In the early 1970s, Frank Lorenzo (MBA 1963) was CEO of Texas International Airlines, a struggling regional operation. There were whispers of change coming for the airline industry as Washington considered the pros and cons of ending regulation. “If there was a list of who would perish under deregulation, we would have been at the top,” says Lorenzo, who instead became a leader in the new era of more affordable air travel, eventually as CEO of Continental Airlines. His recent book, Flying for Peanuts, recalls that tumultuous time and the innovative decisions—from the first unrestricted low fares, “Peanut Fares,” to unfriendly acquisitions—that helped the company survive.

“In my first appearance in Congress, I testified against deregulation. I explained that it would put us out of business. At the end of the hearing, I sat down with the Senate staff, and they said, ‘Frank, we think you’re right. We think there will be a loss of some small airlines, but we also think that’s a small price to pay for bringing low fares to the consumer and to get the government out of your hair.’ And boy, when I heard that, I said, ‘We better develop another strategy.’ ”

“I had some really capable marketing folks who came up with this idea: ‘Let’s offer everyone who comes to the airport $1 fares on the first day of the month and then on up with the calendar.’ The airport was mobbed. It was a great promotional stunt that was contrary to Civil Aeronautics Board regulations. But the CAB said nothing.”

“Deregulation bred a very different kind of management. Suddenly, managers could see there were opportunities to be creative. You couldn’t be creative when you had to go to the CAB to approve taking cigars and pipes off the plane or coming up with a different low fare. And you also had an environment where airline managers were put under pressure in the marketplace from a financial point of view.”

“Reregulation has been in the air, and there’s no reason for it. To go back to the old days would not help the traveling public. It would take away many of the opportunities managers have to be creative, and it would create a massive increase in costs.”

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