Last week, I attended the Travelport Ignite conference which was put on with Duke’s Fuqua business school. There was no tradeshow floor or panel discussions. This was a different kind of conference that was meant to get a small group of people from the travel industry into a room to talk about solving some of its problems. What better way to kick off the event than with the legendary former CEO of American, Bob Crandall?
[Disclosure: Travelport paid for my hotel only at this event]
If you aren’t familiar with Bob Crandall, then you probably haven’t been watching this industry for very long. He was an early believer in computerized reservation systems, and used technology to create a real advantage for American over the years. Under his leadership, American quickly saw value in the new hub-and-spoke model which took hold after deregulation. The airline also became the first to launch a modern frequent flier program (AAdvantage). Not enough? American was a leader in implementing successful revenue management controls using the Super Saver fares it created. That’s just some of what has made Mr. Crandall (as he’s said his friends call him) a legend.
While this is most of what people remember when they think about his legend, there were plenty of failures under his leadership as well, especially in the last decade of his reign. Crandall tried to solve labor issues by proposing a novel B-scale, a system where new employees would get paid less to the do the same work as existing employees. That was a disaster. He also poured a ton of money into creating now-failed hubs in Raleigh/Durham, Nashville, San Jose, and San Juan. And let’s not forget his four-tier Value Pricing experiment which was completely unsuccessful.
He’s a brilliant man who had quite the temper, so the stories go. But in recent years, he seems to have relaxed. I suppose that happens when you’re no longer responsible for running a giant airline. That being said, he’s still incredibly opinionated about this industry and he is blunt, to say the least. I was excited to watch him be interviewed by the dean of Fuqua, and I was not disappointed. The interview was excellent, and Crandall owned the room. Here are just a few snippets from the talk.
It’s Monopoly Time
Crandall did not mince words when talking about consolidation in the airline industry. “Our government has chosen to create monopolies.” He thinks that travelers would be better served with more airlines competing in the market, though that ship has now sailed.
An MBA Didn’t Help
Since the dean of Fuqua was the one doing the interview, he asked early on if Crandall’s Wharton MBA education really helped his career. The answer? “No.” In short, he said the contacts he made through the school and the alumni network were valuable, but then he just had to do a great job once he landed a role. The MBA didn’t help with that.
US Airlines Will Never Provide The Best Service in the World
People have long complained that service at US airlines lags that of international competitors. Why is that? Well, “You can’t make flight attendants retire.” Crandall then explained his response to a complaint asking why a flight attendant didn’t bring someone water when he had hit the call button. “She’s 83 years old!”
American Was Stupid
Why did it take American so long to declare bankruptcy after everyone else had done it? “They were just stupid.” That doesn’t mean Crandall is a fan of bankruptcy, but it means that an airline can’t compete without it if everyone else does it. And by failing to file for bankruptcy protection, American limped along until US Airways came in.
On that downhill slide… “Inside each person who worked at American, there’s a little guy crying. We all loved American and it got destroyed.”
Crandall went on quite the rant about consulting and told students in the room not to do it. Clearly we have similar feelings on this one. He said to those students, “Consulting is a dead end. The only purpose consultants served was to validate the decisions I already made and then convince others.” He added, “if you were the guy who had to do what you [a consultant] were recommending, would you do it? Probably not.”
It was nearly everything you’d hope for when you hear Bob Crandall is coming to speak. The only thing missing was a fiery display of his famed short temper, not that I expected to see it in this setting. One thing I will say is that if Bob Crandall doesn’t grab your attention, nobody will.
This was actually my first time seeing him in person, and I had the chance to meet him afterwards. I was downright giddy when he said he knew about this site and he read it on occasion. That’s pretty damn cool.
This set the tone for an interesting couple days. We talked about topics ranging from big data to loyalty and yes, even how to operate in a world dominated by millennials. We gathered in a classroom in the business school, so it was a very different kind of setting for a conference. The following day, we sat with current Fuqua students and talked to them about the travel industry, offering our help in any way we could.
