Current American AAdvantage head Rick Elieson interviewed former American Airlines Chairman Bob Crandall at the Loyalty Summit online conference on Wednesday. Crandall spoke about innovations at American, from computer reservation systems to launching the AAdvantage program as well as his belief that companies should be required by law to do certain things to advance equality but that companies shouldn’t do those things on their own – to get too political, or stray from their purpose of making money.
Crandall discussed the failed experiment with the airline’s Raleigh hub, explaining that people in the city chose to connect on other airlines over taking American’s non-stop flights because of frequency – other airlines offered more flexibility, and greater redundancy, so actually were providing customers what they cared about most in a way that American didn’t.
He made several interesting points about travel and loyalty programs, largely centered around being transparent and fair with customers and winning the business of the people who are traveling today.
- Crandall hates resort fees. They’re a way to make customers feel tricked, which is bad for a long-term business relationship.
A hotel business for example that imposes but does not advertise a facilities fee is going to irritate the hell out of its loyal customers who show up but have not anticipated paying that fee.”
- He doesn’t believe miles should expire. The point of the mileage program is to cultivate future business, but expiring miles earned does the opposite.
There’s been a lot of talk about let’s let some of these miles expire. I think that’s a really bad idea. The cost of carrying an unsatisfied liability is very small, and the fact of the matter is if you get some man, some woman, some family and they don’t get an opportunity to travel very often but when they do travel they always travel American or they always travel United.
And over a period of years they build up, they finally get to the point where they’ve got enough miles where they can take a trip they wouldn’t otherwise, turning around and saying ‘uh oh it’s been too long you can’t use it’ is a good way to infuriate that person who has for a long time anticipated realizing the promise associated with the program.
I think not only airlines but also hotels have to be very careful about violating the trust of people who have chosen to participate in the loyalty program.
In a separate interview of MileagePlus head Luc Bondar at the conference Bondar commented on mileage expiration that “there will always be some breakage in your program even without expiration” and that a mature program with a good handle on its economics can therefore model itself effectively without actually expiring miles and retaining the business of occasional customers.
American’s Elieson responded to Crandall “the liability doesn’t concern me” but suggested customers finding reason to stay engaged in the program does. It was a bit of an awkward moment, because American’s is the only large U.S. airline frequent flyer program which still expires miles.
- Business travel won’t return. “A substantial share of business travel will not come back.” However there will be a strong rebound in leisure travel among those who have been stuck in place. He thinks air travel makes a long-term difference to society so travel volumes will ultimately recover. And it’s important to give the customers who do want to travel what they need.
Bob Crandall remains outspoken over two decades since his departure from American. He even has a blog which he hasn’t posted to in some time. The new American Airlines campus is named for him.
He’s a decisive leader, and also one who’s far more loved now in many ways than he was when he was actually in charge. He was a micromanager, and tough, though also often wrong. But he’s definitely worth listening to.
During the Bob Crandall era at American, I had family members working for Delta and Pan Am. Both of them had great respect for Bob Crandall.
I liked Crandall because he made sure that American’s aircraft had more leg-room than the competition, and he made that fact the focus of his television advertising. I also liked the way he turned the Latin American routes into a huge success story for American after other US airlines had only had mediocre results in that part of the world. I often had to take business trips from Washington DC to Los Angeles, and during Crandall’s tenure, American competed seriously with United with nonstop IAD-LAX flights. After Crandall departed, American decided to let United become the primary carrier for that route. In fact, American pretty much pulled out of IAD.
I have a different explanation for the failure of American’s Raleigh hub. I lived in North Carolina for several years, and the loyalty of North Carolinians to Piedmont Airlines was unlike anything I’ve seen elsewhere. NC is basketball country, and Piedmont was the primary commercial sponsor of all the Atlantic Coast Conference games. When American moved into Raleigh, they were viewed as an interloper, and American never took any steps to win over the local populace. Crandall also failed to mention that, at the same time, he was setting up a rival hub in Nashville, not that far from Raleigh. One of those two hubs should have succeeded, but neither did. I might note that I have friends in Raleigh who remained loyal to American, even after they closed the hub.
Long ago, I skipped college classes one day to hear Bob Crandall speak to the Tulsa Chamber of Commerce. Until that day, never understood how or why an executive could be worth a million-dollar-plus salary. After hearing him speak, remember thinking to myself I sure wouldn’t want to be the CEO of a rival airline. He was/is the kind of shrewd guy who wanted to eat your lunch and drink your milkshake given the opportunity.
An interesting character for sure. I agree with the issues he raises here and would say that YQ is the equivalent of resort fees in that the loyal customer is feeling tricked.
No, no, Bob loyalty and treating customers well isway overrated. Get yourself a copy of Excel and it will all become clear,
Crandall also thinks the industry should never have been deregulated and should be treated as a utility. I like him and respect his contribution to the business, but his word is not gospel.
Having worked in the industry’s most important customer base (financial services), I can tell you business travel will definitely come back…how long it will take is the question. But competition for business ensures it. We are still social animals…
American went from a 5 Star airline under Crandall to a Greyhound with wings under Parker!
