Episode 85 – Featuring Bob Crandall

Taking Flight By Taking Chances:  How Bob Crandall Turned American Airlines, and the Airline Industry, on Its Ear

If you haven’t gathered by now, thanks to the bevy of retail sales and non-stop music in the air, we’re firmly in the midst of the holiday season.

And for many of us, that means travel.  Maybe you’re the one traveling out of town to see relatives, or  you’re the one welcoming them into your home from all parts of the country, or the world.

For those of you who will be flying this holiday season, either for personal or professional reasons, you experienced a process that may be second nature to you by this point.  Book your ticket electronically.  Cash in some of your frequent flyer miles to defer costs, or rack up the miles for better deals down the road.  Book well in advance, or at the very last minute, to take advantage of a great price on a ticket for a seat that would have otherwise gone unused.

None of these developments would have been possible without the determination, the vision, and the intellect of Bob Crandall.

From 1980 to 1998, Bob was the President and CEO of American Airlines, and in that time, he earned every bit of his reputation as THE fiercest competitor in the airline industry, working over his competition (and often, his own people) in order to maximize the success of his company, and the return on investment for shareholders….no small feat, given that over 150 airlines had gone bankrupt since the Airline Deregulation Act of 1978.

And it was that same Airline Deregulation Act,  which removed the government’s control over fares, routes, and markets, that has come to define the legacy of Bob Crandall.  Bob had long been bitterly opposed to the Act, and when it took effect, the biggest airlines, including American Airlines, took the biggest hit. Smaller airlines popped up, charging lower fares, using non-union labor, and establishing smaller, niche-oriented routes.  Things looked grim for an airline that had been the industry leader.

But Bob fought back.  Hard.

Bob had already been a revolutionary force in the marketing department of American Airlines by the time he became President, having introduced his patented SABRE system, designed to help travel agencies use computer technology to book and coordinate flights on any airline, not just American.  He also introduced SuperSaver routes for people who book their flights with American well in advance, giving flyers discounts they never would have enjoyed otherwise, and giving American the cash flow needed to cover overhead.

Shortly after Bob took over the company’s reins, he introduced “AAdvantage“, the first frequent flyer program the industry had ever seen, as well as “AAirpass“, enabling frequent travelers to engage in long-term fixed rate contracts that guarded against future rate hikes.  He also established the first “yield management” system, using consumer data to help American monetize, to any degree it reasonably can, the empty seats (or “spoiled” seats, in industry parlance) that occur on its flights.  (After all, Bob thought, getting $50 for a seat is better than nothing, if all it costs you is the wholesale cost of a bag of peanuts and a soft drink).

The result?  Company performance that not only kept pace with the smaller, upstart carriers, but ultimately drove many of them out of business, never to be seen again. And all of this in an industry where every major carrier filed for bankruptcy, some even multiple times, with the exception of American Airlines.  (Ultimately, AMR, the parent company of American Airlines, DID file for Chapter 11 bankruptcy, but not until 2011, 13 years after Bob retired.)

On this edition of “The Raja Show”, Bob Crandall joins Raja to discuss his impact, not only on one of the most turbulent industries in American business, but also on modern day leadership as well, seeing as few, if any, business leaders got as much out of their people as Bob.  He’ll also discuss the modern state of the airline industry, and the evolution of his developments, which paved the way for how we fly today.

This is a must-listen discussion of an industry with which most of us are intimately familiar, coming from the man who made so much of it make sense.   You’ll want to be there for this one!

Episode 85