This program is presented by WGBH Boston in co-production with KERA Dallas Fort Worth, with grants from the Duncan Bradstreet Corporation, Merrill Lynch, Pierc Fenner & Smith, Incorporated, Arthur D little, incorporated Charles E Culpeper Foundation, the Arthur Vining Davis Foundations, and the William and Mary Green Foundation Enterprises, co-produced wit Learning Corporation of America.

Can you turn it around?

I'd say we've got a better than a 50% chance.

What are you.

I get the attorneys down here from New York and let's get on with.

Branif international was the nation's eighth largest airline and $1 billion company.

How could it go bankrupt when it had the support of an entire city, and the leadership of a man who left one of the world's most profitable airlines to rescue it?

This week on enterprise, tailspin.

I'm Eric Sevareid.

It may be common here, but outside the airline industry, among others, it' caught in a terrible crosswind.

Fewe passengers are flying at a time when costs are high and fares are low.

Losses are in the hundreds of millions.

A few years ago, it was inconceivable that this could happen.

That's because the industry was regulated by the government which allocated routes and set fares to try to guarantee all airlines a profit.

There were no cries for free enterprise here.

But in 79, Congres began deregulating the industry.

And what had been a gentlemanly busines became a rough and tumble one.

Dozens of new airlines started up, price wars erupted, and the economy soured.

This week on enterprise, we look at deregulation.

Greatest victim Braniff International, as it struggle desperately to stay in the air.

In 1965, Braniff painted its planes seven different colors and had dressed the whole to.

Be the man responsible for the airstrip and the end of the plane.

Plane was Harding Lawrence, appointed president of Braniff International in 1965.

Today we added three more nations Germany, Belgium and the Netherlands.

In Lawrence's first two years, profits tripled and the number of miles flown doubled.

When you got this from that Braniff International, when you got it, flaunt it.

Lawrence' style was well suited to Dallas, which modestly bills itself as a city without limits.

Since Braniff was the only major hometown airline, the airport authority built for it a Texas sized headquarters.

Annual rent $6 million.

When you've got it, flaunt it.

Braniff takes the next firm step to greatness.

It is time when deregulation began in 1979.

Lawrence tried to fulfill his Texa sized dream of a Braniff empire.

Overnight the airline increased its routes by 50% and borrowed heavily.

Lawrence beat the company and lost.

Branif flew right into the recession.

By late 1981, it owed more than $700 million and had no credit whatsoever.

Harding Lawrence was out.

And this man, Howard Putnam, was in at age 44.

Putnam left a secure job as president of Southwest Airlines to rescue Braniff.

Hello, Gordo.

Southwest was already an outstanding airline when we got there.

And all we did at southwest was take something that was smaller and triple it in size.

Triple it in profitability.

Really didn't change much.

I guess that's why they wer interested in us coming to bring down the assembly, going to have a post flight.

This fellow alumni pretty fancy.

Braniff offered Putnam $250,000 a year, and enough stock options to make him a wealthy man.

If he could turn it around.

I mean, we could have been here for Braniff employees.

He was the last hope.

Nearly one fourth of them had already been laid off.

How are you doing?

Meeting you, sir.

Some people would say to you that, my personal risk is very low, that if we don't turn around, they'll say, Good Ole Howard drive.

It was too late anyway.

If we do turn it around.

Why, you can't lose from that score.

I asked the firm white faculty one of the stakes.

If we don't make it, I'll be out of a job.

Are you doing?

How are you?

The company Putnam took over had so many problems, it was hard to know where to begin.

Braniff had acquired a reputation for poor service during its rapid expansion.

Its labor costs were high even after the layoffs.

Its fixed costs, like fuel, were $90 million a month.

Whether the planes flew empty or full.

Braniff needed more business at a time when the industry had too many seats and too few passengers.

We lost our credit over a year ago.

So every Thursday we have to dig up about $7 million to pay for next week's fuel.

And every other Thursday we have to come up with about $15 million to meet the payroll.

So we have some definite ups and downs.

If a day come that we're not able to do that on our own, that's it.

It's all over.

Putnam eliminated first class to make room for more passengers, and slashed fares in half to attract them.

He also bargained fo concessions from Braniff unions.

He called his strategy Texas class.

All of our airplanes now are the same.

Some 20 1700s.

All have 146 seats.

All have extra carry on racks.

They all have extra legroom compared to other airlines code sections.

We have simplified the fare structure.

We took Braniff complicated fare structure.

Like other airlines.

Most of them still have a 582 fares in the continental United States.

And we simplified it down to 15.

We only have 15 different numbers.

That too, is Texas class simplicity and value.

Texas class was aime directly at American Airlines.

