[Read first » Tale of the Tagues: An Airline Story, Part 1]

After his first departure from ATA, John Tague and two partners started The Pointe Group, an airline consulting firm with presence in both New York and suburban Washington, D.C. Tague’s only two consulting engagements as an ex-ATA executive were short, almost simultaneous, and quite unusual. At the request of a west coast investment bank, he became the consulting CEO for two ailing regional airlines: Air South, based in Columbia, South Carolina and, a few months later, Vanguard Airlines, based in Kansas City, Missouri.

It wasn’t clear to industry observers at the time how a single CEO was going to simultaneously nurse back to health two struggling airlines that were located 850 miles apart. One analyst, George Hamlin of Global Aviation Systems in Washington, D.C., likened the airlines’ plight to “two drunks staggering down the street trying to hold each other up.”

Tague himself called the engagement his “two years of Outward Bound” (it was actually less than a year) and remarked that the two airlines “were too far gone.” In perhaps his most disingenuous statement yet, Tague said that he had “learned that there are definitely limits to what you can do.”

Even though Air South and Vanguard went bankrupt and belly-up, John Tague achieved something very rare, something that had eluded him in his first engagement with ATA: His “ticket” as a bona fide airline CEO was now punched, in duplicate.

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George Mikelsons had retained the chairmanship and majority control of ATA even after Stan Pace replaced him as CEO. Pace’s time as chief executive was also short, lasting less than a year. In published interviews at the time, Mikelsons was opaque when discussing the reasons why.

Pace drastically reduced ATA’s operations, overhead, and costs and refocused the business on its core strength — government and military charters. But he also recommended that ATA accept a merger offer with AirTran Airways as a way out of ATA’s serious financial difficulties. Mikelsons promptly vetoed this idea because he saw the business models and corporate cultures of the two airlines as vastly too dissimilar. Shortly after this event, in 1997, Pace’s contract was terminated prematurely and John Tague abandoned his two “struggling-drunks” airlines to return to ATA in a new executive role.

Tague’s second stint with ATA, now as CEO, saw him working even harder to grow ATA into a major, scheduled, hub-and-spoke airline that would compete with the likes of American, United, Delta, and Continental.

Mikelsons retired again in 1998 and a completely new round of expansion under John Tague started almost immediately. Orders were placed for new 737s and 757s that would nearly double the fleet size, international carriage to Mexico was started, and another smaller airline was purchased to serve as a regional subsidiary. ATA was now fully vested in Chicago-Midway — Indianapolis was reclassed from hub to focus city. There was also some commentary at the time that ATA’s government charter business was de-emphasized during this period of expansion of the commercial passenger service.

Expansion and the accumulation of debt obligations continued throughout 1998-2001. When the terrorist attacks of 9/11 occurred, with the resulting sudden and steep drop-off in passenger traffic throughout the industry, ATA could not respond fast enough to reduce costs and debt. It was time for George Mikelsons to again come out of retirement to save the airline that he had founded.

John Tague would not stick around to lead ATA through any post-9/11 recovery. He was gone from ATA by August of 2002, and turned up on United’s doorstep nine months later.

Mikelsons remarked at the time that ATA’s debt load was particularly crushing because lease terms on new aircraft ordered by John Tague had been front-loaded — required payments were substantially higher in the early months and years of the leases. Of Tague, Mikelsons said that “[his] primary expertise was in marketing — a valuable asset when ATA posted strong growth in the late 1990s, but less important in today’s environment.”

With the outbreak of war in both Afghanistan and Iraq, starting in late 2001, ATA’s core military charter business bought the company time, but eventually the company’s debt obligations, coupled with the industry downturn in passenger traffic, overwhelmed every aspect of the business. ATA filed for bankruptcy the first time in October, 2004.

[The story of ATA's fight for survival after 2004 -- including details of new and old business relationships with Southwest and FedEx -- will be told in a future post on this blog. - Ed.]

