Tale of the Tagues: An Airline Story, Part 1

When John P. Tague was promoted by United Airlines CEO Glenn Tilton to the post of President last month, it signaled an ironic rise in the career of an executive who may have been instrumental in the downward spirals of four failed airlines.

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]