Hard Landing by Thomas Petzinger Jr. Page A

The following day, only a block north of the White House, Gerald Gitner of Texas International stood behind a lectern at the Hay-Adams Hotel to announce that the company was going to the CAB for permission to cut fares by 50 percent in a few markets—interstate markets. Texas International dubbed the new prices “peanuts fares.” It was a pleasant coincidence that peanuts were the airline snack of choice and that the newly elected president of the United States was a peanut farmer.Flying back to Houston aboard Braniff (Texas International did not serve Washington), Lorenzo’s staffers were delighted to overhear passengers marveling over the Washington Star account of that morning’s announcement. “Jesus Christ! Did you see this?” one man exclaimed. “You can fly half-price!”
    These were not charter fares. They weren’t holiday specials. They were price cuts, pure and simple, of the kind for which the CAB was fully empowered to send people to jail, except that these fares would soon have the official blessing of John Robson and the other radicals who had moved into the CAB. For the first time in nearly 40 years, an airline flying people across state lines was allowed to institute an across-the-board price cut in response to market conditions.
    Back in Texas it was off to the races. On the first day of peanuts fares, Texas International’s passenger loads doubled. They doubled again on the second day, then hit an increase ofas much as 600 percent by the end of the first week—with no advertising except by word-of-mouth and the free publicity generated by the peanuts angle. A product that many people had never even contemplated buying was now, at half off, well within their reach. The notion of value, seldom explicitly applied as a marketing concept in those days, was in full flower. Now confinement to a middle income bracket no longer automatically denied one the excitement and convenience offlight (if one happened to live in a town served by Texas International, that is).Surveys showed that 25 percent of the people flying on “peanuts fares” would have otherwise made their trip in a car; an additional 30 percent otherwise would have stayed home. Some of these new, first-time fliers began to think about doing it a second time, and a third.
    To consumer advocates, Frank Lorenzo was a hero. Better still, Texas International’s profit-and-loss statement, once dependent on handouts from the government and strike payments from the rest of the airline industry, began to glow. More flights were added, and the more Lorenzo’s people went to the CAB, the more John Robson’s people said yes. A number of other airlines offered their own versions of peanuts fares; Continental, for instance, introduced “chickenfeed fares,” which the wags at Texas International quickly dubbed “chickenshit fares.”
    There was one drawback. The very success of peanuts fares strongly suggested that the airlines could manage their own affairs—that they could stimulate their own markets, widen the population of people who had shared in the privilege of flying, even create jobs and demand for new airplanes. But as delighted as he was at the outcome of peanuts pricing, Lorenzo did not want John Robson or anyone else in Washington getting the wrong idea about his intentions. Lorenzo went out of his way to say that peanuts fares were a limited, isolated demonstration of the virtues of flexibility in government regulation. They were not , he emphasized, an argument for doing away with it.
    Lorenzo figured that Texas International would be annihilated in five minutes without the CAB. He could barely handle a single upstart such as Southwest Airlines, let alone survive being surrounded by them. Just as ominously, up the road a piece, in Dallas, American Airlines and Braniff had hundreds of airplanes between them. They sat there like caged gorillas. And United Airlines, the biggest in the United States, flew planes to all 50 states. It could