Bob Crandall, WG’60 – American Airlines – 2014 Joseph Wharton Award for Lifetime Achievement
An interview with Robert Crandall, WG’60 Former Chairman, American Airlines.
08 January, 2015
category: Joseph Wharton Dinner
Bob Crandall, WG’60, laughs a lot. He is genuinely mirthful. A source of that mirth may be that he passionately cares about the airline he led for 25 years, the industry he influenced and the country he loves. Maybe it’s because he thinks, speaks and acts directly. Or maybe it’s because he’s a lucky guy with three healthy kids, seven grandkids and a wonderful wife of 57 years.
What attracted you to the aviation industry?
Nothing particular attracted me to the aviation industry, except my wife’s desire to go to Rome for dinner! Which is really a true story! Coming out of graduate school, I went to work for Eastman Kodak, and then for Hallmark Cards in Kansas City, which was the headquarters for TWA. I was at Hallmark for four years, was making good progress in my career … and I liked it — Hallmark was a good company! TWA wanted to recruit me to do a similar job to what I was doing at Hallmark. My wife said to me one night, “I don’t understand why you keep saying, ‘No,’ to these people. The girls who babysit for us periodically go to Rome or Paris for dinner. TWA wants to give you a raise and let you travel — and I’d like to go to Rome for dinner.” So I took the job, and we did go to Rome and lots of other places for dinner and other things. I found the industry to be complex, competitive and fascinating, and I spent the rest of my career in it. It turned out to be a good move, one of many pieces of good advice that my wife has given me.
How did you transition from TWA to American Airlines?
While I was at Hallmark, I got an opportunity to learn something about computers, ending up as a manager of computer programming. After I joined TWA in the treasury department, I ended up running its data-processing department — what we would call IT today. The industry was in the throes of transitioning to computerized reservations systems — known as CRSs. TWA tried to invent a system using Burroughs equipment. United Airlines was doing the same using Univac equipment. Eastern Air Lines successfully adopted a system called PARS (Programmed Airline Reservation System) created by IBM. The Burroughs effort failed, so I brought in an IBM system, and we successfully transitioned TWA into that system. Later, while I was serving as Controller of TWA, the company made a promotional choice I disagreed with, and I left and took a job as Treasurer for Bloomingdale’s. The retail business bored me, and a year later, when the CFO of American Airlines left in April 1973, I jumped at the company’s invitation to take on that position. I remained with American until my retirement in 1998.
You are widely credited with introducing the Sabre reservations system, the first frequent-flyer program and yield management.
Accomplishments like those are always team efforts, requiring the participation of lots of committed, highly skilled people. Let’s take Sabre as an example. The original Sabre was cobbled together, years before I was involved, by C. R. Smith of American and Tom Watson of IBM. However, by the early 1970s, Sabre was far out of date, and American was lagging behind TWA, United, Eastern and others in the area of computerized reservations. When I came to American, I came with a background in IT and enough knowledge of the industry and CRSs to know we had to move quickly. So, we put a system in place that utilized part of PARS and some of the updates that Eastern had incorporated into it, added some tweaks of our own, and came up with the new Sabre.
We did create the first frequent-flyer program, and we pioneered the development of yield management. Both efforts were the consequence of putting together a powerful team of operations research people and mathematicians, who worked with our data-processing teams to develop very sophisticated modes of everyday problems. We built aircraft scheduling systems, manpower management models to match very complicated pilot and flight attendant schedules with particular aircraft requirements, and to determine how many baggage handlers we needed at any one time, and we devised solution kits for lots of other airline problems. Our competitive success during the 1980s and 1990s was largely based on using technology more successfully than other airlines.
Airlines, as you have said, are highly complex organizations with many stakeholders. How did you have the confidence to aspire to take on that role?
Anyone who has had the good luck to have a good undergraduate education and then attend a great grad school, like Wharton, has been well-prepared to do any job that presents itself. Assuming appropriate background and training, and a willingness to work hard and keep learning, I don’t know why any individual would lack the self-confidence to take on any opportunity that presents itself! Most people in the world aspire to do more than they ever get a chance to do. My great good fortune was that I had a chance to do a lot of things that others never had a chance to do, and I certainly wasn’t about to deny myself those opportunities.
You may have been one of the first CEOs to enter an industry as a computer programmer. Can you talk about the nature of programming at that time?
Well, the most I ever learned about programming was rudimentary. What I learned while at Hallmark was how powerful computers and mathematical modeling can be. My contribution was knowing what needed to be done and hiring the right people to do it.
While leading American Airlines, you were renowned to be a pragmatist.
