ormer American Airlines chief Bob
Crandall came to New York to pick up another honor -- he was chosen
to receive a Lifetime Achievement award from the Association of
Travel Marketing Executives. The packed room of industry marketers,
analysts and media buyers didn't show up simply to listen to an
acceptance speech. They wanted the man who the Wall Street Journal
said "changed the way the world flies" to write out a prescription
for what ails the airline industry, and by extension, the travel
He gave some fresh insights into the future of regional
airlines, but most of his remarks were straight from the Book of
Crandall: Critics of the hub-and-spoke system are wrong. Alliances
are anticompetitive. Low-cost carriers do not have a better system
than legacy carriers. The government is idiotic not to move forward
with a "trusted-traveler" program. The cash bailout of the airlines
after 9/11 was good, but the loan program was bad. Frequent-flyer
programs are here to stay.
When the moment finally came, and Crandall gave his prescription
for legacy airline survival, he again stayed in familiar territory:
Reduce labor costs and raise customer service standards. "These are
the essential ingredients for survival of the legacy airlines."
I don't think anyone will disagree that these two ingredients
would strengthen the legacies, but how is it done?
What arguments, rewards, threats or tactics could persuade
airline unions to make more concessions? I raised my hand during
the Q and A period, but made a fatal mistake: I began the question
with the preface, "If you were currently president of American
Airlines ..." He refused to listen to another word on the grounds
that anything he might say could be construed as criticism of
current American management.
But a variation of the question was asked by someone else --
something about the partnership between management and unions --
and the response was intense and personal. "There is no partnership
between unions and the company, never will be. We'll work
together?" With sarcasm: "Sure we will."
There had been an earlier, joking reference to Crandall as Darth
Vader, and one could almost see him pick up his lightsaber as the
rebel union troops advanced. "It's an individual's responsibility
to provide good service. What's good service? Smile. SMILE! You
smile -- your union doesn't smile. If you only smile when your
union says to smile, it's a problem.
"And when I say cut labor costs, I'm not saying cut salaries.
I'm looking at productivity, how often they fly, how many weeks'
vacation they have. Seven weeks? What, do you have another job?
"And the fixed benefit plans -- you've got to stop it. Give them
a good 401(k)."
Couched in less antagonistic language, some of what he suggests
could work. A trade-off of salary maintenance for less time off,
while not exactly a sweet deal, could sound better to a union
employee than the alternative of corporate bankruptcy. And airlines
would not be the first of companies to swap out a retirement plan
for a 401(k).
But Crandall wants to go further yet: "I think we need new
legislation that would allow companies to replace workers [on
strike], so you can say, 'You don't want the job? Then I'll give it
to someone else.' "
Yeah, that'll motivate 'em to smile.
Many brilliant innovations occurred at American under Crandall's
tenure that justified the award he received -- strengthening of
hub-and-spoke, frequent-flyer programs, yield management systems --
but his legacy also includes a notable souring of labor-management
His diagnosis may well be correct, and airlines will need to
lower labor costs and improve service to survive. And he also may
be right to presume that it's up to individual employees to commit
to providing that service with a smile.
But if the industry is looking for a case study to accomplish
the dual goals of smiling employees and financial turnaround, it
might do well to look at the continuing work of Gordon Bethune. In
rebuilding Continental, he has prescribed carrots in far greater
proportion to sticks.
Look for additional details on this article in the Oct. 20
issue of Travel Weekly.