ENTERPRISE Battle for Love

Legend Airlines’ T. Allan McArtor is pumped.

“We aren’t just starting an airline,” he declares. “We are also creating a cause, taking on the establishment, and navigating the local B.S. This is the most exciting aviation opportunity in 30 years.”

Talking nearly nonstop for almost four hours over dinner at Cafe Pacific in Highland Park Village, the ambitious McArtor outlines his vision of a scrappy, new airline that would fly out of Dallas Love Field, offering the oppressed business traveler first-class service at coach prices.

McArtor, 55, clearly savors the challenge Legend would pose to an entrenched competitor, particularly American Airlines, with its fortress hub at DFW International Airport. For an added frisson, the boss at American, Robert Crandall, is a personal acquaintance.

Waving a red silk handkerchief as he speaks, McArtor describes local business travelers as angry and rebellious over the recent runup in walk-up airline fares out of DFW. Local business people who need to be somewhere else right away can pay more than twice as much as their counterparts in Houston to reach that destination.

For example, a last-minute American Airlines fare from DFW to Chicago cost a whopping $1,156 in January, much higher than the S510 paid for the lowest Continental walk-up fare from Houston to Chicago. American charged $1,142 for a walk-up ticket from DFW to Phoenix, but only $538 from Houston to Phoenix.

The root cause for the escalating fares, says McArtor, is the artificial clamp on competition imposed by the 19-year-old Wright Amendment, originally designed to nurture the growth of newly built DFW.

However, insulated from low-price competition by the likes of Southwest Airlines, American has been “leveraging their monopoly at DFW Airport on the backs of business travelers,” McArtor maintains.

Now that a business backlash against the neighborhood bully is emerging, he says. Legend is poised to fill its roomy seats with rebellious suits.

McArtor already has pulled one stunning coup-persuading Congress to support Legend’s proposal to establish long-haul passenger jet service out of Love Field.

Now the former fighter pilot says he hopes to inaugurate that service this year, using retrofitted. 56-seat DC-9s in a top-notch operation patterned on Milwaukee-based Midwest Express, a favorite with business travelers. McArtor believes thai the briefcase set will flock to an airline that provides first-class service only, with two roomy leather seats per row and gourmet food, out of convenient Love Field. He says he plans to charge coach-class prices or less for the premiere service.

Southwest Airlines so far has remained “passionately neutral” about opening Love Field to other carriers and to the Legend plan, says spokesman Ed Stewart. But American, which has a 73 percent share of the DFW market, vehemently supports the status quo, as does the city of Fort Worth, which is suing Dallas and Legend Airlines to spike any threat to DFW’s continued prosperity.

Bob Crandall, a tough, aggressive, and outspoken competitor, has responded to the Legend threat as if McArtor had waved the red handkerchief directly at him. American is waging a broad-front media campaign, buying television, newspaper, and radio advertisements in an effort not only to ground Legend, but also to combat a spreading sentiment within Congress to eliminate all restrictions on air service at Love Field.

The airline has issued sophisticated direct-mail appeals and even hits the bricks to spread its word. On Jan. 17, the day Dallas voted in favor of a new downtown arena, American representatives appeared at polling sites, where they distributed “Campaign for Local Airport Control” literature tucked into “Yes! Let’s Build It” brochures.

“Just mind-boggling,” said Dallas City Council member Donna Blumer of the election-day blitz. “It looks like Bob Crandall is beating the bushes everywhere he can.”

American characterizes the opening of Love Field as undue meddling by Washington in local affairs, as well as a threat to the area’s continued economic well-being. The ads warn that Legend’s advent at Love would sap DFW Airport, which American calls “the engine driving our phenomenal growth, bringing major corporations, people, and jobs to the area.”

At a press conference, Crandall expressed his company’s view succinctly, “Opening Love Field will cause the DFW hub to shrink and will reduce the travel options of everyone in the Metroplex,” he asserted. “Two small airports won’t support as much service as one big one. Moreover, since airlines- and not airports-set fares, opening Love Field will not mean lower air fares.”

Crandall was not available to comment for this article.

McArtor calls American’s counterof-fensive a “classic barrage of propaganda. When you have a monopoly, you will go to any length.”

Besides waging a war of words, American has pursued a strategic campaign, too. For example, the airline grabbed what used to be the old Braniff gates at Love Field from the Pritzger family of Chicago before Legend could secure them.

“Bob,” says McArtor of Crandall (whom he has known for more than a decade), “is a consistent personality. He will tell you right to your face, and maybe in your face, what he thinks.”