Frankly, I don’t see any alternative for anyone who wants to contribute to solving the world’s problems. Pragmatism is nothing more than taking a problem and finding a doable solution. I don’t see much point in looking at a problem, and concluding either that the problem is insoluble, or that the only thing you can do about it is what’s been done before or that a possible solution cannot be implemented. If you see a problem, think, “What can I do that might possibly solve this problem?” If you come up with an idea that might work, go try it. If it doesn’t work, go back to thinking and try again.
You’ve been outspoken about airline deregulation from the beginning. How would the airline industry be different today if deregulation had been implemented differently?
I believe that comprehensive economic deregulation was a public policy mistake. It was done with the objective of increasing competition and bringing down fares, and for a while, it seemed to work. However, competition in an industry as structured as the airlines are is destructive, and over the years, a large number of airlines have failed.
Today, the remaining airlines have consolidated away much of the competition; the public has far fewer transportation choices than it has had in times past; and far fewer cities are on the national network than was the case years ago. The airlines are now very profitable, and the public is paying many billions of dollars in ancillary fees in addition to fares that are rising steadily. The fruits of deregulation appear to be in the airline industry much like the cable television industry in which there is no real competition, and we all have to pay for a lot of stuff that we wish we didn’t have to buy.
Is there a story of how you came to attend Wharton?
It’s a good luck story. After graduating from college in 1957, I got married and joined the military as an infantry officer. When I got out, my wife was working part-time as a nurse, and I was selling group insurance in Philadelphia. I wanted to go to law school, and took both the law exam and the graduate school exam. However, I had absolutely no money, and needed a full scholarship to go anywhere. I had pretty well resigned myself to working for a couple of years to save money when Wharton called.
The voice on the line announced that the school had just received a scholarship from Arthur Young & Co.; that the sponsor wanted to award the scholarship immediately; and that, if I could start school in two weeks, I could have it. We found a three-story walk-up in West Philadelphia for $65 per month, and I started at Wharton. Jan continued to work part-time, and I got a job as a night manager at WFIL, a television station in Philadelphia. Tough, but doable.
What advice do you have for Wharton students and alumni?
Work as hard as you can. Be the first person in the office, and the last person to leave. I was never smart enough to differentiate myself based on pure brainpower, so I decided to work harder than anyone else and to be better prepared than anybody else. I also think that everyone should take every opportunity to tackle a different job. Every time you get an opportunity to learn something new, grab it. The fact that you don’t know anything about something, is a circumstance you can change. The more you know about more subjects, the more valuable you will be.
What concerns you about America?
I am horrified by the steadily worsening level of income and wealth inequality and by the erosion of opportunity for people who start out without family resources. In the years after World War II, we led the world in education, and as a consequence, Americans had more upward mobility — better opportunities to improve themselves — than people in other countries. Today, we are way down in comparative rankings on both the depth and excellence of our education system and on the amount of social mobility in our society. In most other advanced countries, 70% or more of young children are in preschool by age 3; in the U.S., only 30% get that opportunity. Unless we fix these problems, I am very pessimistic about the long-term success of our country.
You have spoken twice at the Wharton Emeritus Society about the “Geezers’ Crusade.”
As I have just said, I think we need to change the direction of our society, and I therefore encourage people to be more politically active. I write letters to politicians, participate in local events and periodically write a blog. I think there are lots of geezers — people like myself who are no longer working full-time but have good educations — who ought to be spending time pushing politicians and government toward better outcomes. In the most recent national elections, only 37% of eligible voters went to the polls. That’s disgraceful — and it’s an open invitation to ideologues.
Many years ago, I lived in Charlotte, North Carolina, and had an early morning paper route. I remember unwrapping some newspapers I was about to deliver, and reading on the front page that Eisenhower had done something in Korea. I don’t recall the details, but I remember thinking that, if Ike did it, it must be OK. Time has banished my naiveté, but I continue to long for public policies and actions that will make us all proud to be Americans. We ought to be at the top of the league tables in infrastructure, education, research and development, and all the other things by which we can contribute to the betterment of mankind. The best cure for an ailing system is an active, well-informed, impatient and demanding public. We can all do better, and we should be part of a geezers’ crusade to make America a better place.
You are full of mirth. What is your secret?
Well, it’s interesting that you say that. I think of myself as angry most of the time — angry about oversights and outrages in public policy, angry about our collective shortcomings, angry about the fact that we aren’t the America I remember from the 1960s, 1970s and 1980s. But on a personal level, I have lots to be thankful about, and when I get the opportunity to share an evening like this, I enjoy myself. I’m glad it’s clear that I’m doing so.