Caught at the Crest

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As the biggest strike in U.S. airline history dragged through its first full week, disruptive effects large and small spread across the entire U.S. economy and throughout the everyday life of Americans. Thousands of vacationers canceled travel plans. Hotel bookings dropped sharply in such varied cities as Pittsburgh, Las Vegas and Honolulu. Miami Beach hotels, heavily dependent on package air tours for summer trade, laid off employees as occupancy rates shrank as much as 25% below normal.

Cut flowers wilted far from florist shops; live lobsters piled up awaiting shipment from Maine. Manufacturers dependent on air shipment of electronic parts suffered production delays. Traveling salesmen and executives resorted to circuitous odysseys, chartered air taxis--or stayed home and used a phone.

In all, five airlines were struck: TWA, United, Eastern, Northwest and National. Of all their operating heads, none had more at stake than TWA President Charles Tillinghast Jr., 55, who has been in the airline business just over five years but in that time has helped turn TWA from a floundering giant into one of the industry's highest flyers. The strike caught Tillinghast not only near the crest of TWA's comeback but also at a time when the line must fly if it is to prosper. TWA's income is greatly concentrated in the summer along its west-to-east routes, which span two thirds of the world from California to Thailand.

Still Tillinghast's individual and corporate problems were dwarfed by the real lesson of the strike--which was a dramatic demonstration of just how much jet transportation has come to mean to the U.S.

Frenetic Blessing. Neither the nation's business nor its social life could have assumed today's form without the airlines. "Of all the inventions, the alphabet and the printing press alone excepted," wrote English Historian Thomas Babington Macaulay in 1848, "those which abridge distance have done the most for the civilization of our species." The age of commercial jet travel, not yet eight years old, has not only shriveled distance to a degree far beyond Macaulay's vision, but has spread that frenetic blessing to hundreds of millions of people.

Businessmen, from chief executives to chief clerks, fly thousands of miles as casually as they once drove 50. Politicians and bureaucrats, professors and diplomats use the new mobility to solve problems, stir decisions, win accords more quickly. Industrial complexes, hotels, office buildings and even nests of nightclubs have sprung up around airports, just as cities grew around railroad terminals in the 19th century. Some affluent couples whisk from Washington to New York, or Detroit to Chicago, just for dinner and a show. Youngsters pack airline counters on weekends, asking for seats to any place that swings.

Fast Resuffle. The passion for pilgrimage has made the airlines the fastest-growing industry in the U.S., expanding by an average 14% a year since 1950, as against 8.4% for the runner-up, electric utilities. The pell-mell pace is still accelerating: this year U.S. airlines plan to take delivery of 287 new jet and turbo-prop planes worth almost $1.5 billion, nearly twice as much as they spent on equipment in 1965. With that outlay, the industry will add as much seat-mile capacity as it had altogether in 1950. The airlines are already the nation's No. 1 public carrier. Last year they accounted for 57% of intercity travel, more than buses (27%) and railroads (16%) combined. Of U.S. travelers heading overseas, 83% now fly.

The strike by 35,400 members of the International Association of Machinists grounded carriers that fly 61 1/2% of all U.S. airline passenger-miles, carry 70% of the nation's air mail, 73% of its air freight. At the behest of the Civil Aeronautics Board, six other trunk carriers and 13 regional airlines feverishly reshuffled schedules and added what extra flights they could to meet the demand for seats.

Though the strike caught the airlines at the seasonal peak of their biggest year ever, they still managed to plug a good many of the gaps in service to 231 cities. Pan American, for example, substituted cramped thrift-class seats for spacious first-class accommodations on all its New York-San Juan flights so as to squeeze aboard 200 more people a day each way. American halved service between New York, Syracuse and Rochester in order to add nine flights a day between New York, Cleveland and Washington. Mohawk Airlines stepped up its schedules where American cut back.

The strike heaped up confusion and distress, humor and heartbreak, unevenly. New York lost an estimated $500,000 a day in tourist trade, retail sales and entertainment spending, while in Chicago, 50,000 conventiongoers jammed hotel space. Air Force Reserve and Air National Guard pilots airlifted some 4,000 strike-stranded servicemen to their destinations, including 1,500 en route to or from Viet Nam. Yet some commercial flights went out as much as a quarter empty because overloaded phone lines deluded would-be passengers into thinking a trip to the airport would be useless.

Trumpet Player Chet Baker, still waiting at Los Angeles Airport at the hour his trio was due to perform in a nightclub near San Francisco, took his horn into a phone booth, piped his third of the music 350 miles north by wire and loudspeaker. A pretty young girl, pleading with a Chicago ticket clerk for a flight to a San Francisco wedding (her own), was surprised to hear the man in line behind her say: "Funny, I've got to get to San Francisco for a divorce--my own." Both got aboard.

