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AirTran Ex-CEO: 'Scary Period' for Industry

Ted Reed

CHARLOTTE, N.C. -- Looking back, Joe Leonard says he was misled when he was hired at AirTran(AAI), because somebody told him the airline had close to $30 million, when the amount was actually about $10 million.

"I did a bad job of due diligence," says Leonard, who stepped down May 31 as chairman of the carrier he joined in 1999. "If I had done a proper job, there is no way in the world I would have come here." Leonard will turn 65 on July 10.

Things worked out pretty well, though. When Leonard arrived, AirTran was truly in sad shape, but today the carrier "is rocking along," he says.

"It has the best fleet in the industry, morale has never been better, and [CEO Bob Fornaro] is ready," he says. "There's no point in me sitting there and blocking his progression. Nine and a half years is a long time for a guy with a three-year attention span. I'm best when things are sort of chaotic and need major change."

Though AirTran has seen its fortunes take a turn for the better, the same can't be said for the industry in which it operates, given record high fuel prices. "This is a pretty scary period we are going into right now, much worse than 9/11," Leonard says. "That was an event where we knew the outcome, assuming there wasn't a second event. This is a continuum."

The only valid response, Leonard says, is an industry capacity reduction of 15% to 20%. He praised AMR(AMR), which plans an 11% to 12% domestic cut. "American is responsible," he says, while others, which he didn't name, are not. Last week, UAL(UAUA) and Continental(CAL) also announced double-digit capacity decreases.

During 30 years in the airline and aerospace industries, Leonard's most visible posting besides AirTran came at Eastern Airlines from 1984 through 1990. He worked for chairmen Frank Borman and Frank Lorenzo, and he was viewed as Borman's heir apparent until Lorenzo bought the carrier in 1986.

Leonard learned a lot at Eastern. One lesson, he says, was: "Challenge every lie -- never let a lie stay out there."

He's speaking from experience. From the contentious labor climate at Eastern emerged the malicious rumor that Leonard bore responsibility for American's 1979 Chicago crash, which killed 279 people after an engine fell off a plane. The cause was damage to a pylon that occurred during an engine change, in which a forklift was used. Somehow, Leonard was assigned blame, along with the nickname "Forklift Joe," even though he joined American in 1982, three years after the crash occurred. Still, the nickname stuck.

Leonard also learned "the power of will," from Borman and deal-making from Lorenzo. "Borman willed Eastern's existence long after it should have failed," Leonard says. "Failure wasn't in his psyche."

Meanwhile, years later at AirTran, two deals with Boeing(BA) were among Leonard's biggest achievements.

Soon after the Sept. 11, 2001, attacks, when air traffic had plummeted, Leonard went to Boeing and asked for faster deliveries of Boeing 717s. It seemed counterintuitive, but the goal was to preserve cash. After all, flying new airplanes meant avoiding expensive maintenance on aging DC-9s.

The benefits didn't end there. AirTran had started taking two or three 717s a month in 1999, and the speedup changed its image. Instead of a ValuJet successor with an aging fleet, it suddenly became a scrappy competitor with new airplanes. "It amazed us," Leonard said. "We killed off the old brand and built a new one."

Newer airplanes meant lower costs, a trend that has continued ever since.

In 2003, a low point for aircraft sales, Airtran moved again, ordering up to 100 new 737s. "We got a really good deal," Leonard says. "We know it because today, we are selling airplanes at a substantial profit."

Leonard knew Boeing, where he went to work as a flight engineer after graduating from Auburn in 1965. He subsequently filled executive jobs at Northwest (NWA) twice, at American and at AlliedSignal, rising to CEO of marketing before leaving a safe job at a strong company to join AirTran.

In his first stint at Northwest, Leonard worked under chairman Donald Nyrop. He says Nyrop "taught cost control with religious zeal," approving every expense over $19.95, and "was a really tough guy from the old school. Praise from him was a lack of criticism.

"To me, that's the way it's supposed to be," says Leonard, who still lunches annually with Nyrop, now in his mid-90's. "I have high standards and expect people to deliver."