I like this kind of event where you actually get to think and participate in trying to help solve industry issues. I hope that they put this on again, maybe in conjunction with other business schools next time.
That sounds like an awesome event. Thanks for the write up!
I heard him speak last year at Randy Peterson’s Travel Executive Summit, and he was amazing. The airlines had just raised their change fees to $200, and he was exasperated. He said something along the lines of “These bozos complain about government taxes and fees, but they are worse than the government could ever dream of being”. I couldn’t have agreed more.
Makes you wonder if Mr Crandall thinks he knows more about the airline business now or when he was running AA. That could go for anyone in any business, but they always seem to have all the answer after they leave a company.
AA went from 200 planes to 600 planes under his guidence.
Well he did once say…..”If pilots were in charge, Columbus would still be in port”.
Haha love the point about needless “consultants”. Bob Crandall is a legend :)
management consultants, perhaps. But these days, IT and Operations consultants who provide new products and tools are still extremely valuable. (shameless plug)
Noah – Remember, he was talking to a group of MBA students with those remarks so he was definitely referring more to management consultants.
There are other countries where “you can’t make flight attendants retire” (age discrimination). E.g., Germany/Lufthansa but probably all of EU. And yet they somehow manage to offer better service and tend to not have 83 year old FAs. Perhaps the difference really is that the FAs in those countries have other career options (or better retirement and medical choices)?
I am curious what he thinks would be the solution for US airlines to improve service.
It’s much, much easier (more viable), as a general rule, to retire earlier in those countries than it is in the US.
Many European countries have government pensions and/or union backed strong retirement funds, that make it financially viable to retire at an age of 60 to 65.
Another important factor is that employment contracts automatically end at “retirement age”, which effectively forces retirement on employees before they become extremely old.
Wow, that’s a compliment of the highest order, having Bob Crandall tell you that he reads your blog. Way to go!
I do find it somewhat amusing that Crandall now calls for more competition, considering the scorched earth tactics AA used to employ if a competitor dared to infringe on one of AA’s hubs (not that any of the other legacies were any different in that regard).
Bob is really something. He, Fred Smith, and Herb Kelleher…what a troika! (I’m sure if I had worked for any of them, I would have gone nuts, (more, that is!)
Once met Fred Smith in our office. He was trying to convince us that he had a great plan to fly boxes al over the country, using these little French jets, and hubbing every shiipment through a single airport, Memphis. He wanted to get government business too, but not if he had to live with the government’s shipping documentation regulations. Maybe we would like his company’s name?
We, Mr. Know-It-All’s, smiled, convinced this man was off his rocker, but Fred never lacked persistence and eventually we gave him just about everything he wanted. The rest is history, I guess!.
Someday, I hope, I can say with great pride, I remember this guy and his blog. Maybe he was pretty smart after all!
Brett, I’d be interested in hearing more about his monoply argument, and if you agree or not. If not, you can make it a point-counterpoint.
Eric – He didn’t elaborate. This was a pretty short-form interview, so I don’t know what he’d say to back it up.
It is worth noting the current CEO Parker was originally hired under AA’s fast track MBA progam.
Well, Cranky has an MBA, you, if I recall correctly. We won’t hold it against him :)
Sorry everyone, but I completely forgot to note in here that Travelport paid for my hotel at this event. (I handled my own air and car, but I still should disclose the hotel.) I’ve updated it in the post.
The AA hub in SJU is doing quite well operated by others such as Jet Blue, Southwest, Delta and other airlines. AA wants all SJU travelers to go through MIA when they don’t have flights to all cities as Delta does from Atlanta. It does not want to compete on price with Delta. One recent example SJU to RST Delta business class $888 AA coach $1200.
Its well known to airport staff that the SJU hub is being kept at an unacceptable level by management that wants to keep MIA growing. The number of AA flights has gone down purposely to force higher fares. This has resulted in fewer passengers choosing AA.
Hoping that the new USAir management looks at SJU and the opportunities that others are taking advantage of.