Far Apart. In Washington, in a basement room at the Department of Labor, negotiations moved fretfully. At one .point, Chief I.A.M. Negotiator James Ramsey stomped out of a mediating session, held up all negotiations overnight because Northwest had warned its strikers in Tokyo that they must now pay rent in advance for their company-owned quarters. At week's end, Assistant Secretary of Labor James J. Reynolds, the chief mediator, reported that the settlement was "no nearer than a week ago."

The machinists, who were already paid a top of $3.52 an hour for servicing and repairing the 744 planes of the five airlines, demanded a 53-c--an-hour wage boost over three years, plus higher overtime rates, a shorter work week, company-paid health and pension plans, and a cost-of-living escalator. Accepted by the airlines but turned down by the union was the recommendation of a presidential fact-finding board that called for a 48-c--an-hour hike spread over 3 1/2 years. By industry estimates, the union demands would amount to a 5%-a-year pay boost and would cost the five lines $114 million, nearly 60% more than the limit set by the presidential panel. That would just about wipe out the White House's battered 3.2% guideline for noninflationary wage increases and would goad all labor to push for similar raises this year and next.

Whatever the settlement, the passengers would ultimately pay for it in one form or another. The airlines depend heavily on today's soaring business to bring in enough money so that financing tomorrow's much more expensive planes will not saddle them with a crippling load of debt. Though airline profits rose last year to a record $367 million on revenues of $5 billion--and climbed another 20% in the first six months of this year--such prosperity hits been brief. U.S. airlines lost millions in 1961 as their effective new jets raised passenger capacity more swiftly than the demand of the day could fill it. Only in the past two years have airlines profits risen as high as the 101% on investment that the CAB deems reason able. That return reached 10.8% in 1964 and 11.8% in 1965, but over the past five years, the average has been only 61%.

The Managers. The reason why almost all airlines are thriving--or were, before the strike began costing them $7,000,000 a day in lost revenues--lies chiefly in new technology. Swift, safe and efficient beyond their creators' dreams, the jets have been embraced by the traveling public, and the carriers offer almost everything but LSD to lure customers aboard. But another important factor is the new generation of coolly professional managers, replacing the strong-willed early birdmen who led the industry from infancy to gianthood. The lineup:

> At United, George Keck, 54, up from the ranks of maintenance and operations, two months ago succeeded retiring William A. Patterson, who bossed the airline for 32 years. United is by many yardsticks (revenue, passenger-miles, fleet size, employment) the world's largest airline, but it has had to battle its way back from the disastrous results of a 1963 attempt to replace the traditional first-class-and-coach flights with a one-class service priced in between. The idea had sounded plausible. But competitors ran needling anti-egalitarian ads plugging their own frills for first-class status-and-comfort seekers. Having long since done away with the one-class experiment, United has recouped its share of the market. In the first four months of 1966, revenue rose 25% and profits more than tripled.

> At Eastern, President Floyd Hall, 54, former pilot and later a vice president of TWA, has achieved a remarkable corporate revival since the 1963 retirement of World War I Ace Eddie Rickenbacker. By the time Hall took over, Eastern's shoddy service had led to the formation of an informal but nationwide WHEAL (for "We Hate Eastern Air Lines") club. Today, that club is only a memory. Equipment and service have vastly improved. From a $37.8 million loss in 1963, Eastern rebounded to a $29.7 million profit last year, managed to make the best return on investment (12.8%) among the big lines; TWA was second at 12.2% . But Eastern is still held down by the fact that it has too many short-hop routes to use jets efficiently; the average Eastern passenger travels a mere 310 miles. Hall has therefore flung Eastern headlong into the competition with eight other U.S. airlines, including TWA, United and American, for lucrative transpacific-route rights now held only by Pan Am and Northwest.

> At American, President Marion Sadler, 55, a onetime schoolteacher who still spends an hour a day studying Latin ("I'm reading Caesar now"), is assuming increasing responsibilities from durable Chairman C. R. Smith, 67, who made the line virtually the extension of his own bulky shadow (TIME cover, Nov. 17, 1958). Once the nation's largest airline, American's share of the domestic market has slipped from 22% to 19% in the past five years, partly because the CAB has kept it from expanding its routes at home as much as most other lines. Yet American has kept its profits aloft by paring costs and filling up its planes through promotional campaigns like the youth fare.

