FRANK LORENZO

Why Francisco Lorenzo Failed in the End



Abstract

This essay highlights the journey of Francisco Lorenzo from leading one of the largest airlines in the Western world and then filing in the end. This essay describes he took over various airlines and made a stronger and larger airline company. In this paper the strategies he used in sustaining his airline and in saving his airline from liquidizing are also discussed. The reason for his downfall is also discussed in this paper.

Why Francisco Lorenzo Failed in the End

Introduction

Francisco Lorenzo is an American philanthropist and businessman. He was born on May 19th, 1940. He is mostly famous for being a strong leader of Texas International Airline and Texas Air Corporation between 1972 and 1990. He also took over a number of the Airline of United States, which includes Peoplexpress Airlines, New York Air, Frontier Airlines, Eastern Air Lines, and Continental Airlines.

Education

Frank was born to the Spanish immigrants Olegario and Ana. He went to Forest High School and then to University of Columbia. In between, he worked at different places. In 1961, he graduated and achieved a degree B.A. in economics. In 1963, he completed his MBA from Harvard Business School (Bernstein, 2000).

Early Career

Lorenzo's initial job was at Eastern Airlines and then at Trans World Airlines, where he worked a financial analysis. In 1966, Lorenzo formed a company with Robert Carney, called Lorenzo & Carney Inc. It was a financial advisory company that specialized in business related to airlines.

Lorenzo Slowly Taking Over

Jet Capital

The Carney and Lorenzo duo formed another Airline advisory company, known as Jet Capital Corporation. The first two clients of the firm were Texas International and Mohawk Airlines. This corporation, in the offering of the public stock, rose over $1 million. The Jet Capital was asked to take over Texas international Airlines (TIA) by the Chase Manhattan Bank (Chriss, 1978).

Texas International Airlines

In 1972, Lorenzo took over Texas International Airlines through Jet Capital. This control of Lorenzo acquired him the 26 % equity interest of TIA and the voting power of 59% for $1.15 million. This deal was approved by the Civil Aeronautics Board (CAB). The company was at the brick of a financial fall when Jet Capital took over. However, the management was able to steer the company towards success by revamping, cutting down costs, dropping some routes and adding flights (Chriss, 1978).

National Airlines

From June 1978 onwards, Texas International Airlines was playing with the possibility of taking over the National Airline. TIA tried to acquire the shares of that Airline and filed documents to the United States security and exchange commission when the stakes achieved 9.2%. It was only 10% short, which could get them, the approval of the CAB. TIA then asked the approval of CAB to buy 20% stocks of the National Airline, which was six times larger than TIA during that time. Pan Am also submitted an offer for taking control of National Airline and the stocks soared up as the National Airline agreed to be acquired by ...