Bob Crandall Flies Off the Handle
In the eighties, his toughness and intensity made American Airlines the best in the business. Today, his rivals are undercutting him, Washington is ignoring him, and answers to his company’s woes are eluding him. No wonder he’s so angry.
(Page 2 of 4)
Bob Crandall was not seduced by the romance of flight. He was not an aviation buff. He does not, as they say in the business, have kerosene in his blood. He came to American Airlines in the spring of 1973 as a vice president for finance, a number-crunching job. It was a bleak time for the industry. The country was in the midst of the Arab oil embargo. Air traffic was down. The national economy was in a free-fall. American had a fleet of noisy fuel-inefficient jets and no money to buy new ones.
In the five years since Crandall had gotten his MBA on full scholarship from the Wharton School of Finance and Commerce at the University of Pennsylvania, he had hopscotched from Eastman Kodak to Hallmark Cards to Trans World Airlines, making an impression everywhere he went for his aggressive self-confidence, his stamina, and his brains. As assistant treasurer of credit and collection at TWA, Crandall would stay at the office until nine, ten, eleven o’clock at night, eating meals at his desk, always smoking, always alert. He was fiercely ambitious but unpolished. A colleague remembers how Crandall once wrote a speech, then transferred the text to a series of slides and proceeded to read the speech straight from the slides. “It was absolutely abominable,” recalls a former colleague. “I sat through the whole thing, and I thought he was a bore.” But Crandall was learning. From TWA he went to Bloomingdale’s department store, where he chafed at the sedentary pace of retail until he got the offer to join American. He was 37 years old.
In the days before deregulation, the airline industry was dramatically different. Airlines needed government approval to do everything: to obtain new routes, to add new service, to change prices. It was a safe and genteel way of doing business. With deregulation in 1978, the older established carriers found themselves suddenly facing competition from an epidemic of upstart airlines like People Express, New York Air, and Air Florida. Like most of the other carriers, American vehemently opposed deregulation. It had the wrong planes, the wrong routes, and union contracts that were far too costly. But faced with the inevitable, American eventually became more aggressive, an ideal strategy for someone as ferociously driven as Bob Crandall.
Not long after he joined American, Crandall helped develop the industry’s first computerized reservations system. It was a revolutionary step: Any consumer who wanted to buy a plane ticket had to make only a single phone call to find out the lowest price on the market. The result was that each carrier was constantly forced to match its rivals for the lowest price or suffer instant losses. Computerized reservations gave rise to the cutthroat fare wars of the eighties, in which American always seemed to come out ahead.
In an industry in which everyone competes viciously for the same piece of turf, Bob Crandall stood out as the toughest guy in the business. He lived in suburban New Jersey with his wife and three kids and took the first train to the company’s headquarters in mid-town Manhattan at six o’clock and the last train home. No golf, no martini lunches, no social lubrication—just endless work. It took him just seven years to get to the top. In July 1980, a year after American moved its headquarters to North Texas, chairman Al Casey named him president.
Under Crandall, American Airlines became the most sophisticated, the most analytical, the most heavily computerized carrier in the business. Crandall wanted quantification of everything. If an airplane was one minute late departing from the gate, if the number of no-shows exceeded what was planned, if fewer passengers flew to a given location than expected, Crandall had to know why, and he wanted it in numbers: spread sheets, percentages, data. Crandall was the first person in the airline industry to recognize that computers could be used to process information—to analyze results, lower costs, improve sales, and ultimately increase profits.
Take, for example, a typical route such as Austin to Dallas. American flies this route nine times a day. Into the computer goes a tidal wave of information about each flight: how many passengers fly at what prices, how many seats are empty, how many passengers end their trip in Dallas, how many go on to other destinations. The value of any given seat is not the same for all customers: It depends on when you buy your ticket. Airlines try to boost their revenues by selling as many seats as possible for as much as possible. Crandall realized sooner than anybody else how computers could help maximize revenues for each seat.
When Crandall became president in 1980, American Airlines was essentially a North American carrier with a few routes to Canada, Mexico, and the Caribbean. It was also a floundering company; in 1980 it had a record loss of $75.8 million. So Crandall began whittling away. He withdrew from hundreds of unprofitable routes. He put inefficient Boeing 707s up for sale and redesigned the rest of the planes to increase the number of seats. And then, after he had slashed the company to the bone, he began planning a massive expansion. What he wanted was a new fleet of planes. He wanted to develop new domestic hubs. And he wanted to expand to Europe and other markets. All he lacked was money. But how could he do it when low-cost start-ups like People Express were undercutting his prices?