> At Braniff, ninth largest of the trunk lines, flamboyant Harding Lawrence, 46, took charge last year and has already lifted its earnings 58% by tripling its jet fleet and adding such eye-catching innovations as ocher-painted planes, gaudy interior decor and hostesses in Pucci dresses.

> At Pan Am, Juan Terry Trippe, 67, one of the true pioneers of U.S. commercial aviation, remains very much in charge, partly because he is wise enough to delegate more and more responsibility to younger men, partly because he has lost none of his instinct for money-making innovations. Trippe was the first to order the 490-passenger Boeing 747 --some $525 million worth--for delivery starting in 1969. But even Trippe can have problems. The most notable: Pan Am flies the rest of the way around the world, but, by Government edict, its planes cannot take customers across the U.S. Pan Am has long argued that it should be permitted continental pickup rights. Last week a Civil Aeronautics Board examiner agreed, recommended that Pan Am be allowed to carry passengers between the East and West coasts on flights to and from Europe, with stopover privileges in New York. Pan Am would still be barred from carrying purely domestic traffic.

Among these rivals, none has come back more dramatically from its dark days than TWA. It came the hard way--and by a circuitous route. TWA is one of the oldest and proudest of U.S. airlines. Yet only five years ago, the company seemed to be in a fatal dive. It was de moralized, litigation-lamed, and desperately short of the jets by then necessary to stay alive. TWA went into the red by no less than $38.7 million in 1961. Yet that same year, two happy things happened. First, the capricious hand of Billionaire Howard Hughes was lifted from corporate controls. Second, Charles Carpenter Tillinghast Jr., a Vermont-born lawyer, became TWA's president and chief executive officer. Under Tillinghast's regime, TWA took the U.S. airlines' profit leadership from Pan Am--$50.1 million to $47.2 million last year. In February, TWA paid its first cash dividend (250) in 30 years.

Tillinghast talks the sort of language that comes out of a well-fed computer. "My toughest job," he says, "is to figure out with some precision what the growth of the airline industry is going to be and then to order the right amount and kind of equipment. Profitability lies in a very few points of load factor."

Efficient maintenance conserves his own sturdy load factor (5 ft. 11 in., 185 lbs.) under the pressures of his $122,000-a-year job. Tillinghast carefully budgets time for such morale-boosting chores as awarding 20-year pins to employees. With his wife Lisette, he lives in a 22-room Georgian house in suburban Bronxville, N.Y., golfs (badly), shoots clay pigeons (much better), occasionally plays high-stakes poker (superbly). Though little in his background prepared him for the airline business, Tillinghast holds: "Special knowledge is a lot less important than a keen mind." That he has.

On the Second String. Tillinghast went to high school at New York's Horace Mann, an academically demanding private day school in The Bronx, which was run by his father for 30 years. Explained the school newspaper: "Till can't get high marks because his father is headmaster; Till can't get low marks because his father is headmaster." A scholarship English major at Brown University ('32), Tillinghast also was second-string center on the football team. His big moment came when he blocked a Colby punt in 1932, producing a safety in a game Brown won 22-0. After that, classmates called him "TwoPoint Tillinghast."

Tillinghast went from Columbia Law School to a $175-a-month job with the Manhattan law firm headed by Charles Evans Hughes Jr., son of the onetime Chief Justice. Except for 29 months as a deputy assistant Manhattan district attorney under Thomas E. Dewey, he spent the next 22 years practicing corporate law. It was through law that Tillinghast eventually became associated with TWA--and was brought into classic corporate conflict with TWA's eccentric genius, Howard Hughes.

Hughes, inheritor of a $16 million fortune derived from oil-drilling equipment, had become chief stockholder of ten-year-old TWA in 1939. He and President Jack Frye pushed TWA into technological airline leadership with such innovations as the feathering propeller, the automatic pilot, wing and propeller deicers, and wing flaps for shorter and safer landings. Yet flashes of brilliance and even the visionary decision to put TWA into the overseas trade could not make up for the caprices of Howard Hughes, whom an associate once dubbed "the spook of American capitalism." He abhorred the details of decisions involving money, even his own. Instead, he loved to tinker over the design of interior cabinets or galley layouts while a succession of five TWA presidents in 17 years begged him to make up his mind what planes to buy.

