BUSINESS, Page 57Special Report: Airline GiantsHow the New No. 1 Got ThereUnder tough guy Crandall, American leads in profits andpopularityBy Richard Woodbury
At 4:50 on a Monday afternoon, the scene is hectic in a giant
ten-story tower at the Dallas-Fort Worth airport. Rows of
technicians at consoles keep tabs on a swarm of taxiing jetliners.
Other workers stand in front of bay windows to direct planes near
the gates below. But this is no Government-run control tower. The
command center is run by American Airlines, whose staffers
supervise only their own planes on the ground. The airline erected
the unusual structure just a quarter-mile from the air-traffic
tower run by the Federal Aviation Administration to cope with the
torrent of American's arrivals and departures (daily average: 800).
While Dallas-Fort Worth is the carrier's largest hub, the pace
is nearly as furious at 155 other airports served by American as
the airline pursues a jet-propelled growth spurt. American has
added 51 of its destinations in just six years and has become a
major international force, flying 119 foreign trips a day, compared
with just one in 1983. Last November American officially became the
No. 1 carrier in the U.S. by overtaking rival United Airlines in
monthly revenue-passenger miles. That milestone prompted American's
hypercompetitive chairman, Robert Crandall, 53, to take to the
public address system at Forth Worth headquarters to shout
congratulations to his staff. Says Crandall now: "We had a
strategic plan, to grow the airline very fast. It worked out very
well." Last year American's parent company, AMR, posted sales of
$8.8 billion and profits of $476.8 million, a 140% earnings gain
from the previous year.
Such bullish expansion seemed out of the question when Crandall
became American's president in 1980, a year in which the carrier
lost $75.7 million. The price of jet fuel was skyrocketing, and the
industry was embarking on fare wars. Saddled with high labor costs,
Crandall fashioned a then novel wage structure that enabled
American to hire new pilots, flight attendants and mechanics for
as much as 50% below existing pay scales. He persuaded the
airline's unions to accept the plan by guaranteeing them lifetime
employment and promising not to cut wages for current employees.
The resulting labor savings enabled Crandall to embark on a hiring
spree in which he doubled the payroll, to 67,000 workers, in just
six years. Many of the employees hired at lower wages have reached
the higher pay scale through advancements.
Crandall has acquired airplanes just as aggressively. The
airline now takes delivery of a new jet every five days, a pace
that will swell its fleet by the end of the year to more than 500
planes, second in the world only to the Soviet Union's Aeroflot.
Because Crandall began his buying binge in 1984, American got a
jump on the current industry rush to replace aging aircraft. The
carrier's fleet is one of the industry's newest, averaging 9.4
years old.
Crandall's strategy has been to build from within. Though
American bought California's AirCal for $225 million in 1987,
Crandall has otherwise avoided giant acquisitions like those that
haunt Texas Air's Frank Lorenzo.
The cussing, chain-smoking chairman, who made $1 million in
salary and profit sharing last year, leads his workers with a
tightfisted, demanding management style. Middle managers work
twelve-hour days and eat lunch in their small battleship-gray
office modules. Mondays Crandall meets with ten top vice presidents
for planning sessions that can run ten hours without interruption
and leave participants staggering from his pointed questions.
Crandall provides further motivation through a profit-sharing
program that last year paid out an average $2,000 to each employee.
He conducts give-and-take sessions with workers throughout the
route system and awards them travel passes or merchandise for their
suggestions. To test new dinners, the airline rolled out a 767 at
the Dallas-Fort Worth airport for a lavish feed for workers and
their families.
For all his acumen, Crandall can be rash. He is notorious for
a 1982 phone call in which he suggested to Howard Putnam, then the
chairman of Braniff, that the two airlines curb their fare wars.
The Braniff boss tape-recorded the conversation, in which Crandall
said, "Raise your goddam fares 20%. I'll raise mine the next
morning." The Government accused American of trying to create an
illegal monopolization, a charge Crandall later settled by signing
an agreement not to engage in any such practices.
The most remarkable element of American's success is that in
the midst of rapid growth and sharp cost cutting, the airline has
achieved a topflight reputation for customer service. Says Robert
Baker, a senior vice president: "When no-frills roared in, we
resisted quality deterioration." The company has relentlessly
created new lures for customers, ranging from the first
frequent-flyer program, in 1981, to its recent opening of
luggage-repair stations at Dallas-Forth Worth and Chicago's O'Hare.
At the Los Angeles airport, American is testing a system to help
incoming passengers who miss connections because }of delays. The
travelers are met at the gate by agents who give them rebooked
tickets.
For all his attention to keeping passengers happy, though,
Crandall rarely loses sight of the bottom line. Case in point: he
ordered olives removed from the |salads served aboard American