Braniff fiercest competitor, American, duplicated Branif routes and offered more flights.

If it continued unchecked, American would overwhelm the much smaller Braniff.

So Putnam went on the offensive, launching a direct advertising assault on his arch enemy.

I'm getting damn sick of American letting on like they go the lowest fares when Brandon's the ones that brought them in.

But, you know, with the amount of money we've got to spend, which isn't a hell of a lot, we got to pump pump the price on the product.

And the message at the time is, this thing got the new commercial in it.

Yeah.

Look, as this commercial goes on the air, tomorrow, in all the markets and the commercial is the combination of the hardball story.

I tell the truth between Braniff, American and utilizes the music that is going your way.

Our theme music.

Braniff would lik you to check out the difference between American coach and Texas class.

Now you want some other seats?

Check back.

How about more legroom?

Check.

Braniff again.

You want low, unrestricted fare system wide in the USA.

Better check Braniff again.

Because normally American only gives you low, unrestricted fares wher they face low fare competition.

And it's usually competition from British Braniff.

It's gonna make your way down.

Check it out and see for yourself.

That's excellent.

Tony.

That's right on.

Braniff needed to raise cash quickly and staged a giveawa sale by one round trip ticket.

Got another for a dollar.

The sale was a huge financial success, but American was outraged.

It matched the sale and made it clear it would not let Braniff steal its customers.

We believe that it is ill advised or Braniff and for the industry, and it borders on on being irresponsible.

We know that, you cannot exist in that kind of a competitive environment by allowing another participant to have lower prices than yourself.

As long as they continue t compete with us and schedules, we will be competitive in prices.

Across town, travel agents were furious.

Agents write more than half of all airline tickets sold when Braniff cut its fares.

The agent's commissions were cut to the dollar.

Sales sent them even lower.

We have an extremely sophisticated computerized agent, and I knew Monday morning that we had lost almost $100,000 in gross business.

Now, actua cost lost commissions over time, things like this cost us almost $30,000.

Team travel agents began openly questioning the wisdom of writing tickets for Braniff.

We have to worry about the fact that we are responsible for refunding of tickets.

And should an airline go bankrupt, such as Braniff, for example, we would be responsible to refund to our clients the price of the tickets that they had purchased with the brand of bankrupt.

Of course, we could not, recover our money from them, but at the.

As if that wasn't enough, Braniff managers had to devise a new financial plan.

They had to convince creditor that the airline had a future.

But our chief financial officer, Phi Guthrie, is tomorrow afternoon.

We will have a meeting with a very limited number of the key lenders to review with the the long term business strategy.

The critical point is convincing the lenders that there's an airline here that, has not only a chance for survival, but can be profitable in the long term so that they can see that their debt can be earned out.

We told the board that we would expect to drop an additional 3 to 6 domestic cities, sometim within the next 60 to 90 days.

I think we've got the same consideration as here.

We do with our with our labor and go.

The minute we allowed to go public, people start posturing.

And the more we can keep it just in-house and out of out of that posture, better off we are.

It will be a highly, politically charged environment because there are so many different points of view and so many different vested interests.

It will be almost a diplomatic effort just to keep everybody in the same room.

As George Ames from Lazard said, you know, there's plenty in there to offend everybody.

I don't think there'll be on person leaving the meeting happy that they're getting a good deal.

Almost every brand of solution brought a new problem.

Employees learned from the media that half their wages would be held up because of a cash shortage.

Phil Guthrie found himself fighting rumors of impending bankruptcy.

Tell them to the employees to try and quell some of the rumors.

Despite rumors being circulated as a result of the Braniff Employees Pay deferral program announced yesterday, we are continuing ful operations with no interruption and have no plans to discontinue operation of the airline.

Public confidence was shake again by the next day's paper, which quoted Putnam as saying he couldn't guarantee Braniff survival.

The company seemed ready to fold.

But it employees weren't giving up yet.

That night, when Putnam returned from Washington, he was greeted not by pallbearers but by 500 cheering workers.

And Doug handed me a great long list of employees, signatures and it says, on behal of all the employees signatures below, please let it be known that we, the employees of Braniff, have not and will not give up without a fight.

Therefore, World take notice.

Braniff will continue to strike back and will not go down until the very last dollar is gone.

And then watch out.

We just might be back.

Good evening.

Everyone is more like a pep rally for the Cowboys and the arrival of the man in charge of a nearly bankrupt airline.

Putnam became a Dallas celebrity and quickly made use of his fame in a new commercial.

Texas, we need your support.

Fly.

Braniff now stand behind us in our battle to keep airfares affordable and fight with us to maintain the extra comfort in the leg room of our Texas class.

It's a tradition worth fighting for, and it worked.

