Sunday, June 10, 2001

Did AA Really Kill Braniff?

It's a pretty popular airline legend that AA killed Braniff. Especially in North Texas, where there are still hard feelings over 25 years later.

If you truly believe that BN would have survived without having AA as a competitor, look at the facts.

In 1980, the year before AA started to grow DFW as a hub, BN's annual report stated that "the Company may be unable to continue as a going concern." In English, "The Company is almost insolvent."

Here are the profit, total debt, and aircraft order commitments for BN starting with 1971 for history, and then 1976 through 1981, the last year that whole year results are available.

YearProfit/LossDebtAircraft Orders
1971+ $8M$188M$63M
1976+ $26M$257M$62M
1977+ $36M$287M$186M
1978+ $45M$362M$792M
1979- $44M$601M$748M
1980- $128M$673M$236M
1981- $156M$668M$180M
1Q82- $47M loss, bankrupcy filing 2Q82

Up to 1976, debt and aircraft orders stayed consistent. Profits from 1971 climbed from $8M to $26M, which was reasonable considering the economy and oil embargo.

1976 was their last stable year. In 1977, they started to head south. Outstanding aircraft orders almost QUADROUPLED from 1977 to 1978, and their debt almost DOUBLED from 1978 to 1979.

To recap, $375M in losses from 1979 to 1982, and debt growing by $306M in the same timeframe, mostly due to the huge value of aircraft orders placed in 1978.

AA hubbed DFW in July 1981.

AA certainly didn't help BN, however they were clearly "financially troubled" starting in 1977, and were unable to pull out of that situation.

Why did they implode?

Explosive expansion triggered by deregulation. It's as simple as that.

Harding Lawrence, Braniff's legendary and iconic CEO, decided to apply for every dormant route authority he could get. He (along with a lot of others) believed that deregulation was going to be a short-term experiment, and wanted to have a lock on the domestic market when it was re-regulated.

That never happened while Braniff was still around, but there are some who still believe that re-regulation is inevitable...

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