THE EVOLUTION AND 'DOWNFAM OF'
QANTAS. AIRLIFES-

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THE EVOLUTION AND DOWNFALL

OF CAPITAL AIRLINES

BY

Robert S. Kurtz

AN ABSTRACT OF A THESIS

Submitted to
Michigan State University
in partial fulfillment of the requirements
for the degree of

MASTER OF ARTS
Department of Advertising

1963

APPROVED: % @‘W
/ U

ABSTRACT
THE EVOLUTION AND DOWNFALL
or CAPITAL AIRLINES
by Robert s. Kurtz

The history Of Capital Airlines can be traced.back to
1927, when it was known as the Clifford Ball Airline--a pio-
neer mail carrier in the united States.

Between 1927 and 1961, Capital Airlines grew to become
the.sixth-1argest commercial airline in the world, in terms
of passenger revenue. Yet, in 1961, Capitaerirlines ceased
to exist as a corporate entity, having been absorbed into the
vast Uhited.Airlines system.

How could a major air carrier come to such an inglorious
end? The reasons are many-~a route structure that placed it
in competition with giants such as American, Eastern, and TWA,
yet required it to operate short, unprofitable runs: a lack-
of suitable equipment to operate*within its route pattern,
compounded.by scheduling and operational difficulties: lack
of foresight in purchasing turboprOp Viscounts; the financial
crises that Viscount brought to bear; internal management
unrest, and so on.

It was the intent of this paper to study how these var-
ious forces converged to puch Capital to the edge of bank-
ruptcy, with special emphasis on the role advertising might
have played in slowing down or speeding up this date with
destiny.

Source material included various advertising, press,

Robert S. Kurtz
business, and aviation trade publications, several general
consumer magazines, Kenyon & Eckhardt, Inc., Capital Airlines,
and United Airlines.

Results of the historical analysis of Capital Airlines
tended to indicate that: (1) advertising expenditures were
consistently inadequate in comparison with other major air-
lines, (2) advertising was often misdirected due to management
pressures, (3) advertising was sometimes an aid in increasing
sales, if only temporarily, (4) advertising did not appear to
hasten the airline's downfall.

THE EVOLUTION AND DOWNEALL
OF CAPITAL.AIRLINES

BY

RObert S. Kurtz

A THESIS

Submitted to
Muchigan State university
in partial fulfillment of the requirements
for the degree of

MASTER OF ARTS
Department of Advertising

1963

TABLE OF CONTENTS

LIST OF TABIIES O O O O O O O O O O O C O O C O O O 0

LIST OF ILLUSTRATIONS . . . . . . . . . . . . . . .

Chapter

I.
II.
III.
IV.
V.
VI.
VII.
VIII.
IX.
X.
XI.
XII.

XIII.

INTRODUCTION_. . . . . . . . . . . . . . . .
THE PORNATIVE YEARS: 1927-1945 . . . . . .
.A POST4WAR DREAM.EvAPORATES: 1946-1947 . .
A.KEY YEAR AT CAPITAL.AIRLINES: 1948 . . .
A PERIOD OP RELATIVE PROSPERITY: 1949-1953
CRISIS AND A NEW CONCEPT: 1954 . . . . . .

THE YEAR OF THE VISCOUNT: 1955 . . . . . .

THE DMEACT THAT NEVER CAME. 1956 . . . . .

THE VISCOUNT BUBBLE BURSTS: 1957 . . . . .
NEW'ADVERTISING.AND OLD PROBLEMS:
ENTER ELECTRA AND PURE JETS: 1959 . . . . .
A DATE‘WITH DESTINY: 1960-1961 . .

ANALYZING THE COLLAPSE OF CAPITAL . . . . .

APPENDIX C O O C O O O O O O O O O O O O O O O O O O

BIBLIOGRAPHY . . . .

ii

Page
iii

iv

14
27
43
88
110
120
129
138
154
175
204
215
219

LIST OF TABLES

Table Page

1. Financial Status of Capital Airlines,
1940-1959 e o o o a e o e a e o o e o o o e 216

2. Passenger Statistics for Capital Airlines,
1940-1959 e e o o o '0 o o o o o o o o e o o 217

3. Competitive Advertising Expenditures of the

Seven leading Domestic Airlines, 1951 1.
1956 O O O O O O O O O O O O O O O O O 0 O 218

iii

Plate
I.
II.
III.

XXII.

LIST

OF ILLUSTRATIONS

iv

Page
11
12
17
40
62
66

69

75
102
106
118
119
146
148
150
152
160
161
162
167
168

Page
170
171
174
177
178
194
196
197
199
203

CHAPTER I
INTRODUCTION

April 27, 1927 is a date of more than passing interest
in the history of commercial aviation. For on this day
Capital Airlines was born. The maiden flight was made in a
tiny Waco biplane. The airport was a COW’pasture in Pitts-
burgh known as Bettis Field.

June 1, 1991 marks another historic day in the airline
industry. It signaled the end of an era-~the day Capital
Airlines ceased.being a corporate entity, its image lost
forever by assimilation into the vast Uhited.Air Lines com-
plex.

The thirty-four years, one month, and ten days Spanning
these two dates are the subject of this paper. In a little
over three decades, Capital had grown from an experimental
mailehauling operation to fifth largest passenger-hauling
domestic trunk line. And while it was growing, Capital was
also earning a reputation as pioneer, innovator, and pace-
setter in commercial aviation.

Unfortunately for Capital Airlines, its image was not
a true reflection Of ts strength. The carrier was, foremost,
a victim of the route structure it had.built for itself over

the years. This, combined.with inordinate competitive pres-

2
sures placed on it by the Civil Aeronautics Board, the car-
rier's own management policy, and the nature of a rapidly ex-
panding air transportation industry, brought Capital to the
brink of financial disaster more than once. The last trip to
the precipice was irreversible, and forced to choose between
merger or collapse, the airline chose the former.

This paper is about advertising, and the role it played
in the growth and decline of Capital.Air1ines. But because
advertising is just one small part of the total marketing
strategy, and because marketing strategy is but one phase of
the Capital Airlines story, the role of advertising will be
discussed only as one of many factors which may have contrib-
uted to the demise Of the carrier.

Emphasis is placed on the post World war II era, thus
paralleling the period of rapid growth not only of Capital,
but of the entire air travel industry.

Material for the study was drawn largely from trade
publications dealing with advertising, marketing, and the
airline industry. Other sources included Capitaerirlines
annual reports, the airline itself, and its last advertising

agency--Kenyon & Eckhardt, Inc.

CHAPTER II

THE FORMATIVE YEARS: 1927-1945

The Clifford Ball Airline ,
The names Clifford Ball and Merl Moltrup are not likely

to be found in any aviation hall of fame, but perhaps they

should be. Moltrup was the man at the controls that spring day

in 1927 when the forerunner of Capital Airlines made its
initial flight. Clifford Ball was the owner of the Waco bi-
plane that Moltrup was about to gun down the crude runway and
into aviation history.

Until that April day, Ball had been merely the con-
trolling interest in Pittsburgh's Bettie Field. The small,
cloth-covered biplane Merl Moltrup piloted was one of seven
Wacos accepted by Ball in lieu of unpaid storage charges, and
having no better use for them, he decided to plunge into the
untapped, unproven field of mail-hauling by snaring the first
government contract ever awarded to fly mail.1 It must be
remembered that in 1927 carrying the mail was not a sideline,
but was the only tangible source of income in the absence of
a passenger travel market. Paying passengers were in fact

unwanted, and as a Capital Airlines press release pointed

 

1"Problems of Short-Haul Service,‘I Business Week,
July 3, 1954, p. 44.

4

out, they were regarded "as so many fool adventurers that
were excess baggage.“1

The Clifford Ball Airline did not enjoy the fruits of
technology that are so taken for granted today. Its sole
route, a hop of 127 miles between Pittsburgh and Cleveland,
was totally without navigational aids or radio communications.
During the day pilots literally would follow railroad tracks
to their destinations, and at night the glow from YOungstown
steel mills served as their homing beacon.

I‘Weather often played haVOC‘With the mail schedules,
and the decision whether or not to fly usually was determined
by a phone call to the City ahead. And though the Pitts- I
burgh-Cleveland route was dubbed “Path of the Eagle,“ it was
anything but a straight-line course, since the frail air-"
craft then in use were forced to detour around.bad.weather.

Despite the Obstacles, Ball kept his neophyte airline
going until 1929, when his interests were absorbed.by the
PittSburgh Aviation Industries Corporation, an organization
headed by three men who were to shape the future of Capital
Airlines: C. Bedell Monro, George R. Hann, and Fredrick
Crawford.2 Clifford Ball exited, apparently without ever

realizing what he had helped create.

 

1Capital Airlines, ”Biography of a Pioneer-~The Story
of an Airline,“ A.Public Relations Department press release,
No date, p. 2. (Mimeographed. )

ZIQid., pp. 1, 2.

5
PCA: An Uhlikely.Marriag§ That worked

One of the first moves made by the new owners of the
Clifford Ball Airline was the addition of cabin planes to
the fleet, a brilliant piece of strategy destined to increase
the role of passenger revenue as a source of income.1 The
next step, in 1930, saw PittSburgh Aviation Industries Cor-
poration acquire control Of Pennsylvania Airlines and add
washington to its PittSburgh-Cleveland route.2

Somehow, the carrier now'bearing the name Pennsylvania
Airlines continued to grow, despite the fact that "airplanes
were still loOked upon as an oddity misplaced from the dog-
fights of WOrld War I.“3 But it took an incident in 1934
to shake all of the contented mail-haulers into reality. In
that year the federal government canceled all airmail con-
tracts with private Carriers, thus stripping them of their
principal.source of income. Faced with disaster, the air-
lines had no choice but to start hauling people instead of
mail, and though the mail contracts were restored several
months later, they were in the passenger business to stay.4

Any advantage Pennsylvania Airlines might have held by

the addition of cabin aircraft several years earlier was

quickly dissipated as the airline industry phased out the

 

1Robert B. McIntyre, ”Why Capital Airlines Will Use
20%.More.Ads,“ gitor and Publisher, April 10, 1954, p. 22.

2

Capitaerirlines press release, "Biography . . . ,

lhid.
QMCIntyre, Editor and Pgblisher, April 10, 1954, p. 22.

6
wooden, Cloth-covered, open-cockpit Waco and introduced the
metal, two-passenger, closed-cabin Fairchild FC-2, and later,
the ten- and twelve-passenger Ford Tri-Motor.1

Pennsylvania Airlines joined.in the equipment race, but
soon discovered it was no longer alone in the skies over
eastern united States. An upstart named Central Airlines
bid for the mail routes Pennsylvania had flown prior to their
canCellation by the government, and.when the routes were re-
stored they were awarded to Central, precipitating one of the
fiercest competitive wars in aviation histOry.

Pennsylvania scored an early victory by acquiring KOhler
.Aviation Corporation and its routes from Milwaukee to Grand
Rapids and Detroit. Central countered by purchasing a fleet
of Ford Trienotors to replace its Stinsons, but had.barely
put them into service when Pennsylvania introduced an entire
new fleet of faSt, twin-engine Boeings. As the war of escal-
ation grew more intense, Central had no choice but to bring
in newer-version Stinsons and, just to be on the safe side,
slash its passenger rates.2

But equipment and fares turned out to be just minor
factors in the struggle for supremacy between Pennsylvania
and Central, for the two airlines also happened to fly very

nearly identical routes with very nearly identical timetables

 

1Capital Airlines press release, "Biography . . . ,"
pp. 2, 3.

2
Ibid., p. 3.

7
in, as one writer put it, “a race towardzbankruptcy."1 .At‘
times the feud todk on the flavor of a Mack Sennett Comedy,
as the first plane to reach a terminal would “hijack" all
the passengers, leaving no one for the competition.2 But
the two airlines involved were not amused, and the all-out
war ended in the only way possible for the survival of both
combatants--Pennsylvania and Central merging in 1936 to be-
come Pennsylvania-Central Airlines. C. Bede11.Monro, a
founder of PittSburgh.Aviation Industries Corporation and
president of Pennsylvania Airlines, was named.president of
PCA. James B. Carmichael, Central Airlines' chief pilot,
was named to a similar position in the PCA structure.

The years leading up to'World.War II saw PCA trans-
formed from a three-city operation into a far-reaching net-
work of air routes, but with its nucleus still situated
around the'Washington-Pittsburgh-Detroit triangle. In 1937,
Charlston, west Virginia, was added to the PittSburgh terminus,
and routes to Baltimore, Buffalo, Harrisburg, and Williams-
port were added to the Washington station. Chicago became a
western terminal in the same year, and a new route was estab-

liShed in northern Michigan.4

 

1Wesley Price, "He Wants TO Make Money on an Airline,“
Saturday Evening Post, September 3, 1949, p. 23.

2Capital Airlines press release, "Biography . . . ,
p. 3.

3Price, Saturday Eveninquost, September 3, 1949, p. 23.

4Capital Airlines press release, "Biography . . . ,
p. 4.

8

PCA was hard put to keep its market expansion program
from outstripping equipment requirements. The fleet was
bolstered first in 1937 by the integration of twin-engine
Boeing 247-D's--prototype of the famed B-l7 Flying Fortress.
Attainment of an annual passenger volume of 125,000 in 1939
brought about the introduction of the now-legendary “work
horse of worlddwide air transportation"--the Douglas DC-3.1
By 1940, the PCA fleet numbered six 21-passenger DC-3's and
fourteen 10-passenger Boeing 247-D's.2

Another indicator of PCA's phenomenal predwar growth
is the company‘s employment figures. During the period 1938-
1940, PCA's personnel roster swelled from 293 to 698.3

Expansion continued through 1941, as PCA made its first
major penetration into southern markets, with routes opened
up from.NorfOlk to Knoxville, and from Pittsburgh to Chatta-
nooga andBirmingham.4

'WOrld war II not only brought PCA'S expansion activities
to an abrupt halt, it reversed them.in a sense, the carrier
becoming the first commercial airline to turn over its air-

craft to the military, and then Opening a school at Roandke,

Virginia to train army and navy pilots;5 Yet,‘with only the

 

1mm.

2Pennsylvania-Central Airlines Corporation, Annual

Repgrt: 1940, p. 8.

3Ibid.., p. 12.
4

Capital Airlines press release, ”Biography . . . ,

£213-

9
seven planes it retained to continue servicingrits routes, PCA
set.ccmpany records for cargo-and:passenger'traffic during
the war years.1 And,‘by operating in the blaCk every year
since 1939, PCA.managed to build up a surplus of more than

$1 million'by the end of 1945.2

Advertising Emerges

The advertising history of Pennsylvania-Central.Airlines
has a rather sketchy beginning, owing largely to an apparent
lack of expenditures for this purpose. Records Show that
prior to the merger, Central Airlines had.bought more than
three times as muCh newspaper space in 1936 as Pennsylvania
(22,814 lines ye 6,626 lines), with their advertising over-
lapping in four markets-eAkron, Detroit, PittSburgh, and
washington, D.C. After the merger, PCA used a total of only
6,470 lines in 1936, divided about equally among dailies in
Cleveland, Detroit, Milwaukee, PittSburgh, and‘Washington, D.C.3
PCA didn't even bother to reveal its advertising expenditure
to stockholders until 1940, when it showed up in the annual
ropOrt as a combined figure for “Advertising and Selling” of

$241,840.4

 

lgbid.

nggipegg wees, July 3, 1954, p. 46.

3Media Recogds: Hewgpgpgrs and.Newspgp§r Advertisers
(New York: Media Records, Inc., 1936), p. 262.

A 4PCA, Annual Repgrt: 1940, p. 19.

10

The carrier's agency relationships seemed to be quite
volatile during the predwar years, also; Pennsylvania Air-
line's agency of record just prior to the merger in 1936 was
Brooks, Smith 5: French, Detroit, with no agency shown-‘for
Centra1.1 Nor are there records showing who handled the ac-
count immediately after the merger, but PCA appointed Federal
Advertising Agency, Inc., New York, for 1937 and 1938‘.2 The
carrier placed its advertising direct in 1939 and 1940,3 then
appointed Batten, Barton, Durstine a Osborn, New York, for
the next twO years.4 Apparently still dissatisfied, PCA ap-
pointed the J. Walter Thompson Company, New York, to service

5

the account in January, 1943. JWT managed to survive PCA's

pattern of switching agencies every two years, but not by
much, as the account was lost to LeWis Edwin Ryan, Washington,
D.C., in January, 1946.6

Examples of early PCA advertisements are extremely
difficult tO locate, due to a lack of newspaper and advertis-
ing agency records dating back into the '308 and '408, but
the two small-space ads reproduced here were probably typical

of the times .

 

1 Ad er '8' ts (New York: National
Register Publishing Company, Inc., 1936), XXI, 577.

2mg. (1937), xxn, 616: and (1939), XXIII, 693.
BIbid. (1939), xxrv, 717: and (1940), xxv, 694.
4mg. (1941), xxvzr, 698: and (1941), xxvrr, 680.

SJ. Walter Thompson Company (New York), Data supplied
by JWT Information Center, May, 1963.

GIL-Lot.

 

  

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* 13
Plate I illustrates a two—column newspaper advertisement

run in the fall of 1944, and basedon other samples encountered
for the same year, it appears tO'be representative not only of
PCA.but of the airline industry as well.

Plate II is another two-column advertisement from 1944,
announcing the opening of a new PCA ticket office in down-
town Detroit. The body copy suggests that PCA was concentrat-
ing on the business travel market during the war.

The signature on both ads includes the slogan, “The
Capital Airline.“ As far as can be determined, 1944 marked
the first time this line was used.1 The question remains un-

answered, however, of whether it was conceived as part of a

postdwar corporate face lifting.

 

1Since the phrase, "The Capital Airline,“ appeared for
the first time in 1944 in the carrier's annual report, it is
a fair assumption that it made its initial appearance in ad-
vertising around the same time (Pennsylvania-Central Airlines

Corporation, Ang Ihgn There were 14: Annual ggpgrtg 1225,

4th cover).

CHAPTER III

A POST4WAR DREAM EVAPORATES: 1946-1947

The Airline Industgy Exgnds
Confident that prosperity would follow close on the

heels of victory, the airlines petitioned the Civil Aeronautics
Board for a fare reduction shortly after the war had ended.
CAB promptly obliged by granting a 25% fare cut in September,
1945. There was a lone dissenter among the carriers--Pennsyl-
vania-Central Airlines. PCA contended that a slash in passen-
ger fares would not expand the airline business as supposed,
since there already existed a post-war sellers' market that
had people begging for seats. More important, perhaps, was
the rising curve of airline wages and costs, which could be
met only by holding revenue at wartime levels. PCA'S warn-
ings went unheeded, however, and when CAB approved the fare
reduction, the carrier's choice became clear--join the price-
cutters or be forced out of business by them.

And so PCA did what the others did--it sought new routes,
hired more people, and bought new planes. By 1947, PCA had
established stations in such cities as Minneapolis-St. Paul,

‘r

Memphis, Toledo, and Richmond.2

 

lPrice, Satgday Evening Post, September 3, 1949, p. 50.

2Capital Airlines [Pennsylvania-Central Airlines Corpora-
tion], annual Rengrt: 1251, p. 7.
14

15
"In order to staff the new stations and be prepared for

the anticipated onruSh of new customers, PCA swelled its ranks
to 5,000 in 1946.1 Advertising and publicity expenditures
were increased from less than $325,000 in 1945 to nearly
$640,000 in 1946, perhaps in hopes of triggering the stampede
to its ticket counters.2

On the equipment scene, PCA became the first airline to

3

fly four-engine planes over domestic routes when it purchased

twenty-two Douglas DC-4's in 1946.4

In spite of the glowing statistics pouring in from the
airlines, 1946 was a bad year. Business had indeed expanded,
but not as rapidly as had been forecast. One reason--the
public rebelled against the poor service being offered.5
Another reason-awhile airline income rose, Operating costs
rose even faster. Most airlines went into the red in 1946,
and PCA was among the hardest hit. The carrier saw a $1 mil-
lion surplus from the preceding year become a $3 milliOn def-

6 and financial disaster became a distinct possibility

7

icit,

when it defaulted on a $4 million loan made in 1946.

.1

1“Mass Market in the Air," Business week, September 30,
1950, p. 46.

2Capital Airlines Annual Report: 1947, p. 18.

3MIcIntyre, Editor and Publisher, April 10, 1954, p. 22.

4Pennsylvania-Central Airlines Corporation, Annual

Rengrt: 1946, p. 3.

5Price, Saturday Evening Post, September 3, 1949, p. 50.

GBnginess Week, July 3, 1954, p. 46.

7SeligAltschul, "Capital Seeks Financial Freedom,"
.Aviatign week, OctOber 31, 1949, p. 35. .

16

A New Imagg for PCA

Pennsylv;nie~Centra1 Airlines apparently compounded its
mistakes by changing images in mid-stream; The"carrier's
famous eagle emblem was adopted in 1946, and a brief message
on the inside front cover of tn.t year's annual report in-
formed stockholders that the name "Capital Airlines“ would be
used in advertising and other material addressed to the pub-
lic (“because of the Obvious promotional advantages they offer
over the long corporate name"), and requested that they, too,
refer to PCA as "Capital Airlines."l The one-column ad illus-
trated in Plate III shows how the carrier's signature was
altered initially in 1946, with “Capital Airlines“ replacing
"The Capital Airline.“ The overall advertising campaign, if
this particular uninspired effort is representative, may well
have contributed to the carrier's poor showing in 1946.

It has been said that PCA's corporate change over was
ill-timed, inasmuch as it forced the carrier to scrap much of
its promotion material at a time when it was in perilous
financial condition--as were other airlines--and when new
airlines were fighting for a share of the market.2 Neverthe-
less, without fanfare and almost unnoticed, Pennsylvania-

Central Airlines had'become Capital Airlines.

 

1PCA, Annual Report: 1946, 2nd cover.

2Samuel Rovner, "Consistency Helped.Airline Out of the
Red," Editor and Publisher, January 14, 1950, p. 16.

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18

winged to Eras-1

The*airline industry, still reeling'from*1946 losses,
experienced an even more disastrous year in 1947. .Most car-
riers expected”to lose money during'the‘winter, but the 1946-
1947 season showed industry-wide losses 30%.higher than usual,
and for several reasons.

For one thing, people in general seemed less inclined to
travel. For another, a series of plane crashes in the spring
of 1947 kept potential customers away in droves. One of theSe
disasters involved a Capital airliner, and to make matters
worse, it occurred in a prime market. The summer of 1947 saw
the industry jolted by another traffic slump of such propor-
tions that President Truman publicly announced that he was
not afraid to fly.1 The airlines, torn apart by soaring costs
and plummeting revenue, now petitioned CAB for passenger fare
increases. .Again, CAB reacted favorably, and fares were raised
10% on two separate occasions in 1947.2

PCA's new name didn't prevent the airline from‘being
among the hardest hit again in 1947, and the addition of
twenty-three DC-3's to its burgeoning fleet seemed to be para-
doxical in the face of Shrinking passenger volume.3 Total

passengers carried in 1947 numbered 1.1 million, compared with

 

1Price, SaturdaypEvening Post, September 3, 1949, p. 50.

 

"2Capital.Air1ines, Annua1_Report:g;947, p. 7.

31bid., p. 12.

19
1.3 million the year before. Orders for twenty Martin 2-0-2'3
and a fleet of Douglas DC-6's‘had'to“becanceled.l Postdwar
plans to make Capital a worldwwide airline suddenly evaporated.
Capital lost $2.7 million in 1947, and its debt went from zero
to $14 million-~all without even borrowing for new planes, as
many other carriers had done.

Capital's planes were flying practically empty, liabil-
ities exceeded assets, and there were some doub s that the
payrolls could be met.3 In what may have been the understate—
ment of the year, CAB said that Capital's position was "appar-
ently critical."4 CAB certainly didn't lessen the seriousness
of the situation by awarding Northwest Airlines a Detroit-
Pittsburgh-ClevelandAWashington route in 0ctdber, 1947--a
route Capital was already flying, point for point. CAB chair-
man James Mm Landis, in dissenting from the decision, said the
competition would'be too severe for Capital, and fellow board
member John Lee, also dissenting, noted that the Northwestern
award‘would result in serious diversion of traffic from Capi-

tal, necessitating a substantial increase in mail pay for the

 

1“Smaller Loss in '48 Forecast by PCA," Aviatign_fl§g§,
May 31, 1948, p. 37.

2LawrenceM. Hughes, "Capital Cashes In on Creative
Selling," Sales Management, OctOber 1, 1950, p. 37.

3"Capital Leads Again,“ Aviation week, January 30,
1950, p. 50. '

4Bus'ness' week, September 30, 1950, p. 44.

20

carrier.1

The Northwest award'had been made in conjunction with a
route extension, between Milwaukee andvain Citie , granted
to Capital. CAB member Clarence Young questioned‘thveisdc
of the Capital award, saying it would not lead the airline out
of its financial crisis.2 Indeed, it appeared for a time that
nothing could lead Capital out of the woods. Postdwar losses
totaled more than $3.5 million.3 and the value of Capital
common stock plummeted from 49 7/8 to 3 7/8.4 Capital's
financial backers, distressed by the situation, demanded the

resignation of President C. Bedell Monro.

A New EIGSLQGBE Takes Ihe REES

C. Bedell Mbnro, president of Capital Airlines since
its formation in 1936, was clearly on his way out. What
actually went on behind the scenes is something only the prin-
cipals know, but it was reported to the trade that.Monro of-

fered to step down on the condition that James H. Carmichael

succeed him.5

Carmichael, it will be recalled, was chief pilot of
Central Airlines at the time of its merger with Pennsylvania

Airlines in 1936. After serving as chief pilot of the newly-

1"Northwest, PCA Get New Routes,“ yiatign week,
October 20, 1947, p. 46.

mg.
3Price, §a§gg§gy_fiyeg;ng_§9§§, September 3, 1949, p. 22.
4Hughes, fialggdugnaggmenp, October 1, 1950, p. 38.

5Price, §aturday Evening Post, September 3, 1949, p. 23.

21

created PCA, Carmichael moved to the executive side of the
company as operations manager,“ later became vice-president
of operations, and in 1946 was madeexecutive vice-president.1

Munro's offer was accepted in a compromise'move, and on
October '1, 1947, James H. Carmichael was elected president of
Capital Airlines.2 According to Business Week," 'the succession
of Carmichael to the presidency came as a surprise, because
he had been one of Honro' s staunchest‘ supporters.3 Some
skeptics predicted he would never last. He just happened to
be a nice guy who lacked experience in the one area of opera-
tions Capital could not afford to have mishandled--finances.
But by 1949, Carmichael would be recognized as “one of the
toughest guys who ever read a balance sheet, roared in pain
and started firing brass hats."4 His success would cause
one financier to remark: “We picked a compromise candidate
for president to settle a fight, and fell heir to the smartest

young man in the business."5

“With flat Wg Have“

According to one observer, the Civil Aeronautics Act of
1938 virtually guaranteed that the federal government would

not permit any scheduled airline to go bankrupt. The Act

describes airlines as essential to commerce and the national

 

lBusiness Week, July 3, 1954, p. 46.

2Price, §aturday Evening ng , September 3, 1949, p. 22.

'-‘-3“On Top at Capital," usinegs Week, October 11: 1947:
p. 41.

4'Price, Satgday Evening Post, September 3, 1949, p. 22.
SIbid.

22
defense. It provides for adjustment of mail subsidies by CAB,
enabling each carrier to earn a fair return on investment.
But the Act further stipulates that an airline must be managed
honestly, efficiently, and economically to qualify for sub-
sidies. Applying these facts of airline life to Capital, the
observer poses the question: "How economical can an airline
get without impairing safety or quality of service?“1 The
new management team at Capital, headed by James H. ”Slim"
Carmichael, was about to be put to the acid test.

Carmichael's first act as president was to call a meeting
of Capital's top executives in the airline's Washington head-
quarters, to outline a new policy:

We're going to mafie- a comeback with what we have. We
won't base our planning on the new routes the Government
might give us, or the raise in mail pay we might collect,
or the if-money that might buy us maybe-airplanes. Sup-
pose we can't be the fastest airline in the world or the
most far-flung: we can be the safest, the most comfortable
and the most on-time. With what we have now.‘

Thus, in one swoop, Carmichael had renounced his company's
policy of basing planning on expectations of new routes, bet-
ter planes, and higher mail pay--and expanding accordingly.

His "With What We Have” policy dealt instead with pure reality--
existing routes, existing aircraft, existing mail pay, and re-
duced spending to fit existing income.

As an example of how the task was accomplished at the
upper echelon, James B. Franklin was promoted to vice-president

in charge of operations, maintenance, and engineering--replacing

himself and two other executives in Carmichael's first manage-

lrpiq” p. 48. 2m.) p. 23.

4

23
ment shift.1
A key me her of the new management team was James W.
Austin, who had been named director of traffic and sales for
Capital several months before Carmichael was elected presi-
dent. Austin had come to Capital after four years with the
Air Transport Command, but his earlier background hardly seemed
to qualify him for his newduties.2 Austin had been graduated
from Colorado College as afpetroleum engineer, then turned to
selling securities. His success at Capital was attributed,
in part, to an engineer's approach to selling--planning, organ-
ization, and follow-through.3

Austin spearheaded an economy drive that pared Capital's
payroll from 4,900 to 3,000 within two months after Carmichael
took over the presidency.4 .Austin's own sales staff was
slashed from.186 to 37, leaving only four salesmen in New
York, compared with the thirty-five employed.by one of the
other airlines alone.5 But Austin wasn't interested in selling
seat by seat on a personal contact basis, anyway, so the dras-
tic cut in sales personnel didn't really perturb him.(“You
could lose thirty-five salesmen for a month in the Empire

6
State Building alone," he was heard to say).

*

3..-

Ibid., p. 48.

N

Business week, September 30, 1950, p. 46.

D)

Hughes, Sales Management, October 1, 1950, p. 38.

uh

Ibid.

Buginess'Week, September 30, 1950, p. 46.
Ibid.

O‘U‘I

24

Simfilar reductions*were'made in other departments of
the airline, withth of them-based on Carmichael's brand of
efficiency or the superfluous nature of the particular job.
For example, Capital was among the majority of airlines that
employed.meteorologists to draw weather maps and make fore-
casts, but the basic data they use come from the United States
weather Bureau, which also provides maps and forecasts. Thus,
when the ax fell at Capital, it claimed thirty meteorologists--
practically the entire staff. The few that were spared*were
kept busy on special studies and seeing that weather bureau
reports moved directly to pilots and dispatchers.1

Capital's engineers found themselves in a similar posi-
tion. nuany of them.had.been engaged in mastereminding the
design of new'airliners, a Wasteful pastime by Capital's new
standards, since aircraft manufacturers had their own designers
for the same purpose. Besides, Capital couldn't afford the
new'planes its engineers had on the drawing boards, anyway.
As a result, 75%.of the carrier's engineers were fired, and
those remaining were assigned the task of modernizing the
existing fleet. This move saved Capital $1 mdllion--or the
cost of hiring an outside firm to do the same job.2

.After the personnel reduction program.had.been accom-

plished, at an annual savings of $6 million, Capital's of-

ficers proceeded to cut their own salaries,3 then looked else-

1Price, Saturggy Evening Pos , September 3, 1949, p. 48.

2:21.51.

3Hughes, figleg Manggement, October 1, 1950, p. 38.

25
where for economics. A savings of $25,000 a year was realized
by pasting sign: sayingf"Is this long distance call necessary?“
on all company telephones: gasoline costs were cut $200,000 a
year by straightening out fuel-consuming bends in flight paths
between cities, and an additional $168,000 was saved annually
by consolidating ticketing and ground services with other air-
lines in thirty-three cities.1 Other annual dollar savings
were accomplished in office rentals ($120,000), engine main-
tenance ($237,000), and ticketing and reservation expenses
($1.5 million).2
A A new reservations system developed by Fred Klein,
Capital's reservations manager, saved $200,000 a year by
replacing "rooms full of moving belts, jangling phones and
distracted clerks" with a wall full of holes, for sales slips

3 The Klein Plan was also tied into a

and sold-out markers.
system for controlling seat space, pioneeredey Capital and
Braniff International Airways, and copied throughout the in-
dustry.4

Not even the advertising and.publicity budget was spared
the ax, with expenditures in this area being cut by nearly
one-third, to less that $500,000 in 1947.5

When the dust had settled, Slim Carmichael had completed

an economy drive that reduced variable costs to 62¢ a mile--

 

1Price, Saturday Evening Post, September 3, 1949, p. 48.

