The link to a video of Bob Crandall on the Charlie Rose show speaking to airline industry issues, and the bankruptcy at American Airlines, spurred some comments from our readers. The most interesting comment came from a Doug Stephan, whose comment is reproduced at the end of this post.
When we co-owned Commercial Aviation Report (until recently called Commercial Aviation Online by Flight Global, which became the fourth owner of the company), we resided in Dallas in Bob Crandall’s backyard at American.
Naturally the proximity gave us many Crandall stories. Stephan’s comment spurred us to remember some. We share a few with readers today.
Crandall was, without a doubt, one of the greatest CEOs in global aviation, and we don’t make this remark lightly. He was profane, aggressive, controversial and seemingly callous. Without question, he was brilliant. Here are some of the stories we have about Bob from our first-hand observation. There is no particular order to this list.
Darth Vader has feelings
Back around 1992, Crandall introduced “Value Pricing” in an attempt to simplify a very complex fare system that cost airlines untold money making fare changes. It was basically an attempt to adopt the then-simple Southwest Airlines fare model of peak and off-peak for the more complex First/Coach classes at what were then known as “major” carriers.
This came at a time when 40% of the US capacity was in bankruptcy following the 1991 Persian Gulf War. Value Pricing took existing fares and cut them dramatically: if memory serves, about 30% for first class and 40% for coach (don’t hold us to these numbers). Crandall fully expected competitors, especially those in bankruptcy, to attempt to undercut these fares. He warned publicly, at a press conference announcing these fares, that AA wouldn’t be undercut. If any airline attempted to do so, he would move the entire fare structure to match.
Airlines were appalled. The fare cuts took yields already depressed from the Gulf War and further lowered them. Several airlines thought AA was simply trying to drive them out of business. Northwest Airlines would shortly file an anti-trust lawsuit against American (in, of all places, Galveston, TX, which didn’t even have airline service but which was widely considered to be a plaintiff-friendly forum).
Carl Ichan then owned TWA, in bankruptcy (as we recall, but if not shortly would be), and his business acumen when it came to airlines was never rated very high. He didn’t take Crandall at his word and he lowered fares below Value Pricing. Crandall, if nothing else for all his foibles, said what he meant and meant what he said. He promptly lowered the entire fare structure. (See, It’s My Airline and I’ll Do What I Want To, below). NWA sued and Continental and TWA may have joined the suit–30 years later, we don’t remember this fine detail.
American promptly labeled the the lawsuit without merit (no surprise there). But the potential damages if NWA prevailed would have ruined American. It was top secret but widely discussed that AA had Chapter 11 papers ready in case it did lose.
Well, they weren’t needed. When the case finally went to the jury, the jurors had lunch, selected a foreman and returned a not guilty verdict in something like 40 minutes. It was a stunning win for American, which prompted called a tele-press conference to gloat.
During the course of events, Crandall had been called just about every nasty name in the book, including (basically) evil incarnate. All of us reporters, used to Crandall’s take-no-prisoners style, figured that didn’t bother Darth Vader (Star Wars was still big at the time). But a reporter asked Crandall on the phone how it felt to be the target of such vitriol.
“Well,” Crandall said in that distinctive nasal, New Jersey (his native state) twang of his, “my feelings were hurt.” That was the last thing we expected from the iron man.
There was an audible gasp and some nervous laughter. “Darth Vader’s feelings are hurt. You got to be kidding,” some of us on the call remarked to each other afterwards.
It goes to show. Ya just never know.
It’s my airline and I’ll do what I want to
In connection with the same Value Pricing scheme, travel agencies were then the primary means of booking tickets on airlines. When Crandall sharply lowered the fares, he also sharply lowered the agency commissions. When he further responded to TWA’s fare cut, the commissions were sliced even more. This particular sale ended on a Sunday.
On Monday, a national travel agent convention began in Dallas and Tuesday morning, the keynote was none other than Bob Crandall. We spoke with Dan Reed, then the airline reporter of the Ft. Worth Star Telegram, who attended the Monday session and reported that the agents were steaming and ready to lynch Crandall Tuesday morning. We went to this session to see the fun. We did but not in the way we expected.
Crandall gave what we called a standard Dale Carnegie speech (he had taken lessons from this outfit), complete with standard inclusions of jokes that really weren’t very funny. Then he went to Q&A, at which he absolutely shined as related in Stephan’s post below.
The first two questions were cold but polite. The third was dripping in hostility. “How can you justify cutting prices like you did?” Crandall was asked. He didn’t blink, he didn’t miss a beat. Blithely waving his hand dismissively, Crandall replied:
“It’s my airline. I don’t have to justify it.”
How can you argue with that? The hostile agents didn’t lay a glove on him. Crandall finished his Q&A, received polite if not enthusiastic applause and strode from the stage up the main aisle unscathed. It was a masterful performance.
He’s no Darth Vader after all; nor a Hitler, either
American’s battles with the labor unions were legendary under Crandall and remain so to this day. As CEO, Crandall was the natural target all union wrath. Crandall introduced the so-called B Scale (which, in an interview we did with him, denied that’s what it was called) with pilots. This lowered cockpit costs for new hires and spurred the dramatic fleet expansion that propelled American to become the largest airline in the free world at the time. Pilots went along on the theory more airplanes meant more jobs and more rapid advancements, but they hated B scale anyway.