But, McArtor is quick to add, “I am an old fighter pilot, and I have been shot at by real bullets.”

American’s furious response to the Legend challenge is in some ways hard to figure. American is one of the nation’s largest carriers, with almost 650 planes, $16 billion in annual revenues, and 85,000 employees arrayed against tiny Legend, which has no gates, no planes, not even any passengers yet.

Indeed, the start-up airline is working from a modest business plan. McArtor wants to rent six DC-9s from Triton Aviation Leasing in California and refurbish them at Dalfort Aviation. If it can raise the necessary $32 million and be certified to fly by the FAA, Legend hopes to pair three cities with Dallas Love Field by this summer.

“American Airlines complaining about Legend is like Sea World complaining about a bait shop,” says Bruce Leadbetter, who co-founded Legend with McArtor. “What Legend does will hardly show up on their radar screens.”

Nevertheless, the folks at Legend Airlines-all 10 of them-are girding for a corporate fight to the death. Each new hire is handed a green Army combat helmet emblazoned with the silver and gold stars that are part of Legend’s logo.

“This is a combat mission,” says Mc-Artor, a fighter pilot in Vietnam. “We have people trying to kill us.”



BRUCE LEADBETTER IS PROBABLY best known in Dallas aviation circles for arranging the Pritzgers’ 1984 investment in then-bankrupt Braniff Airlines, a dollar infusion that revived the chronically ailing carrier for a few more years.

By late 1993, after a 1988 bankruptcy for Braniff, the Pritzgers’ stake consisted largely of its airline maintenance business at Love Field, renamed Dalfort Aviation.

Leadbetter bought Dalfort from the Pritzgers and struggled to turn the business around. He failed in a bid to convince McDonnell Douglas to assemble narrow-body passenger jets at Love and was forced into massive layoffs recently when Dalfort’s largest customer, United Parcel Service, yanked its business.

With Dal fort reduced to a fraction of its former size, Leadbetter then hit on a longshot solution to filling up his shop. If a new airline could come to Love Field, he thought, then Dalfort could service and refurbish its equipment.

Of course, there was the Wright Amendment with which to contend.

Generally, the Wright Amendment-sponsored in 1979 by Jim Wright of Fort Worth, then speaker of the House-prevented Love Field’s only commercial passenger airline, Southwest, from providing direct air service from Love Field beyond four contiguous states: Oklahoma, Arkansas, New Mexico, and Louisiana.

But Leadbetter thought he saw some wriggle room, a loophole in the Wright Amendment that specifically permits 56-seat capacity aircraft to fly anywhere in the country from Love. Such a plane- with about half the standard seating capacity-was not considered profitable for long-haul operations.

Leadbetter, however, figured he could half fill a DC-9 with cargo and half fill it with passengers and make a profit.

He talked about the idea with Allan McArtor, whom Leadbetter had gotten to know when McArtor was consulting to Express One, a Love Field charter carrier which had run afoul of the FAA.

At the time, McArtor was in Memphis, Term., where he was running an investment consulting business. After talking to Leadbetter, McArtor decided to drop everything and work on Legend full time. He quickly took over as point man for the operation.

McArtor calls Legend the ideal challenge for him. He loves a good fight-he claims he is a better attack general than occupation officer-and he is intimately familiar both with the airline industry and with Washington, D.C., where his first major battles would be fought.

As one source close to the airline industry exclaims: “What a perfect foil for Bob Crandall-a good-looking flyboy.”



T. (FOR TRUSTEN) ALLAN MCARTOR, TRIM with intense blue eyes, was raised in Webster Grove, Mo. His father was a math teacher and sports coach. His mother taught physical education.

McArtor attended the Air Force Academy in Colorado Springs, Colo., where he enjoyed a brilliant career. Not only was he quarterback of the Academy football team as well as first-string catcher on the varsity baseball nine, but he also served as Academy wing commander-the rough equivalent of student body president.

While at the Academy he also met and married Grace Mitchell, a University of Colorado student. Thirty-three years later, Allan and Grace McArtor remain married and have two sons, Scott and Andrew, as well as two grandchildren.

After graduation in 1964 with a degree in aeronautical engineering and a short stint flying F-104 Star Fighters in Florida, McArtor was dispatched to Vietnam. He flew 200 reconnaissance missions over enemy territory and was decorated 10 times. His medals include the Distinguished Flying Cross and the Silver Star for Heroism.