Costly Rescue. Frye quarreled with Hughes and quit in 1947 while the company was in the throes of serious losses. In return for more common stock, Hughes came forward with a major loan ($10 million) to keep TWA flying. In time, he hired a gifted administrator, Ralph Damon, who got the airline back into the black by pushing low-cost tourist fares. In 1956, Damon died of pneumonia, and TWA's fortunes plunged into five more years of turbulence. By now, Hughes had virtually vanished from sight, dealing with TWA's officers by phone, often in the dead of night, or through lawyers, or sometimes not at all. Carter Burgess, an Assistant Secretary of Defense whom Hughes picked as president a year after Damon's death, never saw his boss. Once, Hughes summoned him cross-country to a Las Vegas conference but left him all night in a hotel room waiting for a phone call. Burgess quit after eleven months of frustration.

Because of Hughes's habits, TWA was late ordering--and obtaining--jets, a lapse which let Pan American run away with the lucrative transatlantic trade for several years. Then, characteristically, Hughes ordered so many jets that even his fabulously profitable Hughes Tool Co. could not meet the bill. While he still could have done so, Hughes brushed off proposals that he give up a small part of his 78% ownership of TWA to raise money. In the end, forced to borrow $165 million or face receivership, he had to surrender operating control of TWA to the Metropolitan and Equitable life-insurance companies and a group of 15 banks. Hughes placed his stock in a ten-year voting trust controlled by the lenders, who named former Ford Motor Chairman Ernest Breech as a trustee. TWA was again without a president, former Navy Secretary Charles Thomas having resigned in a tiff with Hughes five months earlier. Breech began a desperate search for a man to lead TWA out of chaos.

The Dirty Trick. His eye soon lit on Tillinghast, then vice president for international operations of the Bendix Corp., Detroit-based maker of aviation, missile and auto components. Breech, as a former Bendix president, had been so impressed with Tillinghast's legal work for the firm that years earlier he had persuaded him to move to Detroit, where Tillinghast subsequently joined the company.

"Now, I told him what a mess TWA was, except for the flying operations," Breech recalls. Tillinghast insisted that Breech become TWA's chairman (he still is). For himself, he arranged a contract that would continue his in come even if Hughes regained control of TWA and--as was fully to be expected--fired both of them. "It was kind of a dirty trick," Breech says today, "taking him out of Bendix where he was doing well and putting him in a business he knew nothing about."

Crossing the Cartel. Tillinghast learned fast. TWA had only 28 jet planes as against its chief rivals' 124 (Pan American had 46, United 44, American 34). It took Tillinghast ten days to make up his mind to order 26 Boeing 707s for $150 million. With good luck, he was soon able to buy six Convair 880s for immediate delivery when General Dynamics repossessed them from troubled Northeast Airlines. The planes helped TWA catch up in the equipment race. Still, TWA continued to lose money, and for a time Tillinghast seriously talked merger with Pan American. Before the deal jelled, the CAB flashed a red light, and as airline business picked up in 1963, the idea died.

TWA's biggest traffic gains have come across the Atlantic, largely at Pan American's expense, and owing in significant part to Tillinghast's decision to plunge into free in-flight movies, at a cost of $60,000 per plane just for the apparatus. Though the earphones needed to hear the movie sound track were pretty uncomfortable, and the programming was often dreary, the novelty lured passengers. But it jolted the International Air Transport Association, the fare-fixing cartel dominated by European lines, which couldn't stand the cost of competing. Delicately hinting that TWA would otherwise face harassment from foreign governments, or perhaps even suspension of its landing rights, I.A.T.A. persuaded a reluctant Tillinghast to go along with a $2.50 charge on overseas flights for the earphones (just watching the films without hearing the dialogue is free, and often an improvement).

Privacy's Penalty. TWA opened new terminals in 17 cities, including its architectural masterpiece by the late Eero Saarinen at New York's Kennedy Airport, developed such an efficient maintenance center in Kansas City that several other lines have engines overhauled there.

Now Hughes made his worst mistake. Chivvying Tillinghast about his Boeing purchases--he argued that other planes should have been bought--Hughes threatened to sue the airline for ignoring his wishes. Instead, backed by Breech and his star-filled board, Tillinghast sued Hughes for $145 million treble damages on antitrust charges. While he had control, the suit charged, Hughes had forced the company to buy planes that did not fit its needs, notably 20 Super-Constellations. TWA wrote the Connies off its books as a $38 million loss after flying them only a year and a half. Hughes countersued, but when his penchant for privacy kept him from testifying in court, a federal judge held him in "willful default" and threw out his case.

This spring, Hughes stunned everybody by cashing in his chips--all 6,584,937 shares of TWA, for $546 million, six times his original $90 million investment. Still, Tillinghast has insisted that the suit against Hughes remain alive. "It's a corporate asset," says TWA's General Counsel Melvin Milligan.