Those that argue that large portions of business travel will not come back do not understand human nature.
Humans work best in community and with accountability. No CEO outside of the tech industry is honestly going to tell you that their workforce is better off never seeing each other. Good teams need to work together and be face to face with each other and customers. Yes, there will be a shift of some travel to online solutions but companies that find a balance that puts some people back in the office and on the road will ultimately win.
Companies that think they can allow employees to work totally from home will find out their decisions result in underachieving compared to their peers.
The challenge for the travel industry is that not all companies can survive the time it takes to make the transition.
Crandall served on the Boy Scouts of America national board back in the 80’s. He chaired the newly formed marketing committee and was highly critical of how BSA did business. He believed that in order to grow membership, BSA should focus on becoming the premiere camping and hiking organization and devote all resources to that end.
Wow! It’s been like forever since I last gave any thought to American Airlines’ attempt to create hubs in Raleigh/Durham (RDU) & Nashville (BNA)!
But, then as now, something that always stood out to me was that both of those cities allowed American to compete for (or perhaps, siphon) northeast-southeast & Florida traffic AND Midwest-Southeast & Florida traffic during the waning years of Eastern Airlines, whose hub in Atlanta would see either an outright loss of passengers who connected in RDU or BNA, or in competing against American, saw its yields chipped away just enough such that over time, the difference between its ability to hang on in its weakened/weakening financial condition versus much stronger competitors, American at RDU & BNA plus Delta’s already larger (& massive, super) hub in Atlanta, with both of those airlines able to outlast Eastern – as they did – & both then benefitting greatly – as they did – with American gaining Eastern’s Miami hub/gateway to/from Latin America, the Caribbean & London routes, & Delta, of course, becoming the predominant airline in Atlanta.
Sure, had American been successful in its attempt to create connecting hubs in RDU, BNA or both cities that would’ve been great!
But, in the end, American gained most of Eastern’s prized assets in Miami, plus gates & slots at key airports (for example, JFK, LGA, Chicago/ORD [which was slot controlled at the time]), while Delta solidified its dominance in Atlanta after Eastern’s demise in January, 1991.
Finally, looking back, while it was hardly exotic to see hubs created at cities like Cincinnati (CVG), Cleveland (CLE), Kansas City (MCI), Memphis (MEM), Milwaukee (MKE), Pittsburgh (PIT), San Jose (SJC), or even Greensboro (GSO) (!) during that era, none of those cities survived the consolidation phase of the deregulated era.
Not a single one of those cities!
Heck, even a geographically well positioned city, St. Louis, saw its (TWA’s) hub disappear after the 9/11 terror attacks & the resulting recession & Middle East wars, when American, which took over TWA nine months earlier on January 10th 2001, could consolidate at its much larger hubs in Dallas/Ft. Worth (DFW) & Chicago/ORD instead.
So, that neither RDU or BNA ended up being successful hubs for American should hardly be surprising.
Perhaps if American’s expressed strategy had been to establish what most now call “Focus Cities” (as, for example, Delta did before the onset of the Covid19 pandemic) at RDU & BNA we might, repeat “might”, be having a different discussion (although it’s likely Doug Parker’s takeover of AA would’ve required either divesting RDU or shutting the hub there down as US Airways did at PIT; Delta did at Memphis & Cincinnati after it merged with Northwest; or United did at Cleveland after it merged with Continental due to RDU’s close proximity to US Airways’ much larger, not to mention super profitable despite it being a unicorn hub in Charlotte (CLT) where O&D traffic is as small as it is compared to most hubs around the world).
But, as standalone “hubs” given the failure of virtually every other hub in cities comparably sized, or in some cases, larger than either RDU or BNA, again, it’s hardly surprising to see that neither of those 2 cities that AA under Bob Crandall ended up being successful hubs.
As noted, pre-Covid19, perhaps as “Focus Cities” RDU (especially) may have worked out.
In fact, Delta seemed to think so given its pre-Covid19 officially announced plans to make RDU, BNA, Austin (AUS), SJC & its own former hub in CVG “Focus Cities”.
But, that’s an altogether different discussion!
Just the same, & as noted at the beginning of this reader comment, long ago it never seemed to me that Crandall’s officially expressed strategy to create permanent, long term hubs in RDU & BNA was the sole objective, but rather to push Eastern over the edge by revenue dilution &/or siphoning off just enough market share to accelerate the demise of a financially ailing competitor on its key North-South routes, which, in fact, is exactly what happened & endures to this day with Miami being as successful as it has been for as long as it has been.
Of course, Crandall cannot/will not ever acknowledge that otherwise “unintended, but kinda sorta it’s what we ‘hope for’ outcome” as that would be “bad form” – not to mention admission of predation, which most certainly would NOT be a good look for him after having already been caught on tape in February 1982 shouting at OG Braniff’s CEO, Howard Putnam, to “raise his ‘gosh darn’ [he used a different term] fares 20%. I’ll raise mine the next morning!” – which was a bigly anti-trust price fixing no-no!