After Vietnam, the Air Force sent McArtor to Arizona State University in Tempe, Ariz., for a master’s degree in engineering mechanics. He graduated with honors and later taught the subject as an associate professor at the Academy.

He later flew for (wo years as a member of the U.S. Thunderbird aerial demonstration team, but then personal disaster struck. The McArtors’ five-month-old daughter. Kelley Leigh, was diagnosed with brain cancer.

He quit the Air Force and moved his fam-ily to Memphis, in order for Kelley Leigh to be treated at the acclaimed children’s cancer center, St. Jude’s Hospital.

Kelley died eight years later.

“It is a revealing insight into Allan’s character,” says Fred Smith, founder of Memphis-based Federal Express and one of McArtor’s best friends. ’”He loved the Air Force, and he gave it up in order for him to try to help his daughter. It showed his priorities were right.”

In Memphis. McArtor the fighter pilot began a masquerade in pinstripes. His first job was at a private merchant bank, which he says consisted of two guys and a typewriter. Later, Fred Smith hired him at Federal Express, where he eventually became senior vice president of telecommunications, heading up the communications satellite sector. That brought McArtor to the attention of Transportation Secretary Elizabeth Dole, who in 1987 appointed McArtor head of the FAA.

“It was the most rewarding and frustrating job I have ever had,” he says. McArtor helped expedite the regulatory approval process for his friend Ross Perot Jr.’s Alliance Airport project in Fort Worth and also helped secure funding for the FAA control tower at Alliance.

McArtor “is a remarkable individual with a lot of drive,” Perot Jr. says. “He supported us very well through the aviation circles.”

After a two-year stint with the FAA, McArtor returned to Federal Express, first as senior vice president of air operations, then as director of the new Federal Express Aeronautics Corp. affiliate, where he soon discovered he’d have to stand in line for FedEx capital resources. So he shook hands with Fred Smith in 1994 and started up his own consultancy in Memphis.

McArtor’s post-FedEx incarnation as a consultant was not his favorite time. He calls these his “wilderness years.”

“I sat on boards of directors trying to find the next thing that felt good and that not only would I enjoy, but make money at,” he explains. ’”I had a half-dozen irons in the fire-a lot of big ideas that didn’t pan out the way I wanted them to. 1 spent a lot of money and a lot of time.”

McArtor shopped for all kinds of high-tech ventures until Bruce Leadbetter came calling in 1996. Ever since, his business life has been devoted to making Legend Airlines a reality.

The challenge holds a special allure for him.

“It offered everything I was looking for.” says McArtor.

“It was an enormous challenge. It offered the growth. It was a chance to build something that would meet my standards of excellence.”

LEGEND ACTUALLY WAS NOT THE PART-ners’ first choice name tor their new airlines. Their first choice was Contrails. However, as McArtor explains, people confused Contrails with Conrail, the railroad, so a new name was needed. Casting around for something that would convey just the right sense of luxury and uniqueness, they hit on Legend.

That was the easy part.

The battle to build the airline began two years ago, when Bruce Leadbetter asked the U.S. Department of Transportation if large planes such as DC-9s retrofitted with just 56 seats would comply with Wright Amendment requirements.

That autumn, DOT said no. In order to fly long-haul out of Love, said the feds, an aircraft had to have a designed capacity of 56 seats.

Leadbetter and McArtor were stunned. Among other things, the ruling essentially eliminated from consideration all American-designed aircraft. Only the Canadians and Brazilians built jets to those specifications.

Nevertheless, the partners went on to found Legend in late 1996 and then headed for Washington, D.C., to kick up a fuss.

McArtor, who had acquired some political savvy as FAA administrator, knew his way around Capitol Hill, where he went to work with his son, Scott, 27, lobbying to loosen, or revoke, the Wright Amendment. The timing could not have been better.

Some members of Congress, notably GOP Senator Richard C. Shelby of Alabama, had grown impatient with rising walk-up air fares. These legislators were, and are, pushing to increase airline competition, and thus lower fares.

With airline ticket prices having soared by nearly 40 percent in the last two years, according to American Express Travel, the business community had grown restive, too.

One of the first allies they made was Sen. Shelby.

“This obscure, oppressive, and outdated amendment served its original purpose long ago and now only serves to punish the traveling public by restricting competition,” said Shelby of the Wright Amendment last August. ’This is an issue of interstate commerce and competition in the free market.”

