Never Give Up
By Scott Dickson
Former CEO, Vanguard Airlines
In this article from his new book Never Give Up, former Vanguard Airlines CEO Scott Dickson shows how anyone can lead and survive in tough times.
On September 11, 2001, my world and the worlds of countless other leaders in the airline industry were shaken like never before. At the time, I was serving as president and CEO of Vanguard Airlines, a small and struggling carrier based out of Kansas City, Missouri. I was in New York City on that terrible day, and as soon as I realized that our nation had come under terrorist attack, I knew that not only small airlines like Vanguard but the entire airline industry would face new and unique challenges the likes of which no one in my industry had ever seen.
The few days following the terrorist attacks passed in a blur. I was away from my home base in Kansas City, but I was still busy. I operated a pseudo command center out of my hotel room in New York, conferring regularly with my staff about all the new security directives the FAA and other government bodies had handed down. It seemed that we were receiving new directives every few hours, which only added to the stress of dealing with the events of the past few days.
During those times when I ventured outside my hotel, I saw a lower Manhattan that looked and sounded eerily different from what it had looked and sounded like just a few days earlier. If you've ever been on the streets of Manhattan during the busy part of a typical day, you know that they are usually teeming with many thousands of people heading in all directions. But this, of course was not a typical day. The streets were nearly empty and it was much quieter than usual. About the only sounds I heard were of military aircraft flying overhead, barely above the tops of the New York City skyscrapers.
On Thursday of that week, two days after the attack, the FAA's cease-flying order was partially lifted, and I was able to board our majority stockholder's private plane and fly from New York back to Kansas City. My secretary picked me up at the general aviation terminal at Kansas City International, which was only a few minutes from Vanguard's offices.
When I walked into the Vanguard Airlines office, I was met by the greetings of officers and staff members, who were all greatly relieved that I was safely home, and by what seemed like an unending string of questions about what I'd seen and heard. Rather than repeat the story a dozen times, I gathered our officers and key staff into my office to talk to them about my experience and what it meant to all of us. When I called that meeting, I did so knowing that our airline (like all other commercial carriers) faced incredible and immediate challenges. We would have to deal with the needs of our employees as well as the needs of hundreds of customers stranded at our hub in Kansas City and elsewhere around our network.
That morning, I heard all kinds of questions but had few immediate answers. Where would our stranded customers stay and how long would they be stranded? When would the FAA allow us to resume flying? What kind of future does Vanguard Airlines face?
Fortunately, one of those questions was answered the following day, when the FAA allowed airlines to resume flying. Now, we would be faced with the daunting task of recommending thousands of passengers with new flights. The job would be Herculean, but the Vanguard employees were up to it, and within a few days the backlog of customers was cleared out and people got to where they needed to be.
While we were successful in our efforts to serve our passengers in the wake of September 11 attacks, we at Vanguard still faced mounting stress and never-ending questions over the following days, weeks, and months.
An Industry in Chaos
The terrorist attacks did significant damage to the American economy, already headed into recession at the time, and we in the airline industry felt that damage immediately.
In the days following the attacks, the industry as a whole lost millions of dollars a day as people, many afraid to board a flight and many facing uncertainty in their own financial lives, mostly stopped buying tickets. The airline industry is what is called a "cash-flow business," meaning that most airlines rely heavily on daily cash disbursements from sales made on Web sites, through reservation centers, and through travel agencies. With this cash flow mostly dried up, airlines struggled to pay employees, contractors, and vendors of key services, such as fuel companies. All of us in the industry knew that the loss of any of a number of key vendors' services would cause a shutdown of all or part of our networks.
At Vanguard, dramatically reduced sales, customer service issues prompted by the security regulations, vendor demands for payments, and an enormous reduction in the desire of investors to put money into any airline-let alone one like Vanguard, which had a history of financial difficulties-became both daily and long-term issues.
When It All Ended
Over the ten months that followed the terrorist attacks, Vanguard struggled greatly but continued its operations. By the summer of 2002, however, the airline's financial situation worsened. We were in the midst of a good summer season; tickets sales were up dramatically. But a bizarre combination of events occurred, events that would lead to the end of Vanguard.
Around 95 percent of Vanguard's ticket sales were done through credit card transactions. The banks that processed many of these sales began to become nervous about our financial situation (we were literally surviving day to day) and required changes in the way those transactions were collateralized-that is, protected against potential default by the airline. The banks increased our level of collateralization, which meant that for every dollar we brought in through bank card sales, they held back about $1.20 of our future sales. We were, despite our high level of sales at the time, in the negative cash-flow situation.
This had been an ongoing crisis for some months, but hit a peak in the summer as our sales volume shot up. The more we sold, the more the credit card processors sought collateral. In a very real sense, our own success was killing us. We were in deep financial trouble. Our shareholders could not provide more capital, and the U.S. government refused to provide a loan guarantee.
In nearly three decades in the transportation industry, I had never experienced such an unusual juxtaposition of financial events. This pushed Vanguard to the brink of bankruptcy. Finally, on July 28, 2002, our board and senior staff agreed that we had no choice but to suspend operations and file for protection under chapter 11.
July 29 was one of the most miserable days of my life. We had to face the media and we had to announce the bankruptcy to our eleven hundred employees-people I cared for personally, people who would, at least temporarily, be losing their livelihoods-and to our frustrated and greatly inconvenienced customers. We also had to alert our shareholders, who would be facing the loss of their financial investments in Vanguard, and to our vendors and suppliers, who would also suffer loss.
Lessons from a Business Failure
I was heartbroken over the demise of Vanguard Airlines. But at the same time, I saw up close and personally how applying the principles of leading in difficult times can make times of struggle and even failure times when God does great things in and through us.
I saw how God's plan involves the building of character, faith and a life of prayer in the Christian leader and how building those things within us sometimes means going through difficult times. But I also saw how when He builds these qualities within us, He also prepares us for the next test and for the next assignment. In so doing, He shows us how to persevere and how to deal with tough times and the stress those tough times always bring with them.
Adapted from Scott Dickson's upcoming book Never Give Up (Barbour Publishing). Scott Dickson is a senior airline executive with thirty years of experience. He has worked with airlines, airports, and tourism groups on six continents and in fifty countries. Scott is currently president of Airline Partner Services and works with his team to provide value-added marketing, charter brokering, and management services to a select group of airlines in the Americas. Scott and his wife, Priscilla, currently reside in the Dallas, Texas, area. They have three adult sons and two grandchildren. They are active in their church and numerous mission outreach endeavors.
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