Chapter 2: The Rise of the Sun King

National Airlines was something of an anomaly in the American aviation landscape, a carrier whose fortunes seemed intricately tied to the sun-kissed beaches and vibrant cities of the East and South. From Miami’s tropical allure to the bustling hubs of the Northeast, National carved out a niche, ferrying sun-seeking travelers to their seaside escapes. Yet, the skies were crowded, and competition was fierce. In Houston, National squared off against heavyweights like Continental and Texas International; in Miami, it was squeezed by the dominance of Pan Am and Eastern. At New York’s JFK, where airlines battled for every inch of tarmac, National found itself navigating a web of rivals all eager to lure away its passengers.
Despite the intense competition, National Airlines managed to rise through the ranks, becoming the 11th largest carrier in the nation. This was no small feat for a company whose primary focus was flying vacationers to sunny destinations. With a fleet that included the wide-bodied DC-10s, National seemed to have secured its place among the clouds, at least for a time.
Yet, the airline’s specialization in leisure routes to warm locales proved to be both its greatest strength and its Achilles' heel. The looming specter of deregulation cast a shadow over the entire industry, threatening to upend the established order. For National, the future was uncertain, and the coming changes promised turbulence.
Amid Houston’s sweltering heat, a sharp-eyed businessman named Frank Lorenzo was paying close attention. As the head of Texas Air Corporation, Lorenzo had earned a reputation as a shrewd and relentless operator. Under his leadership, Texas International Airlines, once a small intrastate carrier, had transformed into a lean, profitable low-cost airline, nipping at the heels of its chief rival, Southwest Airlines. But Lorenzo’s ambitions extended far beyond Texas. He saw National Airlines, with its extensive coast-to-coast network, as the next jewel in his crown. The imminent reality of deregulation only intensified his focus on acquisition, and the announcement of a potential Pan Am-TWA merger underscored the urgency of his mission.
The news of Lorenzo’s interest in National made a splash across the industry. On July 11th, 1978, Texas International Airlines quietly acquired just under 10% of National’s stock. Less than a month later, that stake had ballooned to 25%, making it abundantly clear that Lorenzo was determined to take over the intercoastal airline.
Bud Maytag, National's owner, was determined not to surrender his company without a struggle. The idea of a hostile takeover was unprecedented in the airline industry, and Maytag was acutely aware that his smaller but valuable airline was an attractive target for larger competitors. Resolute in his effort to fend off the Texan threat, Maytag began seeking a white knight to rescue his airline, turning his gaze toward a fellow Miami resident.
Frank Borman, the astronaut-turned CEO of Eastern Airlines, had been observing the takeover attempt from a distance. That distance closed when Maytag approached him with a proposition: could Eastern Airlines be the savior National needed? Two months after Texas Air Corp began acquiring National stock, Eastern submitted a competing offer. Bormann was enticed by National’s lucrative north-south routes along the East Coast. Despite this, Texas Air publicly vowed to defend its claim to National.
However, Eastern’s bid to take over National was far from certain. Some analysts doubted whether Eastern, already struggling financially, could survive the weight of such an acquisition. The Department of Transportation (DOT) and the Department of Justice (DOJ) launched investigations into potential antitrust issues with the bid, and four months later, in January 1979, both agencies announced they would oppose Eastern’s takeover attempt. Just a month earlier, Texas Air had raised its offer, effectively ending any possibility of a deal with Eastern.
With the competition to acquire National now uncontested, Lorenzo prepared to make his final moves to close the deal. On February 8, 1979, National’s board of directors accepted Texas Air’s bid. A little under three months later, on April 29, 1979, the Civil Aeronautics Board (CAB) gave its unconditional approval of the acquisition. Accepting defeat, Bud Maytag sold his ownership stake in National to Texas Air Corp, marking the end of an era for National Airlines.
Frank Lorenzo wasted no time in taking measures to boost the airline’s profitability. National had some of the lowest overhead costs in the industry after years of strikes and pay cuts under George Baker and Maytag. However, Lorenzo continued the tradition, implementing a 20% salary cut across the board. After tense negotiations with unions, they begrudgingly agreed to the cuts on the condition that no further pay reductions would be made within two years. By 1980, National had the lowest operating costs among the major airlines in the U.S. and capitalized on this by undercutting fares in the markets it served.
Initially, both Texas International and National operated separately under Texas Air. However, in July 1979, Lorenzo announced an “immediate financial and operational merger” of the two companies. One by one, the red, white, and blue Texas International DC-9s were repainted in the “Sun King” livery. National’s hub in Houston exploded with new routes, and its market share in the city skyrocketed. A struggling Continental couldn't keep up with National’s competitive airfares and began distancing itself from Houston throughout the 1980s, leaving National as the leading airline in the city.
National’s growth in Miami was even more exponential. National quickly took advantage of the Midwest-Florida markets, adding routes from Miami to cities like St. Louis, Chicago, and Cleveland. This was devastating to Eastern and Pan Am as National became the lowest-cost option for many of their existing routes. These lower fares drove up National’s passenger numbers, which helped it weather the nation’s economic slump.
Meanwhile, Braniff International Airways, over-expanded and financially strained, was losing money on its Latin American network and looking for ways to raise capital. When Braniff approached National, Lorenzo jumped at the opportunity, acquiring Braniff's Latin American routes at a bargain price. This acquisition was a strategic masterstroke, giving National a significant presence in lucrative markets like Mexico City, Buenos Aires, and Rio de Janeiro. To support these new routes, National closed the DFW hub it had gained from Texas International—competition from Southwest and American proved too strong—and reallocated the DC-9s and crews to Miami and Houston, making 727s and DC-10s available for the new Latin American routes. National’s entry into Latin America was a disaster for Pan Am, which now faced competition in a market it had long dominated. Eastern, too, found itself at a competitive disadvantage as its two Miami rivals now boasted stronger international networks.
Despite a generally successful 1982, National suffered a significant setback on July 9th when National Flight 201, a 727-200 en route from New Orleans to Las Vegas, flew into a microburst on takeoff. The aircraft was slammed into the ground and crashed into several houses in the Kenner suburb of New Orleans, killing 149 passengers, 7 crew members, and 8 people on the ground. It was the airline’s deadliest accident.
Despite these challenges, National Airlines remained resilient. Though labor relations were strained at best—Frank Lorenzo frequently clashed with unions to keep salaries low and sometimes threatened bankruptcy if contracts were not renegotiated—the airline’s fortunes began to improve. By 1983, passenger numbers had recovered, and the airline's financial health was on the mend. The acquisition of Braniff's Latin American routes proved to be a game-changer, positioning National not just as a domestic carrier but as a serious international player. The airline's Miami hub became a critical gateway to Latin America, and the "Sun King" livery became a familiar sight in airports from Mexico City to Buenos Aires.
It seemed like the Sun King was carving out his own kingdom, but it happened to be on another airline’s territory. For some airlines, this was a war. For one airline, it spelled doom.