Crandall’s answer was a series of innovations that would change the U.S. airline industry. In 1977 American introduced the first Super Saver fares—selling a limited number of seats far in advance at cut-rate prices—to compete with the charter business. One year after he became president, he started the industry’s first frequent flier program, creating a loyal customer base. American didn’t invent the hub-and-spoke system—Delta did when it made Atlanta the first huge airport where everyone changed planes—but it was American that made the most brilliant use of it.
And then, in 1983, Crandall finally freed up the cash he needed to expand. Risking a pilot’s strike, he jawboned the unions to accept a two-tier wage scale, one that paid new employees considerably less than current employees. As he cut labor costs, he embarked on a hiring spree, doubling his payroll and zealously buying airplanes. The next few years at American were golden. Fuel costs were down. Traffic was up. American became a significant player in Europe, and Crandall began talking about Moscow, even a large Asian network. In 1989 he placed one of the biggest airline orders in aviation history, including 150 MD-11 and MD-80 jets, for an astronomical $9 billion. American was taking delivery of a new jet every five days. And whatever American did, everyone else followed—Delta, United, Northwest, and USAir all joined in the dizzying scramble for new planes, new routes, new hubs. By the late eighties, American Airlines was acknowledged as the best airline in the country, and Bob Crandall was being praised for the hard-nosed qualities that would later cause him problems.
When he comes to the door of his house in North Dallas, Crandall does not look like an intimidating, karate-chopping corporate chieftain. He wears blue jeans, a forest-green pullover, and penny loafers. On this spring evening, he is ebullient: He loves showing off his home.
Like its owners, the house where Bob and his wife, Jan, live is austere, hard-edged, and somewhat out of step with its surroundings. It sits on a leafy narrow street in old Preston Hollow, among palatial residences placed at the end of long trailing driveways. The house is a Dallas landmark, designed by Edward Durrell Stone, a noted modernist architect—”aaah-chitect,” as the New England—bred Crandalls say. When it was built in 1957, magazines around the world called it “the ultimate bomb shelter” because of its impregnable steel and concrete construction. Inside, it is airy and very white. There are few walls in this house, only a series of marble (“maaah-ble”) pavilions separated by latticed partitions, with open channels of water flowing from one space to another, an indoor swimming pool, and a moat with aqua water encircling the dining room table. Guests fall into the moat with such regularity that Jan Crandall keeps a registry for them to sign. Bob’s 83-year-old mother was the first to tumble in, at a Christmas party. Contrary to rumor, there are no sharks in the moat.
Jan Crandall is a lot like her husband: direct, assertive, unflappable. Her face is tanned, her hair short, white, and unfussy. She wears a plain gray sweater and gray slacks, and like her husband, she is overthin. She and Bob met at Barrington High School in Rhode Island. Without him, she says, she would have never made it through English, and without her, he would never have passed Latin. “It was just one of those perfect things,” she says, her voice a smoker’s mezzo (she also quit, then started again). “But I don’t think, at sixteen, I was smart enough to know that. I think he bullied me into marrying him.”
In a city that inflates and idealizes its corporate leaders, the Crandalls are pleasantly old shoe. Their number is listed in the phone book, and customers often call to complain about service. Not long ago, Bob and Jan spent hours on the phone tracking down some lost luggage that contained a wedding dress. They send fruitcakes at Christmas. They avoid the charity-ball scene, fashionable restaurants, and small talk. “Their idea of a good time is to sit around with four or five friends and have a hellacious argument,” says a former American executive.
The Crandalls’ house is a mechanical wonder, full of marvelous gadgets and examples of singular craftsmanship. Bob and Jan provoke, debate, and interrupt each other, thrusting and parrying as they lead their guests through 12,000 square feet of marble, steel, concrete, and glass, up the circular staircase, down the hydraulic elevator, and through three bedrooms, nine bathrooms, and a cavernous basement. Every few feet, one or the other pauses to expound on some astonishing detail: the walnut cabinetry, the low-voltage electricity, the poured-concrete foundation.
In the living room, we get an explanation of how cool air flows continuously throughout the house.
Bob: “Right above this ceiling is an eighteen-inch plenum, between the ceiling and the floor.”
An eighteen-inch what, I ask?
My Library