Influential Dallas businessman purchased a full page ad pledging support.

Others made commercials.

So join the fight.

Fly the cowboys do good.

I do.

The airline had to set up an office just to handle offers of help.

We.

Not revenue.

Well, somebody don't look.

We did have an, elderly lady call in and she said that she wanted us to kno that we were going to make it.

So I had, you know, I said, well, her best friend had told her.

We said, well, who's there?

And she said, well, it's the Lord.

And he said that, that Braniff is going to make it so you'll have no problems.

And she said, I'll be sending you $25 just to help.

In March, Braniff also worked out a deal to sell its highly advertised but highly unprofitabl South American routes to Panama and beyond.

Contextual wonders of the vast Incan empire.

Good morning, ladies and gentlemen.

My name is Howard Putnam, and I'm the president of Braniff.

We have been going through a lot in our company in the last few weeks, and it's encouraging to stand up here and see all of you looking this way.

We're going down to Miami to meet with all of our employees this morning, and talk about the South American joint venture that we've worked out with Panama.

Thanks a lot for flying with.

Not only would Braniff get much needed cash from the Panam deal, it would also be abl to reduce its payroll in Miami.

Huge layoffs seemed inevitable.

We know of the emotional drain you are going through and the upsetting a personalized.

And I'm not sure I can change any of that, but I will try to tell you, as will Phil Guthrie and Ron and Bill Haskins, why we're doing what we're doing and why it's a necessity.

What I'd like to kno is what you're going to do here in Miami and in Miami.

We want to know if you've got a job.

Don't you?

Just.

Think you can pretty well figure out what we're saying.

If you have a city that has five round trips a day out of it.

How many customer service agents, ramp agents, mechanics does it require?

It's a lot less than what you got today.

Is it 20 is a 22.

Is it 25?

I don't know that today.

I mean, to tell me that an organization the size of Braniff, with a countdown less than 30 days, that you can't give us actual facts and figures on what's going to happen to the Miami station and how many is going to be here, that there isn't something, somewhere with a less than a 30 day countdown?

Keep in mind, it's a very it's a hard thing, but this company could have no jobs at all.

We're trying to save some jobs.

And whether you are a part of that 65 or 6800 that I'm talking about, I recognize makes a difference as to how you look at the end result.

Why would you care enough about the employees to try and make out some kind of unique package to protect us with Panama, and maybe an American agreed to take the ground employees, they did not agree to take flight attendants to South America.

They did not agree to take pilots, and they did not agree to take any employees domestically because they already have the employees and the staffing there.

Our choice was have no agreement at all and end up liquidating South America and put everybody on the street, or do what we could for some and also infuse some cash into this compan to try to keep part of it going.

That was the alternative.

Thank you all very much.

You know, they don't want to believe it because management in the past, like the guy said, why didn't the why didn't they do that two years ago?

Well, I'm not going to criticize Malling and says we weren't here and they aren't now, but they want to blame it on somebody.

The guys that did it are gone.

Joe Braniff expected the Civil Aeronautics Board to approve the Panam deal quickly, but the Cab had other ideas.

And denying interim approval of the agreement.

The board noted that the issue of the competitive impact of the US South American market was so complex and contested that it could not now consider approving the proposal before completing an oral evidentiary hearing on the issue.

Putnam returned home stunned by the decision.

Braniff had already spent the money had expected from Panam.

Now, at the point next week, and we estimate that it would be as early as Tuesday night, that we start becomin cash negative, meaning there's no more cash left in the till in South America.

And it would require taking cash out of North America down there just to keep the operation going.

We can't do that.

We don't have enough of a surplus here in North America to afford to risk the operation here.

So what we have told us here on this board yesterday is that at the point we go cash negative, we're going to shut the whole thing down and clos it down and leave South America.

We have no choice because we can't.

Or it'll drag the whole airline in in 2 or 3 days.

If we do.

Washington was alarmed.

Within a few days the Cab members were called back for an emergency meeting.

They responded to Putnam's threat by approving a new deal, this time with Eastern.

Well, what, what's new?

All right.

Well, we got an agreement, an then you got the money in there.

The money is in the bag.

We're gonna have a little impromptu over here in the next room.

I didn't up.

Okay let's go over there to the left.

This is a working.

And this is not the final thing.

The artwork that was in Dallas.

There was renewed hope.

If only they could attract more passengers, the part would be how you folks.

The money I'd done.

I talked to, and by the end.

We had run through it again.

We were ready to go.

That you had the ad copy by two round trips to one of these long haul destinations for use between the 15th of May and the 15th of August.

We give you a third round trip to any place in the mainland for use after August 15th to August 15th, and November 15th for a dollar.