Though rid of the Hughes incubus, Tillinghast and TWA do not lack for problems, thanks to the lively state of airline competition. "Our industry," says American's President Sadler, "can't compete on price, so we have to compete with gimmicks."

It certainly does. The first-class passenger is deluged with free cocktails, champagne and steak-filet meals, offered a concert on earphones as well as movies. The stewardesses even wake people up to give them eyeshades for sounder sleeping. To woo frequent business travelers, American has a club for businessmen's secretaries, buys them dinners and takes them to the movies. Eastern sends secretaries flowers and seed packets.

I I I Ways to Rome. In their battle to keep half a million seats a day filled, U.S. airlines also depend on a bewildering maze of cut-rate fares. An ordinary round-trip first-class seat, from New York to San Francisco costs $321.80, or 6.20 a mile, while the jet coach passenger pays only $290.20, or 5.60 a mile. But a 30-day excursion by jet coach, which requires the traveler to stay over at least one Saturday on the Coast, costs only $217.65, or 4.20 a mile.

There are family fares, allowing a third off for a wife and two-thirds off for additional members of the family aged two to 21 on coach flights; 25% off for all accompanying family members in first-class, except between Friday noon and midnight and from Sunday noon to Monday noon. There are night coach fares, which cost 15% to 20% less than day coach rates and are mostly available on north-south flights. Also available are propeller-driven-plane fares, group fares of several types, youth and military standby fares, and many more. An Alitalia executive recently calculated that a passenger from the interior of the U.S., journeying through New York to Rome and several other European cities before returning via London, could fly under 111 different fare combinations.

Yet a degree of reason underlies the apparent fare madness. Explains Tillinghast: "We're trying to bribe the public to go at non-peak times. If you had a single fare system, you would get an unwholesome peaking of traffic and an unhealthy number of empty seats."

That is a lesson the railroads never really applied, and the Civil Aeronautics Board means to see that the airlines do not repeat the error. Though some critics insist that airline fares should be slashed across the board, the CAB so far has settled for approving almost any cut-rate special fare, and the prospects that this policy will change look small. Grumbles Delta Chairman C. E. Woolman: "There's everything but a fare for left-handed people with large heads."

Crush on the Ground. Strikes aside, many of the airlines' most pressing problems lie on the ground. The Federal Aviation Agency recently forced U.S. carriers to cancel 100 flights a day into Washington National Airport to relieve the pressure on swamped baggage, ticket and parking facilities. New York's three airports and Chicago's O'Hare, the nation's busiest, are nearly as congested.

The jam seems sure to get worse, even though the airlines are pressing federal and local authorities to expand terminals and other ground facilities. By 1970, the "whale" jets, such as the 490-passenger Boeing 747, will be operational. They will require a separate building for each flight, with docks to unload passengers from exits on both sides of ten-abreast cabin seating. They will also need computer-routed, color-coded baggage and a vast expansion of parking space.

This week TWA's directors are sched uled to decide whether to order 15 of Boeing's "whales," at a cost of $21 million each. Overhanging that decision is the fact that ground facilities to accommodate them may cost more than the fleet itself, as well as the specter of 1961's overcapacity. But Tillinghast notes that despite the growth of air travel, some 60% of all Americans (and 97% of the people of the world) have never been on a commercial plane. The potential market is huge. Moreover, most of the industry figures that the spacious 747 will double in gold as a moneymaking cargo carrier.

And then there is the SST. By 1975, the supersonic transport should be crossing the nation in a mere 2 hr. 10 min. Contemplating that prospect, Tillinghast not long ago suggested what a business trip by an oil executive might be like. Boarding an SST in Tripoli after breakfast, he will outrace the sun across the Atlantic, lunching aboard but arriving in New York at 8 a.m., in time for a conference at headquarters. Helicoptering back to Kennedy Airport, he will board the 1 p.m. flight to San Francisco, lunching again en route, but arriving on the coast in time for a business lunch at 12:30 p.m. with his colleagues there. Slipping onto a 5:30 p.m. flight, he will down his fifth meal, nap and arrive in Tokyo at 4 p.m., in time for another conference and a dinner. Of course, by then it will be the next day. Joked Tillinghast: "If this vision is accurate, management people who do much traveling may have to form their own union and lobby for a three-day work week. Each of the three days may be 36 hours long."

What all this tampering with time and distance will do to the passenger's psyche and physique remains to be seen. But air transport's fundamental attraction is speed and convenience, and the prospects of SSTs please Tillinghast so much that he has reserved the first U.S.built production model for TWA. For all its inconvenience and high cost, the airline strike surely would be only a pause in the almost breathtaking advance of air travel.

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