2Hughes, Sales Management, October 1, 1950, p. 38.

3Price, Saturday Evening Pogt, September 3, 1949, p. 48.

4Ibid. 5Capital Airlines, innual Repgrt; 1942, p. 18.

26

lowest in the industry. "We have to scratch around now to
find the half-cent items,” he remarked.1

"But Capital was not saved by saving,” said Lawrence
Hughes in Sal 8 Mana ement, "but by selling. [And] selling
began at home."2 Slim Carmichael and his management team
told employes: "Think Capital: talk Capital; sell Capital."3

"Sell Capital"--the key words in the carrier's reincar-
nation. And the man who sold Capital Airlines when, as
Businer Week put it, "there was almost nothing to sell,"
was "James Austin--“hard-hitting and aggressive."4 Austin was
faced with the awesome task of making up for the airline's
shortcomings with salesmanship, and the philosophy of his
brand of salesmanship was to sell mass transportation to the
masses. Why concentrate on business executives who already
fly? Austin's course, instead, was to broaden the base of
air passengers from the three to five million figure of 1947.

Fortunately for Capital, the breaks were coming its way.
Not only had CAB authorized a more liberal mail pay formula to
pump new money into the industry, there was now a general turn
for the better in airline traffic.6 Capital Airlines was set

to welcome 1948 with a new vitality, a lean, tough, hungry

management, and a new name.

 

 

lPrice, Saturday Evening Post, September 3, 1949, p. 48.
2Hughes, Sales Management, October 1, 1950, p. 38.
BEBE-£1.-

4Bginesg Week, September 30, 1950, p. 46. 5Ibid.

0‘

Aviation Week, January 30, 1950, p. 50.

CHAPTER IV
A KEY YEAR AT CAPITAL AIRLINES: 1948

The new image with which Capital Airlines entered 1948
was lacking one facet. The name PCA had given way to Capital
Airlines, but the official name of the company was still
Pennsylvania-Central Airlines. This was remedied in 1948, when
the corporate name also was changed to Capital Airlines.l

Another Push Southward

Expansion into the deep south was ‘a'highlight of 1948
for Capital, with new stations bringing to thirty-seven the
number served by the carrier.2 The two principal awards, in
February, involved route extensions from Birmingham to New
Orleans via Mobile and from Bristol (Tennessee-Virginia) to
Atlanta via Asheville, North Carolina.3 Capital could be
pleased in the knowledge that it had won these awards over
six competing airlines, including American, Delta, National,

and Northeast, and that it had overcome an objection. by »

1"Enginesg Week, July 3, 1954, p. 46.

2Capital Airlines, Annual Remrt: 1148, p. 9.

3Charles Adams, "PCA Bolstered by New Routes in Boston-
New Orleans Decision," Aviation Week, February 9, 1948, p. 42.

 

27

_ 28
Eastern that the award to any carrier would result in a 16%
loss on its own Boston-New Orleans route.

Slim Carmichael hailed the news of his company' 8
latest plum by stating that the new routes would materially
strengthen Capital's entire operation. At the same time,
CAB denied that Capital's financial difficulties would '
prevent the carrier from performing the newly-authorized
service, reasoning that only three new stations were being
added (Atlanta, Mobile, and New Orleans), and that little,
if any, new flight equipment would be needed. On the con-
trary, CAB joined Carmichael in maintaining that the new
stations would give Capital Airlines a more solid foundation
for its entire route system. Some observers went so far as
to say that the southern routes would be more important to
Capital than its recently-established Milwaukee-Twin Cities
route, and Capital itself was looking for an additional eighty-

two million passenger revenue miles to be generated over existing

routes because of the new routes.1

"At the same time it was expressing pleasure {over its
newly—expanded system, however,;Capital was expressing concern.
over restrictions on its existing system, and in not being al-
lowe~d..to-sgrve many of its markets "in their. historical direc-
tional'flow of traffic."2 Of particular concern was the re-
quiredstopat Pittsburgh'onfhig‘h volume routes out of New
York, and the claim that this restriction put Capital at a

Ibis-
2Capital Airlines, ABE uai ngnont; lfifl, p. 14.

29
competitive disadvantage with-nonstop'flights.1 These matters
were to be thorns in the side of Capital Airlines for years to

come.

New Fares and New Sources of Revenue
In 1945, with demand for airline seats at a peak, Capital

Airlines had been the lone dissenter of an industryewide petition
for lower fares. Now, in 1948, with consumer demand sagging,
Capital again spoke out--this time in Opposition to a proposed
10% fare increase. The air traveler had been staggered'with
two similar price rises only the year before, and.he might not
stand still for another. Instead, Capital proposed a 5% re-
duction for various promotional packages to stimulate traffic.
Again, Capital was to be denied, as the 10%1fare hike went into
effect. Shortly thereafter, however, the airlines had a change
of heart and filed for the 5%.discount suggestedflby Capital,
thereby heralding a neW'era in commercial aviation in the
united States.2

Fare reductions came in varied forms, including dis-
counts on round-trip tickets, for flying early in the week,
for bringing the family, or on one airline, for sacrificing

in-flight meals.3

Qhartc s Comcginto Their Own
Capital participated in the Family Travel Plan along

with.other carriers, but in the meantime it was also pursuing

 

1112.111" pp. 14, 16. 2110151., pp. 17, 13.

3Price, Saturday Evening Post, September 3, 1949, p. 50.

30
what it had discovered to be another lucrative source of in-
come--charter flights. In 1947, Capital ranked sixth in
total operating revenues among the sixteen domestic~trunk
lines, but was an impressiqc 1h; « 1n non—soheduled trans-
portation income--right behind.AmerlcQA and Trans World Air-
lines. Capital stepped up activities in this area in 1948,
and*with the help of heavy ;rr{otion, took the industry lead
by a wide margin in the first seven months of the year.1 .More
significant, perhaps, Capital diverted business from;bus lines,
railroads, and non-scheduled airlines in building its charter
business.2 The non-scheduled airlines apparently were affected
because travelers would rather fly a scheduled carrier such as
Capital, given the opportunity.

According to Bill Hrquhart, manager of Capital's special
events section, the main sources of charter business were pro-
fessional and college athletic teams, large business organiz-
ations, and such assorted groups as the Atomic Energy Commie-i
sion,9the~American Legion, and the Detroin Times. In the
sports department, Capital not only booked teams ranging from
football and basketball to hockey and track,‘but sold charter
flights to their fans as well.3

One reason Capital was able to parlay charter flights

 

 

lupCA Leads in Charter Business," Aviaticnhflfisku OCtdber
25, 1948, p. 38.

2W. September 30. 1950. p. 4 3..
3Aviai'ion Week, October 25, 1948, p. 38.

31
into a profitable sideline was the freedom to carry passengers
outside its normal route system, and in 1948 it flew as far as
the West Indies. The main reasons for the popularity of char-
ters among Capital's management, however, lay in its ability
to smooth out the valleys in traffic volume caused by seasonal
slumps in regular traffic, thereby keeping personnel busy, and
keeping the carrier's DC-3's and DC-4's in the air during
normally slow times.
Despite the impressive statistics placing Capital as

the leader in charter business for 1948, they should not be
blown out of prOportion, for in actuality income from this
source accounted for only 2% of the carrier's total operating
revenue for the year.1 This figure was particularly important
in 1948, however, because it was one way Capital could keep
losses at a minimum while awaiting CAB review of its request
for subsidy, and as Avianion Week pointed out:

The company's enterprise in luring new traffic points

strongly to the presence of efficient management--a
factor which CAB weighs carefully in setting mail rates.2

Rumblings of Merger
The momentum imparted to Capital by its new management

was being felt now in the form of rising revenues, but the air-
line was far from being solvent. In fact, at one point in
1948, merger rumors involving Capital began to circulate
through the industry. At the time, National Airlines was in
the midst of a crippling strike by the Air Line Pilots Associ-

1 2

1219.- Bali-

32
ation and the International Association of Machinests, and
it was speculated that National would merge“ with Delta to
avoid complete collapse, with Capital to join the combine
at a later date. For Capital, the consolidation would have
meant a strengthening of its routes from Chicago to the eastern
seaboard, but as it turned out, neither proposal materialized

and the rumor mills were closed down for the time being.

The Aircoach: A New Concept

It cannot be said for certain that an event that oc-
curred on the morning of November 4, 1948, hastened the rumor-
quashing, but there is no doubt that it 'was to put Capital
back in the black within a year. It was on this date that
Capital Airlines topped all the discounters with the invention
of the "Aircoach"; or "aircoach“ or "air coach." The impor-
tance of the spelling should not be underestimated, for as
Saieg Management;= pointed out, by 1950 “aircoach had become
generic-mwith nine other carriers adopting it. But only
Capital was still entitled to spell Aircoach with a capital“.
. A. 3.2

The theory behind Capital's aircoach was simple enough.

James Austin felt that the element of fare might have been as

 

important as the element of fear in keeping people out of the
air. Therefore, while all carriers including Capital would

have liked to see fares raised, Austin caught everyone by sur—

 

l"NAL—Delta Deal to Involve PCA?, " Aviation Week, July
5, 1948, pp. 11,12.

ZHughes, Sales Management, October 1, 1950, p. 39.

33
prise when he persuaded Capital's board of directors. and TEAS
to accept his plan for simplified, four-cent-a-mile, late-
evening flights as a means of filling planes.

It should be noted, however, that the concept put forth
by Austin was not exactly new to the industry. Quite to the
contrary, non-scheduled carriers had been running coach flights
extensively since the end of World War 11,2 and on September
24, 1948, Pan American World Airways became the first certi-
fied scheduled carrier to offer such a service--flying between
New York and Puerto Rico.3 It is significant, though, that

Capital was the first scheduled airline to employ coach service

exclusively over Qomestig routes.4

Capital's aircoach was born of necessity more than any-
thing else. The airline, faced with problems similar to those
of strictly short-haul airlines, was operating at less than
peak efficiency. Its planes, personnel, and facilities sat
idle from midnight to dawn, and any way they could be put to
use, profitably, would be worth a try. Thus, as Wesley Price
stated in a Saturday Evening Post article, aircoach service
never would have gottenioff the ground, literally, if Capital
had been busy at night.5 Slim Carmichael confirmed this several

years later when he said that for short-haul carriers, at least,

lipid.

2“PCA to Start Sky-Coach Service," Aviation Week, October
4, 1948, p. 14.

BBnginegg neck, July 3, 1954, p. 44.

4W. October 4. 1948. p. 14-
5Price, Satni'day Evening Pain, September 3, 1949, p. 50.

34
the only valid reason for coach service was "to change a
sixteen—hour sales day to a twenty-four-hour sales day."1
Carmichael went on to say that for long-haul carriers the price
differential between first class and coach would be enough to
attract new customers on daylight flights, but that for short-
haul line-s daytime coach flights would find the carrier com-

peting with itself, since the price differential would be so

small.2

Confident that the aircoach would succeed, Capital ap-

plied for the service on its New York-Chicago route on October
15, 1948, and received quick approval from CAB.3 One reason
Capital chose this route was the lack of late-night competition,
which led to the belief that a 50% load factor-~that is, 50%
Of the seats filled--wou1d make the new service profitable.4
Other scheduled airlines and CAB were skeptical of the five-
hour trip costing $34.04 with tax,5 but Carmichael predicted
that "the low-cost operation should react not only to the

‘benefit Of the public but to the industry as well in that

more people will take to the airlines."6

The Big Day Arrives

In case anyone has forgotten, actress Kyle MacDonell was

a popular television personality back in the late '40's. It

J'Business Week, July 3, 1954, p. 44. 2Ibid.

‘9
“Ibid. 4Aviation Week, October 4, 1948, p. 14.

5Hughes, Sales Hana ement, October 1, 1950, p. 39.
6Aviation Week, October 4, 1948, p. 14.

35

is doubtful, however, that even her most loyal fan would re-
call that on the evening of November 3, 1948, it was she who
christened "Night Hawk" "the first Capitaliner to fly as an
aircoach. As a matter of fact, the ceremony in New York
didn't seem to arouse much interest among anyone, as the first
aircoach departed at 1:00 A.M. on November 4, 1948, with only
nineteen passengers on board. The poor turnout could have
been attributed to at least two things--little advance public
notice, and the launching Of service "in the Wake of an elec-
tion that could be expected to keep most people home."l

Traffic built up steadily in the next few days, however,
with people phoning in for reservations despite Capital's an-
nouncement that phone reservations would not be accepted.
Tickets were sold over the counter only, with seats on the
plane guaranteed--but this was of little comfort to the pas-
sengers, who would rush to the loading gates to get on board,

fearing they would have to stand in the aisles if they were

late.2

Aircoach service Offered "service" in name only, for
there were no magazines, no matches for smokers, no meals--

not even chewing gum3--and there was only one stewardess or

cabin attendant on the plane.4

 

1"Capita1 Starts Sky Coach Service," Aviation Week,
November 15, 1948, p. 48.

2Price, Saturday Evening Post, September 3, 1949, p. 50.

3Ibid. 4Ayiation Week, October 4, 1948, p. 14.

36

At four-cents-a-mile, or 35%»less than first class plane
or train, people flew who fiéyer flewbefore.1 And the hostesses
liked them, claiming they were not ill-clad or ill-mannered, as
some had contended. One Capital hostess remarked that aircoach
passengers were, in fact, just like the first class travelers--
except half of them needed help with seat belts, and a greater
than normal percentage of them were women andbabies.2

If Slim.Carmiohael was upset by one rival's complaint
that he had set aviation back twenty years by Offering four-
cent-a-mile flights to plain people, he was too busy counting
the profits aircoach was raking in to show it. Capital's
1948 annual report revealed that aircoach had grossed nearly
$219,000 in its first two months of Operation and.had con-
tinuously produced a net profit.3 Apparently, this was enough
to convince the opposition, for within one year after the debut
of Capital's Aircoach, five other airlines were in the race,
with others seeking coach service authorization from CAB.4

Pan Am.and Capital had scored immediate successes with
their economy class services, but one question bothering air-
line operators was where coach passengers came from. If they

were diverted from first class flights, the implications were

ominous, but if they were diverted from other forms Of trans-

 

Ibid.

NH

Price, Saturday Evening Pogt, September 3, 1949, p. 50.

w

Hughes, Sales Management, October 1, 1950, p. 39.

.p

Price, Saturday Evening Post, September 3, 1949, p. 50.

37
portation, the future looked promising. The answer would not
come until studies could be made, but Capital strongly suspected
that the latter was the case.1 As will be seen later, Capital

was right.

Aircoach Not a Panacea

Despite Capital's instant success in the mass air travel
market, the carrier was far from being in good health. Thanks
largely to Aircoach, 1948 losses were cut to $126,000 (though
a $3 million deficit in earned surplus remained), and the long-
term debt had been cut to just under $10 million.2 Capital
also gained $3 million in operating revenue from all business,
bringing the total to just over $23 million for the year.3
In addition, CAB offered the airline a $9 million lump sum
subsidy in December, covering the period from January, 1947
through December, 1948.4 This still was not good enough,
unfortunately, and losses forced Capital to withdraw applications
for route extensions from Atlanta and Memphis to Los Angeles
and San Francisco. Another gloomy note was sounded by the

carrier's systemdwide load factor, which dropped to 46.9%

despite an aircoach figure of 70%.5

 

1"Air 'Coaches'," Business Week, January 15, 1949, p. 39.

2Hughes, Saieg genagement, October 1, 1950, p. 38.
3Ibid., p. 39.

4"Mail Pay Proposals Aid Capital, Colonial," Aviation
119215, January 3,1949, p. 33. ,

511219.

38
Sales and Advertising Proms

Slim.Carmichael gave much of the credit for Capital's
1948 comeback to James Austin's aggressive sales campaign.
"Capital Airlines iS‘a retail business," said the 1948 an-
nual report, and "its existence is dependent upon its ability
to merchandise its product--air transportation."l

This statement referred to the planned indoctrination
Of sales personnel to "Think CAPITAL! Talk CAPITAL: Sell
CAPITALi," but Lawrence Hughes, writing in Sales Management,
insisted that Austin's sales campaign could also be called a
creative campaign--one designed to get people into the air by
luring them with low fares.2

Whatever it was, Capital believed that no amount of ad-
vertisinfii public relations, or sales effort could result in
greater utilization and public acceptance of air travel, which
was in greater supply than demand, unless the product itself
merited public approval. Therefore, the 1948 campaign sought
to make Capital the "friendliest, safest, most comfortable,
and dependable airline in the industry."3 Capital hoped to
accomplish this by exploiting word-Of-mouth advertising ("the
best advertising"), and building its entire sales and adver-
tising program on this foundation.4

Capital's sales program was geared to two specific

goals: (1) greater acceptance of Capital services in a de-

 

1
Capital Airlines, Annual Rengrt: 1238, p. 22.

2
Hughes, Sales Management, October 1, 1950, p. 39.

3Capita1 Airlines, Amps; gepgrt: 124g, . 17. 431d.

39
pressed market, (2) effective competition for the 70% Of its
business vulnerable to other air carriers. Secondary ob-
jectives were three: (1) to win acceptance" in Capital's
three new terminals--At1anta, Twin Cities, and New Orleans,
(2) tO win acceptance in three established terminals--Charlotte,
Mobile, and Toledo, (3) to combat Northwest Airline's newly-
acquired competitive route connecting Detroit-Pittsburgh-
Cleve land-Washington .

The major emphasis in 1948 was an advertising program
designed to accomplish these objectives. Newspaper and radio
were used more than ever before in an effort to influence mass
markets, and a brand new direct mail program replaced the ex-
pensive personal solicitation effort Of former years.

In comparison with past years, Capital's advertising and
publicity budget for 1948 was a healthy $840,000--or almost
double the 1947 figure.1 Part Of the money came from savings
effected when Austin slashed his sales force, and this, plus
additional funds, went into a "high-frequency, high-visibility
newspaper campaign," for which Editor and Publisher's Samuel
Rovner credited Capital's 1948 comeback.2 Plate IV shows a
pre-Aircoach two-column advertisement from Capital's news-
paper campaign--still not much different from what had been

running for several years.

 

Ire...

2Samuel Rovner, Editor and Publisher, January 14, 1950,

p. 16.

   

today ‘---
.. I - .movorydoyh ‘
CHICAGO

. Mus-uni:

unmet;

  

   

41
Curiously, the introduction of Aircoach created little
stir in Capital's 1948 annual report. The airline did en-
vision the new service as a “forerunner“ of a new phase in air
transport development, but said barely more- This fact, plus
a lack of advance promotion announcing Aircoach, are perhaps
the best clues that Capital itself did not know the full

potential of this “new'phase in air transport development."1

A. n o ut e

Comparatively speaking, 1948 was a good year for Capital.
Even its passenger fleet, though not bolstered by the addition
of new aircraft, came through the year unscathed.2 For 1949,
however, it saw no renewed effort to improve upon what it al-
ready had in the air. But the airline did set its sights
higher in other areas, such as development of sightseeing
flights, an increase in cargo revenue, efforts to reduce the
need for subsidy, greater emphasis on the role of charter and
special flights as revenue producers, holding the line on costs
or even reducing them/by tighter cost control, development of
existing markets, attempts to improve the company's financial
structure, and efforts to improve the safety, regularity, and
dependability of scheduled airline operations.3 The annual
report further noted that new’or revised routes‘would‘be imr
portant in the coming year, and that the airline could easily

add ten new'stations‘without-increasing the current total

1Capital Airlines, Annual figpgrt; l9§§, p. 19.

2;p;g,, pp. 10, 21. 3gbidg, pp. 2, l9.

42
station expense level.

Perhaps the only pessimistic note was in the area of
passenger volume, where for some inexplicable reason, Capital
did not anticipate gains-ebut at the same time assured stock-
holders that it was prepared to handle any growth.

And, perhaps the only overly-optimistic note sounded
in 1948, was made by James Carmichael in his letter to stock-

holders:

Eighteen months ago the continued existence of Capital
Airlines hung 3n the balance. Today it is a vigorous,
going concern.

In actuality, the “continued existence” of Capital Air-

lines was to hang in the balance for another decade.

 

lIbid., pp. 2, 9.

2
mid.’ P. 2.

 

 

CHAPTER V

A PERIOD OF RELATIVE PROSPERITY: 1949-1953

1949: The Upswing Continues

Aviation week reported in May, 1949, that Capital Air-
lines had come through the winter in “exceptionally good '
shape,“ and that the carrier believed it finally went into the
black in April.1 Slim Carmichael gave much of the credit for
his company's rebound to.Aircoach, pointing out that it helped
regular daylight flights instead of diverting traffic from
them, and that it also made possible more efficient use of
equipment,facilities, and personnel between midnight and
6:00 A.M.2 2

Sharing the credit for putting Capital into the black
were government mail subsidies, newly-established sight-seeing
flights over Washington, addition of three seats eaCh to the
carrier's DC-B's, reduced ground time resulting from instal-
lation of baggage racks and built-in ramps in the same planes,
a high percentage of flight completions, and contracting to
perform maintenance for other airlines and for businesses that

owned planes .3

 

1"Capital Airlines Position Improves," Aviation week,
May 23, 1949, p. 46.

2

 

gagg. 3Ibid., pp. 46, 47.

43

: 44

The hill-Mat Subsidy A

The importance of government subsidies in post-war air-
line operations cannot be underestimated, for they kept many
carriers from—going under; From:the end of'World:War II to
the spring of 1949, domestic*trunk lines lost more than
$32 million, but during 1948 alone government subsidies totaled
$47 mdllion,'with payments to international and feeder lines
bringing the total to sloz milliOn. Not only did subsidies
help put airlines in the black, they also helped “keep unprof-
itable cities on the routes and pay for wasteful practices
imposedfby CAB to regulate competition. Carmichael, for one,
insisted that if CAB were to remove certain route restrictions
his airline would.be able to give better service to some
cities,:reduoe service in others where traffic did not warrant
it, andfput Capital $1.5 million in the black for 1949. As
much as,he disliked accepting mail pay ("It's a damned dole.
we're going to get off it someday."), Slim Carmichael grabbed

all he dould get for the time being.1

a:

A Need for.Mode;gization

1A3~1949 rushed on, Capital Airlines“ position continued
to improve, but things change quickly in the airline industry.
Early in 1949, Slim Carmichael had taken the position that his

line'had no plans to purchase or lease newaircraft,2 but

 

Price, Sggggggy Evening Post, September 3, 1949, pp. 22, 50.
2Aviatiop Week, May 23, 1949, p. 47.

45
in spite of soaring passenger volume, the pinch of competitive
equipment began to be felt. Capital's fleets of DC-3's and
DC-4's were no match for the newer DC-6's, Constellations,
and Convairs being flown by rival carriers over parallel
routes, and it became evident that the only way to survive in
1950 was tp lay the groundwork‘in 1949. In September,
Capital announced that it was purchasing three 3l—passenger
Super DC-3's, and hoped to have twenty in the air by 1952,
while at the same time phasing out the older DC—3's° In
October, Capital bought three 56-passenger Lockheed Constel—
lations, to be used mainly as supplements or replacements for
the DC-4's used on its heavily trafficked tashington-Chicago
route.1 Eventually, two more Constellations were ordered for

1950, giving Capital an initial fleet of five.2

Aircoach Takes the Spotlight

‘As Capital gained momentum, the airline industry specu-
lated that the carrier would soon become an all-coach line.
wesley Price noted that this would be a remote possibility,
since it would not be looked upon with favor by CAB; rather,
Slim Carmichael envisioned a combination service--part coach,

part Pullman.3 Carmichael himself squelchcd all rumors

 

l
p. 50.

"Capital Connies," Aviation week, Octdber 24, 1949,

2Hughes, Sales Management, Octdber l, 1950, p. 37.

3Price, Saturday Evening_Post, September 3, 1949, p. 50.

46
of an all-coaCh airline while simultaneously maintaining he
did not plan to start a fare war. To this a competitor was
heard to say to him:
Slim, I'd hate to make aircoaches out of DC-6's, but
listen, I could stuff 77 seats in them if I had to. How
would you like that? Ha-hai I am only kidding, Slim.‘

Persuading people to fly was no laughing matter to Slim
Carmichael. He estimated that in 1948, only three to five
million people bought the fourteen million tickets sold by
domestic airlines, which served to demonstrate that what was
wrong with the industry was inability to sell the masses on
air travel. His oft-stated theory that Capital's Aircoach
would expand the market, rather than divert regular-fare pas-
sengers, was at last ripe for testing.

In the spring of 1949, CAB released findings of a study
it made on the aircoach. It was found that: (1) 3T% of the
coach passengers flying Capital and four other major lines
were diverted from regular fare flights, (2) 18.5%.of Capital's
coach passengers were making their first commercial flight,

(3) 86% of the coach passengers making their first flight said
they would not have flown had this service not been available.2

In the fall of 1949, the U.S. Census Bureau surveyed non-
scheduled airlines, and released statistics of great interest

to the nation's trunk lines. The survey showed that: (l) 30%

of “nonsked” passengers had been diverted from regular—fare

 

1Ibid.

2"Capital's Coach Gains Trim Mail Pay Need," Aviation
Eels. August 29, 1949, p. 34. _

47

flights (they had claimed only 10% of their passengers had
been so diverted), 15% from rail Pullman, 13% from rail coach,
4%.from'automObiles, and 2% from buses, (2) zax'would not
have made the trip at all had coach flights not been avail-
able, (3) 6% were not sure whether they would have made the
trip if there had.been no coach service, (4) 6%.were uncertain
how they would have traveled, (5) 1% would have taken more
than one form of transportation.1

A.third survey showed that 21%»of Capital's Aircoach
passengers had never flown before, compared with 1r% first-
tflmers on regular flights.2

From all indications then, it appeared that Carmichael
was‘wrong in insisting that coach service would not divert
first class passengers. In fact, as many people were being
diverted from the first class flights as from all other forms
of mass transportation combined, at least for the non-scheduled
airlines. On the other hand, from all indications it seemed
as though Carmichael was correct in predicting that coach
service had expanded the hitherto static air travel marketo

In the face of mounting evidence that the aircoach was
not doing the job it had.been designed to do, and that its
original purpose had been distorted.by competitive pressures,
Capital restated the original concept in its 1949 annual rem

port by saying that in return for traveling at hours when

 

1Charles Adams, "How Is Aircoach Working Out2,";§yi§;ipfl_
Eek. January 9, 1950,pp..43, 44. . .

2Hughes, figlgg Management, OctOber l, 1950, p. 39.

48
planes would otherwise be idle, the public would receive a
bonus in the form of reduced fares. The aircoach, Capital
believed, would tap new sources of traffic, and in any event,
was not intended to compete with regular service. Capital

(said Capital) had adhered to the original concept.1

Airgoagh VOlume Sags
Throughout the first half of 1949, Capital Airlines was
able to report impressive traffic and saler figures, thanks
to the aircoach service it had pioneered. As summer drew to
a close, however, so did Capital's brief surge to new heights.
Aircoach, which had saved the carrier from almost certain ex-
tinction, had.become its own worst enemy. Eastern, Northwest,
and TWA all were making inroads on Capital's load factors--
a consequence Capital had foreseen when it warned that CAB
authorization of coach service where such service was already
available would make all_coach service unprofitable.2
Sadly for Capital, the prediction came true, and late in
1949, Aircoach lost money for the first time since its inaugu-
ration. Capital also suffered a slump in regular-fare traffic,
but while the carrier attributed this to the usual seasonal
slack period, it blamed coach service declines on competition
from TWA and Northwest.3

Despite the downtrend, Capital refused to give up on

 

1

2Adams, Aviation Week, January 9, 1950, p. 43.

3mg.

Capital Airlines, Annual Repogt: 1949, p. 180

49

Aircoach, and in September began coach service on the New York~
New Orleans and New Yerk-Atlanta routes. Capital was not
alone, however, as Eastern Air Lines also started coach service
on the same two routes in the same month. By the end of
Octdber, Capital could Show only a 25% average load taste:
for the Atlanta route, and in December decided to suspend
service until the following spring-~but Capital held onto its
New Orleans segment tenaciously, believing it would still be
a revenue-producer.l

The extent to which Capital's share of the aircoach
market was being carved away was apparent from its load factor
performance. Between June and November, 1949, the airline's
average load factor on east-central area coach flights tumbled
from a peak of 85%.down to 58%” and with Atlanta and New Or-
leans included, the November figure was a dismal 49%. This
compares with an average load factor of 76% for the first
eight months of 1949. It would be misleading to assume,
however, that the abnormally high load factors reported by
Capital were unique. For example, the coach service Northwest
Airlines established in March, 1949, reported load factors a!
60%, 80%, 87%, 92%, 90%, and 82%, for the April-September
period, while for the same period, Northwest's regular fart

2
service load factor ranged from 47% to 68%w

 

l"Capital Halts One Coach Segment," Aviation fleck,
December 5, 1949, p. 17.

2

 

Adams, Aviation week, January 9, 1950, p. 43.

50

Another airline reporting high volume on its coach
flightS'was TWA, whidh inaugurated DC-3 coach service between
Kansas City and Los Angeles in February, 1949, and Stratoliner
coach service on its New York-Chicago route in June, 1949.
The airline reported load factors of 8I% for the first eight
months of the DC-3 operation, and.8b% for the first four
months of the Stratoliner service.l

Thus, while load factors for coach flights were uniformly
higher than those for regular—fare flights, they were common
to most airlines offering this service. The one bright note
for Capital was the profit Aircoach had earned before starting
its downward p1unge--$30,000 a month from November, 1948,
through July, 1949, with a total passenger volume of 83,000.2
Even after the downtrend started, Slim Carmichael was optimr
istic, for the eastern railroads had just raised fares 12.5%»

opening up a brand new coach market--and.making it the closest

competitor to bus transportation:3

The Charter Picture‘Wag Brigg;

While Capital Airlines battled.to maintain its position
in the race it had started, it did not forget the market for
charter and special flights unearthed in 1948. Athletic teams

were still considered the most likely prospects for group

 

Ibid.
2Aviation week, August 29, 1949, p. 33.

3Aviation week, December 5, 1949, p. 17.

51

flights, accounting for 60% of sales by 19501--though in
1949, clubs, associations, and other groups were also tapped.2

Special sight-seeing flights, which had their beginnings
in‘Washington, Pittsburgh, and Cleveland,3 spread to forty
cities by 1950.4 These weekend excursions proved an instant
success, at least in washington, where for the first quarter of
1949, load factors averaged 98%.5

Another promotion-getter was Capital's “Mystery Flight,“
which eventually rated a picture story in Lifg,6 This Capital
original attracted vacationabound people who apparently were
undecided as to where to spend their vacations, for the premise
was that when a passenger boarded a "Mystery Flight,“ he
didn't know where it would take him.7

Thanks largely to mmaginative promotions such as these,

Capital again led the industry in charter and special flights
in 1949, grossing $550,000.8

Advertising and Publicity

Capital Airlines managed to offset late-year losses in

coach traffic by seeking out passengers at every turn, and

 

1Hughes, Sales Management, Octdber l, 1950, p. 125.

2Capital Airlines, Annual 3gpgrt: 1942, p. 19.

3Aviation week, January 30, 1950, p. 50.

4Hughes, Sales Managemegt, October 1, 1950, p. 125.

SAviation week, May 23, 1949, p. 47.

6Hughes, Salgs Management, Octdber l, 1950, p. 125.
7Bgsigesg week, September 30, 1950, p. 46.

8Hughes, Sales Management, Octdber l, 1950, p. 39.

 

52
ended 1949 in considerably better shape than in the previous
year. This surprised‘even Slim Carmichael, who had said at
the start of 1949: ”[1 see] no reason to expect an increase
in Capital's business in the nearfuture."1
One reason for Capital's comparative success was its
sales program, the objective of which“was to developrmass
markets, with major emphasis on its newspaper campaign. In
the words of James Austin:
[@apital has] staked everything on an aggressive, con-
sistent newspa r campaign [that has dond} a truly mag-
nificent job or the airlinej].2
For 1949, this meant using every newspaper in every one
of the seventy-three cities then served.by Capital, except in
New York and,Chicago, where several newspapers were not sched-
uled. The resulting media list included 127 publications,
with Capital running two to three insertions a week year-round,
in sizes ranging from 80 to 270 lines. The advertisements
were run in preferred positions (usually page two or three),
at the top of the column, next to reading matter. Austin ‘
said Capital paid an average premium of 25% for this space,
adding that ”I would rather have 100 lines in preferred posi-
tion than 125 r.o.p. at the same cost."3
Most insertions were scheduled on Monday, Tuesday, or

fibdnesday to avoid heavy competitive advertising, and also to

take advantage of the relatively low volume of air traffic on

 

ihyiation week, Octdber 24, 1949, p. 50.