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Each of the previous four airlines that John Tague led was generally bankrupt or near bankruptcy within about four years of the midpoint of his tenure there. In the case of Air South, it took less than eight months. And just in case you were wondering: As of the date of this post, Tague has been at United for over six years.

United’s history is clearly still being written, but it is safe to say that the best-laid plans of Tilton and Tague have not panned out thus far. The “consolidation” with another carrier that Glenn Tilton was hired to bring about has not happened; United’s stock price has lost over 90% of its initial post-bankruptcy value; layoffs and forced retirements have shrunk the workforce by 55% and decimated morale; and while Tilton has recently hinted at new aircraft orders, it is not at all likely that United has the cash, credit, or sustainability over the long haul to support delivery of any new aircraft.

John Tague is not yet the CEO of United Airlines, although it is widely believed that he is the heir presumptive to the post. Tilton, 61, has turned over day-to-day management of the airline to Tague, and has assumed a wider industry role as chairman of the Air Transport Association, a trade organization representing leading U.S. airlines.

Apart from Tilton, who had been an oil executive and never ran an airline prior to United, John Tague himself does not have a successful track record of instilling generative growth or sustainability at any of the other airlines he led. Even in an industry that is regularly levered by outside forces (fuel prices, credit markets, relentless competition, fare wars), leadership has to stand for something.

All of which has left me wondering if Tague was hired at United (in a “Plan B” strategy, perhaps?) precisely because of his experience in the business of how airlines fail and get culled from the herd.

At his prior engagements John Tague always exited the failing airline prior to its filing for bankruptcy. At United however, he got the bankruptcy experience that he needed to be a well-rounded, large-airline executive in a merciless economy. About the only thing Tague hasn’t done as a top airline exec is to shut an airline down. If his career history is any predictor, that may soon be on the horizon for United.

John Tague, born in 1961, is the son of Irving T. Tague, a memorable figure in U.S. aviation history who got his start as a Pan Am ramp worker in Alaska and was well-known later for leadership at three legendary U.S. carriers: Pan American, Hughes Airwest, and Midway Airlines.

Irving Tague worked his way up through the management ranks at Pan Am, eventually establishing himself as a master planner, scheduler, and economic analyst. While at Pan Am in the early 1970s, Tague’s skills as an operations manager were evident to principals from the aviation consulting firm of Simat, Helliesen, and Eichner (SH&E), who at the time also had billionaire businessman Howard Hughes as their client.

In the 1960s Hughes controlled both Trans World Airways (TWA) and Northeast Airlines, a Boston-based regional carrier. Irving Tague left Pan Am in the early 1970s to consult for SH&E at Northeast. At this time Hughes bought western regional carrier Air West and renamed it “Hughes Airwest.” Irving Tague became the first General Manager of the new Hughes airline. After five years of successful operations, Tague left Airwest in 1976 to start a new regional carrier based at Midway Airport in Chicago.

Midway Airlines started operations within a year after the Airline Deregulation Act of 1978 and is widely considered to be the first post-deregulation airline startup. At its apex under second CEO David Hinson, who had been Irving Tague’s assistant at Airwest, Midway serviced 39 cities throughout the U.S., Canada, and the Caribbean with a fleet of 96 DC-9s, MD-80s, and 737s.

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It was at Midway that John Tague got his start in the airline business, although he doesn’t appear to have worked his way up through the ranks the way his father did. Two newspapers (Indianapolis Business Journal in 1998; USAToday in 2003) reported that John Tague dropped out of college to become an airline executive. Tague himself was quite disingenuous about this part of his career in a press release issued to announce the startup of his aviation consulting firm (“The Pointe Group”) in 1995:

“Prior to joining Amtran, [John] Tague held the position of Senior Vice President of Planning and Marketing for Midway Airlines. Tague became associated with Midway in 1984 when he was retained as a consultant to develop a comprehensive turnaround plan for the company. He subsequently agreed to join the company as head of its planning division …. Prior to his association with Midway, Tague was a transportation consultant.”