Shelby, whose business constituents in Alabama have frequent occasion to fly through the Dallas-Fort Worth area, cited reports that air fares in and out of DFW increased 37 percent last year, making them among the highest in the nation.

For example, he said, a typical coach-rate flight from Birmingham, Ala., to Dallas, with five days advance booking, was $920 on American Airlines and $903 on Delta. However, the same ticket from Birmingham to Houston cost just $309.

With Shelby’s support. Legend carried the day. In October, Congress approved an amendment attached to a transportation funding bill that allows Legend, or any other commercial carrier, to fly long-haul out of Love Field in planes retrofitted with 56 seats.

Southwest Airlines also may now fly directly from Dallas to three new states: Alabama, Mississippi, and Kansas. As a result, by mid-January, walk-up fares from DFW to Birmingham had dropped to as low as $386.

Sen. Shelby says he will now work toward outright repeal of the Wright Amendment.

AMERICAN AIRLINES, STOUTLY SUPported by Texas Republican Sen. Kay Bailey Hutchison, suffered an unaccustomed setback.

“We obviously have a big stake in this,” said company spokesman Al Comeaux, who declined to specify how many lobbyists American threw into the fray or how much money the carrier has spent fighting the issue.

Now, the battle moves to the courtroom.

After the Wright Amendment was changed, Fort Worth sued Dallas in state court, arguing that Dallas must meet its promise to protect DFW Airport by limiting air service at Love Field. Legend Airlines and Dalfort Aviation-which Bruce Leadbettter recently sold to a Singapore firm-are also named in the suit.

Dallas has countersued, arguing that it cannot supersede federal law. Unless a settlement is reached-which many observers doubt-the issue will go to trial in state court in Fort Worth. Final resolution of the legal tangle could take years.

Meanwhile, Legend Airlines remains an unrealized dream. McArtor must raise the $32 million he estimates he will need to get the airline off the ground. Plus he needs to lease his planes, staff up the operation, and secure FAA certification to fly.

Doubters say that even if McArtor can find the money, it is an open question whether his little fleet of refurbished DC-9s will generate sufficient income to make Legend Airlines viable. They point to the deaths of similar all-business airlines, such as the old Midway Airlines and McLain Airlines, as well as the high overall failure rate for start-up airlines.

Others say they’d never underestimate T. Allan McArtor.

“Allan McArtor is extremely highly regarded throughout the industry,” says Kevin Mitchell, president of the Business Travel Coalition. “I don’t believe he will have a hard time finding money.”

McArtor, who is working with the Tennessee-based investment banking firm of Morgan Keegan, says he already has firm commitments from individual investors for about half the S32 million he needs.

He characterizes them all as substantial investors but is unwilling to name any of them.

McArtor expects to have a comfortable financial cushion beneath him when, as he believes. Legend Airlines becomes a reality.

“We could start with half that much,” he says, but “one of the greatest risks is to be undercapitalized.”

He hopes to have all funds in hand by the end of March and to have completed FAA fitness tests for air certification by this summer.

Although Dalfort Aviation has been sold, the new owners, Singapore Aerospace, say they plan to refurbish and maintain Legend’s planes as Bruce Leadbetter, now Dalfort CEO, originally had envisioned that he would.

McArtor also is assembling his management team, which he says will be “high energy, high talent, and high commitment.” If everything goes as McArtor plans, he hopes to start looking at pilot and other air operations staff résumés by the end of March. Under present expectations, Legend would take off this summer.

But to where?

McArtor doesn’t yet know or isn’t saying. He and Leadbetter indicate their target markets will be mid-sized cities or underserved big-city markets with close-in airports such as Love. Possibilities include Rochester, N.Y.; Memphis; Indianapolis; Burbank, Calif.; and Chicago’s Midway Airport.

He says that eventually he wants Legend to serve about 15 destinations, lease as many as 30 planes, and employ 3,000 people.

The demand, says Leadbetter, is there. When Legend sent out a survey to gauge interest, the response was impressive.

“It almost turned into a referendum on the Wright Amendment,” Leadbetter says.

Other surveys have indicated about two-thirds of the people in Dallas-Fort Worth favor repeal of the Wright Amendment and an increase of air service at Love Field.

“There is pent-up demand for this type of service,” says Mitchell.

Meeting that demand won’t be easy. Legend has many obstacles yet to overcome. Win or lose, however, McArtor and his little band of intrepid warriors-helmets and all-are prepared to put up a hell i it a tight.

“I am kind of a sucker for a big challenge,” he says.