A Man for all Seasons
Bob Crandall, former Chairman, President and CEO, American Airlines
Competition has fostered great innovation and efficiency in aviation. Bob Crandall, former Chairman, President and CEO of American Airlines (AA), was the man behind many of the industry’s most enduring initiatives, including Frequent Flyer programs, yield management, and development of a global distribution system.
Born in 1935 in Rhode Island, Crandall joined TWA in 1966. He left the industry briefly in 1973, returning a year later to join AA as Vice President of Finance.
A staunch and vocal opponent of US airline deregulation, Crandall noted that not only might some destinations suffer a reduction in service due to unprofitable routes, but that many employees could lose their jobs. Crandall commented later that, following deregulation, “a lot of people came into the airline business. Most of them promptly exited, minus their money.”
AA, however, grew stronger. Crandall became President in 1982 and Chairman and CEO in 1985, having already proved influential in the development of AA’s business strategy. In 1981, he was the driving force behind AAdvantage, recognized as the industry’s first true Frequent Flyer program (FFP), even though Texas International Airlines had launched a loyalty scheme a few years earlier. AAdvantage clearly blazed a trail and today remains the largest FFP with some 67 million members.
In 1982, AAdvantage became the first program that allowed members to earn and redeem miles with an international carrier (British Airways). “The idea came from the ‘Green Stamp’ programs popular at the time,” said Crandall. “We figured if people would collect stamps, they would love collecting miles and would stick with the airline that provided them. Worked out well!”
Much of the work done on the loyalty scheme was made possible by developments in the Sabre reservation system. Although an electronic system had been in place for a number of years, it was Crandall who realized the potential for expansion and data-mining. In fact, the first members of the AAdvantage scheme were identified from the recurring phone numbers in the reservation system. Not for the first–or the last–time, Crandall’s efforts were controversial. Recognizing that travel agents most often picked the flight at the top of their screen, and certainly chose one on the first page, Crandall ensured American’s flights always headed any list. He was unrepentant about the move, the fairness of which was questioned in Congress. “The preferential display of our flights, and the corresponding increase in our market share, is the competitive raison d’être for having created the system in the first place,” he said in 1983. Although he lost that particular battle, the advance in the science of reservation systems had begun.
Crandall further developed the data in his possession, coining the term “yield management” for the method of getting the best return for any particular flight. It is estimated that this contributed billions of dollars to AA’s bottom line.
American Airlines had tripled in size by the end of the 1980s, making it possible for the company to realise a mammoth $1 billion profit in 1997. Crandall oversaw it all.
Crandall’s reputation for wringing every last penny from the business is legendary, and his ability to cut costs was equalled only by his desire to generate revenue. To wit, he calculated that removing the olive used as a garnish on AA’s salads would save the airline $40,000 every year.
Other incidents, however, stir debate even today. In 1982, he told Braniff CEO, Howard Putnam that if Braniff raised its prices, AA would too–a statement that earned him a Justice Department rebuke. He was also accused of doom-mongering to lower costs. Crandall faced two notable strikes: the cabin crew in 1993 and pilots in 1997. While the actual strike lasted only a few minutes, as President Clinton quickly invoked federal authority to order the pilots back to work while the two sides negotiated under government oversight, it was particularly bitter and made headlines when Crandall threatened to shut down passenger operations.
Crandall retired from AA in 1998 with a string of awards. In 2001, he was awarded the Tony Jannus Award for outstanding leadership in the commercial aviation industry.
Bob Crandall continues to exert an influence on the industry today through op-eds and blogs. Tellingly, he prefers to remember the team he assembled over the years rather than any specific innovation. “We catapulted AA from a relatively small domestic carrier to the largest carrier in the world, provided jobs for more than 100,000 people, led the way on Frequent Flyer programs, scheduling modifications, revenue management, and other innovations,” he said. “My biggest contribution, I suspect, was assembling a talented team and providing leadership for them to do all those things.”
Bob Crandall blogs can be viewed at: