A gentle response to an ugly diatribe

My friend, Richard Cass of BraniffFlyingColors.com, has re-posted a financial analysis that I did some time ago and which refuted the idea that Harding L Lawrence simply spent 15 years running an airline into the ground.  The purpose of that was to put some fact based perspective on a very emotional subject.

Please recognize that I don’t excuse Harding Lawrence entirely from the bankruptcy of Braniff but I would also point out (and did so during the Flying Colors conference last fall) that there were a number of people who contributed to the bankruptcy of the airline.  The airline went on for 2 more years after Harding Lawrence’s retirement.  Even more important, the entire industry for airlines changed in such a fundamental way, the impacts were felt until the 2000’s.  That is the disruptive force of airline deregulation.  Braniff was the first to go down, it wasn’t remotely the last.

Fair disclosure:  I have a degree in economics and finance.  My exposure to airlines has gone on for over 40 years.  And, most importantly, I am the son of Neal J. Robinson who served in various executive roles at Braniff International.  Those roles began in accounting and included titles such as VP Finance, VP Finance & Control, EVP Marketing.  His career at the airline spanned 13 years and he was also responsible for guiding Jay Pritzker in the re-launch of Braniff II.

I would like to offer rebuttal to comments made by Brooke Watts via his Facebook site on Braniff.  I’ll address them in order.

Mr Watts:

In order to assess a company’s financial stability, you must look at the “debt to equity” ratio

In simple terms, how much does the company owe vs how much it made

This ratio was near 1:1 during Beard. It increased exponentially under Lawerence (sic).

Therefore, Braniff was making a profit on paper, but owed more and more money over time

Well, Mr. Watts isn’t entirely incorrect on debt to equity ratios telling a story at a company, he inadvertently tells the story of exactly why Braniff was purchased and put into the hands of new leadership.  A debt to equity ratio of 1:1 says the business is being run exceptionally conservatively and competent financial authorities then (and now) would have said that this business cannot adequately grow to maintain its position in the industry.  That kind of ratio doesn’t scream “hey, look at me!  I’m running a great business.”  To the contrary, it screams that the business is run too conservatively and probably not returning a good ROI (return on investment) to its shareholders.

Curiously, Mr. Watts offers that this was all due to Harding Lawrence.  In fact, C. Edward Acker led the purchase and arranged the financing for that airline for years and continues to be considered a very solid, authoritative figure in finance (airline and otherwise) even today.  The airline ran its business under the very stern eye of Republic Bank as well (who served as the lead bank in financing the airline).  It is disingenuous to characterize the airline being run into the ground with debt by a single person.  This was a public corporation governed by some of the most conservative business leaders in the area during Lawrence’s tenure.

Again, Mr. Watts:

This stemmed from the fact that Acker and Lawerence decided to pay profits to “preferred stockholders” instead of re-investing in the company.

They also re-incorporated three times after 1965. And set up “Golden Parachutes” for themselves.

There were three sets of “books”. One for the common stockholders, one for the IRS, and a private one. Ted Beckwith was killed over the latter
This is just slander and terrible slander at that.  It implies criminal acts by many men, not just Lawrence, in a public corporation for decades.  Let’s be smarter than that.

This public corporation was being audited by a Big 10 accounting firm annually.  It had fiduciary duty to report its actions to the SEC in an era when the SEC had substantial bite.  It operated under the scrutiny of serious businessmen such as Troy Post, Herman Lay, Pamela Harriman, and others who had and still have reputations for being exceptionally responsible individuals.

As for the final statement on Ted Beckwith . . . Ted Beckwith was a contemporary of my father and man respected within and outside of Braniff.  His murder was brutal and exceptional and entirely horrific for Mr. Beckwith’s family.  To give purpose to his death with an implication of financial impropriety is just a giant disservice to Mr.  Beckwith.

Mr. Beckwith’s murder is unsolved today and we do not know why he was killed.  The circumstances around his death were barely investigated unfortunately.  Lack of facts does not prove a thing.  Furthermore, to suggest multiple sets of books is silly and slanderous to Mr. Beckwith (who was the EVP of Finance at the time my father was EVP of Marketing).

The airline suffered on a bet made by Harding Lawrence.  A bet that several other CEOs made at the time of the 1978 deregulation of airlines.  He bet big and it didn’t work.  He does deserve some credit for the airline’s demise.  Nonetheless, the airline was led and governed by others for more than 2 more years.  There were 2 others who were in charge of the airline.  This wasn’t due to one man and to say so really understates the entire airline industry.

I would ask that when people judge Braniff and Braniff’s fortunes, they do so with facts rather than gossip, speculation and unfounded rumor.  It’s certainly OK to have a negative opinion of its leaders, including Harding Lawrence.  But those opinions should be based on fact rather than emotions such as hatred.  In the case of Mr. Watts, I’ll point out that the very airline he celebrates so much, the 1965 to 1982 era, was crafted by the very man he derides at every opportunity.  The irony is curious.

Greg Robinson | Flying Colors Airline Blog

One Response to “A gentle response to an ugly diatribe”

  1. Amen!!!

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