So, let’s just say it was a “happy coincidence” that after Crandall launched hubs at RDU & BNA that it was that long until Eastern failed.
But, when revisiting what we do know about the “success” (NOT!) of virtually every other smaller/medium sized city hub EXCEPT CLT (which for decades made itself desirable by having some of the lowest per enplaned passenger costs in the country) versus the spectacular & irrefutable success of the assets American gained after Eastern failed, “intended” or “not quite but kinda sorta it’s what we’re ‘hoping for & won’t mind if that happens’ – wink, wink” Crandall’s revenue diluting, traffic siphoning “hubs” in RDU & BNA sure do look like they more than amply fulfilled their purpose after all.
Just sayin’
Addendum:
The “just sayin’” in the above should have included/concluded with a double wink, as follows:
“Just sayin’ ; ;”
The winky emoji’s were dropped during the upload! 😉
Wow! Sometimes the 😉 shows up as the emoji – & sometimes it doesn’t!
Go figure! 🙂
I”m sure Bob Crandall won’t comment on it but if he was still CEO Parker would have been fired years ago. A once great airline is now considered the worst!
Good riddance OPM flyers! Your service to your corporate overlords was appreciated, but its now time to stop flying, and have the airlines fight over customers who pay their own way.
I worked for American in the 80s-90s. I remember it as a time of great expansion and opportunities… Under Chairman Crandall’s leadership there was excitement, engagement, and profit (to include product sharing for employees and opportunity to move around and up in the company. I had Mr. Crandall on flights – he was interested in passengers and their opinions. He seemed to understand that everything was not always going to go perfectly, but trusted the employee to make things right, to keep that passenger coming back, building loyalty with consistency. Much respect.
Correction: PROFIT sharing
I totally agree with Euragone, AA was a 5 stars airline when Crandall, now is a Greyhound with wings. I been with AA for 36 years and proud to say I worked for Crandall in the 80’s and 90’s I was proud to say I worked AA now I’m ashamed to say it, as many of coworkers also are, that I work for American Airlines. Please Mr. Crandall come out of retirement and take the reigns of AA again and make it a 5 star airline one more time. Fire Parker and his US Air management that have destroyed American Airlines.
Yes I agree with Philip, excellent statement, JDS III
Bob Crandall was a brilliant leader and inspiring speaker. Yes, he micromanaged but, I believe, with good reason. American Airlines grew fast and operated at its peak under his leadership. Yes, he did not suffer fools gladly. He got things gone and if you worked hard and remained loyal, you were rewarded.
Crandall was a genius. Probably still. I once wrote to AA when he was head of marketing. I complained around 1978 about the two rows of facing seats in their transcontinental by to LAX 747 first class non smoking downstairs and cocktail table in between. Row 1 and 2. Loud talk travelled back. Smokers sitting there because no room upstairs facing backwards would sometimes ask person opppsite for permission to light up. I in row 5 or 6 window I could not work the noise got so loud as it became a little bar area. Nor booze consumed more noise. . United 747 so much more business like with a closet in nose and no rear facing seats. No little cocktail area . I was shocked when Crandall wrote back to me. He said he sent people up and confirmed I was right. Too much noise from booze and smokers lighting up. He ordered those rear facing seats removed. Went to same closet config as United. Imagine an airline today giving up revenue-rich first class seats? Imagine an airline listening and writing back today?
I worked as a second generation loyal employee. I followed my father and even stayed in his department of Crew Scheduling. I had pleasure of getting to know Bob Crandall. We had opened the new SOC center and I got to be one of the guides for company officers and board of directors,. Imagine my delight for Mr. Crandall to call me by name. I respected him for making a successful airline. I was proud to say I worked for AA.. Due to one of the difficult times I was given an early out package in 1995. Now I watched in horror after Mr Crandall retired we became as stated before ” Greyhound Bus” in all its sloppiness. Thank you Mr. Crandall for being the brilliant leader who had my respect.
From perspective of former employee I saw hard work from our CEO and wanted to give back as he did.
The sad thing is one almost always resents doing business with American over the past 5 years
The once great program has been near ruined by Parker & his cronies. The morale of those that work for American shot even before the virus and everything from leg room to be able to drain ones lizard in a closet made for midgets ins the norm.The seats are poorly padded, the leg room poor and the food if any is typically vile.Even the seat belt is the most uncomfortable I’ve ever been in
The once great earning miles by flying tossed to the wind replaced by credit cards earnings and sky high mileage redemption’s.And the whipped cream on the topping the 737 max is back to worry about falling out of the sky..I would get on my knees for Crandall or just about anyone to come back take over perhaps Elmer Fudd available?The good old days are long gone and now American is a premium version of Spirit for 50x the price
Oh gee- the business wonder from Hallmark cards who unleashed a 50% sale to kill all
competitors–we actually had to lock our doors–and missed graduations because of
his nonsense. Also the company who used technology to take down Braniff–and then
run into the ground Canadian Pacific and Reno Air. We pioneered SABRE in a regular
travel agency and know exactly what it can and did do.