2Rovner, Egitor and pgplisher, January 14, 1950, p. 16.

3min...

53

those days (“The air-minded audience is more likely to be at
home early in the week," Austin theorized).l

Capital.Airlines was also a firm believer in direct
mail, turning out thousands of post cards annually on office
duplicating machines in a campaign, described:by Businesg
(Eggg,as a "scattereshot method that gets results," that was aimed
at businessmen who attended conventions along Capital's routes.2
The Direct Mail AdvertisingiAssociation was enough impressed
that it judged the airline's mail effort as the best in the
entire transportation industry in 1949.3

Capital's advertising and publicity budget of just over
$1 million was carefully distributed among several revenue-
producing categories-inrcoach, regular service, interline
sales agency sales, special events, international sales,
cargo sales, and timetable and promotional material space
sales. According to the airline, each area was developed
“as if each constituted a separate and distinct consumer
product being sold under the 'Capital' brand name."4 In the
areaof cargo sales, for example, a specialized Cargo Sales
Department was maintained in large industrial markets, and‘was
supportedby an advertising campaign directed specifically to
shippers. As a typical example of Capital's efficiency; how-

ever, the carrier's entire sales force was on the lockout for

cargo service-buyers.5 Even the advertising for its number one

1Ibid. ngsinesg week, September 30, 1950, p. 46.

3Rovner, Editor anngublisher, January 14, 1950, p. 16.

'4Capital Airlines, Annpgl Report: 1949, pp. 16, 26.

SM°I P0 17. O

54
commodity, Aircoach, was expected to spin off"benefits to
the company over and above its effects on the‘coachmar'ket.1

Despite the increasing emphasis it was placing on ad-
vertising, Capital still believed strongly that selling air-
line services was basically a person—tOuperson jOb, as indicated
in the following statement from the 1949 annual report:

Capital's product is service. The basic ingredient in ser-
vice is the attitude of the people who perform the service.
Capital's personnel relations, therefore, are of tremen-
dous importance because they are girectly reflected in the
quality of the serVice performed.

Personnel relations were not regarded lightly at Capital,
probably because they played such a crucial role in the crisis
of 1947. The spirit and teamwork of the employee} to whom
Capital had taken its case with no punches pulled, were given
due credit by the airline for their part in its recovery.3

In 1949, Capital also reiterated its contention that
word-ofemouth advertising was a "potent sales force,“ and ap-
pealed to stockholders to recommend Capital whenever the op-

portunity arose.4

Rogte Structure and Finances

Capital made little headway in 1949 toward improving its

route system, but did petition CAB for removal of restrictions

on some routes, and applied for a new route to Puerto Rico.5

Another accomplishment, which drew little attention, was CAB

approval for an equipment interchange between Capital and
iAviation Week, August 29, 1949, p. 34.

2Capital Airlines, Annpal Report: 1949. P. 22-

3Ibid. 4Ibid., p. 23., 5;pid.. pp. 13, 14.

55

National.1 Although it wasn't put to use immediately, the
CAB blessing would'have great implications on Capital's pene-
tration of the lucrative Florida vacation market.

Financially, Capital had strengthened its position in
1949, though it was far from paying its debts. On the sur-
face, Capital was the sixth largest domestic air carrier in
terms of total dollar volume from all sources ($27 million),
with net income only slightly less than that reported by Eastern
and United, which ranked second and third in size and carried
three times as many passengers as Capital.2 The carrier did
well enough to turn a $126,000 neflcit into a $1.6 million
profit,3 thanks in some measure to a 28%.increase in passenger
volume--twice the industrydwide average.4

On the debit side, the $4 million bank loan in 1946
had been reduced to less than $400,000,5 the total funded
debt had been cut to $7.2 million, and the carrier's assets
were now nearly double its liabilities.6

President Carmichael attributed the record operating
revenues racked up in 1949 to "the sales and promotional effort

of the company.“7 Some free publicity in the form.of a

 

lIhid., p. 13.

N

Hughes, Sales Managemegp, October 1, 1950, pp. 37, 38.

00

Business Week, September 30, 1950, p. 44.
éAviation Week, January 30, 1950, p. 50.
5Aviation Week, OctOber 24, 1949, p. 50.
6Hughes, figles Management, October 1, 1950, p. 39.

7Ibid.

56

Saturday Evening Post feature also helped things along, ac-
cording to one observer.1

For the year just ended, Capital had solved one of its
major prdblems--acquisition of new equipment; Avigtiog‘week
saw this accomplishment as marking “a new high in the car-
rier's comeback from the brink of bankruptcy.“2

The year did end on a sad note, however, as a DC-3 crash
on December 12 claimed six lives.3 Hopefully for Capital,

it would not drive potential customers away from the carrier's

ticket counters.

1950: A Big Year For Advertising

Capital Airlines' stockholders had been promised the
"most aggressive promotional campaign" in the company's
history for 1950, and they were not let down.4 Much of the
effort was centered around the new Constellation service, but
that would come later in the year. In the meantime Capital
was pushing its other services with renewed vigor, and in
keeping with the company's philosophy, selling began right

at home.

Personnel Relations
It has already been pointed out that in Capital's darkest

 

1Hughes, Sales Management, October 1, 1950, p. 39.
2Aviation week, Octdber 24, 1949, p. 50.

3Capital Airlines, Annual Report: 1949, p. 22.

42b; do I Po 4.

57

hour, Slim.Canmichael took his case to the people who worked
for him: “we tell [our employes:]in detail--theibad‘with the
good-4hOW'things are going. we don't soft-soap them, nor
minimize problems.“1

Part of Carmichael's program of taking employes into
his confidence included distribution of edited confidential
management reports, and a policy by which ”all our people
from foremen up attend monthly meetings in'W’ashington.”2
The results, according to one aviation consultant quoted by
Sales Management: “Capital has developed the best sales spark
of all the airlines."3

A part of that ”sales spark" was generated.by special
employe incentive programs, including: (1) a contest for in-
ternational business, with top prize being an all-expense-paid
trip, (2) ”in-flight" contests among 150 hostesses and 100
male flight attendants, for signing continuing and return
flights. These two contests alone produced $109,000 extra
revenue in the spring of 1950, leading to a decision to re-
peat them the following fall and spring; And if it seems odd
that Capital Should.be promoting business abroad.when it was
limited to continental united States, it was just another of
Slim Carmichael's customer services; that is, Capital offices

in seventy-four cities would sell air travel anywhere in the

world.4

 

1Hughes, Sales Management, Octdber 1, 1950, p. 124.

2min. 3mg. 4m.. pp. 39, 124.

58
The Advertising Progggg;

Direct Mai1.-—Despite Capital's quest for international
business, domestic business held the spotlight. Fresh from
its awarddwinning direct mail program, Capital wisely tried
again in 1950, this time with a budget of $30,000. In the
first half of 1950, Capital sent sixteen "tailorsmade, whims
sical mailing pieces to 30,000 convention prospects--inc1uding
antiquarians, barristers, bakery engineers, and sales execu-
tives.“1

In conjunction with the introduction of Constellation
service, Capital mailed 125,000 "invitations“ to likely pros-
pects, with Lockheed generously picking up the tab.2 Capital's
intensified direct mail campaign, which also included promo-
tion of seasonal travel,3 impressed DMAA judges to the tune
of a second consecutive "best of industry" award in 1950.4

Newspgpgr.--A.budget of $900,000 was set for 1950, with
one-third for promoting regular service and two-thirds for
Aircoach and.Family Fare Plan advertising. In addition to
a schedule of 136 newspapers, ads were run in travel agentfig
business papers, sales retailing papers, and some 100 college
publications.5 The latter were scheduled.by Capital as a con-

tinuing part of its effort to tap the rich charter and group

travel markets.

 

2

Ibid., p. 128. ruin” p. 126.

Capital Airlines, Annual Report: 1951, p. 16.

 

o: la

Rovner, Editor and Publisher, January 14, 1950, p. 16.

U19

Hughes, Sales.Management, October 1, 1950, pp. 126, 128.

59

Charters.--Colleges represented only one segment of the
charter market, however, and Capital sought to reach at least
part of the remainder through travel agents. Largely as a
result of business paper campaigns directed at travel agents,
who were sold on promoting the airline on a “mass-volume" basis
rather than a "long-haul" or "resort“ basis,1 revenue from
them doubled between 1946 and l950--amounting to $1 million
per year in 1950.2

The importance Capital attached to its special events
business was evident from a statement in the 1950 annual re-
port :

The prestige and good public relations inherent in these
profitable movements represents an intangible advertising
and promotion value that is reflected in the revenue pro-
duction of the Company's regular services.

The popularity of the charter rate--less actually than
Aircoach fares per head per mile4-dwas further evident in the
list of more than 150 sports teams and companies named by the
airline as charter flight users.5

Cargo Sales.-~Ads in the sales and retailing trade pub-
lications were aimed at the cargo market and featured testi-

6

monials'by leading shippers. Emphasis was placed on the speed,

lflppinegs Week, September 30, 1950, p. 46.

Hughes, Sales Management, October 1, 1950, p. 126.

 

(JON

Capital Airlines, Annual Report: 1950, p. 17.

9

Hughes, Sales Management, October 1, 1950, p. 125.

0'!

Capital Airlines, Annual Report: 1950, p. 17.
6Hughes, Sales management, October 1, 1950, p. 128.

60

dependability, and economy of shipping everything from shoes
and radios to boats and mushrooms via Capital air cargo ser-
vice. Perhaps this'hardesell campaign accounts for Capital
being able to boast of the highest cargo load factor of any
scheduled air carrier in the United States in 1950.1

Magazipe.--Historically, Capital Airlines restricted its
print campaigns to newspapers, while its biggest competitors
poured considerable advertising dollars into magazines.2 All
this was changed in 1950, however, as the carrier allocated
$85,000 to its first national magazine effort, scheduling ads

3 The initial

in New'Yorker, Saturday Evening Post, and.gipg,
campaign was designed as a prestigesbuilder, running in con-
junction with the introduction of Capital's Constellation
service.4
Other Media.--Capital budgeted $20,000 for outdoor ad-
vertising in 1950, and an undisclosed amount for spot radio.
In addition to its spot schedule, Capital district managers
in Mobile, Toledo, and.Charleston (west Virginia) broadcast

5 apparently not only

aviation news programs over local stations,
as a public service, but as a community public relations function

as well.6

 

1rhid., pp. 39, 128.
2Rovner, Editor and Publisher, January 14, 1950, p. 16.
3Hughes, Sales Management, October 1, 1950, p. 126.

4W. September 30. 1950. p. 46.

Hughes, Sales Management, October 1, 1950, pp. 125, 128.

5
6CapitalAirlines, Annual Report: 1250, p. 16.

6l A
Aircoach Cgmpaigp.--The approach Capital Airlines used
in its 1950 Aircoach campaign was a far cry from"the reminder
type advertising of the '40's, as is evident from Plate V.
The campaign, built around the visual “Flying Scotchman“ and
stressing economy and popularity in copy, was one of only
two transportation companies (and the only airline) to be in-

cluded in the 1950 edition of the American Newspaper Publishers

Association Blue Book of Newspgpgr Advertising.l

“Queens of All the Air"

Capital Airlines launched the most ambitious promotion
campaign in its history in 1950 in anticipation of its new
Constellation service.2 The carrier was staking its future
on the competitive equality the Constellations would create,
to the point that all advertising and promotion materials,
"from baggage stickers to 47-inch neon point-of-purchase signs
to a 60- by l4-foot painted bulletin in Cleveland's Municipal

3 Capital was

Stadium,” were redesigned around the airplane.
hardly in a position to go it alone, but based on past in-
genuity, it should come as no surprise that the airline forms
ulated a three-pronged attack to help distribute the financial
burden: (1) the company's own promotional efforts, (2) came

paigns by Lockheed—ebuilder of the Constellation, (3)rpromo-

tional tie-ins by suppliers to Capital and Lookheed.—

 

1Capital Airlines, Annual Report: 1951, p. 16.

2Capital Airlines, Annual Re ort: 1959, p. 4.

3Hughes, Sales Managemept, October 1, 1950, p. 128.

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63
All that remained for Capital was the staggering task
of coordinating'the three phases so they would converge, with
full impact, by introduction time in Octdber.

Lockheed's Part.--It was noted earlier that Lockheed ab-

 

sorbed the cost of a Capital direct mail campaign to 125,000
prospects,1 but the aircraft manufacturer was to contribute a
good deal more to the Constellation promotion program.

A key element was a one-year campaign in twenty-five
major market newspapers, placed through Lockheed's advertising
agency--Foote, Cone and Balding.2 The aircraft manufacturer
alsojbought Z4-sheet posters announcing Capital "Connies" in
Milwaukee,.uinneapolis, and Norfolk, and at still other levels,
it scheduled trade ads and house organ articles telling the
story of Capital's new service.3

The most ambitious project, however, was a mock-up of
a Capital Constellation "Cloud Club"-4built by Lockheed in the
old New York Airlines TerminalAnnex.4 The Cloud Club was a
separate lounge in the front of the plane where, according to
Capital, one could play cards, rest, or listen to the radio
amid "colorful flowers and decorations, luxurious lounge

Chairs, divans, tables."5 Capital was gambling that the pluSh

atmosphere of the Cloud Club would justify its cost--$50,000

 

-."'-...-m . _

lSupra, p. 58.
2 ~33 Jim
Hughes, Sale§?Managcrent, October 1, 1950, p. 126.

3“Introduction of a New Service Demands Something More
Than Usllalflflggintejrs' Ink, September 1, 1950, p. 39.

“Hughes, Sales Management, October 1, 1950, p. 126.

51bid., p. 128.

64
per plane.1

The Suppliers' Part.-~James Austin locked far beyond
the airline-industry for help in promoting Capital's new ser-
vice, and in doing so, decided to use the tie—in technique
employed successfully by non-airline advertisers.

First, he wrote to 352 Capital suppliers--everyone from
gasoline and §§:§kp1ug manufacturers to firms that supplied
Lockheed. Austin's letters explained the impending Constel-
lation service, outlined a sixty—day promotion to the trade,
and asked if they would like to participate. As a starter,
he suggested that a minimum three-page insertion in each of
two trade publications would be desirable, with Capital sup-
plying electros, repros, and special slagun slugs. Austin
was so confident of faVOrable reaction to his letters that
he, Joel Daniels (Capital's advertising manager), and John
Anderson (Capital's sales promotion manager), prepared the
proposed kit in six days—-complete with an explanation of the
program, proofs of available electros and examples of how to
work them into completed ads, art for new ads, and radio and
television copy. The success of the program was virtually-
assured by an 80% response by the time the kit was ready--
though not all of them.were favorable.2

Next, Capital's field men and the trade magazines went

.into action. Promotion kits were delivered to all 352 suppliers,

 

lIbido l p. 38 a ‘_-_ 3"».

2Printerg' Ink, September 1, 1050, p. 39.

65
and the results of each call were tabulated so that the solic-
itation program could be controlled, and return calls made on
promising prospects. Said Printers' Ink of the campaign:
If anybody in the aviation industry doesn't knOW'by the
end of Octvber that Capital is going Constellation, he
can be written off as blind or illiterate.

Approximately 200 tie-in ads were scheduled by mideAugust,
and on August 28 the campaign was officially launched. Capital
also received bonuses in the form of supplier stories of their
contributions to the Constellation, and local retail ads run
by department stores, caterers, and other firms with an inter-
est in the airline business-wsome of them using Capital layouts
such as shown in Plate V1.2 Ezen the‘Girard Perregaux‘watch

Company got into the act, proclaiming itself the "Official

watch of Capital Airlines."3

Capital’s Own Campaign for Constellation.--Large-space
newspaper ads, built around the theme "Queens of All the.Air,"
announced Constellations as they went into service on such .
routes as ChicagoAWashington and Chicago-N’ewYork.4 There
were also radio spot announcements and trade and consumer maga-
zine advertisements, direct mail to travel agents, feeder lines,
and hotels, and display pieces, timetables, and baggage stickers.

The public relations forces also swung into action to keep

nmdia informed of maiden flights and plan christenings.

 

Ibid. Zing.

NH

Hughes, Sales Management, October 1, 1950, p. 128.

9

Ibid., p. 126.

grinterg' Ink, September 1, 1950, p. 39.

UI

66

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67

Capital was Obviously high on airliner christenings, despite
that poor turnout for Kyle.MacDonell's Night Hawk launching
in 1948, but this time a better-known celebrity was chosen to
do the honors, with none other than Margaret Truman dedicating
the Constellation "united States."1

Capital's follow-up newspaper campaign, as exemplified
by Plates VII and VIII, shifted emphasis from luxury to price.
This was a curious turn of events, in view of all the fanfare
and prestige surrounding the plane at introduction time,
the considerable amount of money spent on creating and adver-

tising plush interiors, and even with the names given the

flights--“President,“ "Diplomat," "Constitution,” "Executive,"

and so on.2

Competitive at Last:
Admittedly, Capital Airlines had purchased the Connies

as replacements for the older DC-4's in markets where compet-
itive equipment put the carrier at a disadvantage.3 The Super
Inc-3's, also purchased in 1949, served a different purpose--pro-
‘viding better inter-city service with a speed and performance
capability greater than the older DC-3's.4
An ironic twist put the Chicago4Washington route on the

Constellation priority list, even though Capital's DC-4's were

already carrying half the industry volume--and in direct com-

 

lHughes, Sales Management, October 1, 1950, p. 128.

3Capital Airlines, Anngal Report: 1249, p. 20.

4 .
Capital Airlines, Annual Repgrt: 1950, p. 14.

68

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70
petition‘with the DC-6's of American and united, and the
Constellations of TWA.1 Sales Mbnagggggg, which provided.the
information, did not speculate on‘the effects Capital's Connies
might have on share of market, but Capital itself was confident
enough to go ahead and order seven more of the aircraft--call-
ing them a "significant development“ that introduced a "new
concept of comfort and service aloft."2 The airline also
noted that the prestige aspect was a "potent sales factor in

the promotion of all of [Capital's] services.”3

Route Problems Remain Unsolved ‘
Despite its improved competitive position in the equip-

ment race, Capital continued to be plagued by shortcomings in-
herent in its route structure. The airline was unique in
serving not only all U.S. cities of over 500,000 population
(except Boston, Houston, Los Angeles, and San Francisco), but
towns as small as 3,000 as well.4‘ This was not a position to
be envied, however, for the main routes were highly competi-
tive and the shortehaul routes were unprofitable, and none of
the routes-~long or short--generated resortbusiness.5 More-
over, the carrier‘s 5,810 route miles represented only one-

fourth to one-half that of the top five trunk lines, four of

h
_

1Hughes, Sales Management, Octoberl, 1950, p. 39.

2Capital Airlines, Annual Repert: 1950, p. 4. 3Ibid.

 

4Hughes,‘Sales Management, October 1, 1950, p. 39.
5Business week, September 30, 1950, p. 46.

71
which were transcontinental operations,1 and the average pas-
senger tripras less than 300 miles on*an average fare of $18.2
Still, Capital continued tO‘dny the odds, and in 1950
showed a revenue increase of 11%, compared with the industry

average of l¢%.3 In doing so, Capitalclaimed to have carried
50% of all aircoach passengers for the year.4 Apparently,

the $1.2 million spent for advertising and sales promotion had
paid off.5 But whatever the reason for Capital's survival

may have been, Slim Carmichael's version went as follows:

Capital's comeback has been based on realism, we've had
to do the job by making the most of what.we had. ‘we first
did it, and made money, in 1943, when our entire fleet had
been reduced to seven planes. we've done it again, under
even tougher conditions, since 1947. 'Among other things,
we've had to regain the respect of our own industry, the
financial community, the cgties we serve. And our own
stockholders and employes.

 

ilflughes, Sales Managemegt, October 1, 1950, p. 37.

2Capital Airlines, Annual Repgrt: 12 9, p. 11.

3§usige§§ week, September 30, 1950, p. 44. 4Ibig,, p. 46.
5Hughes, Sales gapagemen , October 1, 1950, p. 126.

6 .

Ibid., p. 38.

72
1951: An Unspectacular Year

Qustgmer Services

Some of the biggest news in a relatively quiet year
occurred in the area of custémer services. In the innovation
department, Capital updated its reservations system to intro-
ducing a ticket dispenser calculated to save twenty-five seconds
per sale--or seven hours a day in Washington alone.1 The ticket
dispenser was conceived by Capital's assistant treasurer, which
proved that at Capital, anyone could get into the efficiency act.

Meanwhile, Capital's Constellation service moved steadily
ahead, expanding its operation southward on January 10, 1951.2
The route, between New'York and Atlanta, not only broke the
monopoly Eastern Air Lines had held on nonstop service, but
threatened to provide Eastern with some real competition, as
Aviation week pointed out:

Eastern is up against Capital's more de luxe service, ac-
tively promoted, using a 50-passenger-seating-density
Constellation that has a lounge forward, complete with
potted plants and caged lovebirds. Capital's whirlwind
fipibmotion and inauguration of the service puts a new

face on southern service to the north.

Capital had actually received CAB approval for nonstop
service to Atlanta in 1948, but did not exercise the option
at that time because of a financial situatiOn that called for
"pruning rather than sprouting new routes."4 Said one Capital

official of the new service: "This route puts our airline on

l"Quick Ticket," Business Week. August 110 1951: Po 94-

2"Capital Rings Bell on N.Y.2Atlanta Run," Aviation Week,
February 12, 1951, p. 42.

31bid., pp. 42, 43. ' 4Ibid., p. 43.

73

Main Street. " 1

Capital took a step even“ farther south in March, when
its interchange with National Airlines was finally put into
operation.2 Under the terms of the agreement,. Capital was
permitted to fly through-plane service from" its northern
cities to National's Florida‘and Caribbean resort markets
during the winter months, with National providing reciprocal

service during the summer.:3

Korea Becomes a Eactor

By 1951, the Korean conflict was well under way, creating
among other things an economic boom in the United States. Slim
Carmichael pointed out that the high volume of air traffic in
1951 was a result of this expanded economy, and that his com-
pany had responded to it by gearing operations to the inflated
demand.4 What would happen after the end of hostilities was
debatable, but Capital Airlines felt reasonably confident
that the greater use of air travel during Korea. would result

in a "greatlyiexpanded and lasting acceptance of air trans-

portation."5 The carrier was not overconfident, however, and

kept close watch on the dangers of over-expansion in the in-

 

 

flated markets.6
J'Ibid. 2Capital Airlines, Annual Remrt: 1950, p. 11.
3

Capital Airlines, Annual Repgrt: 125;, p. 11.

Capital Airlines, Annual Report: 1950, p. 4.

Ibid., p. 8. 611231., p. 4.

Ullh»

74

The Advertising “Prom

At the end of 1951, Capital Airlines was able to report
a 50% increase in passenger revenue over the-previous year,
an accomplishment attributed to having taken full advantage of
the expanded air travel market in two ways: (1) by developing
new markets through the improved “competitive service pattern"
brought about by Constellation, (2) by carrying out "inten-
sified promotional and advertising campaignsJ'J' Capital
claimed that its 1951 national advertising campaign, through
the Lewis Edwin Ryan agency, “further enhanced the prestige
of the company“ and helped "increase revenue and further
establish Capital identity."2 The airline went on to say that
the ad series, a continuation of the 1950 campaign, was “dis-
tinguished by its colorful and attractive illustrations, [and]
utilized attention-getting headlines. ”3

The one-page, four-color advertisement reproduced in
Plate IX was included in the annual Agvertising Agency magazine
readership survey of airline advertising, no doubt because of
the high Starch readership scores it attained. The ad, which
was compared with ads of similar specifications representing
TWA, ”United, and American, scored highest of the four in Starch
“read most" among men.

Capital also received at least two awards for its 1951

programs. In the field of direct mail, it was the recipient

 

l«unit-11 Airlines. W. p. 17.
2mg. 3m” p. 18.

4" Starch Reports Best-Read Advertisements,“ Advertising"
Agegcx, XLV (May, 1952), 80, 81.

75

PLATE IX

 

 

 

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76
of a third consecutive “best of industry" award from DMAA, and
for its public relations efforts, it won a national award from
the American Public Relations Association.
In terms of total exPenditures for advertising in 1951,
Trans World Airlines was the industry leader: while Capital's-
budget of about $1 million placed it fifth among all domestic

airlines, and some $400,000 behind the leader.2

The {inancial Situation Improves

Capital AirIines made a healthy $3.6 million profit in
1951, up from the $2.2 million of 1950.3 Its share of total
U.S. trunk line passenger revenue was up to.5.97%, compared
with the 4.69% of gloom—ridden 1947.4 At long last, Slim
Carmichael was able to report the attainment of a personal
objective--his airline was finally put on an airmail rate,
“based on services rendered, [and] free of any element of sub-
sidy.“5 The new rate was set at 53¢ per ton mile of mail
carried, rather than on the former sliding scale, which was
loomputed in inverse ratio to passenger load factor.

Happily also, Capital had scraped together enough money

to neke needed improvements on its ancient DC-3's and DC-4's.7

lCapital Airlines, Annual Report: 1951, p. 18.

2Lawrence M. Hughes, ”Are the Railroads Being Wrecked
by 'Saved' Advertising Dollars?," Sales Management, October 4,

1957, p. 73.
Capital Airlines, Annual Repggt: l954,up,IIZ;,

Business Week, July 3, 1954, p. 46.
Capital Airlines, Annual Report: 1951, p. 4.

0\ U1 J> «a

Ibid., p. 6. 7Ibid., p. 8.

77
1952: The Year of the -mrg§r Talks

The most exciting news around Capital Airlines' Washing-
ton headquarters in' 1952 focused on one word-~"merger." Un-
like 1948, however, the rumors had some substance, and if
anyone doubted'this, all he had to do was turn to page twelve
of Capital's 1951 annual report. There, and on the next three
pages, appeared a detailed account of the merger proposal--
complete with an additional three-page fold-out spread showing
what the combined route structure would look like.1

The airline with which Capital was to be joined was

Northwest, and so great was the desire for the merger to be

accomplished, that Slim Carmichael urged Capital's stockholders

to vote for it.2

Northwest-Capital Airlines, as the new carrier was to be
called, would have domestic routes tOpping 8,000 miles, making
it the biggest in the United States. It would also solve the
route problems that plagued both airlines. For Capital, it
would mean continental routes extending as far west as Seattle:
for Northwest, it would mean expansion into the eastern mar-
kets via a much-sought-after transcontinental route through
Chicago.3 For the merged carriers, therefore, it would mean a
competitive foothold in markets where long-haul passengers

preferred to fly transcontinental airlines, rather than having

lipid.. pp. 12-15. 21bid., p. 4.

3"Made for Each Other," Time, February 11. 1952'
pp, 86, C7.

78
to change planes. The new carrier would also fall heir to
Northwest's 18,000 miles of international routes, reaching
such ports of call as Honolulu, Japan, and the Philippines--
thus fulfilling Capital's long-forgotten dream of a world-
wide operation.1

both lines would benefit also from an equipment stand-
point, pooling their 49 DC-4's, 35 DC-3's, 10 Boeing Strato-
cruisers, and 5 Constellations.2

Piloting Northwest-Capital would be two veterans of
financial and operational crises. Croil Hunter, Northwest's
president, would'become board chairman of the new carrier,
and Slim.Carmichael would become its president.

Carmichael commented after signing the merger agreement
that “it was about as casual as if we were buying each other
a pack of cigarettes,"4 bet Northm gt's stockholders did not
view the proposal in such a cut-and-uried.manner, and they
subsequently rejected it. In June, Northwest announced that
the merger was off, and that its application had been with-
drawn from CAB.5 '

Capital had been counting strongly on the merger, and

 

was understandably upset w: . .1 it was voted down, especially
1Ibid. 21bid., p. 87.

3"Airlines Merge to Pare Costs," Newsweek, February 11,
1952 , p. 65.

4Time, February 11, 1952, p. 87.

5"Merger Cancellation Disappoints Capital,” Aviation
Week, June 16, 1952, p. 92. .

79
since the veto had come" only after‘a last-minute change of
heart by William Salvatore, a mojor' Northwest shareholder.1
Slim Carmichael, embittered by the' refusal of the two airlines
to make another attempt to win over the stubborn Northwest

holdouts, made this statement:

Because of the strong sentiment in favor of the merger as
evidenced by the public and official acceptance of the

proposal and the vote of the majority of Northwest stock-
holders it appeared likely that Northwest in fulfillment
of its agreement would take action to further the merger

program.
With one last breath, Camichael added that the merger

".would have benefited both companies and would have been much

in the public interest."3 His words were of to no avail.

The Rumors Are Revived
- Hardly a month had passed before merger reports were

again being circulated throughout the industry. According to

Aviation Week, CAB had been anxious for the Northwest merger,

but would settle for a similar arrangement between Capital and
Delta, or National, or both--any of which would create ”a sort of
second Eastern Air Lines."4 But the main reason for renewed
speculation, in the estimation of Aviation Week, was a desire

on the part of the banks with which the major-air: we”; had
credit to improve the financial base and growth potential of

these airline accounts .

l;_b_i_d. 21bid., pp. 92, 93. 3Ibid., p. 93.

 

 

4"Big Airlines Bid for Capital Merger,” Aviation Week,
July 14,1952, p. 79.

.. Epid.

80
Whatever the reasons, several airlines were reported to
have talked merger with Capital after the Northwest fiasco,
including United, American, Eastern and National.1 But notling

concrete was to emerge from these secret huddles in 19520

The.Advertisinqu£ogram ‘

While merger struggles were being carried on behind
closed doors, Capital was out drumming up new business, as
usual. The charter and special events business, Capital's
pride and joy, took on a new look--featuring such slack season
padkage tours as “A Piggy Bank Vacation," and “A‘Weekend at
the Waldorf."2 Convention and group flights were also promoted
heavily, using direct mail as a primary medium, and it was
good enough to win another DMAA "best of industry“ award in
1952.3 These campaigns helped Capital special events flights
account for an almost traditional 2% of total passenger rev-
enue again in 1952.4

The national magazine campaign, launched in 1950, was
continued to 1952 "in the interest of enhancing the reputation
and.acceptance of Capital on the national level."5

The lion's share of the over~$1 million budget went in-

 

lIbid. 2Capital Airlines, Annual Repert: 1952, p. 17.

3There is evidence that Capital itself lost track of the
number of consecutive DMAA awards it had won through 1952. In
the 1951 annual report, it claimed three consecutive awards
(IL. 18), but in the 1952 annual report, it claimed to have won

five awards in a row (p. 16).
4Capital Airlines, Annual Report: 1952, p. 8.

5Ibid., p. 16.

81
to newspapers in on-route cities, supplemented.by spot radio,
and apparently for the first time, Spot'television.l
Corporate image and customer service were of major con-
cern in 1952. Capital had.been gradually transplanting its
ticket offices from exclusive hotels and financialedistricts
to areas with greater traffic potential,2 and in the 1952 an-
nual report, three such new locations were featured in the
center spread, along with this statement from the airline:
Capital is proceeding with a long range program to ac-
quire, where economically justified, tastefully decorated
ticket offices on the more prominent corners of the imr
portant cities it serves. In addition to the service
facility of these offices, the Capital identity at these
crossroads of business and commerce invites and reminds
the thousands who pass them daily to avail themselves of
friendly, courteous and dependable Capital service.
The Route Situation Grows Worse
While Capital was making progress on the ground, it was
still having problems in the air. A major setback was the
loss of the nonstop NeW'YorkeAtlanta run, which left Eastern
.Air Lines with a virtual monopoly once again. Capital blamed
abandonment of its service on CAB route restrictions that pre-
'vented.the carrier from continuing on to Birmingham.and gulf

coast cities after landing at the Atlanta terminus of the non-

stop New York-Atlanta route.4 Eastern, on the other hand,

 

11b d. 2Business Week, September 30, 1950, p. 46.

