by Charlie Leocha
www.ConsumerTraveler.com

Kate Hanni’s FlyersRights.org issued their 2009 Real Air Travel consumer Report Card yesterday at the Press Club in Washington DC. If I came home with a report card like this when I was a kid, I’d get a spanking.

The 2009 report card for tarmac delays of more than three hours gave all of the major airlines a “F” for their performance. The major legacy airlines themselves — American, Continental, Delta, United and US Airways — were graded as failing; their grades were lower when they were combined with their codeshare regional airline partners.
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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.

Delta Air Lines (DAL) plunged into bankruptcy in September 2005, marking the culmination of more than a decade of management missteps made largely out of hubris. The Southeastern airline allowed itself to go through many of the stages of decline outlined in Jim Collins’ new book. Its sense of infallibility helped foster an undisciplined pursuit of practically every new jumbo jet that aircraft manufacturers rolled out, forcing it to fly large planes even on one-hour routes. Add to that a distinct denial of the increasingly grim realities of the airline business, exemplified by the errors made earlier this decade by then-Chief Executive Leo F. Mullin. He launched the trendy Song discount airline, which fizzled amid high costs and stiff competition from JetBlue Airways (JBLU). Worse, Mullin negotiated a 2001 labor deal that paid top pilots a record-shattering $300,000 a year. “Management always had to have the biggest and the best,” recalls a former exec. “It was the Delta way.”
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