Friday, August 12, 2022 Aug 12, 2022
78° F Dallas, TX
Publications

BUSINESS The Grounded CEO

When Lamar Muse lost his airline, he lost his son as well.
By FREDERICK E. ROWE JR. |

M. (FOR MARION) LAMAR MUSE WILL be seventy in June. It is unlikely that he will ever run another airline.

The consummate chief executive officer, Muse always had an exact knowledge of his business, treated his shareholders wonderfully, and had an intensity of presence that lifted the performance level of all those about him. But, for his success, Muse has paid a high price-a son who won’t speak to him and, perhaps, the lingering regret that is sometimes the legacy of executives who may have given too much to their careers.

I have invested in three companies for which Muse was CEO. The first two were spectacularly profitable and hooked me permanently on the stock market. The third investment was marginally profitable. It would have been catastrophically unprofitable had not Lamar Muse placed professional duty ahead of fatherly devotion.

My own father was tremendously impressed with Lamar Muse. The two had met when Muse was hired in 1965 as president of Central Airlines, a puddle-jumper operation based at Fort Worth’s Greater S.W. Airport. My father spent most of his career at TracyLocke, which in 1965 was a much smaller advertising agency, and had overall responsibility for the Central account.

What made Lamar impressive was his bearing as a tough bean counter, but also his flair for marketing-a unique combination.

Born in Houston, June 4, 1920, Lamar Muse was a child of the Depression. He spent two years at Southwestern University at Georgetown and one year at TCU, married his first wife Juanice in 1941, and served during World War II in the Army Corps of Engineers. The experience of two stints as a CPA at Price Waterhouse would later serve him well. Prior to joining Central in Fort Worth, Muse had served with Trans-Texas Airways (the predecessor of Frank Lorenzo’s Texas Air), American Airlines in New York, and Atlanta’s Southern Airways.

At Central, Muse initiated a series of promotions along the line of “buy one round-trip ticket and get one free.” There is hardly anything less profitable than an empty airline seat. An airline, as the accountants say, is a high fixed-cost, low variable-cost proposition. Muse was among the very few to capitalize on this rather obvious fact.

At my father’s suggestion, I bought Central Stock with $450 I had earned during the summer of 1966. In September of 1967, Central merged with Frontier Airlines and my $450 magically turned into $3,000. I was hooked for life.

After the merger, Lamar Muse spent the next two years as president of Universal Airlines in Detroit but soon became disenchanted with the direction the 80 percent owner was pushing this “Sup-plemental” carrier. Muse fought for the way he wanted to run the airline, lost, and left-a pattern that seems to repeat itself. Within a year of his departure, Universal was broke.

In about a ten-year period, Muse had worked for five airlines in five cities, each time moving Juanice, daughters Diane and Deborah, and son Michael. That first “retirement,*’ in 1969, may have been an attempt to spend more time with family, but by the summer of 1970, the fifty-year-old retiree was climbing the walls.

After upstart Southwest Airlines won certification to start flying, Muse contacted Rollin King, who, with Herb Kelleher, had founded and conceived of the airline. For the eight years that their relationship was to last, the match could hardly have been more successful: a hard-nosed, bean-counting marketing wizard and a couple of visionaries.

On June 21, 1971, Southwest opened for business. The operation struggled for three years. The airline was so lightly regarded that nobody bothered to ask Southwest to commit to move to D/FW Airport, then nearing completion. Southwest struggled, in innumerable court battles, to attract passengers. Southwest struggled to stay at Love Field. Southwest was an underdog fighting for its life. Gradually, Lamar Muse, who joked with the press and charmed the public, became the human embodiment of Southwest Airlines. His imagination was boundless-he sold $1.05 for $1 in change machines-and no detail escaped his scrutiny.

Southwest turned the corner in 1974, at the very bottom of the most severe bear market since the Thirties. 1974 was the year that Juanice, Lamar’s wife of thirty-three years, died of cancer, and ironically, also the year that marked the beginning of Muse’s greatest professional glory, after years of service and family sacrifice. During the next four years, Southwest Airlines1 performance exceeded everyone’s expectations. Receiving most of the credit was Lamar Muse.

Problems arose when Muse began moving his son Michael along in the company at a rate that made its board of directors and other senior employees uneasy. All of the participants have slightly different versions of what happened next. Basically, Lamar Muse wanted to open operations at Chicago’s Midway Airport and do for the Midwest what Southwest Airlines had done for the Southwest. The board of directors balked. When Muse said do it my way or 1 quit, the board accepted his resignation and the stock price of Southwest Airlines swooned.

At the urging of his public, and most importantly, his son Michael, Lamar Muse lent his name to Muse Air, which came public in June of 1981. Apparently in some father-son agreement, Lamar assented to let Michael run the airline.

At the time, Mike Muse wore a mustache like his father, adapted many of his mannerisms and colloquialisms-some of which did not quite come off-and acted like a chip off the old block. When Mike spoke, most people assumed that he was speaking for his father. That turned out not to be the case. In fact, it was soon learned that not only was Lamar’s son not listening to his advice, Michael was making decisions that Lamar felt would bankrupt the airline.

The airline continued to lose money despite the delightful service too few people remember. Finally, at the end of 1984, Lamar Muse approached maverick investor Harold Simmons for help. Simmons injected enough cash into the airline to tide it over but insisted that Lamar take the reins. Lamar Muse, in order to salvage what was left of shareholder investment, essentially had to fire his son. Michael Muse has not spoken to his father since.

In the spring of 1985, Southwest Airlines bought Muse Air for cash, stock, and warrants worth about $72 million. During the four years of its existence, Muse Air was sometimes referred to as “Revenge Airlines’* because it often seemed that the airline’s focus was on hurting Southwest rather than making money. I know that was not Lamar’s motive, and Michael won’t return my calls. I know that the failure of Muse Air and the failure of his relationship with his son hurts Lamar Muse. Perhaps, somehow, Michael and Lamar will patch up their differences.

Meanwhile, Lamar looks better than he has in years. During the winter he and his wife Barbara, whom he married in 1974, live in Palm Springs. Lamar plays golf every day. His business card reflects the delightful self-deprecating humor that has always been his trademark. It reads: “M. Lamar Muse, Unemployed Chief Executive Officer.”