3Capital Airlines, Annual Report: 1952, pp. 12, 13.

4"Capital to Protest Route Restriction,“ Aviation Week,
December 15, 1952, p. 82.

82
was not faced with such restrictions, and could afford to op-

erate the through service with lower load factors on the non-

stop portion . 1

The Atlanta problem reflected Capital's growing concern
with its southern route network, with the carrier claiming
that routes to the south from New York and Washington were
established long before air travel was in mass demand. Com-
mercial and industrial growth in the ensuing years had made
the situation totally impractical, with "another carrier"
existing virtually unchallenged, and with some cities denied
“adequate development of air service in the directions in
which their community of interest now lies.":2

Capital also insisted that the reinstatement of an ob-
solete CAB regulation had resulted in unprofitable coach ser-
vice, with larger competitors pushing Capital right out of
the market it had created. On the New York-Chicago route,
for example, CAB experimented by reducing the number of stops
Capital coaches were required to make from two to one. Load
factors increased J'Jmnediately, but when TWA and American
entered the aircoach market with nonstop service, CAB promptly
reimposed the two-stop requirement on Capital. When- United
entered the market, also nonstop, Capital was forced to with-

draw its Nighthawk aircoach service because it couldn't very

well fly empty planes at a profit.3

Capital had long contended that CAB forced it to fly

 

lgbid. 2Capital Airlines, Annual Report: 1952, p. 15.

‘SAyiatigp Week, December 15, 1952, p. 82.

83
half empty, making it a nonprofit organization and:hindering
its ability to serve major cities satisfactorily.1 In order
to correct the situation, Capital announced late-in 1952 that
it was filing route requests that would allow it to attain
"competitive equality within its own region.“2 CAB approval
would give Capital direct access to major cities on its New
York-Chicago and NeW'YorRAWashington-New Orleans routes, in-
stead of having to land at marginal-revenue cities along the
way.

Capital would also claim, in complaints to CAB and con-
gressmen, that restrictions originally imposed to prevent
competition at taxpayers' expense had.become unworkable, and
that since the major carriers were no longer on subsidy, the
restrictions had succeeded only in creating bigger profits
for the "Big Four"--American, Eastern, TWA, and united.
Capital also hinted that if the situation did not improve,
it might be forced.back on subsidy, instead of the air mail
rate it was receiving in 1952.3

Despite its persistent route prdblems, Capital managed
to make slight financial gains in 1952.4 Employment was also
1gp to 4,100, and once again the fleet had come through the

year intact.5 Unhappily, the carrier's load factor tumbled

 

 

lIbid. 2Capital Airlines, Annuaereport: 1952, p. 15.
3Aviation week, December 15, 1952, p. 82.
4

Capital Airlines, Annual Report: 1954, p. 17.

5Capital Airlines, Annua; Report: 1952, pp. 16, 18.

84
nearly three percentage points from the 1951 high, to 57.97%.1
For 1953, Slim Carmichael made“ a restrained forecast of better
times, with emphasis to be placed“ on cost control and ”the

correction of basic inequities of our route structure."2

1953: No Change in Route Structure

Capital's route system problems were not resolved in
1953, but significant developments did take place in the
carrier's efforts to expand its marketing area. First, the
airline petitioned CAB for a straight-line operation from
eastern cities to the South, and for extensions from New
Orleans to Houston, and from Knoxville to Dallas-Fort Worth.

Second, Capital requested authority to establish an
equipment interchange with Continental Airlines, to link Denver
with major eastern cities.

Third, the equipment interchange with National Airlines
had proved so successful that CAB permitted expansion of the
service to three new northern markets--Buffalo, Milwaukee,
and Twin Cities-~in addition to the original cities of Detroit,
Cleveland, and Pittsburgh.3 The interchange not only gave
Capital a share of the winter vacation market from cities
within its own system, it also resulted in more efficient use

of personnel and equipment during the normal slack season, and

 

J'Capital Airlines, Annual Report: 1954, p. 17.

2Capital Airlines, Annual Report: 1952, p. 2.
3Capital Airlines, Annual Report: 1953, pp. ll, 17.

85
provided extra National equipment on Capital routes during

the peak summer months.1

Personnel Relations

Capital Airlines established a retirement program for
employes in 1953, becoming the last major airline to do so,
and ending a paradox in which a company that counted on good
employe morale had failed to assure it by providing for their
future.

The company seemed to be going overboard, however, when
it established a policy with each of its seventy-five stations
that the executives would take over all tasks for a day if the
station equaled or exceeded its established sales quota for
twelve consecutive months. The executives included everyone
from Carmichael on down, and the functions they took over from
the station's regular staff ran the gamut from reservations
agent to baggage handler, but they would revert to correct status
in time for a banquet after working hours. By that time,
Capital's grapevine would be spreading the word on the day's
activities to other stations;§&ong the line.3

The employes generally spent their day off watching their
bosses, nicknamed the “wrecking crew,“ make blunders. They
were not often disappointed, but while the executives did stay

can the jdb until everything had been straightened out (including

A-

1 2
Ibid., p. 11. Ibid., p. 13.

3J0 Stephens, "Brass in Coveralls," Nation's Business,
XLI (August, 1953), 56.

86
sweeping'the floors) , the airline's customers were not aware
of what was happening. A passenger whose luggage ended up on
the wrong plane, or who" ended up on the wrong plane himself,
might just take his business elsewhere in the future. And
losing customers was hardly some-thing Capital could afford.
» Slim Carmichael was willing to take the risks, however, in
the belief that such programs not only would unite his people
behind him, but would make them more inclined to discuss local
problems with him. Equally important, "morale soars, fand]

handling baggage again is less an arduous job."1

The Pressures Begin to Build

Capital carried nearly 240,000 more passengers in 1953
than in 1952, with a gain of $5.2 million in operating rev-
enues.2 Figures can be deceiving, however, for Capital was
steadily losing ground in share of total trunk line passenger
revenue. It slid from 5.95% in 1951, to 5.34% in 1952, and
to 5.17% in 1953. If the trend continued, Capital would
soon drop below the 4.69% figure of l947--the year of the
crisis.3

There was no longer any doubt that Capital Airlines was
experiencing the full effects of competitive equipment, for
despite the twelve Constellations now being operated along

its routes, the carrier's aging DC-3's and DC-4's were

 

lIbid.

2Capital Airlines, Annual Report: 1954, p. 17.
3

Business Week, July 3, 1954, p. 46.

87
hearing a disprOportionate share of the burden. The car-
rier's coaCh service was also in trouble, even though'its

share of passenger revenue was up slightly, to 13.7% of total

passenger revenue . 1

Despite its glowing prediction of a growth in traffic

volume for 1954,2 Capital Airlines was about to face another

crisis.

 

lCapital Airlines, Appual Report: 1953, pp. 7, 9.
2Ibid., p. 18.

CHAPTER VI
CRISIS AND A NEW CONCEPT: 1954

gackgrggpd to the Crisis

Capital Airlines had long been recognized as a "big"
airline in terms of passenger revenue, but in 1954, th§”air-
line went so far as to call itself the biggest strictly domes-
tic carrier in the United States. Viewed from another per-
spective, Capital had just fought its way into tenth place
among transportation lines of all types.1 It has already been
pointed out, however, that size is only relative. In terms of
financial stability, sound route structure, route miles served,
modern aircraft, and passenger volume, Capital was hardly in

a position to challenge the likes of United, American, TWA,

and.Eastern.

The Number One Prdblem

0f the multitude of meblem facing Capital in 1954,
route structure had been causing the most grief. The airline
was now serving seventy—seven cities, comprising 60% of the
entire United States population.2 But it was still geograph-

ically centered on its birthplace of Pittsburgh, with terminal

 

lMcIntyre, Editor and Publisher, April 10, 1954, p. 15.
2
Ibid., pp. 15, 22.

88

89
points reaching east to New York anerashington, west to
Twin Cities, and south to Atlanta and New Orleans.1 This
made Capital a “regional carrier,“ and"though the term is
not used.by CAB, Business Week theorized that a regional
carrier might be defined as not being a transcontinental car-
rier.

Regardless of the terminology used, it was a fact that
Capital Airlines was basically a short-haul airline, with
only a small share of the middle- and long-haul markets.

For example, the average distance between Capital's cities
‘was only 214 miles, the average passenger journey was only
320 miles,3 and the average fare was just $18.4 Several of
its routes ended in deadends, while others were loaded with
unprofitable stops and detours.5

To make matters worse, Capital faced stiff competition
from bigger airlines serving its on-route cities, and on a
systemdwide‘basis, competed directly with Eastern, united,
TWA, and.American, for over 80% of its revenue.6 On many of

these routes, Capital had.been added for better service only

after the other carriers had established themselves, and CAB

 

1Lawrence M, Hughes, ”Capital Sells a New'Way to Fly,"
Sales Management, November 1, 1954, p. 58. .

2Business week, July 3, 1954, p. 44.
3Hughes, §§l§§ Management, November 1, 1954, p. 58.
4McIntyre, Editor and Publisher, April 10, 1954, p. 15.
5Hughes, §§l§§_Management, November 1, 1954, p. 58.

6Business Week, July 3, 1954, po 44.

90
was then Obliged to protect them from unfair competition by
newcomers. The demise of Capital's nonstop service between
NeW’York and Atlanta illustrates this principle. It will be
recalled that Capital had entered a market where Eastern Air
Lines had a monopoly, and in order to protect Eastern from
a loss of business, Capital was subject to certain restric-
tions. It could serve Atlanta from New Yerk, and it could
serve Birmingham and New Orleans from New'York-ébut not on
the same flight. unfortunately for Capital, there was not
enough business on either of these routes to justify separate
flights, making it unprofitable to fight Eastern in that long-
haul market.

The situation that forced Capital out of the southern
nonstop market was not unique. In fact, the numerous similar
restrictions placed on the airline led it to claim that in
Capital's own region, Capital should be protected from trans-
continental giants--not the other way around.1

Capital had high hopes that the cases it had filed with
CAB.would be settled in its favor, allowing the carrier to

eliminate some stops, fly nonstop between additional cities,

2 In the opinion

ladd.neW'routes, and extend existing routes.
of Business Week, the outcome of these cases would determine
"whether Capital is to be truly successful or only moderately

successful . " 3

 

lIbid. , p. 47.
2Hughes/Sales Management, November 1, 1954, po 60.

afiuginess Week, July 3, 1954, p. 47.

91
.A Need :gE;NeW’Aircraft'

The nature of Capital's route system placed it at an
equipment disadvantage, also. on shortehaul routes, which
were usually segments of competitors' longéhaul routes, Cap-
ital was often up against larger, faster, more modern planes
than its own local market could justify. And the planes it
did fly on these short routes were not suited to its longer
flights. The-typc-of aircraft Capital needed to meet competi-
tion head-on would have to be flexible enough to operate on
both lOng- and short-hauls, and it would have to be fast enough
and attractive enough to lure passengers away from the other
airlines.1 The prdblem.was that no U.S. aircraft manufacturer
offered a plan meeting these specifications. The big ones,‘
such as the Lockheed Super Constellation and Douglas DC-6 and

2

DC-7, were too costly to operate over Capital's routes, and

the smaller ones were simply not competitive enough.3

The Answer: Viscount
nginegs week reported in 1953 that despite the spec-
tacular performance of Britain's Comet turbojet airliner,
“some American manufacturers foresee the stiffest competition
from the turboprop—powered Vickers Viscount."4 In June, 1954,

Capital Airlines confirmed the fears of the manufacturers by

 

11bid., p. 44.

2"British Planes for U.S.," Business week, June 12, 1954,
p. 161. ' .

3Business week, July 3, 1954, p. 44.

4"NewAirline Workhorse," Business Week. October 24.
1953, p. 184.

92

announcing that it had just purchased $45 million worth of
Viscounts, making it the first U.S. tur'bopropairline.l

Capital's surprise move aroused some resentment among
American aircraft manufacturers, but Slim Carmichael was'un-
perturbed, for he had ordered the Viscounts only after a com-
prehensive study of the domestic market convinced him there
were no Americanébuilt'planes to suit the needs of his air-
line. Carmichael further justified his decision by pointing
out that Viscounts would still bring business to domestic
firms, since many of its parts were manufactured in this
country.2

The important thing, as Carmichael saw it, was that the
Viscount was the answer to Capital's prayers. Its 1,5004mile
range would permit it to fly nonstop between any two cities
on Capital's existing routes, and for short runs, it would
be as fast as, or faster than, any plane in operation.3
.Moreover, it would be able to operate from forty-eight of the
fifty-one airports on Capital‘s route system, compared with
thrity-six for Constellation and forty-one for the DC-4.4

Slim Carmidhael had a great deal to say about the Vis-

count as a competitive weapon:

 

lBusiness Week, June 12, 1954, p. 161
21bid.
3Hughes, Sales Management, November 1, 1954, p. 60.

4"The British Are Coming,“ Time. June 14. 1954c Po 102-

93

We compete with the “Big Four” [on 80%of our route sys—
tem],‘andryou can‘t do this successfully without a first-
class airplane. ‘We had an acute need fir a four-engine
plane ggmparable to Big Four equipment.

0 O O O O O 0 O O O 0 O O O O O O O O O O O

‘Ifiem”éfith3siastic about the traffic-producing potential
of the Viscount. It will be completely competitive with
the DC—7 and the Super Connie, and set a standard of ser-
vice that will not be exceeded in our area.

There will be no section of our system where we cannot
compete with other domestic airlines, and in a few sec-
tions we will be able to better their schedules. The
Viscount still has further development ahead of it and
gradually will improve its performance with experience.
Capital truly felt that the Viscount was the first plane
ideally suited to a regional type of operation, and as James
Austin told his sales force, until it came along Capital ”had
to fly planes built for others.“4 Slim Carmidhael thought
the plane was so well suited to Capital that “he couldn't be
more pleased with the aircraft if it had been designed to

”5 He even envisioned that Viscount might

our specifications.
some day give Capital ”the airline operator's ideal"; that is,
the capability of serving the entire route system.“with one

type of plane and one type of engine."6

The Deal for Viscount
. The contract Capital signed with Vickers-Armstrongs,

Ltd., called for the purchase of forty Viscounts, with an

 

1"British Crack U.S. Market with Viscounts,“ Aviation
week, June 14, 1954, p. 17.

21bid. BIbid. , p. 16.

4

Hughes, Sales Management, November 1, 1954, p. 58.

01

Aviation Week, June 14, 1954, p. 17.

0‘

Time, June 14, 1954, p. 102.

94

option for twenty more. Delivery of the first three planes

1 with the remaining thirty-

2

was to be in the winter of 1954,

The
3

seven scheduled to arrive in waves, ending in 1957.
airline hoped to begin Viscount service in April, 1955, and
have a total of twenty in the air by the end of the year.4
Capital assured itself of a three to four year jump on the
domestic turboprop market by insisting that Vickers deliver
all forty of its planes before filling any other orders from
the united States.5 A

The $45 million Capital spent on its initial Viscount
purchase equaled the carrier's entire operating revenue of
1953, but it was still considered a bargain because a similar
number of DC-7's or Super Constellations would have cost about
twice as much. Payments for the Viscounts were to be spread
over a five year period, with monthly installments of $16,000
for each plane, plus interest of l 3/4%.per year more than

the current Bank of England rediscount rate, which was then

3%.6

 

1Hughes, Sales Management, November 1, 1954, pp. 56, 58.
2Aviation week, June 14, 1954, p. 16.

3"Capital Airlines Picks the Turboprop," Business week,
July 3, 1954, p. 41.

gaughes, Sales Management, November 1, 1954, p. 58.

5Preble Staver, "Capital Stakes Its Future on Viscounts,"
Aviation week, July 18, 1955, p. 111. .

6Hughes, Sales Management, November 1, 1954, p. 60.

95
The'lichount 13561:

A 1954 article in Business week referred to the Viscount
as a “radically new airplane," but in reality, it was far
from unproven.l It is quite true that no domestic manufacturer
had announced plans for a commercial turboprop as of 1U34, but
the British aircraft firm of VickerSwArmstrongs had been fly-
ing prototypes of the Viscount turbopr0p since 1948.2 Twenty
of them went into commercial service on British European Air-
ways in April, 1953) and proceeded to log 100 million passen—
ger miles of safe operation in fifteen months, during which
time BEA's share of traffic on highly competitive routes
jumped from.28% to nearly 58%..3 The Viscount had proved so
successful right from the start that Capital Airlines had to
stand in line behind Air France, Irish, TranSeAustralia,
British West Indies, and Trans-Canada Airlines to place its
order.

The Viscount Engine.--It was the power plant that made
Viscount different from any other commercial plane then in
operation. Viscount was in fact the first plane to be "built
around an engine," as Capital put it.5 The sole means of

propulsion up until that time was the reciprocating (piston)

 

l-'

Business Week, July 3, 1954, p. 41.

*—

Hughes, Sales Management, November 1, 19%}, p. 58.

(AN

Business Week, June 12, 1954, p0 1610

uh

Hughes, Sales Managemenp, November 1, 1954, pg 580

U!

Ibid., p. 56.

96

engine, which moves the plane forward bywmeans of‘a propeller.
Still in the"testing stage in 1954, as far as the airlines
were concerned, was the jet turbine (turbojet or pure jet)
engine, which derives its thrust solely from exhaust gases.
The turboprop (propjet or jetprop‘ engine was a combine of
both--about 80%»propellor and 20% jet. It gained some extra
thrust from exhaust gases, as in a pure jet, but relied.main-
ly on its propellors.l

Capital's vice-president for operations, James B. Franklin,
said the turboprop engine offered short~hau1 airlines the un—
beatable combination of low cost and high efficiency, and a
comparison of the three types of engines will make the reasons
clear. The piston engine could run at full power only for
short periods, and had to be throttled down to 50% of rated
peak capacity after reaching cruising altitude to keep it
from burning out. The pure jet, on the other hand, could
run at full power for long periods, but its appetite for fuel
was enormous. The turboprop combined the best features of
both. Like the pure jet, it could run close to full power for
sustained periods, but like the piston engine, it consumed more
reasonable amounts of fuel.2 To be perfectly accurate, the
turb0prop did use about twice as much fuel as the piston ene
gine-ebut it burned kerosene, which costs half as much as gas-

oline.3 Other advantages of Viscount's Rolls~Royce Dart en-

gines over conventional piston engines were its lack of vi-

 

2

lBusiness Week, July 3, 1* pp. 4.1., 42. raga” p. 42.

3 .
Hughes, Sales Management, November 1, 1954, p. 58.

97
bration and lower noise leveluwdefinite selling points for
airlines.1
The entry of Viscount into the domestic market was
hailed by turboprop supporters, who had long predicted its
value to shortwhaul operations.2 Slim Carmichael felt the
same‘way:
The piston plane has reached its high point and the de-
velopment of the art suggests that the turboprop is next.
Capital is proud to be the first to introduce the turbo-
prop on airlines in the U 3.3
The Plane That Was Built Around the Enqymg
Depending upon its seating configuration, a Vickers
Viscount could whisk from 44 to 56 passengers4 through the
skies ingvibration-free silence, at speeds up to 385 miles
per hour. Inside the plane, passengers would find a wider
cabin and larger windows than they were accustomed to seeing
on Capitaliners.5 Their comfort would be assured, even at
altitudes up to 30,000 feet, by a pressurization system reported

6

to be the best ever designed for a commercial airplane. And

it might have been of further comfort to passengers to know

that a Viscount could remain aloft on two engines, if needbe.7

 

p

Aviation Week, June 14, 1954, p. 17.

 

2B i ess Week, July 3, 1954, p. 41.

3Aviation Week, June 14, 1954, p. 17. 4Ibid.
5Hughes, Sales Management, November 1, 1954, p. 58.
6

Business Week, July 3, 1954, p. 41.

7Hughes, Sales Management, November 1, 1954, p. 58.

98

The Master Planffor Viscount

Preparations for the Arrival
The first order of business after Capital had signed

the contract with Vickers was to prepare for the arrival of

the first Viscounts. The logistics problem alone was titanic--
and expensive. Capital would have to spend $800,000 for kero-
sene storage facilities, including storage tanks, tenders, “
and.handling equipment, at approximately twenty stations where
Viscounts were to be fueled.

Complete engine overhaul and test facilities would have
to be established, and in order to be able to perform any
maintenance at all, an estimated $10,000 would have to be
spent for equipment in the metric system of measurement.

Finally, Vidkers leased Capital's Alexandria, Virginia,
parts depot to stockpile a multiemillion dollar supply of

parts for the Viscount and its Rolls-Royce engines.

Where the Viscounts WOuld Fly

Capital had hoped to place its first twenty Viscounts
in service by the end of 1955, in its top eight markets.2
One by one, Capital would replace its existing fleet, until

all ferty Viscounts had.been put into service.3 .Aviation

 

1George L. Christian, “Capital Busy Getting Set for
Viscounts," Aviation Week, February 21, 1955, pp. 77, 82. '

2Hughes, Sales Management, November 1, 1954, p. 56.
3Business week, July 3, 1954, p. 42.

99
‘Eggk did not see things exactly as Capital did, however,
and challenged the carrier's timetable for an all-Viscount
fleet. For one thing, the trusty old DC-3's would be needed
indefinitely, to serve airports too small to handle the Vis-
count: for another, Capital's DC—4's were very economical to
operate.1 Capital had, in fact, the largest DC-4 fleet in the
united States, and Aviation Week thought it highly unlikely
that with so much flying time and.maintenance experience, the
airline would abandon them entirely. And it was further spec-
ulated that Capital's constellations would.be retained and

converted to 82-seat tourist or coach service equipment.2

yiscognt Services

The Viscount would be used initially for first class
service only, and with a 48—seat configuration the break-even
load factor was estimated to be 50.6%.3 Despite the uniqueness

of the turboprop in an a11~piston industry, Capital planned no

4

surcharge for Viscount service. Viscount coach service was

,not a part of Capital's early plans, but when the time did come,

the configuration would.be modified to 56 seats.5

 

1Capital had acknowledged this, saying that Viscounts
would cost slightly more to operate than DC-4's on a per hour
basis, but actually less on a per seat-mile basis, due to its
.115 Rule per hour speed advantage (Time, June 14, 1954, p. 102).

2"One-Type Fleet?," Aviation Week, February 21, 1955,
p. 77.

3Aviation Week, June 14, 1954, p. 17.
4Hughes, Sales Management, November 1, 1954, p. 58.

5Aviation week, June 14, 1954, p. 17.

100

.Advertising;Strategy; Before and After Viscount

Capital Airlines had just stunned the airline industry
by scoring two significant “firsts”: (1) it:would.be the
first carrier to fly foreignemade planes commercially in this
country, (2) it would be the first carrier to fly turboprop-
powered planes commercially in this country.

Capital Airlines also stunned its advertising department
and advertising agency with its announcement in June of the
Viscount deal, because the promotion campaign for 1954 was
already in high gear. Now the advertising people would.bave
to start scrambling, for while Viscount service would not be
introduced until the spring of 1955, there was a great desire
on the part of Capital's executives to insure immediate public
acceptance. A pre-introductory campaign was developed and
put into operation by August, but there is nothing to indicate
that Capital's regular campaign was affected.by it. For this
reason, the airline's advertising for 1954 will be treated as

two separate and distinct programs-~non-Viscount and Viscount.

The Non-Viscount Campaigg

Capital's advertising strategy for 1954 was geared to
the airline's increasing emphasis on its existing fleets of
four engine Constellations and DC-4's, with its old reliable
DC-3's being banished to routes serving small airports.1

Newspgpgr.--Robert B. McIntyre, writing in Editor and
Pgblisher, asserted that the advertising philosophy at Capital

 

lRichard Balentine, ”Capital Educated Workers to Cut
Expenses,” Aviation Week, February 22, 1954, p. 102.

101

Airlines was to spend what you have to on advertising in or-
der to make money; If this were indeed—the case, Capital
mdght have had the largest advertising budget of anybody, any-
where. In reality, however, the airline did manage to spend
in excess of $1 million for advertising in 1954, with the
major share-~about $800,000-~going into newspaper.l According
to James Austin, newspaper was doing yeoman's work for the car-
rier:

If we didn't think newspaper advertising was doing a job,

we wouldn't be spending $800,000 in the medium. Of course,

it's difficult to pin down just what part of our sales are

attributed to newspaper ads. But it's a safe bet that the

medium has exerted a tremendous influence.

.Austin added that his sales force agreed that “news-
papers are the most important part of our overall advertising
schedule,“ and that the salesmen "depend on it for that all-
important local-level sell."3 ‘

Capital's newspaper schedule included 127 dailies, and
its campaign was built around.small-space (100- to 450-line)
ads, run three times a week, always on page two or three. -
Each advertisement in the campaign featured a different major
city on Capital's route system, identified both by name and
by a familiar landmark in the background.4 Plate X.illustrates
one of the ads from this series.

Magazines.--The 1954 magazine campaign, which ran in eight

publications, bore a striking resemblance to the newspaper

 

LMcIntyre, Editor and Publisher, April 10, 1954, p. 15.
2____Ibid. 3mg. 4mg... pp. 15. 22.

102

PLATE X

 

PITTSBURGH

 

  

“I as ' g
'- , a II Flights
\ 1 C
Dally

 

 

 

 

 

 

 

H A
‘l ‘ ,‘ Morning, Afternoon
J l and Evening
fl
L . Featuring
11. ‘ l .
ii: a; ' £5]:th flush/[shuns
’ fl 3 at 7:30 p.m. and 8:45 p.m.

5", . - - , _ Also daily service '0 Detroit,
(ft—fsz-Jj’i- Cleveland, New Yovk, Ballimore,
”*5” Washington and Norfolk

Call DEarborn 2-5711
or your TRAVEL AGENT I
Tickflel Offices: Cor. Slole & Monroe Sn. '
& Conrad Hullon Holc‘

TH! TREAT '8 HOURS

103

series. The illustration in each of the six ads in the cam-
paign was dominated byhthe same attractive girl, but with a
different male escort and a different on-route city featured
in each. Said James Austin:

we plan a seventh ad showing the girl with all six es-

corts. The idea, of course, is that the gal gets around--

via Capital Airlines, naturally.1

The magazine version'of‘the advertisements featured the
use of black and red in the prominent Capital logo, and
stressed a single copy point, such as “The Treat is ggggg,"
or 9§gg£§_to Enjoy," while the puns were played down and the
cities emphasized in the newspaper series.

Other Media.--Capital also spent money for direct mail,
radio and television spot announcements, outdoor boards ad-
jacent to airports, and promotional material. In addition, it
continued to close ties with travel agents, supplying them.with
newspaper mats, art,-and suggested copy. Capital might
have even paid for this co-op advertising, were it not for a
government regulation 1bmiting airlines in this area.

Capital Becomes a Medigm,--In addition to buying adver-
tising space, Capital sold it, being one of the few airlines
to offer space on timetables and ticket envelopes. The reason,
according to advertising manager Joel Daniels: "It's just our
way of keeping that all-important cost-of—acquisition of pas-

sengers to a minimum."2

 

lIbid., p. 22.

 

2Ibid., pp. 15, 22.

 

104

Ebsixissssstrsssssisu;

' Slim Carmichael had said the Viscount "sells itself,"1
but in envisioning the plane's role in lifting‘his' airline
to first place in progress and prestige, he left nothing to
chance. Capital and its agency, Lewis Edwin'Ryan, were to
build a fully-integrated promotion campaign'that couldn't
help but make the name “Viscount" practically a household
word, and to assure success the airline would spend $500,000
on it.2

The Kickoff .--Although Viscount service was programmed

to start on April 1, 1955, the first promotion piece herald-
ing the event was mailed to all Capital employes on August 11,
1954. The same brochure was mailed to 100,000 prospects in
October, and an additional 150,000 c0pies were made available
at Capital ticket counters and in flight kits aboard all Cap-
ital planes.3 The piece was entitled "A New Concept in Flight,"
which also happened to be the theme for the campaign that was 9
to follow, and in it Carmichael wrote:

History was made . . . when Capital announced its pur-

chase of 40 Rolls-Royce powered propellor turbine Vis-

counts, with a further option on 20 additional Viscounts.4

The, brochure went on to describe Viscount as having "an

ease and comfort in flight that transforms air travel 1o .

something more than a race against time."5 A cutaway Viscount

engine was illustrated in the center spread, along with a

 

1Aviation Week, June 14, 1954, p. 1?.

2Hughes, Sales Management, November 1, 1954, p. 56.

31bid., pp. 56, 58, 60. 4Ibid., p. 58. 51bia.

105
description of itsmain attributes-~fewmoving' parts, no re-
ciprocating action, and little jolt or friction. It' was also
pointed out that on a 24,000 mile round trip flight between
London and New Zealand, a Viscount used less than one pint of
'oil.

The Print Campaigp.--Perhaps the most ambitious schedule
ever run by Capital Airlines involvedadvertising Viscount to
the trade. Plate 15:; illustrates a typical two-color ad
placed in thirteen trade publications encompassing travel,
advertising, and marketing. In addition, local, “commerce”
papers in six key cities received four full-page ads over'the
six-month period-~all of them featuring the headline, "A New
Concept."

A series of two-column, two-color advertisements was
scheduled for Ema, Newsweek, and Business Week, beginning in
January.

Weekly newspaper insertions were planned for dailies in
the eight markets that were to receive Viscount service init-
ially, and were scheduled in the following order: 1200, 450,
249, and 1200 lines. The starting date of this phase of the
campaign was staggered from city to city, so that at least one
1200-line size would be running each week.1

The Broadcast Campaign.--There were two alternate plans
for radio in the eight Viscount markets, with Capital purchas-

ing either morning news programs or 60-second spot announce-

 

11bid.. pp. 58, 60, 62.

106

PLATE XI

A New Concept in Flight

The powerful Capifal Viscount. is the first and only modern
propeller aircraft to combine swiffness with the highest degree of
silence and smoofhness. The four Rolls-Royce propeller furbine
llurbo-propl engines introduce the traveler to an ease and
comforf in flight fhaf transforms air travel info somelhing more
lhan a race against time. Panoramic pidure windows . . .
individual fables . . . air-conditioning and

pressurization . . . contribute to this new kind of luxury.

The Viscount, which comes to Capital

\_/"‘—‘\

\\ with over one hundred million pass-
-. enger hours of safe operation,
will be serving Capital cities

soon. Watch for the announcement!

‘ Pronounced Vi-Counl

 

fipifs/flfr/I'nes

 

 

 

SWIFT, SMOOTH, SILENT, SURE

 

107
ments adjacent to these programs. Television was utilized
via 20-second’ spots adjoining Class A network programs.

The Outdoor Cmigg'm-Capital erected three-dimensional
painted boards adjoining airports in the eight Viscount intro-
ductory markets. II'he boards, telling of the impending arrival
of Viscount service, were to be repainted to coincide with the
actual launching of service.

Other Promotion Media.-—Capital saturated the trans-
portation market with an assortment of promotion pieces and
exhibits that could scarcely be avoided. Among the items
made available to all who requested them, were medallions
(for use by Viscount users all over the world), model Viscounts
with wing spans up to eight feet ("for the use of all who
would like to make them a symbol of 511g; progress") , and even
movies. The latter, a 20-minute, l6-mm color film aptly
entitled "A New Concept in Flight," was released in November
to Capital's district people for showings to business and
service clubs, and hopefully, for showing on television.

The film, which was prepared largely by Capital's own camera-
man, concentrated on the craftsmanship of Vickers and Rolls-
Royce.

Every two months, Capital planned to distribute 100,000
copies each of three different folders, dealing with the Rolls-
Royce engines, the passenger features, and the over-all per-

formance of the Viscount.1

1Ibid.

108

Eventually, the Viscount found its way onto Capital's
letters, postage cancellations, timetables, ticket envelopes,
baggage stickers, matchbooks, post cards, playing cards, and
souvenir coins.

In addition to reaching the general public, Capital
made its district sales managers responsible for submitting
lists of key prospects-~including city leaders, businessmen,
advertising agency and public relations executives, represent-
atives of the press, industrial traffic managers, and travel
agents.

Capital also scheduled Viscount demonstration rides
for business and sales executives, inasmuch as they accounted
for 85%»of the airline's passenger volume.

