Crandall, Robert 1935–

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Robert Crandall
1935–

Former president, chief executive officer, and chairman of the board, AMR Corporation

Nationality: American.

Born: December 6, 1935, in Westerly, Rhode Island.

Education: Attended William and Mary College, 1953–1955; University of Rhode Island, BS, 1957; Wharton School, University of Pennsylvania, MBA, 1960.

Family: Son of Lloyd Evans Crandall (insurance salesman) and Virginia (Beard) Crandall (homemaker); married Margaret Jan Schmults; children: three.

Career: Eastman Kodak, 1960–1962, credit supervisor; Hallmark Cards, 1962–1966, computer programming division supervisor; Trans World Airlines, 1966–1970, assistant treasurer; 1970–1971, vice president of data services; 1971–1973, vice president and controller; Bloomingdale's, 1973, senior vice president and treasurer; American Airlines, 1973–1974, senior vice president of finance; 1974–1976, senior vice president of marketing; 1980–1985, president and chief operating officer; AMR Corporation, 1985–1998, president, chief executive officer, and chairman of the board.

Awards: Horatio Alger Award, 1997.

■ Robert Crandall earned a reputation as the toughest executive in the airline industry by mercilessly pursuing the best return possible for the shareholders of American Airlines and AMR Corporation. He drove his management employees relentlessly and would fire a friend as readily as a foe if he thought that doing so would benefit his company. He had a passion for new technology and was responsible for revolutionizing travel of all kinds. Crandall introduced the first computer system for use by travel agents to make reservations and used data on passengers to create the "yield management system" that saved his airline millions of dollars. In addition, he introduced "supersaver" fares and other innovations that became standard practice throughout the airline industry.

CLIMBING THE CORPORATE LADDER

In the beginning Crandall had no social or financial advantages, but he had a good education, and he was driven to succeed. He also had a remarkably flexible mind that could adjust quickly to new economic realities as they arose. It was while working at Hallmark in 1962 that he began developing theories about how computers could revolutionize the ways in which businesses marketed themselves. While working for Trans World Airlines from 1966 to 1973, he implemented his ideas for applying computer technology to improve profits for airlines. It was Albert V. Carey who gave Crandall the authority to put his innovations into practice. Carey had been named president, chief executive officer, and chairman of the board of American Airlines in 1974. While he and Crandall were interviewing candidates to run American's marketing department, Carey realized that Crandall knew more about marketing than did the interviewees; as a result, he appointed Crandall senior vice president of marketing.

INNOVATIONS

In 1975 Crandall founded the Semi-Automatic Business Research Environment (SABRE), a program codeveloped with the IBM Corporation to provide travel agencies with a unified computer reservation system that would allow them to book reservations with any airline, not just American. Being able to make flight reservations immediately rather than having to wait for confirmation by mail transformed airline travel; it enabled travelers to make reservations at the last minute rather than having to plan weeks ahead. On April 24, 1977, Crandall introduced the supersaver plan in New York and California; in 1978 it was expanded to all routes. The supersaver plan offered discounts on tickets purchased months in advance; this program offered American Airlines a cash flow that it could use to cover overhead and factor into its spending plans.

Crandall bitterly opposed the deregulation of the airline industry. When deregulation came in 1978, it hit American Airlines hard. Small, low-fare airlines popped up, taking passengers away from established airlines. The low-fare airlines used nonunion labor to keep costs down, but American was locked into long-term union contracts. When Crandall was made president and chief operating officer, American Airlines was losing money. After American Airlines transferred its corporate headquarters from New York City to Dallas–Forth Worth, Texas (and Crandall moved from New Jersey to North Dallas), he began reshaping the company to suit the new marketplace by cutting low-yield routes, adding seats to aircraft, and trimming the number of employees from 41,200 to 37,000.

In 1981 Crandall introduced the concept of the frequent-flier program, calling it "AAdvantage" and rewarding repeat customers with free flying miles. American Airlines also introduced "AAirpass," which offered travelers long-term fixed-rate contracts for five years to life. On May 19, 1982, a holding company for American was formed, called AMR. It was in that year that Crandall had his greatest personal crisis; he telephoned the chairman of the board of Braniff Airlines, Howard Putnam, and declared, "Raise your goddamn fares 20 percent. I'll raise mine the next morning" (Texas Monthly, August 1993) Putnam taped the conversation, and the Justice Department used the tape as the basis for filing an antitrust lawsuit against Crandall. In October 1983 Judge Robert M. Hill dismissed the lawsuit, saying that no violation had actually occurred.

On December 12, 1983, AMR Services was created to sell services to other airlines. In that year Crandall temporarily solved his labor problems by implementing the two-tier wage system in a deal with unions that enhanced job security while allowing American Airlines to pay newly hired workers lower wages than established workers. From 1983 to 1988 American spent $7 billion for more fuel-efficient and quieter aircraft. In 1984 American retired its Boeing 747 cargo carriers and switched to using passenger jets to carry cargo as well as travelers.

By 1985 approximately 10,000 travel agencies were using SABRE, and AMR had become a service company for the airline industry as well as an airline company. When Carey retired, Crandall became president, CEO, and chairman of the board of AMR while retaining the same positions at American Airlines. From 1986 to 1989 AMR grew from 50,000 employees to 78,000. In 1987 SABRE was made accessible by personal computers. In 1988 AMR netted $806 million, and in 1989 Crandall bought the Latin American routes of Eastern Airlines and ordered $9 billion in new jets. That year American Airlines grossed $10.6 billion and netted $535 million.

In 1990 AMR lost $40 million. Even though it had 20 percent of the domestic airline market of the United States, AMR lost $935 million in 1992. Crandall responded by creating "value pricing," which featured an easy-to-understand fourlevel pricing system based on the individual needs of travelers. It failed because discount airlines undercut even the plan's lowest price level. That year the AMR Consulting Group was formed as part of Crandall's vision of a diversified, serviceoriented company. It offered management help and maintenance services to other airlines. In July 1993 AMR Consulting Group became AMR Training and Consulting Group, and AMR formed SABRE Technology Group. In 1994 American Airlines created First Call, which focused on making travel arrangements for group travels. These innovations helped pull AMR out of the red. In 1997 American Airlines grossed $16 billion. On May 20, 1998, Crandall retired. In retirement Crandall served as a spokesman for the airline industry. In 2003 he was appointed to the Federal Aviation Administration Management Advisory Council.

See also entries on American Airlines and AMR Corporation in International Directory of Company Histories.