zero, they ignored it,” he said.
When Spencer and the airline’s management disagreed, he said, “I always sided with management.”
Nor did Chodorow get involved in the Braniff transaction or develop a business plan for the airline solely based on Spencer’s advice, he said. PaineWebber, the investment banking firm that handled the transaction, the respected airline consulting firm Simat, Helliesen & Eichner, Inc. and GPA Group Ltd., a large aircraft-leasing firm that also became an investor in the deal, all reviewed the plan, Chodorow said.
Chodorow learned on the day he was scheduled to close on the Braniff transaction of Spencer’s police record — from the Pritzker people.
“It came to my attention at the time of the closing. I had not bought the company based on his recommendation. I had bought the company based on a lot of analysis. So we closed,” he said.
Chodorow said that Spencer told him that he had made restitution for the bad check and that his offenses were misdemeanors.
“I was not prepared to ostracize him for the rest of his life for things that happened when he was a very young person,” said Chodorow. “The fact that had happened did not mean he couldn’t work for the rest of his life. He offered to use his knowledge in a positive way, and we gave him an opportunity to do that.”
In a subsequent interview, Chodorow said, “In point of fact, the reasons he is being picked on are really twofold. Number one, he was vocally critical of certain people at the company and the job they were doing and he stepped on toes. Number two, some former members of management of this company are out looking for jobs who, to the extent they have any responsibility for what happened through their actions, are not prepared to step to the forefront and take responsibility … The problem we’re having is there are people out there covering their own ass and not necessarily being truthful.”
Braniff Chairman William G. McGee, who was formerly chief executive of Piedmont, and W. Howard Mackinnon, Braniff executive vice president and chief financial officer, another Piedmont executive recruited to Braniff management, said they viewed Spencer as the owners’ agent but that their decisions were never overridden by him.
“It’s ludicrous to think he would influence to any major degree a management team that had had substantial experience in running an airline,” said McGee. “I think that’s heavily overstating his influence and the issues.”
Asked whether he would have hired Spencer, McGee said, “I will tell you frankly that, no, I would not have hired him … He’s an extremely bright young man, but he simply did not have the experience in the business.”
The picture that emerges of the way Braniff was run in the next year is of an airline with ambitious plans that would have been hard to carry off in the best of circumstances.
Undercapitalized from the beginning, in McGee’s and Mackinnon’s view, and unable to raise additional capital fast enough when the airline hit a slump in the market, it was all over.
One of the major decisions suggested by Spencer was to drop the Dallas hub to focus on Kansas City, where Braniff’s chances for success appeared greater.
“Yes, he brought the idea of expanding in Kansas City, but the idea was adopted by everybody involved in the transaction,” said Chodorow of Spencer’s contribution.
“If Braniff was ever to get ahead and have its own identity in the business, it could not have done so by concentrating in Dallas,” said McGee.
Others agree that it was probably the right step to take. “It was much more of a benefit to Braniff to pull out of Dallas than it was to American,” said Edward Starkman, an airline analyst with PaineWebber. “Was Braniff ever going to be able to hub at Dallas and make a go of it against American and a rapidly growing Delta? The answer is no. They would have gotten squished.”
Braniff had operations in Dallas, Kansas City and Orlando, but faced its stiffest competition at Dallas, where American dominates airline traffic and Delta has a strong presence.
Eastern Airlines, the principal competitor in Kansas City, was planning to abandon its hub there and was shut down by a strike a few months later.
According to Chodorow, Braniff didn’t have the luxury of remaining in Dallas at the same time it tried to build a hub in Kansas. Its resources were too thin. Besides, the airline’s owners wanted to reposition the carrier as a full-service, full-fare airline, instead of the low-cost alternative.
“We might have had some limited profit potential in Dallas, but no expansion, no ability to take the airline and build it into anything really significant,” he said.
Even so, building a successful hub at Kansas City that could compete for coast-to-coast traffic with hubs such as Trans World Airlines’ St. Louis hub or American’s and Delta’s hubs in Dallas was risky.
For one thing, in addition to being relatively small, Kansas City also has relatively few nearby cities to supply connecting traffic, according to Bill Pacelli, director of schedule and revenue management for Avmark. Pacelli worked in Eastern Airline’s strategic planning department when Eastern adopted Kansas City as a hub. In markets that could have generated traffic for Kansas City — such as New York, Washington, Los Angeles and San Francisco — Braniff offered relatively few flights compared with other carriers. Competing in those markets, Braniff was “just going to get lost in the crowd,” said Pacelli.
And yields — passenger revenue per mile — were low in Kansas City. Braniff had challenged Eastern in Kansas City with low fares, which were hard to raise rapidly after Eastern left.
“When we tried to bring our yield in line with hubs at other cities, traffic migrated away from us,” said Chodorow.
Braniff could have eventually built the hub at Kansas City into a success but for two things — a general softening of traffic and a lack of city support in providing Braniff promised services and financing, said Chodorow.
As airline traffic declined, other airlines discounted fares and fewer passengers sought Braniff. Braniff’s yield dropped from a record high in March of 11.8 cents to 10.22 cents by August, he said. As a result the carrier lost about $8 million a month in revenue it had anticipated. That shortfall coincided with some extra expenses.
Braniff not only faced expenses from moving its headquarters from Dallas to Orlando, but also from costs related to acquiring new aircraft. By the end of July, reserves had shrunk to $3.6 million from $31.6 million last February.
Critics of Braniff’s owners have also pointed to fees paid its new owners and bonuses paid management as a drain on cash. For instance, Core Leasing received $1.7 million for “conceiving of and executing” a $3.5 billion deal to acquire Airbus Industrie A320 aircraft. The fee Core Leasing received “was probably in keeping” for a transaction of the size and complexity of the Airbus deal, said Turk of Avmark.
BIA-COR Holdings, the company formed to acquire Braniff, received $1 million for its role in the purchase, a fee that Chodorow describes as modest compared to fees paid in other takeovers and barely enough to cover costs. “I spent five months on this,” he said. “That amount of money did not cover our overhead for the time we spent doing the transaction.”
Chodorow and Cohen also each invested $10 million in the transaction and have guaranteed loans, and GPA invested another $5 million, none of which has been repaid, he said.
The owners also received fees through Core Capital Consultants for administrative services. Again, according to Chodorow, there was virtually no profit.
McGee received a cash bonus of $500,000 to come to Braniff at a $425,000 salary and was to receive an additional $350,000 at the end of each of his first two years of employment. Mackinnon and Richard L. James, executive vice president, were recruited with bonuses of $275,000 each and an additional bonus after a year.
One of the biggest demands for cash resulted from Braniff’s $32 million purchase of Eastern and Trans World Airlines’ gates and facilities in Kansas City. The airline anticipated that the purchase would be refinanced by the city through a bond issue. When the city found legal barriers to the bond financing, “that left us with a $32 million shortfall of cash at a critical time,” said McGee.
Other plans to raise cash were in the works but couldn’t be completed in time.
On Sept. 27, the airline began cancelling flights. Early Sept. 28, Braniff filed for protection from its creditors under Chapter 11 of the federal bankruptcy code.
Staff writer Nell Henderson contributed to this report.