Tie—In Promotions.--Capital demonstrated in 1950 that
it had a way with suppliers when it succeeded in enlisting
their aid in promoting the Constellation, and in 1954 the air-
line decided to try the same thing with Viscount. Vidkers-
Armstrongs led the way through its advertising agency,.McCann-
Erickson, and Rolls-Royce joined forces by providing Capital
with a full-size cutaway of its Dart turboprop engine. The
airline promptly mounted it on a 45-foot truck—trailer and
sent it on a tour of hotels, air shows, and airports. And just
in case the engine wasn't enough to attract the curious, Cap-
ital sent along a hostess to explain the turboprop's simplic-

ity and hand out brochures.l

 

1
Ibid., pp. 60, 62.

109
The list of U.S. suppliers who jumped on Capital's

Viscount bandwagon soon topped 100, and among'themrwere names
such as Bendix, Collins leviation'radiO'equipment), Esso (lube
ricating oils), Simmonds (fuel gauges), andThermix (airliner
seats). Leaving no stone unturned, Capital even asked fashion
people to take advaniage of “The New Concept,“ with the result
that Viscount brand luggage, cosmetics, and cigarettes were

being considered for manufacture.1

The Stage Was Set
Capital had apparently done all in its power to smooth
the way for Viscount, gambling everything on a "New Concept“
theme that stressed the smooth, silent comfort of the Vis- '
count and its Rolls-Royce engines. And in Capital's scheme
of things, the engines were an important selling point, as
noted by Lawrence Hughes in Sales Management in 1954:
Boeing's jet transport, the 707, still is in testing
stage . . . . Passengers‘get moral support from the pres-
ence of propellors, Jin.Austin shows, and.Capital will
emphasize that the Viscount is not a jet . . . . The name
Rolls-Royce on the inward side of each engine nacelle
should help, too.2
Had Capital Airlines unwittingly disavowed itself
of the title “America's First and Only Jet—Powerethirline"--
and of all the prestige and, possibly, all the customers that

would have gone with it? The imminent arrival of the jet age

would soon provide an answer.

 

1
Ibid. , p. 60.

2Hughes, Sales Management, November 1, 1954, p. 58.

CHAPTER VII
THE YEAR OF THE VISCOUNT: 1955

Capital Airlines had geared its entire Viscount came
paign to hit full throttle by Introduction Day-quril l,
1955. But something happened, and for reasons not to be un-

earthed anywhere, Viscount service did not begin until'July.l

Marking Time

Rather than standing around looking embarrassed at its
Viscount-less fleet, Capital kept in the news by making state-
ments. In one of them, the airline announced that it had de-
cided to exercise its option for twenty additional Viscounts,
bringing the grand total purchased to sixty, and all without
ever knowing whether the airplane would be a hit in the united
States.2 Four years later, Business week would declare the
decision a "big miscalculation in the face of fast-approaching
competition from other jets."3 It seemed like a good idea at
the time, however, and Capital was obviously unconcerned about

having its bill from Vickers raised to a staggering $70.2 mil-

 

1"Viscount Traffic Gains,“ Axiation Week, AHQUSt 3:
1955, p. 102.

2Staver, Aviation week, July 18, 1955, p. 111.

3"Airline Catching Up with Itself,“ Business Week,
Octdber 17, 1959, p. 115. .

110

111
lion, all of it to be paid back in the original five year
period--something unheard of in airline circles.l

Slim Carmichael was the first to admit that he was
taking a great risk in staking everything on a piece of equip-
ment unknown to the domestic air traveler, but he confidently
predicted that the future of Capital and its Viscounts was one
of unlimited horizons:

Capital is going to be the best airline in the world;
we're not worried about being the biggest. The corporate
future as well as my own rests squarely on the Viscount.
we are either awfully wrong or awfully right, and I think
we were right, in buying 60 Viscounts.

On the subject of recent changes in equipment by his
major competitors (American, Eastern, TWA, and united), Car-
michael had this to say:

Their DC-7's and Super Constellations have been hitting

us pretty hard. By throwing their best at us it is fair-
ly indicative that they recognize Capital's competition
which we take as a compliment. we can and will cut sched-
ules to flying times unsurpassed by any other equipment
presently in commercial use. Passenger comfort features
of the Viscount will make the final difference.

Carmichael might not have realized it at the time, but

his reference to "other equipment presently in commercial use,

would come back to haunt him.

Introduction Day,At Last
.After what must have seemed an interminable wait, Vis-
count service finally arrived. A Capital Airlines press re-

lease recalled the historic day in graphic, if not wholly

 

lIbid.
2Staver, Aviation Week, July 18, 1955, p. 111. 3Ibid.

 

 

112

modest, terms:
One of the most significant and far reaching devel-
opments in commercial aviation history in this country,

since the days of the wright brothers, was touched off
by Capital on July 26, 1955.

American air travelers entered the Jet Age of com-
mercial flight for the first time on that date, on the
wings of Capital's first scheduled jet-prop Viscounts
between washington and Chicago.

It wasn't too long after Slim Carmichael cut the rib-
bon signaling the first Viscount to roll down the runway at
Washington National Airport, that Capital dubbed the plan
“an overnight success."2 This was true enough during the
first ten days of operation, when load factors averaged 82%.
compared with the Constellation figure of 60%.3 It also
prompted Carmichael to say this:

The ship exceeds anything we had hoped for. The pas-
sengers come up after a flight and begin to sell gs on
the Viscount all over again. we're just tickled.

But there was one question still to be answered: ‘Was
the Viscount's immediate popularity attributable to what
Carmichael called.“a new, exciting airplane that has lots of
sex;appeal“--or was it merely a novelty that would.dimini3h

‘with.time and competitive equipment?5

The answer would not come in 1955, for Capital was to

 

1

1p. 5.

21bid.

Capital Airlines press release, “Biography . . ,"

3Aviation week, August 8, 1955, p. 102.

4"The First Viscount," Time, August 8, 1955, po 76.
5

Staver, Aviation Week, July 18, 1955, p. 111.

113
have only eight Viscounts in service bythe end of the year
instead of theanticipated twenty, and they would account for

only 3% of total mileage flown by the carrier.1

Aircoach Downgraded.

Perhaps spurred on by its new competitive weapon,
Capital Airlines in 1955 “turned against aircoach service
in seeking new revenues, although the carrier was a pioneer
operator of coach services."2 Carmichael was bitter over
the evolution of aircoach service into nothing more than re-
duced-fare transportation that diverted standard-fare passen-
gers, and.hinted that his airline would do nothing to further
the expansion of this service. He said, in fact, that the
ultimate solution to the drain on first class travel volume

would'have to be a reduction in first class fares.3

Charters Not Forgotten

If Capital was out of the aircoach derby, it was run-
ning stronger than ever in the apcciaILevents race. The
newest wrinkle was a “Show Plane“ trip to New Ybrk, offered
to the people of Pittsburgh in October.4 For $89.13, a
theater-goer was entitled to three days in the big city,

1with all expenses paid except meals: orchestra seats to four

 

1Capital Airlines, Annual Re ort: 1955, pp. 1, 9.
2Staver, Aviation week, July 18, 1955, p. 111.
ibis.

g“Capital Promotes Theatre Charters," Aviation week,
November 21, 1955, p. 111.

114

Broadway shows, selected by the drama critic of the Pittsburgh
'gggtjgggette; a get~acquainted“cocktai1 party for passengers
and some of the stars of the shows they would see: and a room
at the Statler Hotel.

Capital arranged everything--transportation, hotel,
and the program of events-~but between these events, the
group was on its own. The airline also gave passengers the
option of remaining in New Ybrk on their own, beyond the three-
day package trip, and one-third of them todk advantage of the
offer. In fact, reaction of the 180 adventurers who
were lucky enough to get on board the first three DC-3 tours
*was so good, that Capital began laying plans for a year-round

program in additional markets.1

Route System Improvements

Capital's long-standing route handicaps were relieved
somewhat in 1955 by CAB rulings. The request for an equip-
ment interchange with Continental Airlines was given initial
approval, thus opening the door to Denver and the southwest--
but, cautioned 1mm§_magazine, "Capital is still too small and
too busy battling for its share of eastern air travel markets
to make much headway in the transcontinental business for
some years."2

Other victories gave Capital new routes, and relaxed

restrictions on existing routes. For example, the carrier

 

1Ibid.

 

2Time, August 8, 1955, p. 76.

 

115
-was now permitted to fly nonstop'on its NeW'YOrk-Chicago and
New Yorkunetroit'routes, it wasMgiven unrestricted turn—around
privilegesrbetween‘New*York'and Pittsburgh, and.Atlanta was
added to the NewY’ork-Pittsburgh-NewOrleansrun.l
NeW’routes were approved from Detroit to New York (via
Buffalo and Rochester), New Yerk to New Orleans, and New York

2 CAB had two reasons for awarding these routes

to Memphis.
to Capital, the first of which was a belief that Capital's
regional nature would allow it to provide better service than
transcontinental carriers. The second reason, one easily open
to conjecture, was a belief that Capital's primary interest
lay in the short-haul markets.§'
Slim Carmichael, who had called the route system.“the
last prdblem facing Capital,“ had finally made some headway
in doing something about his company's “acute need to strengthen
our present marginal short-haul operations“ by the acquisition
of new routes, and in achieving “competitive equality" by
'having restrictions lifted and extensions granted on existing
routes.4
Capital was still far from satisfied, however, and con-

tinued to press for exteflsi as to Houston, Dallas, and Fort

Worth, and access to the rich Florida market.5 On the latter

 

lCapital Airlines, Annual Report: 1255, p. 14. Ibid.
3Craig Lewis, "Capital Wins East4West Nonstop Routes,"
Aviation Week, September 12, 1955, p. 139.

4Staver, Aviation week, July 18, 1955, p. 111. 5Ibid.

 

116.

case, Capital had thiS‘tO say:

The company has an historic participation-in the genera-

tion of*this Florida traffic as a result ofitS'interTj

changeoperation with National and'because' of the large

volume of interline business Capital had developed over

the years between Capital's cities and Florida points.

. . . In addition to meeting . . . public need, the cer-

tification of Capital into Florida would provide Capital

with winter traffic to offset seasonal declines and would

materially strengthen the company with long-haul markets.1

The Financial Strain of Viscount
Shortly after negotiating the deal with Vickers in 1954,
Slim Carmichael said: "The Viscount will be the most profitable
plane we ever operated."2 His confidence was not reflected
in the company's financial ledger for 1955, however, partly
because of the small amount of total passenger miles the eight
Viscounts were able to fly from July through December. Another
factor was the astronomical costs incurred in absorbing the
Viscount-into the Capital fleet. The airline insisted that
the actual introduction presented fewer problems than normal,
but did not attempt to minimize the expense involved in train-
ing flight crews and ground and.maintenance personnel, and in
retooling and providing special facilities.
Capital offset part of the cost by selling seven DC-3's

to Uhited States Steel and then contracting to service them.4

 

t

Capital Airlines, Annual Repomt: 1955, p. 15.

Time, June 14, 1954, p. 102.

“NH

Capital Airlines, Annual Report: 1955, p. 12.

.h

Hughes, Sales Management, November 1, 1954, p. 60.

117

The carrier also netted nearly $4 million by engineering a
swap of Constellations with British Overseas Airways. Capital
owned five Model 049's and seven Model 749's, which were iden-
tical in size and speed in the medium ranges, but which had
differing power plants. The resulting duplication in gents,
engines, and equipment was remedied wish Capital swapped its
seven 749's for seven BOAC 049's, thus satisfying the latter's
need for the longer—range capabilities the 749's power plant
offered.1 The first exchange took place in 1954, and the rem
maining six in 1955.2

A third equipment rransaction, made possible by steady
delivery of Viscounts from England, involved the sale of

eleven DC-4’s.3

An Elusive Advertising Schedule

A dearth of information about Capital's advertising ac~
tivities after the introduction of Viscount precludes any
discussion of the 1955 campaign, but the four~color advertise”
ments appearing in Plates XII and XIII are probably typical
of the year—end campaign.

In any event, it had.been a busy year indeed for Capital,
what with selling, swapping, and servicing its old planeemmahd
introducing a brand new one. But it was tine to lack toward

l956~~the first full year of operation fer Capital's Viscount.

mr —— ‘. onnnn-h n..‘-‘-..l-~L’.-IL‘Al—".QI cc; “'7“. v-

 

1 I O 0 '. ‘
Capital Airlines, Annual Report:_i95e, p. 9.

2 o I - e _ . ‘_ '_ ~- . ‘ .- ('si“" , ,.
Capital Airlines, gmmmglyRegggtz.gg.m, p. 9.

,u -C. .1

3 .
Ibld.’ p. 5.

118

PLATE XII

 

THERE'S A NEW SOUND IN THE SKY. . .

It's the distinctive sound of the \’lS(I()l'NT— u-nrld's first turba-pmp airliner!

Powered b) {our Rolls-Ru} cc engines and prosed by m er a billion passenger miles. .
this quieter. smoother airliner marks the advent of a new age in flight. a If:

Nuu' in” “I” nun) l/v- mu i’NlIc/U In Him"! l’t/MI",
C/vhl‘cn. I’ll/Junta". ll .ln’uuglwu. \U'IHH- . . [\[hIm/u/ '1"’/tf mutt.’ A’R"~"

119

PLATE XIII

 

 

    

l\

    

Capital ?Irl:nes

TO THE MAN WHO'S NEVER FLOWN . . .

Let the \"lSLUlTNT be your introduction to air travel . . . for here is the ultimate
in swift. smooth. quiet flight. You'll be flying the world's most modern airliner.

powered by four Rolls-Royce Inrbo-pmp' engines and proved by more than .
a billion passenger miles. The quiet elegance of the VISCOUNT is preferred a If,
by experienced traxclcrs acrywhcre. ”WP"

AIRLIN"

H) I/n' (.qum/ l'mnnu/ [rum——
(./Ut.l""'l, IMMH. (.)'.tu".IuJ, Pimburgb, Nor/all, “(lib/ugh”, Stu Yuri.

CHAPTER VIII
THE IMPACT TEE-331‘ NEWER CAME: 1956

Viscountlngarly Surge

The Viscount was an instantaneous success when it went
into service in July, 1955, and for a time it threatened to
knock everything Else out of the skies in 1956. Capital re»
ported, for example, that business on its busy Chicago-
Washington route tripled When the turboprop replaced the Conm
stellations, and traffic was up from 74% to 124% on three
other important routes.1 '

.All costs included, the Viscount had a ;reak~even load
factor of 56.8%” almost ten percentage points lower than for
the Constellation, but six points higher than had been prem
dicted.2 '

By March, Capital had taken delivery on fifteen View
counts,3 and had placed ten into service.4 There would have
been eleven but for the fact that in February, the landing
gear on one of them collapsed as the plane toudhed down. No

one was injured, but it was feared that the l,500~foot skid

.— .4...-_m ”:‘MJ'T

 

l'Capital Buys,“ Time, July 23, 1956, p. 71. 2;§;§y
3Capital Airlines, Annual Report: l955, p. 12.
4“Capital Checks Gear Switches on Viscounts,“ ~2ig¢ig§_

flees, March 5, 1956, p. 79.

120

121
down the runway had damaged the plane beyond repair. Among
other things, the accident left Capital without a spare View
count to use in emergencies.1 But more than that, the ac—

cident seemed to be an omen of Capital's own skid to the edge

of financial disaster.

The Competitive Squeeze Was 0n
Starting in April, Capital became involved in a series
of equipment transactions, nearhtransactions, and alleged
transactions that started the airline industry buzzing once

again.

flgre yiscognts

The first of these alleged deals was uncovered by Time,
which reported that Slim Carmichael had flown to London in
April, 1956, for the purpose of spending another $18 million
for fifteen more Viscounts.2 This would have brought Capital's
turboprop fleet to seventy-five-ewould.have, because the trans-

action was never carried out°

Angther Lock Toward England
Capital's 1956 annual report summed up the competitive
situation thuslys

The public acceptance of Capital's jetwprop Viscount inm
itiated a reappraisal of equipment programs by the entire
domestic air transport industry. Shortly after Capital's
introduction of the Viscount, orders were p1aced.by prac-
tically all competitive airlines for jetmprop or jet air-_
’craft.- Capital was no exception.

. 2 . l. ..
Ibid. Time, July 23, 1956, p0 7i

3 o o a \ -: . - ' .
Capital AJ—rl 1.1185 , fennel.i-7:§219.§¢Ji§§.. J.. :r .. p o 12 .

nu ~

.5)
O\

1
i

122

Capital had, by its own admission, been caught in its
own trap-~one in which the Viscount turned out to be both a
blessing and the forerunner of future troubles:

This is not contradictory, because it was the popularity
of this sleek plane that spurred other airlines to pur-

chase the new jets and prop-jets which later compounded

the problems Capital had begun to experience.

Faced with future competition from Lockheed's turboprop
Electra, and pure jets like the Douglas DC-8, Boeing 707, and
Convair 880, Capital again turned to England for the answer.

The Britannia.—-Slim Carmichael apparently went shopping
for more than Viscounts on his April trip to England, for
Aviation Week reported in May that Capital was negotiating
with the Bristol Aeroplane Company for fifteen of its 100-
passenger Britannia turboprops. The airline had also looked
at the Vickers Vanguard, another long-range, large-capacity
turboprop, but chose the Britannia beCause first deliveries
could.be made within a year--thus giving Capital a good jump
on forthcoming Electra service.

In return for the $50 million Capital would pay for its
fifteen Britannias, Bristol would set up a parts depotin New
York or Washington and make available its flight and ground
crew training schools.2

The deal was so close to completion that Bristol was

already making plans to send a Britannia on a tour of the

_ — --~ .-

1
p» 6.

Capital Airlines press release, "Biography . . . ,

2William Coughlin, "Britannia Challenges U.So Jet Airm
liners," Aviation Week, May 28, 1956, p. 44.

 

123
United States during the coming summer.l Capital did some
hard thinking, however, and by July had decided it would.be
folly to invest in more turboprops when, at best, they would
be only an interim step to pure jets.2 Other reasons for
Capital's sudden aboutwface were the competition it would soon
be facing from Convair°s Golden Arrow medium jet, and the
engineering difficulties still to be ironed out of the Britan-
nia.

The Comet.-—Capital ended all Speculation in July, when
it announced the purchase of fourteen de Havilland Comet IV pure
jets for delivery in late 1958 and 1959. Slim Carmichael
pointed out that by introducing Comet service to the public
early in 1959, Capital would maintain its lead in the equip-
ment race by entering the jet age from six to twelve months
ahead of the competition.4 In his own words:

We now have the lead in the united States with Viscount.
Lockheed's Electra will offset that when it goes into op—
eration and we will need something to get that lead back.5

Actually, there seemed to be three reasons why Capital
settled on the British jet: (1) Capital had scored with its
British Viscounts, (2) no American aircraft manufacturer

could match de Havilland°s delivery dates.6 (3) the Comet would

‘- "‘ “ -—-‘ AA - wagon...” .ua‘a.‘ -._-.- a“ . . .La-~-.—u.-—a-—._-u«.-a-n~_-a ~‘um‘a-‘4

 

2 u , u t. - , u ,.‘
Craig Lewis, "Capital Orders 14 as Havxllsnd nonets,”
.Aviation Week, July 30, 1956, p. 41.

3 . . . . . .
"Cao1ta1 Negotiates for Comet, May Buy 1.5,J §y35§i93_
tl‘zeC1‘i’ Ul...i‘,’ 230 195.59 I); 381

Lewis, Aviation Week, July 30, 1955, p. 40-

5Aviation Week, July 23, 1956, p. 38. 193g.

124

be more economically sound for Capital's route structure than
any'Americanébuilt jet.1

The de Havilland people were understandably pleased to
have Capital's business, since up to that time BOAC had been
its only Comet customer, with nineteen on'order.2 Not only
would the Capital sale put de Havilland into the international
market, it would also be a vote of confidence for the plane
itself. The Comet I, which had.been in commercial operation
since the early '50's, was withdrawn from service in 1954 af-
ter a phenomenon known as “metal fatigue“ caused two of them.
to disintegrate in mid-air. Comet IV, de Havilland insisted,
was tested at standards "higher than those for other aircraft"--
which obviously*was good enough for Capital Airlines.3 In
fact, Slim Carmichael said that research and design modifica-
tions had.made Comet IV’”without question the safest plane we
could operate."4

Capital was eventually forced to cancel its order of
Comet IV jets because of mounting financial problems, but the
airline's desire to buy them raises an interesting point.
Capital had selected Comet IV over the twin-jet French
Caravelle, which was rejected on the grounds that the public

‘was sold on the idea of fourmengine planes.5 On the other

ihand, the airline's faith in Comet IV‘was expected to indicate

 

1...

Lewis, Aviation Week, July 30, 1956, p. 41.
Ibid., p. 40.
"Comets for Capital," Newsweek, August 6, 1956, p. 80.

Lewis, Aviation Week, July 30, 1956, p. 40.

01wa

Ibid., p. 41.

125
to the world that Capital had studied the effects of the two
disasters on the plane's reputation, and had rejected.them as
having little influence on passenger potential.1 As it has
turned out, however, the Caravelle has become quite popular
irt%Eis country, flying the very routes Capital served, and it
might have met with less passenger resistance than the disaster-
plagued Comet.

Unaware that it would never take delivery on its Comet
jets, Capital proceeded to make plans for absorbing them into
the fleet. The planes, which would give Capital high speed
and economical performance over short-haul routes, would cut
present flying time in half. Initial service, however, was
planned for two of the carrier's longer, more profitable
routes-4Washington-Chicago and New York-Chicago.

As with the proposed Britannia deal, de Havilland*was
prepared to give Capital something more than just planes in

2

return for the $53 million it was spending. Terms of the

contract called for pilot training at de Havilland,3 and estab-

lishment of a parts depot in New York of Washington.4

A Badfxgar Financially
While Capital's judgment in buying the British Comet IV

 

 

iAviation Week, July 23, 1956, p. 38.
2Lewis, Ayiation week, July 30, 1956, pp. 40, 41.
31bid. , p. 41.

éAviation week, July 23, 1956, p. 38.

126
may be questioned, there can be no doubt that it gave a boost
to the future of the commercial pure jet. At the same time,
however, it could be regarded as a blow to the turboprop,
"because Capital has gained position as a leader in that field
due to its success with Viscounts."l In any event, the car-
rier took the plunge into pure jet flight at just about the
time its Viscounts had.market their first anniversary of ser-
vice. Perhaps some of the statistics on Viscount performance
had triggered the sudden interest in jets.

During their first few months in the air Capital's
Viscounts had an 85% load factor, but by the end of the first
year in service, the figure had dropped to 70%.2 This was
still a good showing in comparison with the industrydwide
figure of 64%,3 but it wasn't enough to keep the carrier from
losing $1.6 million during the first six months of 1956, com-
pared*with a net profit of $3.5 million for the first half of

1955.4

Capital attributed $850,000 of the loss to “extra-
ordinary costs“ involved in integrating the Viscount into the
fleet.5

Year-end figures were even more dismal. By this time,

Capital had fifty-four Viscounts, and cheerfully reported

that the plane not only was maintaining its leadership in

 

established.markets, but was rapidly developing newones.6
l . 2 . . 3 .
Ibid. Time, July 23, 1956, p. 71. Ibid.

4“Capital Reports Loss for First Six Months,“ Aviation
Week, August 20, 1956, p. 45. .

51bid. 6Capital Airlines, Annual Report: 1956, pp. 9, 10.

127

The airline's financial ledgers did not reflect this enthusiasm,
however, as the company suffered the highest operating loss in
itS‘historyb-$2.8 million.l

Capital offered many reasons for its poor showing in
1956: (l) the cost of phasingwin Viscount, which uOW accounted
for 44% of total mileage flown for the year, (2) delays in
delivery of additional Viscounts, (3) the air traveler's be-
wilderment over rapidly changing schedules~~caused.by the influx
of new Viscounts, (4) the cost of establishing new markets
where Capital had no immediate customer recognition, (5) “un~
usually poor flyingweather.“2

Related factors were a steel strike (which hurt Capital
more than others because it served.most ofthe major steel
processing centers in the country), and the mid-air collision
over Grand Canyon on June 30. Capital was not involved in the
disaster, but claimed that its load factors were depressed for
two months afterward because other means of travel were read-

ily available over its short~haul route system.3

The Advertising Budget
Capital's advertising expenditures for 1956 were up by
$834,000 over the preceding year,4 to a total of $2.1 million.5

The carrier ranked fifth in advertising expenditures among all

 

3...

Capital Airlines, Annual Report: 1959, p. 13.

 

2Capital Airlines, Annual Report: 1956. PPo 2, 5w8.
31bid., pp. 6, 7. 41mm, p. 1.1..
5

Hughes, Sales Management, October 4, 1957, p. 73.

128

l 2

trunk lines in 1956, and seventh in total newspaper linage.
Between 1951 and 1956 Capital doubled its advertising budget,
with expenditures for promotion and other expenses growing at
a rate eight times faster than the outlays for Space costs.
It is interesting to note that during this same period, the

carrier's total operating revenues increased by only two"

thirds.4

 

llbid.

2Robert B. McIntyre (ed.), "Airlines Outdistance Rail-
Roads on Linage,” Editor and Publisher, July 27, 1957, p. 1?.

3Hughes, Sales Management, October 4, 1957, p. 73.

4See Table 1 of Appendix.

CHAPTER IX
THE VISCOUN’I‘ BUBBLE BURSTS: 1957

The Slide Continues

A chain reaction of events in 1957 left Capital Air—
lines in a state of turmoil, its future about as uncertain
as anything could be. The sharp downswing of 1956 continued
into the new year, and with losses mounting, Capital sought
to halt the skid and perhaps reverse it by petitioning CAB
for a more liberal Family Fare plan. under the existing plan,
each family member could fly for half fare when the head of
the family purchased a full price ticket for himself-—but the
bargain rates were in effect only from Monday through Thurs-
day, and Capital felt the inclusion of Saturday would help
divert some of its overflow Friday traffic. The carrier's
position was apparently deteriorating so rapidly, that al-
though its petition was opposed by the CAB examiner and com-
peting airlines, it chose to begin service March 30-dwithout
waiting for CAB's final decision.1

The slide downward continued to gather momentum, however,
and in May the company announced that heavy first quarter

losses had forced postponement of its orders for fourteen

 

1"Denial of Capital Family Fare Plan Recommended by CnD
Examiner," Aviation Week, April 22, 1957, p. 47.

 

129

130

Comets and fifteen more Viscounts-~orders that would never
be filled.1

In June, Slim Carmichael informed CAB that his company
could not expand any of its markets without more Viscounts,
but that current financial difficulties precluded additions
| to the fleet.2 Moreover, Capital's inability to find buyers
for its aging Constellations and what remained of its DC-e
fleet, cost the airline an estimated $1 million in 1956 alone.3
The irony was that had Capital been successful in disposing of

these planes, it would have been faced with a serious equip-

ment shortage.

Viscount Under Fire

The trap that Capital Airlines had fashioned with Vis-
count was now closing tightly around it. The competition had
brought in its big guns-~the super Constellation and DC-7--and
had placed them against Viscount on Capital's highest volume
routes. The immediate result was a seating disadvantage for
Viscount, which carried only 44—48 passengers, compared with
the 00—90 cupucity of the newcomers.4

Viscount was also in trouble from an engineering stand-

point. For one thing, the cabin-conditioning equipment that

 

1
"Capital Defers Comet Order," Aviation Week, May 13,
1957, p. 39.

2L. L. Doty, "Capital Sees $2.5 million Loss for '57,“
Aviation Week, June 24, 1957, p. 42.

3"Double Trouble,“ Time, December 9, 1957, p. 100.

4
Ibid.

131

came with the plane failed to provide enough cool air on the
ground in hot weather, or enough heat in cold weather. For
another, the plane experienced braking prdbleMS‘with the light
copper linings it had substituted for the original steel lin-
ings. Both problems were eventually solved,l but probably not
before untold numbers of customers had gotten off the Viscount
muttering nasty things about it.

The Viscount was also reported to have been plagued.by
landing gear malfunctions, but Carmichael denied it:

Despite the rumors, we have had no trouble with our land-
ing gear. It's not the fault of the airplang when the
pilot lands with the landing gear retracted.

It would be hoped, for Capital's sake, that this state-

ment never reached the public.

Slim.Carmichael was also visibly disturbed by alleged \

attacks on the merits of Viscount by competitors:

Since the first arrival of the Viscount in June of 1955,
its operation has been subject to the most vicious and
unethical attacks on a continuing basis concentrated on
places that the attackers thought would do the most harm.
I was thoroughly shocked and disturbed.by these attacks
when I first learned of them and still am . . . . I want
to say here and now that neither Capital nor I as presi-
dent, will ever lend ourselves to this type of program
used against us. we will never employ such unethical

tactics.3
Carmichael claimed that at least one competing carrier,
which he declined to identify, went so far as to use an air—
lLbner"s public address system to disparage Capital's Viscount.

He quoted one pilot as telling this to his passengers:

y

1James Dailey, "Capital President Says Viscount Slandered
by Competing Airlines," Aviation Week, April 15, 1957, p. 43.

zlgid. 3Ibid.

132
“Leek sharply now and you'll see us fly past the Viscounts.
If you'want dependable service, steer clear of Viscounts."l

‘In the face of mounting criticism, Carmichael also felt
dbliged to defend his original decision to buy Viscounts. He
said the plane was the best possible one for the carrier, and
though it could not match the Speed of the DC—7 at ideal
altitudes, ”gate to gate we're better because we're easier
to operate and more maneuverable."2

On the subject of operating costs, Carmichael had this
to say:

The Viscount is a good airplane and we're not going to go
brdke operating it. We fly DC—3's, DC-4's and Constella-
tions and we didn't make a profit on any airplane but the
Viscount.

The operating range of the plane, highly publicized as
1,500 miles when Capital bought it, also came under fire.
Suddenly, Carmichael was saying the ideal operating range of
Viscount was 600 miles, and that it could do 750 miles without
difficulty. Capital's longest route was 1,000 miles, but
this didn't seem to bother Carmichael:

we didn't buy them to operate any longer that [700 miles] .
we'd just as soon land at Pittsburg and refuel than wait
for hours in a stack over New York.

'The preceding statement was made in April. Two months
later, Carmichael appeared to have changed his mird about the
desirability of stops such as Pittsburgh:

The short-haul is the curse of Capital. I think we have

reached the end gf our rope without some change in our
route structure.

1. 2. 3. .
Ibid. Ibid. Ibid. Ibid.

 

5Doty,.Aviation Week, June 24, 1957, p. 42.

133
The Management Muddlg

As it turned out, Capital hadn't quite reached the end
of its rope-ebut Slim Carmichael had. In July, 1957, Capital
board chairman George R. Hann brought in retiring Air Force
Major General David H. Baker to succeed James H. Carmichael
as president and chief executive officer of the airline.
Hann then vacated his chairmanship to Carmichael, and was
elected chairman of the executive committee, replacing board
member Charles Murchison. Board Chairman Carmichael was to
continue the functions he had as president--that is, directing
head of the airline, in charge of all policy matters. Baker,
meanwhile, would.be responsible for all operations activities.
Capital said the move was made to strengthen management and
expand the organizational structure to meet the challenge of
the jet age-ebut for Slim Carmichael, it was the beginning of
the end.1 .

General Baker, a graduate of west Point and Harvard
School of Business,2 had no previous experience as an airline
executive. But he had served since 1953 as director of
procurement and production for the Air Materiel Command, where
he gained prestige as a financial man, according to Forbes
magazine.3

Baker's appointment to the Capital post came only after

an internal power struggle that saw Hann and Murchison throw

 

1L. L. Doty, ”Gen. Baker Assumes Capital Presidency,“
Aviation Week, July 29, 1957, p. 39. .

2Ibid., p. 40.

3
P. 33.

”washington Merry-Go-Round," Forbes, August 15, 1958,

134
their.support to Baker.l Murchison, who continued as a board
member and legal counsel to the airline after Hann succeeded
him.as chairman of the executive committee,2 was to figure in

another power struggle before long.

NeW'Management-~NeW'Aqency

The shift in management signaled the end of Capital's
twelve-year relationship with its advertising agency, Lewis
Edwin Ryan, with the account going to Kenyon & Eckhardt in
October, 1957. Two immediate advertising objectives were
then outlined for the agency.

The first objective was to get away from the sameness
in airline advertising, with its supermarket type of capy ap-
proach, and to get the greatest possible selling power from
small-space ads.

The second Objective was to find a fast means of telling
the public about the rapidly growing number of flights, and
the speed of flights, in Capital's eastern markets.

During the next few months, Kenyon & Eckhardt was to be
occupied studying competitive airline advertising in prepara-
tion for its first big campaign for Capital. At the same time,
it was busy setting up shop in Washington to service the ac-

count.

 

2
1Ibid. Doty, Aviation Week, July 29, 1957, p. 39.

3"1\IeW’s Readers Given Ad-Games to Play," Editor and
Publisher, July 19, 1958, p. 30.

135
A Salgsman Departs
Capital had hardiy begun making plans with its new
agency when James Austin announced his resignation, effective

at the end of the'year.l

As Capital's vice-president for
traffic and sales, Austin had played an instrumental role in
the carrier's climb back from the brink of disaster in 1947. He
headed the introduction of Aircoach, directed the advertising
and sales programs for the introduction of Viscount service,
and was actively involved in Capital's acquisition of its
turboprop fleet.2

L. L. Doty, writing in Aviation week, viewed Austin's
departure as having a significant effect-on Capital's.sales
effort, since he “virtually dictated sales policy."3 His role
as a ”powerful force" in Capital's growth pattern during the
decade from 1948 to 1957 was substantially reduced toward the
end, due to a shift from emphasis on sales to emphasis on
economy and efficiency, in the face of mounting financial
losses.4

.As an example of the tight budgets Austin had to work
with--in the first half of 1957 Capital spent 65¢ per pas-
senger for advertising and publicity, compared with American

Airlines' figure of $1.02 per passenger, which led Doty to

comment:

 

1Eorbes, August 15, 1958, p. 33.

2L. L. Doty, "Executive Losses Pose Threat to Capital,"
Aviation Week, December 23, 1957, p. 28.

3mg. 41bid.

136
The wide spread in expenditures held.Austin to less desir-
able outlets than those used by American but he, neverthe-
less, was able to sustain a continuous impact in his pro-
motional campaigns.
Awaiting James Austin, whose resignation was seen as
a permanent de-emphasis of sales department influence on Cap-
ital's operations, was the job of president of Northeast Air-
lines. He was joined twenty-four hours later by Nelson Fry,
Capital's assistant vice-president for traffic, who would
become vice-president of traffic and sales for Northeast.2
Austin denied the existence of internal management
prdblems at Capital till the very end, but L. L. Doty had his
doubts:
The threatened departure of [other] sales staff members
is symptomatic of a morale problem that began when it be-

came evident the Viscount was not the panacea it was ex—
pected to be.3

The Statistics Were Still Deceptive

The Viscount had turned out to be anything but a cure-all,
but in the words of Capital's treasurer: "It's prObable that,
without the Viscounts, Capital would have died on the vine.”4
0n the surface, this staizeu‘xent seemed accurate. It was true
that Viscounts now accounted ior 746 of Capital's scheduled
miles and 76% of its total revenues, that the average pas-
senger journey was up from 342 miles to 383 miles (but still

far below the industry average of 639 miles), and that the

carrier's average ticket in 1957 was $22.44, compared with

 

2 3
lIbid., p. 29. Ibid., p. 28. Ibid.

4
Business Week, October 17, 1959, p. 116.

137
the trunk line figure of $33.17.1 It was also true, however,
that while total operating revenues were up $30.4 million
over 1956, increased expenses all but wiped out the gains,

and left an operating profit of only $40,000.2

gpppe Applications Rejected
Capital suffered two major setbacks in 1957 in its at-
tempts to strengthen its route system. The long-standing ap-
plication for a Great Lakes-Florida route appeared to have
been all but won when approval was recommended by the CAB ex-

3

aminer in the summer of 1957, but the award.had.been contin-

gent upon the availability of new equipment to service the
route, and Capital was hardly in a position to acquire such
equipment. As a result, the examiner withdrew his recommenda-
tion in November,4 but suggested he would reinstate his orig-
inal recommendation if Capital could come up with the necess-

5

ary aircraft. Capital's dilemma was summed up by Time:

Without the planes Capital may not get the route, but
without the route it cannot earn the money to buy the
planes.

Capital's second major setback came when CAB rejected

its bid for a route extension to Puerto Rico.7

 

1Capital Airlines, Annual Repppt: 1957, p. 5.

2Capital Airlines, Annual Repprt: 1259, p. 13.

3Glenn Garrison, "Capital Puts 880 Near Breakeven Point,"
Aviation week, February 3, 1958, p. 40. .

41ime, December 9, 1957, p. 98.

5Garrison, Aviation Week, February 3, 1958, p. 40.
GIimp, December 9, 1957, p. 98. -

7Capita1 Airlines. W p- 14-

CHAPTER X
NEW ADVERTISING AND OLD PROBLEMS: 1958

It is doubtful that David H. Baker was envied by his
contemporaries within the commercial airline industry, for
he had just become head of a corporation that‘didn‘t'know at
the end of one day whether it would still be in business the
next. Capital Airlines encountered more turbulence on the
ground than its planes did in the air. Management was quar-
reling, dividing line were drawn between major departments,
the fleet was falling apart at the seams, the route system
was a hopeless tangle of marginal-revenue operations, and

the financial situation was growing more serious daily.

Convairs for Capipal

General Baker had his work cut out for him as he began

 

his first full year with Capital, and he wasted no time in
taking corrective measures. On January 28, for example,

’the iarline announced an agreement to purchase fifteen Convair
880 jets.l General Dynamics Corporation, whose Convair Divi-
sirna‘builds the 880, agreed to help Capital find money not only
for the new planes, but for refinancing the $48.5 million

still owed on the Viscounts. General Dynamics was also ar-

 

1
Ibid., p. 130

138

139

ranging the leasing of piston aircraft to help tide Capital
over until delivery of the first 880's could be made in Sep-
tember, 1960. The aircraft manufacturer had gone out of its
‘way to help Capital partly for selfish reasons, for the order
for fifteen 880's would put Convair near the break-even point
for the plane, but both parties also agreed that the sleek,
94-seat jet would give Capital the modern equipment*it so
desperately needed on all major routes.' In addition, once the
880's were in service, the carrier's fleet of fifty-nine
Viscounts would be freed for more efficient use on routes then
being serviced by DC-3's, DC—4's, and Constellations.1

unfortunately, the entire Convair deal hinged on re-
financing the Viscounts, and was canceled.when General Dynamr

ics failed to come up with a satisfactory plan.2

Mgpe Management Shifts
July, 1858, marked the end of an era for Capital Airlines.

After twenty-two years with the airline, going all the way back
to the days when it was known as Pennsylvania-Central, Slim
Carmichael finally called it quits. Apparently, he could not
take any more of David Baker's decisions.

The board chairmanship that Carmichael vacated was to

remain unoccupied for the remainder of 1958,4 but a new

 

Garrison, Aviation Week, February 3, 1958, pp. 40, 41.

a: ha

Business Week, October 17, 1959, p. 117.

to

Forbes, August 15, 1958, p. 33.

.5

Capital Airlines, Annupl Re ort: 1958, p. 2.

140

power struggle was in the making. George Harm, former board
chairman and current“ executive committee chairman,- was also
the airline's largest shareholder. In thesummer of 1958,
however, he started decreasing his holdings, while former
executive committee chairman Charles Murchison was increasing
his. By July, Murchison owned 64,000 shares of Capital stock
and replaced Hann as the largest stockholder.1 Themaneuver
was significant enough for Forbes to conclude that Murchison
had just become the new strong man behind the Capital scene,
despite the fact that Baker was doing most of the talking:

Thus, whatever course Capital Airlines' fortunes take in

the future may wel% depend on fast—rising, little-known

Charlie Murchison.

Still other realignments were taking place in Capital's
executive ranks. Carmichael's departure was preceded by the
resignation of three directors of the finance committee.3
One of them, Thomas Neelands, Jr., would be heard from again.
A new face at Capital was Walter H. Johnson, Jr., who joined
the airline after nineteen years with American and was named
senior vice—president for marketing, a new position that ap-
parently absorbed much of James Austin's former responsibil-
ities.4 Other executives brought in by Baker included Marvin

Whitlock, who also came from American Airlines and was named

 

1
Forbes, August 15, 1958, p. 34. 2Ibid.

3
Ibid.. P. 33.

4Philip N. Schuyler, "Selling Air Travel to 91% Non-
Fliers," Editor and Publisher, August 15, 1959, p. 17.

141
senior vice-president for engineering and maintenance, and
.M. J. van der Ploeg, a costdcontrol consultant from KLM Royal
Dutch Airlines.1 Meanwhile, James Austin's former assistant
in traffic and sales, Read Chalfant, was named sales manager

of the airline.2

Management Objectives
The newly-created.marketing department that'Walter

Johnson headed was but one of many organizational changes
David Baker made to accomplish his objectives. Departments
were set up to coordinate route matters, handle corporate af-
fairs, and formulate plans: a management council was formed
to consider policies and decisions; and a budget committee
and.management analysis unit were established.

In addition to the primary objectives of achieving
financial stability and competitive equality, there was great
concern for broadening the base of new'business to match the
increased seating capacity Viscounts had created. This was
to be accomplished partly through development of personal and
vacation travel.4 Capital also recognized that continued
strengthening of its customer service was a necessity in the

face of competitive pressures:

 

lBusinegg Week, October 17, 1959, pp. 115, 116.

2Capital Airlines, Appual Repprt: 1958, p. 2.

3
_ L. L. Doty, "Baker Traces History of Capital Troubles,"
AViation Week and Space Technology, October 31, 1960, p. 38..

4Capital Airlines, Appgal Reporpz 1258, p. 16.

 

142
The quality of service to the customer . . . has become

an increasingly important factor in achieving satisfac-
tory traffic loads and retaining customer satisfaction.

1
It seems odd that with the emphasis Capital chose to
place on "quality service," Baker decided to slash personnel
by 13% in July, 1958.2
The Route Picture Brightens
Capital Airlines won a major victory when CAB reversed
its earlier position and awarded the airline a Great Lakeses
Florida route., In reporting the news to stockholders, the
airline said:
With the PittsburghsMiami flight of 1016 miles and the
ClevelandeMiami trip of 1084 miles, your Company joined
several major airlines flying the Viscount non-stop for
distances greater than 1000 miles thus utilizing the
longer range characteristics of the aircraft.3
This was a curious statement, considering that Slim
Carmichael's defense of the Viscount had.been based on its
efficency under ranges of 750 miles. Even David Baker, who
had no complaints'with the Viscount p§p_§g, said in retro-
spect that it lacked the necessary range capability to be

truly competitive.4

A Compromise op Fares
In 1957, Capital had petitioned CAB for a $21.4 million

subsidy for the 1957-1958 period, marking the first time the

 

1Ibid.

2Doty, Aviation week and Space Technology, October 31,

1960, p. 38.
3Capital Airlines, Annual Repopt:‘1958. p. 11.

4Doty, Aviation Week and Space Technology, October 31,
1960, p. 37.

143
carrier had to resort to subsidy since 1951.1 At the same
fime, CAB was considering a request from Capital and six
other airlines for a 6% fare hike to offset rising costs, with
Capital and one other carrier asking for a $1 charge per one—
way ticket in addition to the fare increase. CAB turned down
both fare request in 1957,2 then reconsidered and granted a
4% interim.increase, plus $1 per ticket, effective February 10,
1958.3 Capital withdrew its subsidy request as a result of
the fare increase, even though it felt the latter was too
little and.had come only after rising costs had adversely af-
fected earnings.4 Capital's contention was borne out late in
1953, when most carriers dropped the long-standing round trip
disoounts and reduced the Family Fare plan savings from.50%
to 33.3%, though neither move proved very effective in boost-

ing revenue.5

A Fresh Approach to Advertipinq
One-of the first objectives undertaken by Kenyon &
Eckhardt after being awarded the Capital account in 1957
was a study of all competitive airline advertising. The
carrier was determined to break away from What its new ad—

vertising director, Robert west, called "the normal airline

 

p..-

Tipp, December 9, 1957, p. 98.

Capital Airlines, Annual Report: 1959, p. 7.
Capital Airlines, Annual Repopp; 1951, p. 7.
Lb_i_d., pp. 9, 10.

Capital Airlines, Annual Report: 1959, p. 7.

45w»

0'!

144

approach."1 He said:

Most airline advertising-—particularly in newspapers--
tends toward a sterile sameness in copy and the use of
airplane interior or exterior illustrations. To avoid
this standardization requires more fundamental differ—
ences than merely a new airplane view or a different type
face. Our goal has been to sell igggp about Capital air
travel. This does not mean ”offbeat“ advertising that is
unsound, but rather advertisements that are interesting,
infonmative and individually distinctive.2

‘West pointed out that Capital Airlines had vaulted into
its position as the world's sixth largest airline in the mid-
fifties literally on the wings of Viscount, but that this
rapid growth was not accompanied.by public recognition of the
size and scope of'qapital's operation.3 He attributed the
delay in public awareness to the problems created by Capital's
sudden emergence as a major carrier:

Most airport facilities and downtown offices remained those
of a small regional airline. Various customer services
lagged behind those offered by Capital's competitors. The
airline was big, but "looked“ small, and the image of Cap-
ital ran far behind the image of the Viscount. Further-
more, Capital serves 11 of the top 15 metropolitan markets
with a promotional budget that has ragged from 30 to 300%
less than that of competing airlines.

By mid-1958, Capital and its advertising agency were
able to set forth some general objectives based on the car—
rier's competitive situation: (1) to create interest in Capi—
tal as a large, exciting, customer-minded, experienced jet~
powered airline, (2) to improve the general reputation and

image of Capital through creative and distinctive advertising

in selected media, including national magazines, (3) to keep

_.__

1 ‘ . .
Capital Airlines, "Campaign Book,“ Commentary by Robert
In West, Director of Advertising, January 20, 1961.

21bid. 31pm. 41pm.

145
the regular business traveler continually informed of speci—
fic services of Capital Airlines.l
The objectives were translated into a new advertising
approach that broke away from Capital's traditional reliance
on high visibility, high frequency, small-space-newspaper ads.
Commenting on the need for this new approach, west said:
In our judgment, small space is generally reminder ad—
vertising and could not provide the proper framework for
a creative approach in presenting new ideas and influenc-
ing customers' attitudes toward Capital.2
Hourly Schedule Campaign.——The first campaign by KsE
ran from April through June to announce the scheduling of
hourly flights on three Capital routes. A “watch face" theme
was incorporated into most of the ads as a means of conveying
the message that Capital now had a lot more flights to offer
on certain routes. fiditg£:and Publisher said this about the
campaign:
The Capital series in newspapers invites readers to cut.
in, as in a card game, and play copywriters to the ulti-
mate end of knowing Capital and making reservations on
its growing number of flights.3
This point is well~illustrated in Plate XIV. .As with
almost every other ad in the series, the number of watches
shown corresponds with the number of flights offered.
Kenyon & Eckhardt reported that passengers were comment~

ing favorably on the campaign,4 and Capital reported rising

. 5 . .
load factors on the routes involved. The carrier was deiously

 

2
11bid. Ibid..
3Editor angrl’ublisher, July 19, 1958, p. 30. 41bid.

 

5Capital Airlines, “Campaign Book," January 20, 1961.

146

WITH “Will's NEW, EXPANDED SERVICE. . . = - — -.
Count how many

more Viscounts go

1030AM. ”30A”. 1210'“

noon-stp to

IJOPl. 230?“ JJOPM

New York on the

‘30P“. SJOPM

half hour. Choose

6309M 730PM. 830PM.

llSAM.

ll 30 Pl.

your flight now.

Mr: 15 non-stops at half past every hour all day
long. Most frequent non-stop service of any airline. 0

Every flight a smooth, swift jet-prop Viscount, flown a ['3]
by the world’s No. 1 jet-prop airline. Relax on Viscount. AIRL INEJ'
Call your travel agent or WOodward 3-8900.

mm: Ion-5m mmm - mam - litmus - comm M ”It/#99! W
mus/st. nu . come . umu - mm to Arum . locusts

 

147
unhappy with the sl w but steady rate of improvement, however,
and when Soheduling and turn-around difficulties complicated
the situation, the hourly service pattern was dropped in July,
leading Bob west to remark somewhat bitterly: "We therefore
cancelled a good campaign that had barely begun to reach its
effectiveness."1

Broadway Show Campaign.--Capital revived one of its old
standbys in June--the packaged tour. The 1958 version re-
sembled the “Show Plane" experiments of 1955, only now it was
called “Hit Show Holiday.” For $26.25 plus air fare, the
passenger was entitled to three days in New Ybrk via Viscount,
hotel, choice of Broadway shows, and the option of paying for
the whole trip on the installment plan. Plate XV illustrates
the type of coupon ad that accounted for nearly one-third of
all package tours sold.by the airline between April and De-
cember in the six cities where they were offered.

V,I,P. Campaign.——Capital Airlines struck out in a com-
pletely new direction in the fall of l958--the "luxury flight"
market. A conclusion had.been reached several months earlier
that this type of service had become a permanent fixture, and
that something had to be done to counter such offerings as
American's “Captain's Flagship," Eastern's "Golden Falcon,"
and United's “Executive” and "Red Carpet" flights. Ironically,
Capital the Innovator was about to become one of the last of
the major airlines to offer the type of de luxe service that

was luring away business on major routes.2

 

llbid. 2Ibid.

 

 

 

 

 

 

 

 

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pogoICLTC

 

3 days in New York-326.25 plus Capital air fare

“Nummbom).hohodmm

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Yuk’omm.Yud-uvommw-oo PA:1¥yoth¢CWlh-Voaflumtoth~
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149

A.newrluxury service posed some merchandising prdbleme,
however, and Capital was the first to admit it. For one thing,
the competition had a good head start. For another, the basis
of de luxe service was virtually identical among the other air-
lines, with steak, champagne, and free cocktails being of-
fered on board. Capital kept these things in mind When it
drew up its objectives for a luxury service: (1) a uniquely
named service, (2) a new method of "packagingi;or “merchan-
dising" the de luxe features, (3) a program.that would help
§;;,Capital flights, rather than just divert traffic from them.

The end product was called Capital 'V.I.P. (for very
Important Passenger) Flights,“ and featured in addition to
the usual steak and champagne, free flowers for the ladies,
Dictaphones for use by businessmen on the go, and quick lug-
gage service. By supporting the new service with advertise-
ments like the one shown in Plate XVI, and other promotional
material, Capital hoped not only to win back some passengers
lost to rival luxury services, but to upgrade the airline's
image as well. On the basis of three months operation, it
appeared that Capital was well on its way toward reaching the
first goal, at least, with the average load factor jumping

from 60.7% in July to 84.5% in October.1

Elorida Market Campaigp.--Capital service between the
Great Lakes and Florida did not begin until December, 1958,

hunt the advertising machinery was set in motion long before

that. Four northern terminals were involved in the new,..ser-

 

1 .
Ibid.

 

 

 

 
 

- ’
.‘ ...

 

\—

.. ’
I.
. I00...
I
1 \

  

. I“
4"

:&.mw' -

Old-fashioned service on America’s most modern airline!

\
-- -bq,~

CAPITAL’S NEW V. I. P. FLIGHTS

No, no . . . don't reach for your wallet! We couldn't accept a penny more than the
regular fare. 'l‘o Capital. you're a Very Important l’amnger . . . a man entitled
to champagne. tilet mignon. even flowers for your lady. At your command is
America's quietest plane the Jet-imwered Viscount. Want t9 work'.’ Merely ask the
hmtena for a “Hit-let" tape recorder. When you arrive. refreshed and contented.
there's no wait for luggage. Next time you fly. we'd consider it a pleasure to serve

a V.l.l’. like you. (‘all your traVel agent or ('apital Airlines at S'l‘erling 13000.
Semng Chicago - Detroit

Milwaukee - Atlanta fifl’fa/

Minneapolis/St. Paul - New Orleans A,“ m5;

 

SERVING CITIES “SI 0' III! MISSISSIPPI IIIII III! URGES? III-MEI“ am II II! mm

lSl
vice--Rochester, Buffalo, Pittsburgh, and Clevelandhebut Cap-
ital decided to concentrate its efforts in the latter two,
where Eastern Airlines had operated with a monopoly for twelve
years.

The strategy was to build distinction and awareness
for the carrier while taking advantage of Eastern's poor rep-
utation for customer relations and in-flight service, and.this
was accomplished by adopting "Fun Flight“ and "Funcoach' as
campaign themes (“they gave a reason for vacationers to prefer
Capital to Florida”).1

The Fun Flight advertisements, one of which is illustrated
in Plate XVII, stressed the pleasures of flying Capital--of
meeting people, having pictures taken by a stewardess, drinking
champagne toasts, having a Florida banquet, listening to music.
In other words, Capital sought to make the flight a part of
the vacation, rather than just a means of getting there.

The first advertising for the Miami route brdke in mid-
OctOber in Pittsburgh and Cleveland, using newspapers, spot
radio, and 24-sheet posters.2 Service to Miami commenced on
December 14, followed a month later by service to Tampa/St.
Petersburg, using Viscounts for the first class (Fun Flight)
and nightcoach version, and modified 72-seat Constellations.
for daycoach (Funcoach) service.3

The Great Lakes-Florida service got off to a fast start,

thanks largely to an Eastern Airlines strike that began in

 

2
1Ibid. Ibido

3Capital Airlines, Annual Report: 1958, p. 13.

152

PLATE XVII

80 MUCH [IKE FLORIDA, YOU CAN

 

Whywoit’tilyououtoMlonHorthooohbulmoFlorido
honqmto? What you fly Capitol Airlinu' now “Pun
W"Mflloyounptmfm«uhoway
down. Pilot mignon. broilod to your “acting ordor.
Chonpopu(ovuwithhrunch).Andollthotrlnminp
you'dupoctbouofomfloridar‘owmtflbpofly
don’t stop with tho bod on a Capital “Pun Flight."
M'omflcondmlndh‘withpooployou'lllflo.1‘op

IIEW CAPITAL
JET-PIIWEIIEII
”FIIII FLIGHTS” TII MIAMI

  

TASTE ITI

  

  

   

it ol with tho luxurious. jot-motor! Viocount and you
hovo tho but way anyone out wont to Miami. Make it
your way. too. Call your travel aunt or Capital Airlina
at “Oh-wk 2236 and lot tho fun bogin!

m «not mom m mm. . . . champagno.
Haida bouquo't.plwto¢npbondmuoicmonly port
of tho fun. You'ro amount“! by a okyful of luxury.

NowIOoyW”Wb1onpo/fl.m.u0oly’llofl-u~u

Gfifa/

(“Mutational-«flow

mm” “Woltb”?uoflhfi."wflh
“dwmwufl'hhonyno-n.
m

 

I
m... a moat a. .56.. AIRl/NIS
V woy avo-oooy ”I“: ...:

douoflhoco'hol ...A-ho'ohjot-pow'o‘

153
December and continued through the first week in January, but
despite steady load factors on the Cleveland and Pittsburgh
segments through the end of the season, the local share of
market dropped sharply-~from 56% to 31% on the former and from

68% to 52% on the latter.1

Debts and Disasters

Capital defaulted on the Vickers debt in July, had to
defer four months' payments, and ended 1958 paying only $5 mil-
lion of the $9 million that came due.2 The carrier also lost
over 400,000 passengers from the preceding year,3 due in part
to a 37-day suspension of operations when the International
Association of Machinists staged a walkout--the first strike
in Capital's history.

An undetermined number of potential customers were
driven away by two disasters involving Capital Viscounts.
The first crash, on April 6, marred a safety record that had
given Capital eight consecutive National Safety Council awards
through 1957, reflecting almost seven billion fatality-free
miles. The second accident occurred on May 20, when a Viscount

collided with a military jet.4

 

lCapital Airlines, "Campaign Bock," January 20, 1961
2 .

Business week, Octdber 17, 1959, p. 116.

3Capital Airlines, Annual Report: 1959, p. 13.

4Capital Airlines, Annual Re ort: 1958, pp. 9, 10.

CHAPTER.XI
ENTER ELECTRA AND PURE JETS: 1959

The S r le Was On

Capital Airlines was able to report in 1958 that its
fifty-eight Viscounts represented "the largest commercial
fleet of jet powered aircraft in the world.“1 It aiso”hap-
pened that on a domestic basis Capital operated the gngy,
‘ fleet of jetepowered aircraft. The monopoly ended'in Jenuary,
1959, however, when Eastern's turboprop Electra andikmerican's
707 jet began the battle for passengers over Capital's'maini
routes, to be followed shortly by the jets of'TWAg'United,
and Delta.2 V A

The blossoming of the jet age signaled more troubies
for Capital Airlines, which even now was trying to catch up
on back payments for its Viscounts. When the carrier défaulted
in 1958, VickerSeArmstrongs urged the carrier to seek“a'merger
"as a matter of utmost urgency," and the advice was taken to
heart.3 A special committee of five board members, including

Baker, was formed in December, 1958, to begin merger explora—

—

1Ibid., p. 11.

 

2Capital Airlines, "Campaign Book," January 20, 1961.

3Doty, Aviation Week and Space Technology, October 31,
1960, p. 37.

154

155

tions. The committee first studied the possibility of merger
with eight airlines or combinations of airlines, and then ap-
proached them directly, Lalking eventually to Eastern, Braniff,
Delta, Northwest, TWA, Northeast, and United.1

David Baker's main concern, however, was in keeping
Capital intact, not destroying it through merger, and to do
this he had to find some way of relieving the crushing pres-
sure of the $36.6 million still owed to Vickers. .Attempts to
refinance the debt with United States lenders failed, and so
the airline turned to the British banks for help.2 Capital
officials huddled with representatives of Vickers on April
28, 1959, with Baker outlining his proposed plan--stretch
the Viscount loan from the original maturity date of 1962 to
1970, and at an average interest rate of 4% instead of the
current 6%%.3 This would not help Capital compete with the
new jets, however, so Baker also developed a plan for financ-
ing jet and turboprop equipment-~raise the $51 million
needed from banks and insurance companies in the United States.

At this point, the waters become a bit muddied. Business
§E§k_reported that the British banks, confronted with further
defaults on the Vickers loan in 1959, felt they would have to

give Capital the additional time it wanted. This led the

-_~

lIbid. , p. 38 .
2Busine§§Week, October 17, 1959, p. 116.

3Doty, Aviation Week and Space Technology, October 31,
1960, p. 38.

4Business Week, October 17, 1959, p. 116.

156

banks to grant approval of Capital's refinancing plan, con-
tingent upon the airline's success in financing new turbine
equipment.1 Aviation Week reported exactly the opposite, how-
ever, saying that Capital's ability to raise money for new
planes was contingent upon successful refinancing of the Vis-
count debt.2

In any case, the carrier announced in October that it
planned to buy seven Convair 880's and five E1ectras--all for

delivery in 1960.3

The total cost for the re-equipment pro-
gram, which included refinancing of the Viscounts, would be
$86.4 million.4 .
Capital felt that its new turbine equipment would put
it back in the jet race, especially in the profitable New York-
Chicago market. The Convair 880's, which were to be tailored
to Capital specifications, would be used on the long north-
south routes: the Electras, which were forty to seventy miles
per hour faster than the Viscounts and had thirty more seats
would be used on Capital's shorter eastawest routes.S
Marvin Whitlock, Capital's vice-president for engineering

and maintenance, hastened to point out that new aircraft alone

would not solve Capital's equipment problems. In addition,

 

lIbid., pp. 116, 117.

2"Capital Reports Convair Jet Plan," Aviation Week In-
cluding Space Technolpgy, October 19, 1959, p. 48.

3Ibid.

4L. L. Doty, "Capital to Offer Stock in Refinance Plan,"
Aviation Week and Space Technology, February 1, 1960, p. 30..

5Business Week, October 17, 1959, p. 117.

157

the carrier would have to upgrade its existing fleet to meet
the need for greater capacity by leasing new jets or late-
model piston aircraft and'Viscounts.1

Part of Whitlock's plan was incorporated into David
Baker's long-range equipment programs which called for the
following: (1) retirement of nine DC-3's and three Constel-
1ations in 1959, (2) retirement of the remaining Constella-
tions in July, 1960, (3) leasing eleven DC-6B's in 1959 for
an eighteen-month period, to replace the retired planes,
(4) retirement of the balance of the DC-3's when CAB released
Capital from certain small station stops that it was required
to make.2

This last item was included in a petition Capital sub-
mitted to CAB, calling for measures to strengthen its route
system. This included removal of the ”last remaining sig-
nificant restriction on Capital's EastJWest service"--per-
mission to fly nonstop between New York and Twin Cities, but
in the meantime, Capital would have to be satisfied with the
award of a long sought-after nonstop route between Chicago
and Twin Cities.3

Baker also moved to increase revenue by better utiliza-
tion of his Viscounts, saying that a decision by former manage-

ment to cut seating capacity from forty-eight to forty-four

 

1Ibid.

2Doty,.Aviatipn Week and §pace Technology, Octdber 31,
1960, p. 38.

3Capital Airlines, Annual Repgrt: 1959, pp. 10, ll.

158
cost the company a minimum profit potential of $9 million.
To offset the possibility of future losses, Baker increased
the seating capacity to forty-six and eventually to fifty--
equivalent to adding eight Viscounts to the fleet from the
standpoint of seat—mile capacity (the number of seats times
the number of milesflown).l Baker said:
Capital's inability to add seat miles in carefully planned
increments as our competitors had was the basic reason why
over-all revenues did not go up as rapidly as other car-
riers even though acceptable crigeria, such as load fac—
tor, showed outstanding results.
The Advertisinq Picture

getfiggwered Experience Campaigp.--Capital Airlines had
blazed the trail into the jet age in this country choosing
not to refer to the Viscount as a jet, a fact attributable to
the belief that the air traveler liked to see propellers at-
tached to the engines when he locked out the window. The
Viscount had a propellor, of course, but the airline still
feared that the implication of "jet“ might scare away those
preciously—needed customers.

Capital's decision to advertise Viscount without ex-
ploiting the jet theme might have been the worst mistake the
airline ever made, for now in 1959 the sky suddenly was filled
with propellor-less aircraft, most of them flying full. At
last the time had come to admit that the Viscount was a jet of

sorts. Advertising Director Bob West said:

 

Doty, Aviation Week and Space Technology. October 31,
1960, p. 38.

2Ibid.

159
We decided to act quickly to preserve the image of Capital
as the most experienced jet-powered airline and to prevent
as far as possible the down-grading of the Viscount to
second—rate equipment. underscoring the necessity for
this were Capital's own plans for pure-jet equipment.1

It is true that Capital had made reference to "jets"
in its copy and signature throughout 1958, using phrases such
as “WOrld's No. l Jet-Prop Airline," "World's No. l Prop—Jet
Airline,“ and "World's Largest Jet—Powered Fleet.“ But while
these were probably concessions to the imminent arrival of
competitive equipment, the campaign Capital launched in Feb—
ruary, 1959, used the "jet-powered“ theme as its focal point.

Capital said that the campaign, which ran until July in
newspapers and national magazines, created favorable comment.
In fact, the ads shown in Plates XVIII and.XIX were cited for
awards by Advertising Age, according to Capital.

The series also attracted the attention of Delta Air-
lines, which complained to CAB that advertising for the new
pure jets was being counteracted.by misleading advertising
for the propellor-driven Viscount and Electra. Citing the
advertisement shown in Plate XX, CAB ruled in April that even
though Viscount was jet~powered, reference must be made to
its propellors either by showing an airplane with propellors or

3
by using the words "turboprop" or "jetprop" in all advertising.

 

lCapital Airlines, "Campaign Book,“ January 20, 1961.
2
Ibid 0

3"If It Has Prop: Ads Can't Say 'Jet': CAB." Advertising
Age, April 20, 1959, p. 3.

160

PLATE XVIII

 

"Jet power? I grew up on it!”

“Mom says I took my first flight on a Capital wantedtoknow was what those two R's on the engine
Viscount back in 1955. But me. I remember the last meant!" Young lady. those two R's stand for Rolls
one. when we went on vacation. I thought an sir- Royce. makers of the world's smoothest jet-powered
plane was supposed to make a lot of noise, like on engines. And in case you didn't know it, Capital
television. But notsCapitsJ Viscount. . Airlines serves the great vacation
[could even hear Mom whispering at areas of the East with America's
me to stop bothering the hasten. All I :3 I f 3 largest jet-prop fleet.