Following one particularly contentious period with labor (we don’t recall if it was with the pilots or the even more militant flight attendants union), we were invited on a local Dallas talk radio show hosted by a conservative. Oddly, he took the position on the side of the unions (it turned out he did so more because he was anti-Crandall for some reason than pro-labor).
What was not well known outside of American was that Crandall’s senior executives sometimes took a much harder line about negotiations than did Crandall, who was more inclined to try and meet labor somewhere in the middle, though Crandall’s definition of “middle” sometimes was at odds with the Dictionary. (It also wasn’t widely known that Crandall generally was a Democrat, not a Republican. He lost an appointment to the Amtrak Board when the team of George W. Bush discovered Crandall had donated to Al Gore.)
Crandall believed in job security, preserving pensions and he disdained the callous use of bankruptcy employed by Frank Lorenzo at Continental and Carl Ichan at TWA to force concessions on employees. Crandall preferred the likes of the B scale and higher productivity to beating up employees.
About mid-way through the radio show, in which we were commenting generally negatively on several Crandall policies, the host likened Crandall to Hitler for his public image approach to AA employees.
We found this comparison to be extraordinarily offensive. Comparing Crandall with one of history’s greatest monsters still offends to this day. Besides, Lorenzo and Ichan treated their employees far worse than Crandall ever did. Not only that, Continental and TWA fired thousands of workers in their bankruptcies and American created thousands of new jobs.
To this day, we wish we had verbally beat the crap out of that radio host. Instead, we meekly said, “Weeeelll, that’s a little strong.” From that point forward in the program, we defended Bob for his labor and strategic policies. We still wish we had told the host to go fuck himself and hoped the five second delay wasn’t working that day.
Note to Readers: any adverse comparisons in Comments will be immediately deleted.
I did it my way–off key
Crandall has a great sense of humor and it’s often self-deprecating. This video (of poor quality) is illustrative. Cover your ears.
Got a light?
Herb Kelleher of Southwest Airlines and Bob Crandall were Dallas-Ft. Worth’s two most famous smokers. They chain-smoked at prodigious rates. But Crandall tried to quit on more than one occasion.
For Southwest’s 25th Anniversary, Crandall did a video with Herb. Herb was in his office, ashtray overflowing not dead and lit cigarettes while smoking still another. The room was smoke-filled to the point of almost making Herb invisible. The phone rang.
“Hello?” Herb says. “No, Bob, no.” Click.
Ring. “Hello? No, I said no, Bob.” Click.
Ring. “Hello? No, dammit, Bob, I said no.” Click.
The camera switches to Bob Crandall, going through withdrawal from his latest effort to quit smoking. He’s holding the receiver to his mouth and nose inhaling the smoke emerging through the phone from Herb’s smoke-filled room.
@#$%& #$@@&*&* $%#&*@#
Although we found the radio host’s comparison to Hitler totally offensive, we’ve been a big fan of the Hitler parodies of scores of topics and personalities. We found this one to be very funny because it parodies Crandall’s well known use of four-letter words and explosive temper.
Returning to American? It will never happen
We, among others, wished Crandall had returned to American after Don Carty was forced out. Instead Gerard Arpey succeeded Crandall. Arpey, and certainly not Carty, both mentored by Crandall, were not up to the task of succeeding their master.
But Bob’s decades-long pace and dedication to American and long, long hours away from home were enough. A mutual friend relayed this story about Bob’s retirement: Bob promised his wife that once he retired from American, that would be it. She had supported Bob throughout his career and now it was his time to devote to her.
Bob Crandall is no Darth Vader. This is one hell of a guy. And we miss his leadership, his dynamic nature, and his quotability from what has now become a colorless industry.
I worked for AMR back when Crandall was CEO. I used to love attending the “Annual President’s Conference”, not just to hear Crandall’s presentation, which was always top-notch and delivered brilliantly, but especially for the Q&A session afterwards. He would take questions from the audience composed of employees performing every function in the airline, and answer every question, usually unassisted. His grasp of the details of not only AA’s business, but the Industry as a whole, was quite impressive. His reliance on timely operational data and statistics was legendary; the Crandall Reports were run early every morning.
I have to take issue with his call for partial re-regulation of the industry. First, I can assure you he wasn’t against de-regulation when it was allowing him to build the most powerful airline in the World. He did complain about overcapacity and everyone chasing market share but he never spoke of re-regulation. He’s been on that kick for a few years now, and I suspect the older he gets and the more time he spends in Marblehead, MA, the more socialist he becomes.
Second, the negative side effects of re-regulation that he sites are: 1) poor service quality and 2) abandonment of small airports / markets. As Crandall stated in one President’s conference circa 1993, “people aren’t interested in paying for quality airline service.” Over the past two decades airlines have tailored their service to fit what people were willing to buy. However, I believe service is improving (e.g., Jet Blue, Virgin American, etc), and will continue to improve, now that the industry has gotten capacity under control.
Regarding abandonment of smaller airports, is it really so bad that someone has to drive for an hour or two to get to the airport considering they now have so many more non-stop choices once they get to the airport? Prior to de-regulation the hub-and-spoke networks didn’t exist so they might have been able to fly to three destinations from their local airport.
Still, Crandall was the best CEO for whom I ever worked.