What's the focus of the copy?

The focus is escape and appreciation.

Does the word escape bother anybody?

No, I'm not saying i bothers me, but does it give it any implication of bankruptcy or.

It's something we can have some overly sensitive these days.

We.

The only thing for us to think about is that some of our competition might come back in and try to up the ante on it and just be ready to match that in case they do.

I don't know.

I'd sit down and I'd play around with this thing and play off of each other because when you go out with it, you got one chance to do it, right.

Otherwise, they're going to immediately say, Christ, Braniff is out of cash again.

It's another last ditch effort.

In honor of your loyal support.

Braniff announce the Great Braniff Escape Sale.

Commercials were produced and volunteers and information to travel agents across the country.

For just a dollar, I received a phone call at home at 630 in the morning saying, when you come in today, come in and you're working shoes.

I think we're going to have a very, very busy day.

So I dashed in and we examined the program, looked at all the rules and regulations, got the office organized, go everybody on board and saying, let's be ready when the doors open at eight, 8:00 so that we can take on the onslaught.

Well, here it is Thursday afternoon, and we're still waiting for the onslaught.

Three days later, in Fort Worth, a country and western club threw a party for 5000 Braniff employees.

Sealed ai with every one of these guests knew that the Great Escape sale had been a flop.

There were.

Roaring rumors spread that a flight just in from Miam had carried only six passengers.

But only Howard Putnam and Phil Guthrie knew just how bad the situation had become.

Our buddy come over there, Frank said.

Well, one of these days I know I'm not ignoring you.

We have a few other things we've been doing, so we'll get there someday.

Okay.

There's a lot of places that we haven't been yet.

There I am, a Billy Bob's friend.

We are happy to have all the employees and you can just see the loads are going to hell.

Ladies and gentlemen, her is your chairman of the board.

Here's our panel.

How?

Since this is a fun evening, and you all deserv a little bit of fun after what everybody has been through in the last few months.

I just simply like to say that we really appreciate all the support you've given the management team.

And the improvements are tremendous.

The costs are coming down.

Texas class is being accepted.

We're going to do it.

Good night.

Thank you.

Friday was terrible.

We had like a 48% load factor last Friday when you ought to have 65 on Friday.

Saturday was like 30%.

That's why I made my speech so very short that night.

Then I went to New York on Monday night to testify on a trial on Tuesday of the pilot suit against us.

And when I called Guthrie at New, we were let him run an I think, 30% load factor that day.

And Phil said, we can't get through the week and we've run out of, you know, the next thing you do is you're going to go out and try to get all the employees to get half their payroll.

Well, hell, we know what happene So we came with a conclusion, I think, on the phone, that we better have a board meeting, which we did last night.

Better get the attorneys down here from New York and let's get on with.

Braniff immediately began parking its airplanes.

Thousands of passengers were stranded.

Even Braniff own pilots and flight attendants had to find other flights home ahead.

At 12:01 a.m. on May 13th, 1982, Branif became the first major airline in United States history to file for bankruptcy.

Ferguson had a call from Midland.

Small business man.

After janitorial work, said I got one of your checks yesterday.

I put it in the bank an I paid money on this yesterday.

And what do you suggest I do?

We're sorry.

Did it bounce?

You mean it will bounce?

It's not like you're sayin I'm going to lose my business.

Good afternoon, ladies and gentlemen.

You've heard me compliment the Braniff employees before.

They They fought a very tough battle.

They're a very dedicated group.

They, have gone through pay cuts and pay deferrals.

They've supported us.

They worked as volunteers.

And what we had to d last night was very difficult.

Not only for us, but for them.

It's a shock to them, I know.

And there is no payroll.

They were taken off the payroll as of last night.

The payroll, the checks that are out there now, will not go through.

There is no cash to support them.

And Putnam have avoided bankruptcy.

Probably not.

Harding Lawrence' strategy of expansion, coupled with the recession, had fatally weakened the company.

Braniff could never get beyon the daily struggle for survival.

When there wasn't enough business to go around in the airline industry.

Something had to give.

It was Braniff.

Within two week of Braniff bankruptcy, American and other competing airline announced major fare increases.

Braniff never flew again.

Although its assets were $650 million, its liabilities were 1.2 billion.

10,000 employees lost their jobs This program was presented by WGBH TV, which is solely responsible for its content and was made possible by grants from the Dunn and Bradstreet Corporation, Merrill Lynch, Pierce Fenner & Smith, Incorporated, Arthur D Little, Incorporated Charles E Culpeper Foundation, the Arthur Vining Davis Foundations, and the William and Mary Greve Foundation.

Enterprise is co-produced wit Learning Corporation of America.

For information about program availability.

Enterprise.

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