AIRLINI: JET-POWERED sr nous Rorrs

161

PLATE XIX

 

"Me? I’ve been flying on jet-powered planes since 1955!”

“Yes sir, I flew outtoseemy grandson onaCapital planning a family vacation this year, you call
Viscount back in 1955. We've had a good many those nice people at Capital. Tell 'em to give
hours of jet-powered relaxation together since you seats on a Viscount. Most comfortable plane
then, the Viscount and I. And I want to tell you ’ve ever flown' in, I'll wager!"

you young folks they’ve been the Fly Capital to Chicago, Pittsburgh,

smoothest, quietest hours I’ve ever .’ I Atlanta, Birmingham. America' s

spent in the air. Now if you're a l 3 largest jet-prop fleet.
AIRLINE!

Jet-powered by Rolls Royce

162

PLATE XX

 

t'apital" «swam Mu liar...“ txrst airline pout mm a rmllion Jel-pom-red mules.

J et-Power Missionary

Next time you fly with ('apital Airlines, notice
your pilot's name. It may he .\le| (iarlou. the man
“‘htljlbl heeame .-\meriea's first airline pilot to fly a
millinn jel-ptmq'rwi miles. ('aptain (iarlow eheeked
out in a (‘apital \‘iseount hack in

('apital pilots haw \xhiqx-rul their way through a
hundred million hushed. \‘ilu'ationlexx miles. Have
you been one of their museum-rs lately? Make
your next flight east of the Eliasissippi a Capital

Flight. Best nay to relax between

1955. Since then. he and other a if: anytn'oairrmrts,

the (Ill'lllu' mth the world’s largest jet-powered fleet

163
Capital's Walter Johnson replied that he was disturbed
that any Capital ads could.be construed as misleading or im—
proper:
It is our ambition to honestly establish that the Viscount
is a jet-powered airplane and to this end, we use the same
standard phraseology which is being used everywhere in t e
industry and which [is] technically recognized as sound.
JohnSon added that his company would abide by the CAB
ruling in any major newspaper or magazine advertisement using
the "jet—powered" theme as the basic sales premise, but CAB
ended its inquiry, satisfied that the term "jet-powered“ is
universally accepted in the airline industry as being descrip-
tive of Viscount.2
The matter was further clarified in 1960, when the
scheduled airlines of the united States unanimously adopted
an advertising code of ethics drawn up by the Air Transport
Association. A section of the code, which became effective
December 31, 1960, set down three conditions under which the
word "jet" could be used in airline advertising: (1) the word
"jet" is applicable only to pure jet planes, such as-the
Boeing 707, (2) turbine-powered planes that have propellors,
such as Viscount or Electra, must be referred to in ads as
"turboprop," "jetprop," or "propjet," (3) if the plane is
not a pure jet, prop traces must be shown in ads illustrating

such planes.3

 

lIbid.

2"Capital Ads Meet CAB Stricture,'West Says," Advertising
Age,.May 25, 1959, p. 8. .

3"U.S. Airlines Adopt New Code for Advertising,"
Advertising Age, December 12, 1960, p. 4.

 

164
Atlanta Campaign.--Two schedule changes in the spring
of 1959 caused Capital to intensify its advertising activities
in the Atlanta and New Orleans markets.
In Atlanta, Capital reported that its load factors "be-
gan to slip alarmingly" when Eastern introduced nonstop Electra
service to New York and broke several feeder connections to

Capital's New York flights.l

Difficulties were compounded.by
two fatal Capital crashes on the same day, both of them bound
for Atlanta. The combination of events caused Capital's load
factors at Atlanta to tumble more than thirty percentage
points between April 5 and.May 18. Capital scheduled a heavy
newspaper campaign to help halt the slide, spending $32,000
during the seven—month period from.April through October, but
load factors failed to reach their former levels after hit-
ting bottom in July and starting back up again. During this
same period, Eastern matched Capital's newspaper expenditures,
but Delta spent nearly three times as much2--possibly because
the airline's home is Atlanta. The special campaign run by
Capital was built around the themes of Viscount service and
frequency of flights, which appeared individually in some ads
and combined in others. ‘

New Orleans Campaigg.-2As the result of a schedule
change, Capital greatly expanded its service from.New Orleans

to'Washington and.New YOrk, but Eastern Air Lines soon moved

to match the expansion in the market it had dominated. Capi-

 

l ’
Capital Airlines, "Campaign Bock," January 20, 1961.

165

tal managed to hold nightcoach load factors steady this time,
but the first class flights were in dire circumstances and.
none of the advertising approaches attempted seemed to help.
The campaign, as in the case of Atlanta, was built around
Viscount service and frequency of flights to various cities,
but Capital's $19,000 newspaper budget for the April through
November campaign simply could not compete against Eastern's
$37,000 expenditure or the $54,000 Delta spent in the New
Orleans market. 1

Summer Promotions.-—Capital Airlines was obviously
pleased with the results of the Hit Show package offered in
1958, for it repeated the same basic promotion in the spring
and summer of 1959. The package was expanded from six markets
to twelve markets and included, for $10.27 down, a weekend in
New York and the passenger's choice of a Broadway show.

~Another target for package trips in 1959 was the summer
traveler to Florida, and this time Capital followed the lead
of arch-rival Eastern Air Lines. Eastern had long been aware
that the main advertising prospect for the off—season Florida
market was the package vacation buyer, but Capital was the one
to step in and pioneer Florida vacations on the installment
plan, using a "Live it up for $00.00 down" theme.3 The cam-

paign was launched in April, but when it failed to attain the

 

lIbid.

2"See Broadway Hit, Pay Later, Capital Airlines Ad Urge,"
.Advertising Age, May 25, 1959, p. 8.

3Capital Airlines, "Campaign Book," January 20, 1961.

166
momentum that had been hoped for, the airline hinted that
perhaps not enough preliminary planning had.been done:
A campaign of this type, selling a new idea in vacation
travel, obviously takes time to generate reservations,
and often the groundwork is laid months before the sale.
By late May, competitive pressures were strong. Advance
Florida bodkings were not satisfactory in the judgment of
the Sales Department.1

As a result of lagging sales Capital acted upon the
recommendation of its local sales managers and shifted empha-
sis to total price beginning in June.2 A comparison of the
two approaches is seen in Plates XXI and.XXII.

Capital itself did not elaborate further on the cam-
paign, but Editor and Publisher reported that K&E had tested
the "Live It Up" package in special vacation travel supplements
of the Pittsburgh Press and Cleveland Press in May. The news-
papers prepared the make-up with editorial matter supplied.by
themselves and Capital. In addition, the carrier bought the
back page for its Florida package advertisements and helped
the publications sell other space to hotels, travel agents,
and carrréfital agencies. Capital also scheduled two ads per
week in the regular news sections of the two dailies during a
sixty-day period,3 but apparently nothing could.bring satis-
factory results in the airline's Florida vacation market.

Twin Cities Introductigg,-~An intensive advertising ef-

fort backed up the inauguration of service on Capital's new

Twin Cities-Chicago route in August. The campaign, a thirty-

 

lIbid. 2Ibid.

3Robert B. McIntyre (ed.), "Capital Flies High on News-
paper Wings," Editor and Publisher, August 15, 1959, pp. 17, 18.

167

PLATE XXI

Live it up

for S14. 6 8 down!

/—- //“

o f

s

   
 
 
  

Cmnplete Miami vacation
7 junfilled days at a luxurious Miami Beach resort

Why wfl and wait? Go now with Capital Airlines for a
down psymsnt of only 814.68! Pay the rest in installments
you'll hardly notice—as little as 87.80 per month.

Your low down psymsnt opens the door to s gay. glittering
worldnoosofthsMiamiBsachruort hotelsyou'vebesn
reading about. Your trip
starts on s jet-powered

CspitalAirlin-Punfiight E 0/
— party plans! And

msksinflightmsybsstay- AIRLINE!
ingstths-Inshotsl.

Pchspsyou'll arrive in
blurthslsts-sfwnoonoocktsilparty.0r.ilyouwflr
“MMsswlminthsgisntoutdoorpool.Work
upanappstltsfioronsofthosssmnptuousfloridsbanmts
you’ll be qioying—eva night of your vacation! Lstc.
dsnatothsrhythnolansms-bsndorchsstn.

Dinhgthsdsy,sv¢yoonosivsblstypsofsportwillbs
svailsbb—hom golfto watt-skiing. In a few days. your
tsnwlllbsssgoldnsssflorldspsoamflakethisthsmost

 

memorable vacation you've ever spsnt. Call your travel aunt
or send this coupon to Capital—the exciting vacation airline.
'5. Capital also oflsu thrilling Caribbean emu-ions. Won-
derful way to extend your Miami vacation! Economical way
to see the romantic islands—such as Jamaica. Na-su. Haiti.

 

“mun“. IOWl-lfll
WMWN,“
Plsssssnd-ssbsolutsly mazes-mm.-

C] Capital's His-i Bosch Ventin-
[j Capital's Caribb- Tours

 

 

 

168

PLATE XXII

l‘.
4""

 

NOW ONLY $133.30! * (or $14.68 down)

7 DAYS AT A MIAMI BEACH DREAM HOTEL
Complete with round-trip Capital Fun Flight

Don't just stand there. Pick up the phone and call Capital Airlines! '5. Extend your Florida vacation to the Caribbean—Jamaica.
Take advantage of this srnaxing vacation ofler for just “4.68 down. Na-su. Haiti. It costs only a little more on Capital's Budget
Pay the rest later—as little as 87.80 per month. This low price puts Vacation Plan.
you in a wonderful vacation world. including:
o 7 fun-filled days and 6 glamorous nights at a Miami Beach resort an MI“ ‘1 I 143]). y I m
hotel. You stay in a luxurious private room with bath. «Price based M m WI “VII. “I” OISE” m
on double occupancy. per person.)
MA round trip on a Capital Fun Flight to Miami—a party on a plans!
set and mingle with the rest of the passengers. Begin your vacation
in the air. W“ Alrllnss, Your Dept.
e Limousine tramportation to and from the airport when you arrive sedan Us 'M Hotel, “V...“ IS, ON.
and when you leave.
0 Facilities for every sport from golf to water-skiing—snd organised
groups to make it even more fun.
. Ni‘huy .nWmnt' vim (I‘Mn‘ Ind “then"n {Of you ‘M (M Capital's Mlllll “Ch Illd Fort Lauderdslc VIC-lb"
your kinds. L] Capital's Caribbean Tours
This fabulous vacation at these low prices is available only while
low summer rates last. Send now
for Capital Airlinss' free. bssu-
tifully illustrated brochure and
fit the full exciting details.

 

When can l have? Please send me immediately Capital's
brochure with complete details on.

 

[Er/airs]

AIRI IN! I

 

‘plustoxonos'r/an

 

 

169
six step program developed by Capital sales vice—president
Read Chalfant, “was ignited with a countdown as if it were a
nuclear blast."1 Newspaper advertising broke two weeks before
inauguration day and continued for two months afterward, sup-
plemented.by a direct mail campaign employing seventeen lists,

2 radio, and a six~week posting on 152

personal solicitation,
outdoor boards.3

The effort apparently paid off, for three of the seven
flights scheduled for introduction day were sold out,4 and
load factors climbed steadily through the first two months
of operation.5 Capital was especially pleased with the success
of the new service because Northwest Airlines had.been operat-
ing in the market as a monopoly for twenty years. Despite
this, Capital and.K&E had some misgivings about the format of
the newspaper campaign, with the exception of the advertise-
ment shown in Plate XXIII.6

Somewhat later in the year Capital ran an ad in the
Twin Cities corket that could have easily backfired, since it
called attention to the fact that the carrier was no longer

alone in offering jet—powered service, having been joined by

Electra. The advertisement is reproduced in Plate XXIV.

 

1Schuyler, Editor and.Publisher, August 15, 1959, p. 18.

2Ibid.

3Capital Airlines, "Campaign Book," January 20, 1961.

4Schuyler, Editor and Publisher, August 15, 1959, p. 18.

01

Capital Airlines, "Campaign Book," January 20, 1961.

61bid.

170

PLATE HIII

 

I],

/

WE’RE PLEASED
AS PUNCH!

Twin Cities, we can’t thank you enough!

Your response to Capital’s nonstop. jebpowered service to Chicago has been great!
We're so glad you like that smooth quiet Viscount ride. And you seem to appreciate the
new convenience, too: 7 jetrprop flights that originate right here (no wait for your flight
to arrive before it can leave). Many of you are dying farther east. too. taking advantage
otourexclusivs ietpowuedaervioetoBufl'alo.
Rochester. New York. Washington. Pittsburgh.

e
mammal. mmwmum F I
travel agent org" Capital at F'Ederal 97%]. aflfa

 

AlRl/NII

 

Jet-W '1)! Rolls Royce

171

PIATE XXIV

 

Welcome to the skies, Electra
...it’s good to have company

In thsahi- above them Cltb. we at
Capital Airlin- have had the calm. quiet
"Mullet-m alltomldvn. Now
newtothsekl- cum-thallium We
wdeomsthseompanthsfri-idly rivalry
layouts“.

In tit-use“ d friendly rivalry.
we'dtthstopotmoutuistCapualhashad
In. years to develop the world's nmst
camp-mm Fourysarsto
w a rqetatlsa It Vheount dawns-

ability Com. too. that nearly ova-y
('apttal flight horn Mtnneapulls Ht Paul
to maiur asst-n ntlssisist .

Take advantage 0! let pnww whacva
and whatever it is available There b no
better way to fly between any two airports.
And when things like vilratiun and ngtne
roar make a thaw-Ice. look to Capital -
Ant-"trail!“ )st- airline linking
Humps“ flt Paul with the mspr cttl.
est a! tin MW.

4!”! I~II

Gfifa/

 

ll? HI'IIID IV I’LL] NYC.

172
Innovations Abound in 1959

Walter Johnson maintained that the real problems facing
"airlines were on the ground, not in the air as one might sup-
pose. Capital Airlines, already in the midst of a program
designed to raise the quality of customer service, sought to
further enhance its position "on the ground" in 1959 under
JOhnson's guidance.

One item was a commuter ticket, introduced on the Twin
Cities-Chicago route. Under the system, Capital passengers
bought books of ten blanks at the usual price, and could
write the tickets themselves, thus saving time and trouble.
Capital claimed the innovation was so successful that it would
be expanded to other routes.

Another innovation involved an industrial vacation
program, using payroll deductions for packaged flights. The
plan, which was intended to attract large corporations and
employe credit unions, had been put into operation by ten
major firms within thirty days after its introduction and
was "likely to grow rapidly."1

A third innovation involved installation of Univac
equipment to speed reservations. By 1959, the system had
been installed in fourteen major cities, permitting central-
ized control of reservations as far as six months in advance.2
Capital made certain the public was aware of the Univac

system, scheduling at least one print advertisement on the

 

1Schuyler, Editor and Publisher, August 15, 1959, p. 18.

2
Ibid.

l73
subject of its operation as part of the "jet—powered experi—
ence" campaign in the early part of 1959. This ad is illus-

trated in Plate XXV.

Box:§§oref£cr_l359

By 1959, Capital was serving eighty—one cities from
fifty-five airports in seventeen states and the District of
Columbia. Servicing this system were 8,000 employes and a
fleet of 100 planes.1

Capital went over the $100 million mark in total operat-
ing revenues for the first time in 1959, but barely escaped
having an operating 1055.2 Then, of course, there was the
Viscount debt.

The most notable changes in management saw George Hann
return to the board chairmanship he had relinquished to Slim
Carmichael, and which had remained vacant since Carmichael's
departure from the airline in 1958. In addition, Charles
Murchison regained his position as chairman of the executive

committee when Hann vacated it to become board chairman.3

 

1"Evaluation of Operations by Management," A.case study
conducted for Capital Airlines, Inc., by R. G. Lochiel, S. B.
Goldthorpe, J. H. Smith, and G. E. Park at the Easeern Confer-
ence, Richmond, Virginia, Introduction and presentation by
R. G. Lochiel, The Controller, XXVII (August, 1959), 357.

2Capital Airlines, Annual Report: 19§ , p. 13.
3Ibid., p. 2.

174

PLATE XXV

sea sss‘ Its
use "

... I ‘I.
L (I. L
l

 

3,239,600 jet-powered seats at her fingertips

Many airlines use jet-powered aircraft thus days.
Now Capital Airlines has combined America’s largest
jet-prop fleet with the world's most modern res-
ervations system.

The girl in our photograph is a Capital reservations
clerk. And she's right in step with the jet age. thanks

button and get the exact status of 3,239.6“)
jet-powered airline seats for up to six months in
advance. (If you like. she can even check the arrival
and departure information on today's flights in any

city on the Capital Airlines system.)
Whenever you fly east ofthe Mini-ippi. stay instep
with the jet age. Fly Capital Viscounts.

to Univac. This foolproof electronic

reservations system enables her to . jet-powered by Rolls Royce. And let
check the availability of seats in just a If, Capital's Univac secure your ressva-
a few seconds. In fact. she can pre- s tion the quick. sure, accurate way.

AIRLINI: JET-POWERED sr nous mm:

CHAPTER XII
A DATE WITH DESTINY: 1960-1961

£960: The Beginning of gpggggg
The showdown that had been brewing at Capital was near-
ly at hand, with the carrier being pressured from all sides--
Vickers, CAB, competing airlines, and its own management and
employes. Despite the factions that were tearing it apart,
however, Capital somehow managed to present a calm exterior

to the public.

The Crucial Florida Market
There was a time when the Florida resort market con—
sisted of one 90-day season, but by 1959 it was made up of
two lZO-day seasons, with the airline industry foreseeing an
eventual year-round sales opportunity.l Capital now had a
stake in this burgeoning market, and the 1959-1960 winter
season would test its ability to compete with the big boys.
Capital launched its campaign in October, 1959, using
the same basic "fun flight—funcoach" theme that had.been some-
thing short of sensational the year before, but a change was

requested in December when Capital's financial situation be-

 

lSchuyler, Editor andggublishgg, August 15, 1959, p. 18.

175

176

gan to deteriorate rapidly:
The Sales Department was given a blunt ultimatum: Capital
would live or die on the basis of its performance in the
Florida market during that winter. The Sales Managers re-

quested a more diiect "hard-sell" approach, abandoning the
fun flight theme.

The hard sell approach was introduced in January, 1960,
with "very heavy" newspaper expenditures, only to be scrapped
for another campaign when Capital introduced its newly-leased
DC-6B's into the Florida market.2 Examples of ads run in
these two campaigns are shown in Plates XXVI and.XXVII.

Within the space of five months, Capital had run three
separate advertising campaigns, leading Bob West to remark:

In retrospect, the Advertising Department feels we would
have made more long—range progress and performed equally
satisfactorily on an immediate basis if we had continued
with the original fun flight theme. The phrase itself
was just beginning to register widely in the Pittsburgh

and Cleveland markets. For example, a front page feature
article in the Pittsburgh Press talking about a local

civic activity led off with the phrase “Ybu'd.have
thought it was a fun flight to Florida . . ."3
Despite the internal misgivings, Capital did manage to
improve its load factors on the ClevelandaMiami route, but

performance on the Pittsburgh-Miami segment was erratic.

The Time was Ripe for a Crisis
Sometime during the first quarter of 1960, Capital's

proposed deal for seven Convair 880's and five Lockheed Elec-

tras fell through.5 Normally, such a development would have

 

1Capital Airlines, "Campaign Bock," January 20, 1961

4
21bid. 3mm. Ibid.

5L. L. Doty, "CAB Orders Major Capital Plight Probe,"
Aviation Week and Space Technology, April 25, 1960, p. 43.

177

PLATE XXVI

CAPITAL
ANNOUNCES MORE

JET
POWERED (:3

NON-STOPS
MIAMI

THAN ANY
OTHER AIRLINE !

 

When you follow the sun. have a plane-load of fun. Daily

"Fun-Flights" from Pittsburgh to Miami, Tampa, Jack- ta [’3 I
sonville and West Palm Beach. Call your travel agent or f

AIRLINES

 

Capital Airlines at GRant 1-7555 for immediate reservations.

178

PLATE XXVII

   
     
     
   

ANNOUNCING
CAPITAL’ S

NEW FLEET 0F
BIGGER, FASTER

FUN COACHES

”FLORIDA

To meet the peak season demand. Capital has added a whole new fleet of bigger, faster,
radar-smooth Fun Coaches to Miami. No wait for reservations. Select the day you want
to go. Then go! - Real economy - Real luxury, too! All these Fun Coach

extras available: hot meals - cocktails and champagne . souvenir 40
snapshots - reserved seats - the most luxurious interior this side of s “'°'
your Florida hotel! What are you waiting for? Call your travel agent
or Capital Airlines at TOwer 14312. '1’" “MC" “"70"“!

fififa/

AIRl INEI

 

179
been of no more than passing interest, since equipment
cancellations had become commonplace for Capital. This time,
however, it might be viewed as the trigger that set off the
final crisis, for the carrier's own officials had regarded
the equipment-financing program as the turning point in the
airline's life.1
There were other financial headaches as well. For one

thing, Capital's existing fleet of unpaid-for Viscounts was
depreciating at the rate of $1 million per month.2 For an~
other, the airline projected early 1960 losses to $9.7 mil—
lion for the twelve-month period ending March 15, 1961.
To offset the anticipated losses, Capital petitioned CAB for
a $13 million subsidy to commence March 25, 1960, and run for
twelve months. Since no domestic trunk line was on subsidy
at the time of Capital's application, a CAB decision either
for or against it would have implications for the entire in-
dustry.3 Said Business Week:

If the board decides Capital should go back on subsidy,

it will have to get the money from Congress—-which might

prove a hitch. It may be that the industry's entire

route pattern and perhaps its overall philosophy will be

reappraised by CAB or Congress.

As it turned out, CAB rejected the petition in April on

the basis that to do otherwise would be to put Capital in

competition with unsubsidized airlines, and at the same time

 

1Business Week, October 17, 1959, p. 116.
2"Looking for a Corner," Newsweek. May 16, 1960, p. 94.

4
3Business‘Week, April 23, 1960, p. 86. Ibid.

180
it ordered hearings to investigate the carrier's financing and
equipment programs,1 its losses, routes, and steps it had taken

toward possible merger with another airline.2

Capital Blames CAB for Its Troubles

Before CAB ordered its probe into Capital's affairs,
David Baker had a few choice words to say about the federal
agency at the annual stockholder meeting. He charged that
Capital's route structure was "a creature of the CAB," and
that "CAB must accept its share for the carrier's unprofit-
ability."3 Baker pointed out that CAB had put Capital in
competition with “the giants of the industry” on short-haul
routes, and that now the airline's only hope rested with the
agency.

CAB's opportunity to answer Baker's charges came when it
ordered hearings into the airline's operations. The agency
pointed out, for example, that Capital had been awarded routes
it had requested in the belief that such awards "were responsive
in substantial measure to Capital's asserted need for route
strengthening and would result in significantly improving its

5

financial condition." CAB said further that it had given

 

1“Airlines Grapple Money'WoeS." §2§;2£§§_E§§LJ April 15:
1960, p. 34.

2"More Trouble for Capital," Time, May 2, 1960, p. 85.

3Doty, Aviation Week apd Space Technology, April 25,
1960, p. 43.

4Ibid.

5"Capital Fights to Stave Off Bankruptcy," Aviation
Week angLSpace Technology, May 2, 1960, p. 41

181
Capital substantial additional routes in the Great Lakes—
Florida market "in an effort, in part, to bolster Capital's
economic health."1 As noted earlier, however, performance
on these resort routes was anything but satisfactory.

Capital was given forty-five days to file a reply to
the CAB hearings order, and there was some speculation that
an attempt would be made to put the Board on the spot by say-
ing it was obligated, by law, to keep the airline in business
for a "useful purpose in the public interest and necessity"--
in other words, to grant a subsidy.2 But something happened.
The carrier suddenly withdrew its pleas for subsidy and filed
a tariff for a fare increase of 4%.plus $1 per ticket instead,
contending that it would be a satisfactory substitute for a
subsidy. In return for withdrawing its subsidy application,
the carrier asked CAB to call off its scheduled prdbe, and

CAB promptly obliged.3

Unrest Among the Stockholders

Capital's annual stockholder meeting in April was a
catastrophe, with management and the board of directors lined
up on one side and the stockholders on the other in a series
of heated arguments. The head-on clash occurred when David
Baker attempted to fix the blame for Capital‘s ills on a series

of contributing factors--including routes, aircraft, weather,

 

1 2
Ibid. Time, May 2, 1960, p. 86.

3“Capital Employe Group Begins Proxy Fight," Aviation
Week and Space Technology, June 6, 1960, p. 41.

182

and fare structure.1 The stockholders weren't buying these
excuses, however, and instead" accused management of "sloppy
business practices," indecision, and operational shortcomings
that included flying dirty planes.2 In the free—for—all that
followed, the company's directors even turned on each other,
and.hy the time the smOke had cleared, George Hann had stepped
down as board chairman for the third time. Charles.Mufchison,
who was waiting in the wings, now made his move to take over
the airline. unfortunately, he was unable to convince a suf—
ficient number of board members that he was the man for the
jdb, so the chairmanship was again left vacant temporarily.3

A Proxy Batglg_Loomed.--In September, 1959, the Capital
Shareholders Association was formed, its member ship made up
of Capital employes who owned at least one share of the air—
1ine's common stock.4 By.May, 1960, the group numbered 30%
of Capital's employes representing 20,000 shares of stock.
In what has been described as "a major proxy battle virtually
unprecedented in U.S. corporate history,“ the association
decided to move into action when Capital's board of directors

refused to act on a stockholder plan for increasing traffic

 

lDoty, Aviation week and Space TechnOlogy, April 25,
1960, p. 43.

2“Capital's Crisis," Newsweek, May 2, 1960, p. 71.

3Time, May 2, 1960, p. 86.

4L. L. Doty, "Capital Employe Uhit Organizes, Plans Fight
to Control Airline," Aviation Week and Spgce Technology, May 9,
1960, p. 39.

5Aviati9n Week and Space Technology, June 6, 1960, p. 41.

183
and strengthening the financial condition——the plan having been
presented at the annual meeting in April.

The group became further angered when Baker stated that
the carrier would continue to operate "even if it is forced
into receivership.“2 Charles Beatley, employe group leader
and senior Capital pilot, answered Baker by saying that no
airline could serve the public properly "under the cloud cf
bankruptcy or receivership," adding that the connotations
of bankruptcy would only drive potential customers away, and
that operations could be damaged if receivers unfamiliar with
airline operations were appointed.3

.Main targets of the association, which hoped to replace
the board of directors with members of its own choice, were
David Baker, senior vice-presidents Walter Johnson and J. B.
Franklin, and executive committee chairman Charles Murchison.
Capital yielded to the pressure in May, when Murchison stepped
down as cahirman of the executive committee and J. B. Franklin
resigned his position as operations chief to return to
flight duty. In still another change, public relations direc-
tor John B. Anderson was named to head up sales, replacing
Read Chalfant, who in turn became assistant to David Baker.5

The most important maneuver, however, brought former

 

l
Doty, Aviation Week and Space Technology, May 9, 1960,
p. 39.

2 3 ' 4
Ibid., p. 41. Ibid. Ibid., pp. 39, 41.

5"Capital Executive Shifts Continue," Aviation Week and
§pace Technology, May 30, 1960, p. 41.

184

board member and finance committee chairman Thomas D. Neelands,
Jr. back to Capital Airlines as chairman of‘the'b'oard.l But
the shareholder group was unimpressed, calling the shake-up a
smOke screen designed to confuse the public and avoid the main
issue-—the board of directors. “There is a new chairman,“
said spokesman Beatley, "but the'full complement of old faces
is still there."2 Then, charging that management ”was still

"3 the group proceeded with a three-

wandering in a wilderness,
fold plan: (1) a meeting with Vickers to discuss refinancing
of the Viscount debt, (2) replacing Capital's board of directors
by establishing a proxy solicitation, (3) petitioning CAB for
a subsidy.4

.Management refrained from taking overt action against
the group until June, when it struck back with a letter ask—
ing stockholders “to withhold your judgment and sign nothing
that will involve your company in what we think is an unnec—
essary, ill-advised and expensive meeting [that] would seri-
ously hurt Capital."5 Neelands and Baker, whose signatures

appeared on the letter, promised that a full statement of the

airline’s position would be issued later, giving "ample time

 

1"Capital Flies Off the Map." Bu._.s._i_n_ess....W___ee_k_. August 6.
1960, p. 25.

'Zéyigpipn Week and Spgcgygechnology, May 30, 1960, p. 41.
3Aviation Week and Space Technology, June 6, 1960, p. 41.

4Doty, Aviation Week and Space Technology, May 9, 1960,
p. 390

5"Capital Management Fights Insurgents," Aviation Week
and Space Technology, June 13, 1960, p. 40.

185
for you to decide what to do when you have all the facts."1
The stall for time paid its first dividend when Gordon
Billard, chairman of the Capital Debenture Holders Protective
Committee, was elected to the board of directors, swinging the
balance of power to Baker. And when chairman Neelands and the
entire executive committee threw their support to Baker, the
internal split that had caused immobility within the airline,

was settled at last.2

The Vickerprhreat and Mepger Talk
When Thomas Neelands accepted the board chairmanship
of Capital Airlines in May, 1960, he was confronted with pros—
pects even more bleak than those faced by David Baker when he
became president of the airline three years earlier. First
quarter losses for 1960 amounted to $5.4 million (the heaviest'
for a three-month period in the company's historyl, system-
wide load factors were almost 7% lower than the industry
average, and CAB reported that the carrier's share of market
was dropping steadily in at least six major markets.3
But the most crushing burden was the Vickers debt. Of
the $33.8 million outstanding, $12 million was already over-

4

due, and another $14 million would be coming due within

twelve months.5 Vickers-Armstrongs, which had agreed to defer

 

lIbid. 21bid.

3L. L. Doty, "Capital Bids to Hold Stockholder Support,"
Aviation week and Space Technology, June 27, 1960, p. 36.

4
BusinespyWeek, April 16, 1960, p. 34.

5Business week, August 6, 1960, p. 24.

186
payments as they came due, ran.out of patience when Capital's
first quarter losses were announced on the heels of CAB's re-
jection of an immediate subsidy and the agency's notice that
it was about to investigate the carrier. Lord Knollys, chair—
man of Vickers, personally demanded the overdue $12 million
from Baker in April, an action that put Capital legally in
default under the terms of the Viscount contract and left
Vickers free to take any legal action necessary to get the
entire $33.8 million balance on the original debt.1 One action
Vickers could take would be foreclosure on the Viscount fleet,
but this was not especially inviting because, as a Vickers
spokesman said: "We don't want a fleet of secondhand Viscounts

"2 Inviting or not,

for which we would have to find a market.
when Capital was unable to produce the $12 million demanded by
Vickers, the British firm asked for the full amount and pro-
ceeded to file a foreclosure suit in a New Ybrk federal court.3
It was at this point that Thomas Neelands was summoned
back to Capital to develop a refinancing plan and restore the
new equipment program. Neelands recalled later:
They had no plan at all. They were just waiting for it
all to land on its hsad. I hated like hell to see them
just standing there.
Neelands agreed to help, but only if he were made board

chairman with unanimous approval of the board and given the

 

lBusiness week, April 16, 1960, p. 34.
2"Capital Need," Newsweek, April 25, 1960, p. 86.
BBusiness Week, April 23,-1960, p. 86.

4Business Week, August 6, 1960, p. 24.

187

1 Both conditions“were met,

power to negotiate as a lone wolf.
and less than two weeks later Neelands was busy discussing a
possible threeaway merger with Delta and Northwest. The talks
were quickly abandoned, however, because Delta had a trans-
continental petition before CAB and Northwest did not appear

to have the necessary combination of financial strength and

aircraft to satisfy Vickers.2

npited Was the Answer
Still in May, Neelands decided that Uhited.Air Lines was

in the best position to take over Capital's debts, but first
he had to convince Vickers. A.merger proposal was quickly
drafted and presented to the aircraft manufacturer, along with
a plea that the foreclosure suit be deferred to allow contin-
ued operation of the Viscount fleet while merger negotiations
were going on. It was further suggested that Capital be per-
mitted to sell some of its Viscounts and lease other planes
to take their place, thus not only eliminating the monumental
chore of having to sell the entire fleet at once, but also
providing orderly replacement of the Viscounts to avoid “the
spectacle of an airline without aircraft to service its auth-

orized route.“3

 

l .
Ibid.

