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Best of Airways — Texas International Airlines

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Best of Airways — Texas International Airlines

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Best of Airways — Texas International Airlines
August 17
13:00 2017

By Jack Harty • Airways Magazine, August 2014


Early Years

The story of the guppy and the whale begins in 1944 when Texas International Airlines was founded in Houston as Aviation Enterprises. The carrier received its air mail and passenger certificate as a feeder carrier in 1947 and changed its name to Trans-Texas Airways (TTA). Originally, it flew routes throughout the State of Texas with a small fleet of DC-3 aircraft.

The airline had several nicknames. Many called it “Tree Top Airlines” or “Tinker Toy Airways” because the carrier was famous for its short hops between Texas cities. This allowed people to cut down their travel time by flying instead of driving.

By November 1949, the carrier had several DC-3 aircraft which were called “Starliners.” At the time, the airline was flying the “Route of the Starliners” which serviced Alpine, Beaumont/Port Arthur, Beeville, Brownsville, Brownwood, Carrizo Springs/Crystal City, Coleman, Dallas, Del Rio, Eagle Pass, El Paso, Fort Stockton, Fort Worth, Galveston, Harlingen, Houston, Laredo, Lufkin, Marfa, McAllen, Palestine, San Angelo, San Antonio, Uvalde, Van Horn, and Victoria. Now, it should be pretty clear why TTA was nicknamed “Tree Top Airlines.”

The 1950’s and 1960’s

During the 1950s and 1960s, the carrier expanded to new destinations both in and outside of Texas. When TTA started flying Convair 240 in 1961, the carrier’s route map stretched from El Paso, Texas to Jackson, Mississippi.

As the 1960s progressed, the carrier continued to upgrade its fleet. TTA converted its Convair 240 to Convair 600 by replacing the piston engines with Rolls-Royce Dart turboprops. The Convair 240 had been purchased from American Airlines, and thanks to American’s good maintenance, TTA was able to fly the Convair aircraft for several years. In 1966, the carrier started flying the Douglas DC-9-10 which is referred to as the “Pamper-jet,” and eventually retired all of its DC-3. The airline also added Beechcraft Model 99A to its fleet for a brief period of time in the early 1970’s.

The fleet of DC-9-10 and, later, DC-9-30 was crucial to TTA’s growth as the carrier could now bring turbojet service to small airports such as Beaumont/Port Arthur, Texas and Roswell, New Mexico, increasing capacity at the same time.

1969 was a year of evolving, and not just for man and space travel. The carrier changed its name to Texas International Airlines (TI) which reflected its growth as a regional airline.

In 1970, TI served more than 25 cities in Texas, and it served six cities in Arkansas, one city in California, one city in Colorado, eight cities in Louisiana, one city in Mississippi, six cities in New Mexico, one city in Tennessee, and one city in Utah. Texas International also served Monterrey, Tampico, and Veracruz in Mexico.

Once the carrier had expanded into a larger regional airline, the fleet was getting a workout. Several aircraft would fly “milk run” routes, which would put a DC-9 to depart Los Angeles during the early-morning rush to Albuquerque, Roswell, Midland/Odessa, Dallas/Ft. Worth, Houston, and Beaumont/Port Arthur. The aircraft would finish the day in Lafayette, Louisiana.

Once the remaining Convairs were retired, TI operated an all-DC-9 fleet.

Lorenzo Enters

By 1972, the carrier was suffering millions of dollars in losses annually and was on the verge of financial collapse. Texas International had not made money since 1966, so filing for bankruptcy was a reality in its future if things did not shift ways rapidly.

Francisco “Frank” Lorenzo grew up in Queens, New York. Son of a private investor, he was destined to enter the world of finance. However, nobody would have predicted that he would eventually become infamous in the airline industry.

Promotional timetables showcasing new services and the Pamper-jet. SOURCE: DAVID STRINGER.

Frank Lorenzo started working at Eastern Airlines, then at Trans World Airlines, as a financial analyst from 1963-1966, after graduating from Columbia University and Harvard Business School. In 1966, he started Lorenzo & Carney, Inc., (later known as Jet Capital Corporation), a financial advisory firm that specialized in airlines.

Initially, the company worked with Mohawk Airlines and Texas International Airlines. However, Chase Manhattan Bank called upon Jet Capital Corporation to take over TI in 1972, to prevent the carrier from filing for bankruptcy.

In a matter of a few years, Lorenzo turned TI around financially, earning a $3.2 million profit in 1976. He utilized clever marketing efforts, eliminated unprofitable routes in order to grow destinations that were in demand, and initiated low-price “peanut-fares” for the first time in the aviation industry.

Lorenzo changed TI. In 1977, the company earned $8 million, and in 1978, reported a net income of $13.2 million.