As a consultant, I hope neither Bob Crandall nor you, Brett, paints such broad strokes about consulting. I, for one, agree that many consultants and consulting firms are full of it, but the work my team does brings real value and innovation to the customer. We cannot solve everything and that’s the attitude I carry when engaging with a client.
We’re not all full of fluffy charts and graphs and big degrees hanging on our walls. Some of us just have passion for the industry and want to affect real, positive changes.
Troy – I’ll admit that I paint pretty broad strokes when it comes to management consulting. I think there are great uses for consultants – during a merger, for example. But too many airlines (and other companies) rely on consultants to do things that should be a core function of the business. I’ve seen so many bad uses of consultants that my view has certainly been colored. (And my wife is even a consultant, though not in this industry.)
Delta has Plan B down pat now with DGS. Actually, DGS employees do more than mainline in some stations… so plan B 2.0 is working for DL.
plan b…b-scale… if you didn’t catch the correlation.
Despite the 83-YO FA issue(*), I think he did a fairly good job during some miserably rough economic times.
The upstarts just love the ’78 deregulation, but it killed, (read bankrupted) most of the legacy majors, some more than once. It also opened the 1L door to flip-flops, odoriferous shorts and constantly declining service.
For anyone old enough to remember the pre-de-regulation (sorry, that’s a bent word.) days, most city pair fares were fixed and multiple airlines competed on SERVICE. That’s been up-ended, and service is now the last consideration in what I call “Boarding Pass Cost.” (the sum of fare, fees surcharges and taxes necessary to acquire the boarding pass).
Intercity or international flying has become ‘normal,’ even for the flip-flop set. The interiors stink, pax do not follow safety instructions and when the rare evacuatuation is necessary, impede others by hauling ALL of their carry-ons with them. One-for One; Me First; Screw You and gen out of my way! (Just look at the pix of some recent evacuations!) I hate to say say it, but Asians tend to be the worst offenders, here. perhaps because they have never understood queing/standing in line for anything. (Much better to holler, push and cheat?)
A sour soul? Not at all. I’ve used air transportation, reliably and usually pleasantly for more years that most of you have been wetting diapers. I’ll still do it, bit if possible I won’t fly in the back.
Does anyone remember the grace an ease associated with even a modest ticket in the 60s and early 70s? Even with a few enhanced security checks, it was still a very pleasant experience – gosh, even on a 99% full airplane. Match that with today’s Miracle Fares, a horrific lack of service (including that 83-YO FA that cannot manage a little water…) and I simply do not want to fly anymore. I do, I often have to, and I do my best to find or buy a “J” seat. (“F” seats and service are just about dead. For anyone with a memory, there really was a day when today’s dying “F” service was the norm for the entire aircraft.) In today’s airplanes, it is not uncommon to experience ‘neighbor odors,’ potent enough to preclude eating a simple meal on a 12+ hour flight. At well over 70, I’m almost done with this game and staying out of those filthy airplanes will improve this old fart’s life, a lot. Why personal behavior standards (on airplanes) changed so much, I do not know. What is wrong with sitting down, shutting up and perhaps reading for a while? When food or beverage is offered, take what you need, decline the rest and… oh please, don’t drink alcohol when flying. One drink behaves like three and you instantly become a jerk.
My apologies for the perceived lecture, but for Gawd’s sake folks, when in public and the cramped quarters of an airplane, please try to be quiet, civilized and yes, contain yourself and your goods within you own, limited space. Please!
You are AWESOME, Cedarglen!. Can’t disagree with you. EVERYONE who ever gets on an airplane should read this , absorb it, and follow it!.
Like Cedarglen, I’m in my 70’s. I’ve flown over 10 million miles, domestic and international. I have said for years, “bring back regulation”. A safe, comfortable plane/seat with good food and service and people on board who actually knew how to travel. You could go point to point without the spoke and hub that now exists. There were no overhead compartments so people weren’t bringing all of their worldly goods and chattels on board. As was suggested, the only things the airlines could compete with was service, food and comfort. Believe it or not, the old Pan AM and, yes, Iran Air had the best international First Class in then world. With luck I’ll retire soon.