2Robert H. Cook, "CAB Opens United-Capital Hearing as
Stockholders Approve Merger,” Aviation Week and Space Tech-
nology, October 24, 1960, p. 40.

3Doty, Aviation Week and Space_$echnology, Octdber 31,
1960, p. 38.

188

Vickers had agreed to at least four postponements of
its foreclosure suit while merger talks with united were in
progress,1 and on July 28, 1960, word finally came-4W.A. “Pat”
Patterson, president of Uhited.Air Lines, announced formally
that his company proposed to merge with Capital Airlines.2
The merger would benefit all parties involved. united, with
14,000 miles of routes, would gain Capital's 6,500 miles3--
and despite some duplication, it would replace American Airlines
as the largest domestic trunk line in terms of route miles,
aircraft, personnel,4 and revenue.5 The resulting route pat-
tern would also give United access to the lucrative north-south
travel markets in the East and.eliminate restrictions imposed
on united to protect Capital in certain cities.

For Capital, merger was a means of bowing out gracefully
and honorably. As Uhited's Patterson put it: “Just one snap

“6

of the finger and Capital would have been bankrupt. Nearly

all of Capital's 7,100 employes would find job security through
absorption into the United system, though Patterson refused to

make the management team part of the deal, saying that even

 

1"Capital Asks to Drop Light Traffic Points," Aviation

Week and Spage Technology, July 4, 1960, p. 44.

2Robert H. Cook, "Patterson Urges CAB to Approve Sweeping

Capital Merger Changes," viation Week and Space Technology,

Octdber 10, 1960, p. 43.

3
Businesg Week, August 6, 1960, p. 25.

4"An 0.x. for the Big Airline Merger," U.S. News & World
Report, April 17, 1961, p. 16.

5“Wing to Wing," Forbes, August 15, 1960, p. 24.

6
Lbid.

189
though he didn't know for sure who was responsible for the
carrier's plight, "I do not want these'fellows."l Capital's
stockholders also stood to profit, gaining one share of Uhited
common for each seven shares of Capital common.

Vickers was also to be rewarded for its patience, ac-
quiring $15.9 million worth of united preferred stock, plus
return of fifteen Viscounts-~bringing the total value of the
transaction to $22 million.2

As a side benefit, Patterson saw the proposed.merger as
removing a threat to the financial credit of the entire air-
line industry.3 In fact, several airlines were actually in
favor of the merger for this very reason, plus the probable
favorable effect it would have on other merger proposals being
contemplated.4 There were also dissenters--mainly those car—
riers already serving Florida, Where competition would be in-
tensified by better-equipped, stronger united. But CAB re-
jected demands by Eastern, Delta, and others that Capital's
entire route system.be investigated as part of the merger

hearings.5

 

1Cook, Aviation Week and Space Technology, Octdber 10,
1960, p. 43.

2
Business Week, August 6, 1960, p. 25.

3
Cook, Aviation Week and Space Technology, October 24,
1960, p. 40.

4Business Week, August 6, 1960, p. 25.

5Cook, Aviation Week and Space Technology, October 10,
1960, p. 43.

190

Saved By the CAB

The boards of Capital and United voted in favor of the
proposed.merger on August 11, 1960,1 the stockholders of both
companies gave their overwhelming support on October 14, and
the CAB hearing examiner recommended approval on December 30.2
Formal approval was not to come until April, 1961, however,
and in the meantime Capital was barely able to stay afloat.
In fact, the carrier said flatly in November that were it not
for the CAB merger hearings then going on it prdbably would
not be in operation, and that if the merger proposal were re-
jected, no effective action could be taken to prevent loss
of its entire fleet and termination of its operation as a

3 A.month earlier, Capital treasurer

certified air carrier.
R. G. Lochiel hadn't been even that optimistic. He told CAB
that based on three-quarter losses of $8.2 million, the air-
line probably would not make it through the‘winter.4

Locking back on the events of 1960, it was not only
amazing that Capital did make it through the winter, but that

it was able to concentrate at all on its reason for being-w

that is, hauling passengers around the eastern United States.

 

l
Cock, Aviation Week and Space Technology, October 24,
1960, p. 40.

2Capital Airlines press release, "Biography . . . ,
p. 7.

3L. L. Doty, “CAB Expected to Rule on Uhited's Merger

With Capital," Aviation Week and Space Technology, November 28,
1960, p. 42.

4Cook, Aviation Week apd Space Technology, Octdber 24,
1960, p. 40.

191
And.while its efforts may have been a case of too little, too
late, they nevertheless represented attempts to keep old pas-
sengers and gain new ones, and will therefore be discussed

briefly.

gew Corpprate Image
On March 1, 1960, only one month before the disastrous

stockholder meeting, Capital Airlines announced that a new
visual image was to be a part of a stepped-up program designed
to “raise the quality of Capital's customer service above that
of industry standards," with the over-all goal being to convey
the image of Capital as "a company dedicated to integrity and
progress."1
The New York industrial design firm of Lippincott and
.Margulies'was assigned the task of overcoming the lack of
visibility of Capital's emblem in the visual context of crowded
airports, and the inconsistency of design resulting from the
speed with which new offices were Opened during the Viscount
era.2 The answer was a three-point program that called for:
(1) replacing the traditional red emblem with a new blue
and Whiteltrademark, (2) changing the corporate color from

red to blue, (3) evolving a new concept and appearance for the

. . . . 3
airline's advertiSing.

 

1"Capital Airlines Promotion to Get New Emblem, Color,"
Advertising.Age,.March 7, 1960, p. 44.

2

Rebert B. McIntyre, "Color to Aid Capital Airlines in
Corporate Identity Switch," Editor and Publisher, March 26,
1960, p. 32. ‘

3
Advertising Age, March 7, 1960, p. 44.

192

The new corporate trademark and color were tested on
Capital's leased DC—6B's, but before the paint brushes were
put away for good, Capital hoped to change the visual identity
of the entire organization—-from city and airport ticket of-
fices,1 to ground service equipment, letterheads, menus, and
luggage tags.2 Exactly when the new look was to be completed
is a matter for dispute. Advertisipg.Age said the target date
was late July,3 while Editor and Publipher claimed that the
transition was to be gradual, proceeding on the basis of
planned Obsolescence.

In any event, Capital planned to break the new'trade-
mark between May 15 and June 15, using full-page and 1000-line
two-color newspaper advertisements in seventy-seven on-route
cities.5 All subsequent advertising featured the new logo,

of course, and it can be seen in Plates XXVIII-XXXII.

The :Newyppok" ip.Advertising

Cardppal Coach.--The second "new look" in advertising
since K&E won the account in 1957, was brought about by the
realization that airline advertising still suffered from a
sameness in illustrative matter and.hird-on-theewing symbols.6

One of the first opportunities K&E had to fulfill its promise

of a fresh concept and appearance was the campaign for Cardinal

 

 

1 .
McIntyre, Editor and Publipher, March 26, 1960, p. 30.
2 3
Advertising Age, March 7, 1960, p. 44. Ibid.

4 .l

McIntyre, Editor and Publisher, March 26, 1960, p. 30.

U1

Ibid. 61bid. , p. 32.

193
Coach service.

The Cardinal Coach was Capital's belated answer to
competitive daycoach operations-—a service it had shunned for
so many years. In 1959, for example, coach service accounted
for only 18.4% of Capital's total operation, while the average
for six of its major competitors was 47.3% of total operations.
Capital's decision to enter the daycoach market in a big way,
and right during the height of financial chaos, posed several
problems: (1) the need to gain rapid identification as a day-
coach operator, (2) the need to reach the broader, less soph-
isticated coach market, (3) the need to create a unique and
memorable coach symbol, (4) the need to convince coach trav—
elers that Capital had.more to offer than its well~established,
jet-equipped competition.

Cardinal Coach, said K&E, was the name that would give
Capital a unique symbol for audio and visual purposes.
Cardinal Coach, said Capital, would offer attractive and.mem-
orable extras to the coach passengers. Cardinal Coach service--
"Economy with a Flair"-- was promoted through local media, in-
cluding outdoor, car cards, radio, and newspaper.1 The latter,
illustrated in Plate XXVIII, could not be said to suffer from
"bird-on-thedwing" sameness——but it did have its share of
birds.

Florida Summer Campaign.-— Capital's Florida vacation

 

package for 1960 also took on a new look, uSing the theme

 

lCapital Airlines, "Campaign Book," January 20, 1961.

 

A NEW VALUE IN AIR TRAVEL

CAPITAL CARDINAL
COACH SERVICE

ECONOMY WITH A FLAIR TO

NEW YORK AND DETROIT

 

’ , f v Music' on hmteo‘ v ' vcabin!»
4 And quick 1mm service after your flight!
The Cardinal Romany: You got all the extra luxury. .
hallmCudinalCoachuirfmioNchorkonlyu'L70 CAPITAL
only $18.80. And Capital's amazingly low jot-powered lightened: '''''''
York: man-u..-
vo ital 3- .

195
“A.week in a luxurious hotel for $19.50," as illustrated in
Plate XXIX. The campaign differed from those of the past in
that it talked in terms of cost of hotel accommodations, with
air fare extra, instead of referring to down payment or total
price.

New'YOrk Summer Campaigg.--Capital again offered its
hit show package in 1960, but with greater flexibility. Now
the prospective customer could choose from a “Hit Show Holiday“
for theater-goers, or 208 "Festival Fare" packages that of-
fered a variety of sight-seeing and length-of—stay options.
The promotion was aided immeasurably when CAB gave the carrier
permission to reduce round-trip air fares by an agerage of 25%
between New York and forty-three cities from July to September.
The reduced fares were tied into the vacation packages, which
were pushed through an intensive advertising schedule involv-
ing newspaper, posters, diSplays, and handout literature in
six Capital markets. The campaign produced 1,966 Festival
Fare package sales, "as well as increased identification . . .
in the New York air travel market."1 A typical advertisement
used in the promotion is shown in Plate XXX.

"Air Bus" and Jet Service.--Capital introduced a new
service to Miami early in Octdber, at just about the time the
carrier's stockholders were approving the merger.plan that
‘would spell doom for it. The service was the "Air Bus"--a
coach flight intended to compete with all modes of transporta-

tion, including an Air Bus already being run by Eastern.

 

lIbid.

196

PLATE XXIX

A FULL WEEK'S VACATION FOR ONLY $19.50*

FLY CAPITAL
TO MIAMI BEACH!

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197

PLATE XXX

...-0*.

 
     
    

*- SAVE 25%

CAPITAL AIRLINES ANNOUNCES

FESTIVAL FARES
.. NEW YORK!

(July 7-Sept. 1)

 
   

Plan your vacation now at New York’s Summer
Festival. There’s more fun for you . . . more savings.
too! Fly Capital to New York this summer at the
lowest fares ever offered. Save 25'; on first class.

, . - Pl d . bso ,
18',, on Cardinal Coaches. Fact 18, now you can fly (152$. :zncnp'flil.s“|0w";}:avj%ffu admgfif

i.
| Capitol Airlines. Tow Dept. "deal ”“1
I
I
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Capital for less than it costs to drive! (For example: : plete New York Summer Festival Vacation Plan.
I
l
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SIS [Whores W I“... Mbmnflo. Mine.

first class Festival Fare only $48.85—regular fare
$65.10 plus tax.) But that’s not all. Capital’s Sum-
mer Festival Vacation Plan includes hotel rooms,
theatre tickets. sight-seeing, the whole works. . . at
the lowest possible rates. Call your travel agent or
Capital at FEderal 9-7661.

MY um ...................................................
AMI!“ ....................................................
I? noon ...................................................

CI" ........................... ION! ..... "A" ..............

198

Capital's version was announced with a full-page newspaper ad
early in October, "with the knowledge that out jet service
would begin in late October," said advertising director Robert
West.1

The source of the jets for Capital°s jet service remains
a mystery, since no reference to a deal for jet equipment was
evident after cancellation of the Convair transaction earlier
in the year. Mystery or not, however, the airline spent
$137,505 for the pre-inaugural campaign involving newspapers,
trade publications, radio, television, outdoor, and collateral
advertising for Boeing 720 jet service, to commence between
Pittsburgh and Miami on January 8, 1961.2 While there is
nothing to indicate that Capital's jet service ever got off
the ground, the advertisement in Plate XXXI proves that such

plans were indeed on the airline’s agenda.

1961: The End Came Fast
Formal CAB approval for the united—Capital merger came

on April 3, 1961, though in its sixtyépage opinion, the Board
expressed disfavor in having to resort to the move:

Notwithstanding the manifest implications of the merger

in terms of maintaining a balanced route structure, we

find that the public interest in preventing a collapse of

the Capital system outweighs whatever disadvantages may

inhere in the merger.3

United, which had threatened to pull out of the merger

if CAB refused to transfer all of Capital’s routes to it, got

 

l 2

Ibid. Ibid.

3L. L. Doty, "CAB Bars Future Hasty Merger Action,"
Ztviation Week and Space Technology, April 10, 1961, p. 47.

199

PLATE XXXI

 

On January 8th. Capital Airline- will launch the first and only pure
jet flighta from Pittaburgh to Florida! TVnce a day. spanking new
Boeing 720 jets will take off for Miami. \Vhat'a more. the new
Capital jot. will ofler luaun'oua Firat Clan. low-coat Cardinal Coach
and economical Nightcoach aarvica.
ThBoainc7miathamaljotflyin¢tOdayTNapaamu
eahtnaanaaquiatmdraatfulaaymirownlivinlroom.1'herideu

no whispering-axiom}: that you'll hardly know you're moving. But
you are: fact «mall to [at you to Miami In I. than 2 hours!

Smart vautionera are booking their jet mutations right now.
How about you? Call your travel agent or Capital Airlin- at [.0qu
3-7555. (Capital alao ofl'en the vacation" daily fli‘hta to Tampa
andWaatPalmBeach.andeaayconmctmmtoCaribhaan
pom of call.)

museum-twp.when.wwmuuum"mnumimomnu—mw.«H'.buuau.muauo

  

AIRLINI.

  

200

I

basically what it had demanded, and as a result would expand

its system:to 18,000 unduplicated miles, serving 118 cities

from Boston to Miami and.New Ybrk to Honolulu.2

united Prepares to Absorb Capital

Although final consolidation of the two airlines would
not take place until June, United was already making plans for
phasing out the ninety planes it would inherit when CAB ap-
proval came. The plan called for: (l) retirement of the
thriteen DC-3's and twelve DC-4's, which had accounted for
15.3% of Capital's total miles as late as 1959, (2) immediate
introduction of jet service in certain major Capital markets,
with gradual extension to all markets in which airport facil-
ities permitted replacement of piston aircraft, (3) intro-
duction of, or increased service in, some markets in which
Capital'was not flying or was providing only token service be—
cause of a lack of competitive equipment, (4) expansion of
daycoach service, (5) expansion of cargo service.

The major problem.was what to do with the forty-one
‘Viscounts that would remain after fifteen were returned to
‘Vickers under terms of the merger agreement,4 since they would

cnnly add to United's surplus fleet of propellor-driven planes.

 

lIbid.

2”The Big Merger," Newsweek, April 17, 1961, p. 84.

3Doty, Aviation Week and Space Technology, November 28,
1960. p. 42.

- 4Four of the sixty Viscounts Capital had purchased were
destroyed in five years of Operation (Newsweek, April 25,

1960. p. 86).

201

United decided: to Operate the Viscounts, despite their, in-
ability to compete with more modern jet and turboprop planes,
until they could be replaced by Boeing and Caravelle jets.1
Pat Patterson pointed out that this would be a costly propos-
ition in more ways than one, because of Capital's practice of
valuating Viscounts lower than they really were for tax pur-
poses. This would cost Unitedmillions of dollars in tax
savings in future depreciation on the planes, since Capital's
assets were worth less to united than they were to Capital,
but Patterson dismissed the possibility that his company
would inherit Capital's problems along with its equipment:

I felt . . . that the experience of Capital should not be

indicative of what the results would be under a combined

United-Capital operation. A large part of Capital's

troubles had steamed from the high annual carrying charges

on its debt.2

L is n are

On June 1, 1961, the complicated legal and financial
ends of the merger were tied up, and Capital Airlines was
absorbed into the United System.3 The official and came with
little fanfare in former Capital cities--if Lansing, Michigan,
was a typical case-~due largely to a last-minute attempt by
other airlines to block the merger in court. The suits were

dismissed on May 25, leaving precious little time for pre-
paring a welcome for United. In Lansing, for example, the

 

m, April 17, 1961, p. 84.

2Cook, Aviation Week and Smce Echnology, October 24,
1960, p. 40. ‘

3United Air Lines, Annual Repgrt: 1291, p. 4.

202
demise of Capital Airlines might have gone completely un-
noticed were it not for its signs being covered with tempor—
ary united Air Lines signs.l
United did get on the track eventually, with an expanded
1961 advertising campaign that emphasized the advantages of
the merged system, and sought to attain rapid recognition
of United service in former Capital cities.2
The following paragraph, tacked onto an old Capital Air-
lines press release, tried gallantly to make the best of the
merger:
For Capital Airlines, the merger with United.marked the
end of a long and colorful history. From its modest be-
ginning on that April day in 1927, Capital had grown to
become the nation's fifth largest air carrier serving 77
cities east of the Mississippi River. Throughout its
long tenure, the company had.made many contributions to
the nation's air transport progress, and to the employes
of Capital Airlines the merger with United represents
another opportunity to continue their long record of ser-
vice to America's air traveling public.
Capital Airlines' epitaph appears on the painted bulletin

in Plate XXXII, but its disappearance as a force in commercial

aviation is deserving of further analysis.

 

1Frank Hand, "United.Air Lines Officially Welcomed to
City," The State Journal (Lansing, Michigan), June 2, 1961,
p. 13.

2UnitedAir Lines, Annual Repppt:gl§61, p. 13.

Capital Airlines press release, "Biography . . .,
p. 7.

203

 

 

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CHAPTER.XIII
ANALYZING THE COLLAPSE OF CAPITAL

About two weeks after the stockholders of Capital and
united voted for merger of the two carriers, David Baker Of-
fered some theories as to how Capital had brought itself to
the brink Of bankruptcy. Baker traced.many of the carrier's
1960 troubles back to the late 1930's and early 1940's.
when management failed "to visualize the future development
of air transportation from 00-3 operations duplicating the
Pennsylvania Railroad in the air to the entirely different
operation experienced in 1950 and 1960."1 In petitioning
CAB for elimination of twenty-eight light traffic points on
Capital's system in 1960, Baker noted.how the carrier had come
to suffer because of its original route pattern:

Since then technological progress in the aeronautic art
has advanced rapidly. The progressive advent Of pres—
surized, piston-powered aircraft, turbOprop airplanes
and pure jets haze clearly outmoded Operating patterns
geared to the DC 3 and similar type equipment.

An inefficient route system, then, was a prime reason

for Capital's ultimate downfall. Through the years it had

remained.basically a short-haul airline, but with intense

 

1Doty, Aviation week and Space Technology, OctOber 31,
1960, pp. 37, 38.

2Aviation Week and Space Technology, July 4, 1960, p. 44.

204

205
competitioanr m long-haul carriers on all its important
routes. Or, as Tipp put it:
Capital's troubles were aggravated.by its zigzag route
'structure, which often ends nowhere, depends on seasonal
travel, coveis cities already served by . . . powerful
competitors.

These powerful competitors had long hops to balance
their route systems, while Capital's required stops were as
close together as fifty miles, “acting almost as a business-
man's commuter line."2

How did Capital justify the acquisition of its haphazard
route pattern? This is something the Capital Shareholder
Association wanted to know, charging that the airline had asked
for too many routes, many of them.nnprofitable. Charles
.Murchison, speaking for management, could not deny the car-
rier's responsibility. “All the routes we have, we asked
for,“ he said, but added quickly that CAB sometimes awarded
the same routes to other airlines as well, when traffic did
not warrant two carriers.3 This was no excuse for sitting by
and watching the airline go down the drain, however, and Baker
himself Charged that part of the carrier's financial troubles
stemmed from a lack Of initiative in divesting itself of un-
profitable routes or seeking longer routes or even considering

merger, before his arrival on the scene.4

 

1"Crisis at Capital," Time, April 25, 1960, p. 96.
ZTimpJ December 9, 1957, p. 100.

3Newsweek, May 16, 1960, p. 94.
"4Doty. AEAEEAQEXWéek and Space Technology, OctOber 31,
1960, p. 37.

206

A short-haul operation is not necessarily an unprofit-
able operation, as witness the success ‘of many domestic feeder
lines. But Capital's pattern" was a mixture of-shorta- and long-
haul routes, as has been seen, and this created another problem--
how to operate efficiently, and competitively, on‘both types
of routes. According to Baker, the airline had failed to pro-
vide for retirement Of costly, out-dated aircraft and purchase
of new equipment suitable to its needs.1 Until 1954, in fact,
the airline has relied solely on its DC-3's and DC-4°s because
the size, speed, and range of more modern aircraft would have
made them less economical to Operate on a short-haul basis,
and it was at this point that Slim Carmichael turned to Vis-
count.

The British turboProp was the answer to Capital‘s prob-
lems--or so it seemed at the time. Capital not only attained
competitive equality in short-haul markets, but it believed
that Viscount was the plane best suited to its entire route
structure. Charles Murchison staunchly defended this position
when the employe association said in 1960 that Capital should
never have bought the Viscounts, but he did back down a bit
by admitting that Vickers' plan for financing the planes was
also a major consideration--especially in view Of Capital°s
financial condition.2 Baker was more inclined to side with
the stockholders than with Murchison on this matter, saying
that while he had no complaint with the Viscount itself, the

plane was not "well adapted“ to Capital‘s route system in

1
1m. 2Newsweek, May 16, 1960, p. 94.

207
terms‘of'cargo‘ capacity, seating capacity, or range. Despite
Carmichael's build up of Viscount as having a 1,500-mile range,
Baker said the maximum range was l,lOO.miles--1ess than half
that of any competitive plane-~resulting in cancellation of
the longest, most profitable routes in bad-weather.1 He added
that at other times Viscounts were forced to land en route to
refuele-something that Carmichael did not find at .11 dis-
turbing, it will be recalled.

Another point on which Carmichael and Baker disagreed
was the profit potential of the Viscount. Carmichael had
predicted that it would be the most profitable plane in the
industry, but Baker said that net only did it have perhaps the
slimmest profit margin in the industry,2 its profit potential
had always been less than half that of any competitive air-

3 Furthermore, while the rest of the industry had.met

plane.
expanding costs by increasing speed and capacity per plane at
a planned rate, Viscount gave Capital only temporary equality
in speed and less capacity.4 Viscount, which had been counted
upon to lead Capital upward, turned out to be another weight
dragging it downward.

David Baker also pinned a share of the responsibility

for Capital's demise on the management team that preceded‘him,

 

1Doty,.Aviation week and S ace Technolo , Octdber 31,
1960, p. 37.

2Business week, April 23, 1960, p. 86.

3Doty,,Aviation week and Space Technology, October 31,
1960, p. 37.

4Ibid.

208
charging that it lacked planning, objectives, policies, and
organization. There was a serious clash between operations
and sales, the function of passenger policy was split, and
management‘s relationships with communities, states, and the
CAB staff were unsatisfactory. Baker was also critical of
the labor situation at Capital, which had to deal with an
undisciplined mechanics union whose chairmen had as much in-
fluence on company operations as did any individual in manage-
ment, he said.

;Add to all of Capital's route, equipment, Operational,
and management problems the lack of a long-range financial
program, and it was no wonder that the carrier one day found
itself in a financial condition described.by Baker as “inflex-

ible, marginal and certainly critical."1

Where Advertising Came In
It is noteworthy that nowhere in his analysis of Cap-

ital's collapse did ex-president Baker mention the carrier's
advertising and promotion programs. This can be interpreted
in at least two ways: (1) either he felt advertising did not
contribute to the downfall of Capital, or (2) it wasn't impor-
tant enough a factor to mention. 5

An anonymous airline executive, talking about airline
advertising in general, seemed to be in accord with the latter
alternative, for he was quoted in Printers' lnk as saying the

following:

 

lIbid.

209
The only real difference between airlines and the only
thing they can effectively advertise is their schedules.
On this customers deCide which line to use.

Printers' Ink took exception to this comment, adding
parenthetically:

However, as long as one airline does more business than
another with pretty much the same kind of schedule, there
would seem.to be another element in the marketing picture.
That could just be creative advertising.2

Both views are oversimplified, of course, since airlines
do differ in many areas--quality of service both in-flight and
on the ground, type of equipment, ability to live up to their
sdhedules, and so on. But even if the Printers' Ink theory
that advertising might be the stimulus for increased business
if all other things were held constant were true, it would not
apply to Capital Airlines. Probably at no time in its history
was Capital “equal" to other airlines in terms of routes, air-
craft, schedules, or customer service.

The question then becomes: given Capital's unique mar-
keting situation, did advertising tend to accelerate, retard,
or have no apparent effect on Capital‘s slide toward oblivion?

A scarcity of advertising samples from Capital's be-
ginnings as Pennsylvania-Central Airlines, and up through the
pre- and postdwar years, makes assessment of the carrier's

early efforts understandably difficult. Nevertheless, the

examples that were included in the preceding pages tended to

 

l"Airlines Scrap for More Passengers and Choice Superla-
tives in Jet Age Campaigns," Printers“ Ink, January 15, 1960,
;p. ll.

21bid.

210
rely heavily on price and destination claims, both of which
might have left the prospectmth ‘thefee‘l'ing-JSO what?
Other airlines fly tO‘these cities, too, and the fares are
identical because they're regulated by CAB.“ Since it is also
not unreasonable to assume that most early airliners were
probably either Boeing 247's or Douglas DC—3's, the creative
challenge would have been to promote differences in an area
such as customer services--a challenge that apparently was
not taken up. A clue as to Capital's lack of satisfaction
‘with its advertising is the frequency‘with which it switched
agencies until 1946, even going so far as to place it direct
for two years.

Capital's first big opportunity to cash in on advertising
came in 1948, when it pioneered scheduled aircoach service in
the united States. The lack of fanfare which accompanied the
new service, and the lack of publicity about it in the trade
press, would seem to indicate that the carrier failed to take
advantage of its competitive coup initially. Advertising for
Aircoach picked up as the new service caught on, but by the
time the “Flying Scotchman" theme was adopted, the competition
had caught up with Capital.

In 1950, Capital launched the most extensive promotion
campaign in its history for its new Constellation service.

But in spite of the aura of elegance surrounding it, price
'was prominently featured, perhaps detracting from the very
illusion Capital sought to create for Constellation. In any

event, the competition was starting to pull away.

211

For the next few years, Capital attempted to generate
as much excitement as it could for its fleet of obsolete air-
craft. Its 1951 campaign'for Constellation showed major
creative changes both visually and in copy, if the ad in
Plate Iwaas typical. Now the illustration was dominant, the
copy Short and free of any price claims. By 1954, the consumer
advertising had taken on still another look, with destination
singled out for emphasis and Constellation pushed into the
background.

It was also in 1954 that Capital embarked upon a campaign
that paled the Constellation effort of four years earlier. The
promotion was, of course, to herald the imminent arrival of
Viscount-~"A.New Concept in Flight.“ At last Capital had some—
thing different to offer the air traveler, something so unique
that no other domestic airline would be able to match it for
several years--the turboprop. The pre-introductory campaign
obviously did an outstanding jdb in laying the groundwork,
for Capital's Viscount was a hit practically from the first
day. In follow-up campaigns, Capital continued to hit hard
at the competition with its new weapon. But in retrospect,
Capital might have made a serious blunder in assuming that
the public was not ready for the concept of the jet, and in
thereby declining to exploit the magic imparted.by the words
”jet-powered."

When Capital moved its advertising account from Lewis
Edwin Ryan to Kenyon & Eckhardt in 1957, there were promises

of a "new loo " for airline advertising, but by the time the

212
carrier folded in 1961, KaE would create §E2;”neW'looks” for
it. The over-all impact of Capital's advertising~dmring these
final years of its existence‘can be evaluatedwmore critically
than earlier efforts, thanks to the availability of informa-
tion from the airline and agency;
Robert.west, Capital's advertising director, was quite

pleased with some of K&E's work, which “struck out in new

‘o

directions and set new patterns for domestic airline adver-
tising."l It was also true, however, that some of the camp
paigns failed to attain the objective of increased sales.
West did.not attempt to evade the responsibility for the un-
successful efforts, but he did seek to put them in perspective,
saying there were at least four prOblems “peculiar to Capital
during the past few years that have complicated the advertis-
ing job and occasionally Obscured or damaged its effect.“2

The major prdblem.involved "inordinate pressures for im-
mediately high load factors on new services,“ which resulted
in abandonment of campaigns "that good advertising judgment
would.bave continued."3 In fact, west's greatest criticism
of the advertising pregrams developed.by K&E was not with the
agency itself, but with management decisions that resulted in
"the frequent Shift in direction and failure to give good ad-

“4 Two such campaigns were the

vertising campaigns a chance.
1958 promotion for hourly service--abandoned because of

abrupt changes in schedules--and the "Live it up for $00.00

 

1Capital Airlines, "Campaign Book,“ January 20, 1961.

3 4

21bid. Ibid. Ibid.

213

down" Florida promotion-awhich required “sufficient time to
develop in persuasiveness, but . . . was scuttled before the
summer season really began because of initially low package
sales.'1 .

A second problem was the pressure on individual district
sales managers to produce satisfactory load factors. This
resulted in "too mush dictation . . .'of advertising form and
content“ on the local level, which tended “to reduce the
creative effort to 0what the competitors are doing.”2

Another trouble area was the instability of management
itself. In less than three years, KaE and.Capital°s adver-
tising director worked‘with five different sales managers,
“each with markedly differing advertising views.“3

The fourth problem pinpointed by'West as affecting
Capital's advertising effectiveness was the financial con-
dition of the airline. The continuing crisis “caused occas-
ionally sharp budget adjustments, [which] increasingly . . .
prevented adequate long-range planning and led top management
to expect more from advertising than reasonable judgment
should expect."4

How effective was Capital‘s advertising? Over-all, it
seems to have done little either to postpone the airline's
final undoing or to hasten it. On a campaignéby-campaign
basis, it seemed to have helped Capital a great deal at times,

and done no worse than have no measurable positive effect at

other times. The carrier could.be charged with mishandling

 

3 4
1Ibid. 2Ibid. Ibid. Ibid.

 

214
at least three major campaigns-eAircoach, Constellation, and
Viscount. It could be criticized for putting far too much
effort into promotions for charter andero p flights, which
traditionally accounted for only 2% of total revenues. And
its inability to meet competitive expenditures in individual
key markets could be questioned.

But there can be little doubt that Capital's adver-
tising department and agencies did some amazing things down
through the years with funds that were inadequate by competi-
tive standards, and considering the nature of the operation
that the advertising was supposed to sell to the public, per-
haps it did.not fair too badly after all. As Bob west said:

Advertising, of course, is no panacea. However impor-

tant we believe it to be, it is only one factor in the
total marketing situation.

 

1Ibid.

APPENDIX

215

 

 

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BIBLIOGRAPHY

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"Air 'Coaches'," gusiness week, January 15, 1949, pp. 38-39.

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Balentine, Richard. “Capital Educates'workers to Cut Expenses,"
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219

220

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221

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W
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222

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224

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225

Appual Repgrts
Capital.Airlines. Appual Repgpps,'l948-l959.

Capital.Airlines {Pennsylvania-Central Airlines Corporation].
ua e rt 1

Pennsylvania-Central.Airlines Corporation. Appppi_§ppg£pg,
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United.Air Lines. Annual Repprt: 129 .

Qpher Spurcpp

Capital Airlines. "Biography of a Pioneer--The Story of an
Airline." .A Public Relations Department press release.
No date . (Mimeographed. )

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supplied. July, 1963.

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Capital Airlines account executive, John W. Keeshan.
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Media Records: Newspappr and.Newspapgr Advertisers. New York:
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Standard Advertiping Register. Vols. XXIAXXVII. New York:
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United.Air Lines. Material supplied.by‘William.D. Smith
(Washington, D. C. ), June, 1961: Rdbert J. McBride
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