Mark Rennella

Gordon Bethune’s Revival of Continental Airlines

When Gordon Bethune took over Continental Airlines in October 1994, he and his close associate Greg Brenneman had little time to overhaul the airline.1 Net income had plummeted from a loss of

Herb Kelleher at Southwest Airlines

113 million in 1993 to a staggering

C. E. Woolman and Delta Air Lines

613 million deficit in 1994.2 Bankruptcy and liquidation were not just on Continental’s horizon; they were pounding on the front door. For a week, Bethune and Brenneman spent the evenings together debating how exactly they would save their moribund airline. These “last suppers,” as they ironically called them, turned out to provide the insight and energy that served to resurrect the airline. Brenneman describes the essentials of their approach: “Most companies that are in trouble … tend to develop a myopic focus on cost. They forget to ask simple questions like, Do we have a product people want to buy? … [T]hey forget to think about money in, or good old revenues.”3

Juan Trippe and the Growth of International Air Travel

Wearing satin shorts and a bathrobe, Herb Kelleher prepared to enter Dallas’s seedy Sportatorium during a winter morning in 1992. Kelleher’s “athletic” look, topped off with a sweatband pushing back his hair, was deliberately undercut by a cigarette dangling defiantly from his lips. Surrounded by an entourage rented from the world of professional wrestling, the 63-year-old CEO of Southwest Airlines had come to arm wrestle his company’s latest nemesis: Kurt Herwald, the 38-year-old weightlifting CEO of Stevens Aviation, an aircraft maintenance company based in South Carolina. Herwald had recently taken offense when he learned of Southwest’s use of the slogan “Plane Smart.” It seems that Stevens Aviation had already been using “Just Plane Smart” as their slogan for the past couple of years. But instead of calling on his lawyers to get things straightened out, Herwald phoned Kelleher directly and challenged him to fight for the rights to the slogan, mano a mano. Seizing this as a chance for great publicity, Kelleher hyped the event as “Mallice in Dallas,” gave 700 Southwest employees the morning off and brought them to the event to cheer him on. The arena soon echoed with the chant of “Herb! Herb! Herb! Herb!”

Juan Trippe’s Early Entrepreneurial Efforts

The survival and eventual growth of Delta Air Lines during the tumultuous early days of the airline industry in the 1920s and 1930s was due in large part to the character of its director, Collett Everman (C. E.) Woolman. Simultaneously visionary and practical, risk-taking and fiscally prudent, a university-educated cosmopolitan who naturally blended into smalltown Southern culture, Woolman somehow balanced these contradictory attributes and used them to create a prominent national business.

The Guggenheims: Promoting Aviation in America

Less than 10 years after Pan Am had to charter a plane to save itself from potential ruin by almost failing to fulfill its contract to deliver mail to Cuba, the company was playing a starring role in a major Hollywood movie.1 China Clipper (1936)—starring, among others, Humphrey Bogart—portrayed the hard-driving Dave Logan, a pilot inspired to start his own airline after Lindbergh’s solo flight across the Atlantic. After failing to launch a domestic airline that would serve Washington, D.C. and Philadelphia, Logan establishes an airline company to service the Caribbean and then sets his sights on an even bigger prize: transpacific air service from the United States to the Far East. His dreams are fulfilled by the use of a new, powerful airplane called, of course, the “China Clipper.” The film was made with Juan Trippe’s cooperation and eventually received his blessing. His associates at Pan Am were quite surprised that Trippe did not object to the final cut of the movie because the portrait of Dave Logan was not very flattering.2 A film review in the New York Times provided an apt description of the character based on Pan Am’s president: “he goads himself and his aides mercilessly toward the realization of his vision. Marriage, friendship, consideration of himself—these are sacrificed upon the altar of his ambition.”3

William “Pat” Patterson and United Air Lines

It was October 18, 1927, and Juan “Terry” Trippe, the new president of Pan American Airways, was just days from becoming a failure in the nascent airline industry. Trippe had already begun two airline projects that had ended almost as quickly as they had begun. Now, embarking on his third, Trippe ran into a pressing problem. Pan Am’s head pilot, Ed Musick, was supposed to be carrying the mail from Key West, Florida to Havana, Cuba to fulfill a mail contract granted to Pan Am from the U.S. Post Office. Unfortunately, Musick could not get to the Keys; he was stuck in Miami with a new Fokker airplane because the runway at Key West’s airport had been reduced to mud by some recent rains.1

C. R. Smith and American Airlines

In October 1929 the American press, both large publications and small, began to bid farewell to the Daniel Guggenheim Fund for the Promotion of Aeronautics, which had just made an announcement that it would soon cease the operations it had inaugurated three years earlier. The New York Times began its tribute by proclaiming that aviation itself had become “the flourishing protege of Harry F. Guggenheim and his associates.”1 In a November editorial from the lay Catholic magazine Commonweal titled “Aviation Is Weaned,” the Fund was lauded for having helped “American aviation off to the flying start it should properly have.”2 This was no mean feat. In essence, after having distributed approximately

Entrepreneurs, Managers, and Leaders: What the Airline Industry Can Teach Us about Leadership

4,000,000 during the previous five years, Daniel and Harry Guggenheim had provided the timely financing and the vision necessary to revive the moribund American aeronautics industry. Certainly, the Guggenheim organization was not the only entity to set its sights on improving American aviation—especially commercial and passenger aviation—in the second half of the 1920s. Nonetheless, Commonweal explained, “in any discussion of airways progress in the United States, the work of the Guggenheims is the obvious thing to start with”; its achievements were so impressive, the editorial continued, that it “is more likely that the importance of the Fund will be overestimated than underestimated.”3

Entrepreneurs, Managers, and Leaders

In 1953, Selig Altschul, a prominent writer and consultant on aviation, cited one main reason for the persistent strength of United Air Lines in the airline industry since the early 1930s: “United was probably the first company to bring full-scale business methods and organization to air transportation.”1 Some observers of the aviation industry have minimized United’s success because of its conservative business methods, but it is difficult to argue with the company’s results over the long-haul: “United … consistently held to about 20% of the total passenger revenues generated by all trunk and local service airlines.”2 Having been selected as one of the primary air carriers during the tumultuous 1930s shake-out of the airline industry, United and its CEO, William “Pat” Patterson, chose to take a cautious and deliberate process of securing its dominance in the industry. During the second phase of the airline industry’s evolution, United, like its counterpart American Airlines, sought ways to establish and protect the dominant business model that fit within the confines of government regulation.