Fly Braniff Free: The Braniff Travel Bonus Bonanza Program
The Braniff Fleet owned by the author
For the very few that remember this program, it could be argued that this really was the first modern, points based airline loyalty program to be instituted. And some would argue that it was American Airlines who did this. Before I go further, I should mention that I am not entirely an unbiased observer in this story because it was my father, Neal J. Robinson, who I would argue is one of the originators of these programs.
The story about what drove Braniff to adopt such a program has its start in the 1978 Airline Deregulation Act just like so many other modern airline stories. It was the opinion of many in the airline industry at that time that airlines would have to grab all the routes that they could when deregulation began so that they could hold these routes when the airline industry was re-regulated, as so many thought. Harding Lawrence, Chairman and CEO of Braniff International certainly thought so at the time.
There was a belief among many airline executives that deregulation would last only a few months because no one believed the government and the public would have much tolerance of the chaos they believed would ensue. In hindsight, this seems silly but in the context of the 1970’s and the history of the airline industry, it wasn’t entirely impossible either.
Deregulation only liberated the revenue and service side of the airline industry while the cost side, especially labor, remained regulated in the form of unions, union contracts and the Railway Labor Act. Many of those involved in the accounting and finance domains of airlines became acutely aware of the risk that their airlines were about to endure as prices dropped and costs remained the same. My father was one of those men as he sat as Vice President – Finance & Control for Braniff.
By late 1979, Braniff was under significant financial pressure by having taken on too many new routes and by having ordered too many airframes and engines to serve those routes. The company was under increasing pressure from its lenders and that fact became a matter of speculation within the travel industry and, to a lesser extent, among the general public.
The impact on Braniff as a result of that financial pressure and the attendant speculation was estimated to be that the airline was possibly losing from 5 to 10 percent in load factor on a daily basis as a result. The airline was suffering for passengers badly just when it needed them the most. In the pre-deregulation era, it was commonly accepted that airlines would aim for load factors of approximately 60 to 65 percent which contrasts greatly with the 80 to 90 percent load factors airlines want today.
With air fares suddenly dropping like rocks, airlines could not afford to suffer any drop in load factor whatsoever and certainly not a massive drop such as 5 percent or more.
According to Neal Robinson, his calculation (an educated guess really) was that in 1979, travel agents who were selling to the general public and to the corporate travel departments constituted approximately 65% of all Braniff ticket sales and he was certain that this percentage was dropping quickly. The decline also roughly correlated with the level of news and speculation about Braniff within the industry. In short, the speculation was fueling a self-fulfilling prophecy.
Mr. Robinson describes the problem here:
I concluded the reason for that decline was the basic math of travel agent ticket sales. Travel agents typically received a commission equal to 10% of the ticket price, e.g., for a $500 ticket, $50. In the event of an airline failure where the ticket became essentially worthless except to the extent another carrier might honor it, sometimes on standby, the entire ticket purchase price would be lost, e.g., $500. In that event, the travel agent would be under great pressure to refund the entire ticket price. Thus, where the travel agent had the potential to benefit in the amount of $50 for selling the ticket, it had a corresponding opportunity to lose $500—or ten times the amount the agent had to gain if the carrier ceased operations. I believe that made travel agents and corporate travel departments shy away from using Braniff—that in addition to the inconvenience that would result to the passengers, their “customers,” in the event the airline failed.
Travel agents were doing what smart business owners do: limiting their exposure to risk.
When Neal Robinson was elevated to the post of Executive Vice President – Marketing, he concluded that three things had to happen fairly quickly. First, Braniff needed to create the image that they were fighting their way back. This was initiated with the Glen Geddis (designer of the Braniff Two Tone Livery in the early 1970’s) developed campaign titled Braniff Strikes Back which was thematically inspired by the Star Wars movie, The Empire Strikes Back.
Jet-X 1:400 Boeing 727-127 Glen Geddis Two Tone Red
The second thing needed was a way to take the airline choice decision out of the hands of travel agents and corporate travel departments and get it into the hands of the passengers. Mr. Robinson and his team believed that travelers liked the Braniff experience and even preferred it despite the fact that the airline’s relationship with passengers had recently been strained by operational problems incurred with the rapid route expansion.
The final action was to put together a business plan that made sense to banks and insurance companies who were largely Braniff’s creditors at the time and who the airline needed to reduce the constant pressure and industry speculation that drove falling load factors.
In the next post, I will talk about the program used to drive that passenger loyalty: The Braniff Travel Bonus Bonanza
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