Lorenzo’s Fishing Trip

During the summer of 1978, Texas International Airlines acquired a 9.2% stake in National Airlines. At the time, National was approximately six times bigger than TI. Texas International’s management stated that they were studying the possibility of “seeking control of National.” A few weeks later, TI announced that it planned to buy up to 25% of National’s stock. Lorenzo and his team significantly undervalued National’s assets in hopes of combining the two airlines. However, Pan Am sent in a competing offer which drove up National’s stock.

Eastern Airlines also joined in the bidding for National at the end of 1978. Pan Am and TI were not happy, but Eastern’s chairman, Frank Borman, was seriously interested in National. However, the DOJ and DOT both opposed a merger of Eastern and National, and ultimately National chose to accept Pan Am’s offer. TI sold its shares in National to Pan Am for close to $45 million.

Thanks to a large amount of cash on hand, Lorenzo was ready to start another takeover attempt. This time, he was going to try to tackle Trans World Airlines which had revenue approximately fourteen times that of TI’s.

Nobody could understand why Lorenzo was interested in trying to take over TWA. He said that he and his team wanted to “cure TWA,” and they “could work miracles” at the airline. But TWA would be tricky for Lorenzo to fix because the carrier had an unattractive amount of long term debt estimated at about $643 million. TWA’s board “unanimously affirmed” that TWA was not for sale. Eventually, Texas International sold its entire stake in TWA.

A Convair CV-240 with its two engines running at Dallas Airport in 1962. PHOTO: MEL LAWRENCE.

Meet Texas Air Corp.

In 1980, Lorenzo formed a holding company called Texas Air Corporation by restructuring TI. The new company had about $60 million in cash holdings to be used primarily for investments.

One of the big investments Texas Air Corp. made, was forming a new airline, New York Air. The new airline flew shuttle flights from New York LaGuardia to Boston-Logan and Washington National. It hoped to win customers by offering low fares, roomier seats, and better service than the dominant carrier on these routes at the time which was Eastern Airlines. Eastern cut fares in order to compete with New York Air.

Nobody could understand why Lorenzo was interested in trying to take over TWA. He said that he and his team wanted to “cure TWA,” and they “could work miracles” at the airline.

Texas International employees, who were unionized, opposed the launch of New York Air because non-union employees were being hired and their pay rates were substantially lower than union rates at TI. The pilots were set to launch a $1 million protest and boycott, but it was called off thanks to the 1981 Air Traffic Controller’s strike.

Lorenzo May Make A Catch

In January 1981, Texas International Airlines made an offer to buy Continental Airlines. Like National and TWA, TI already owned approximately a 10% stake in Continental. Western Airlines and Continental already had an agreement to merge, but TI used its shares to help vote against the merger.

There was a lot of opposition to TI’s latest takeover attempt. Continental employees were not supportive because they feared lay-offs, and Lorenzo was anti-union. Lorenzo supposedly stated that employees had the right to select union representation if they desired.

TI eventually acquired a 49% stake in Continental. Meanwhile, employees were working hard to prevent the merger legally. Continental’s chairman, Alvin L. Feldman, objected to the purchase saying the combined company would be “very weak.”

From top to bottom:
a. TIA also operated the Convair CV-600. Pictured is N94216 at Dallas Airport.
b. Another TIA DC-9-31 (N1309T) landing at Memphis Airport in August 1969.
c. The DC-3 Super Starliner (N25668) was one of the airline’s pillars.
PHOTOS: MEL LAWRENCE.

However, the CAB approved the merger, and Ronald Reagan did not block the deal. Unfortunately, Feldman committed suicide as the airlines were planning to announce the deal publicly.

But, there were still major problems ahead. 1981 was a tough year financially for Texas International; many analysts believed that Continental’s problems were worse than they appeared. However, this did not stop the steps to combine TI and Continental.

Lorenzo took charge of the combined airline. TI’s Dallas hub was eliminated, and Texas International disappeared as the Continental Airlines name was selected to be the surviving brand.

Effective June 1, 1982, Texas International and Continental Airlines were officially merged. The guppy (Texas International) had officially eaten the whale (Continental).

Under Lorenzo, Continental filed for bankruptcy, which was seen as a union-busting tactic to lower wages. He acquired Eastern Air Lines, where he followed the same principles of reducing the work force and cutting pay.

In the end, Frank Lorenzo’s reputation in the industry was tarnished among airline employees who saw him as a corporate executive who wanted to take hard-earned money out of their pockets. Some industry analysts applauded his style. But whether people vilified him or admired him, his name will always be remembered in the industry. And the first airline that he managed, Texas International, will also be remembered as the guppy that ate the whale.

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Jack Harty

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