In 1985, John Tague — the college dropout and “transportation consultant” who “agreed” to become a “comprehensive turnaround planner” for his father’s airline at the age of 23 — became Midway’s Senior Vice President of Planning & Marketing at the age of 24.

In 1991, overly aggressive expansion planning and rising fuel prices in the run-up to the first Gulf War proved to be the downfall of Midway Airlines. Loaded with debt and out of money, the airline filed for bankruptcy and ceased operations that November. Irving Tague passed away that same month; David Hinson went on to head the Federal Aviation Administration under President Bill Clinton. John Tague, however, was already gone, having left just prior to Midway’s bankruptcy to fill a similar executive slot at American Trans Air (ATA) in Indianapolis.

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Tague landed at ATA in a Senior Vice President-Marketing role under founder and CEO J. George Mikelsons, who was a slightly younger contemporary of Irving Tague. Mikelsons, like the senior Tague, made his own way in the airline business from the bottom up, having taken a second mortgage on the family home in 1973 in order to buy a Boeing 720 and start American Trans Air as a travel club and vacation charter.

John Tague was in and out of ATA twice between 1991 and 2002. His first arrival at ATA in 1991, on the heels of Midway’s failure, coincided with Mikelsons’ desire to expand ATA beyond charters and into competitive scheduled service.

In many ways, Tague’s first engagement at ATA was a continuation of the same strategic plan that had not proven sustainable at Midway Airlines: Acquire lots of new aircraft; establish a sizeable hub and support facilities at Midway Airport in Chicago; and fly spoke-routes in and out of Florida and throughout the United States, including Hawaii. With cash flow from the charter businesses as a backstop, the plan must have seemed like a no-brainer.

By 1993 John Tague was President and Chief Operating Officer of ATA and by 1995, ATA’s fleet had grown almost 60% in four years. Rising fuel prices became a concern in the mid-1990s because many of ATA’s new aircraft were not fuel-efficient on short-haul routes that the airline was now flying. In addition, Southwest Airlines was setting up shop in Florida, and would cut into ATA’s revenue there, and competition with the majors flying in and out of O’Hare and other focus cities was formidable. ATA would face bankruptcy if it didn’t reduce costs in a hurry.

George Mikelsons was 57 in 1995 and thinking about both rescue and retirement. Succession planning had been on his mind for at least seven years, but now the airline’s financial straitjacket brought the issue into sharp focus: For the first time, he was ready to cede the CEO’s chair to someone else, but that someone was not going to be John Tague.

Tague left ATA in May 1995 “to pursue other interests” and Mikelsons continued his CEO search. In 1996 he hired Stan Pace from Bain & Company. Pace had led turnaround strategy during the second bankruptcy of Continental Airlines in the early 1990s. The new CEO of ATA was hired to undo much of the overexpansion that had been put in place during John Tague’s tenure as President and COO.

[Read the rest » Tale of the Tagues: An Airline Story, Part 2]

Southwest EVP Ron Ricks explains the anticipated “Southwest Effect” in Denver, including expected impacts on Frontier’s employees, in the company’s blog on last Friday:

Southwest has a 38-year history of reducing fares and stimulating new traffic, particularly in markets where we compete against large airlines (like United) in major cities (like Denver). How, you ask? Consider this. Today, Southwest is the third largest airline in Denver, carrying only 14 percent of Denver passengers. United, by far Denver’s largest airline, carries about 50 percent of Denver’s passengers. The combination of Southwest and Frontier in Denver will still be smaller than United (about one-third of flights to United’s 50%) but will immediately position Southwest as a larger and more effective low-fare alternative to United. The acquisition would allow us to significantly expand travel options and low fares for millions of passengers travelling to, from, or through Denver.

Southwest continues its push to become an international carrier as well — Frontier owns Denver routes to Mexico and Costa Rica that parallel SWA’s desire to codeshare to Canada with its partner Westjet. (SWA previously had a Honolulu codeshare with ATA Airlines, an agreement that was terminated with the bankruptcy and failure of ATA. John Tague, former ATA CEO, is now president of United.)