Hard Landing (11 page)

To consumer advocates, Frank Lorenzo was a hero. Better still, Texas International’s profit-and-loss statement, once dependent on handouts from the government and strike payments from the rest of the airline industry, began to glow. More flights were added, and the more Lorenzo’s people went to the CAB, the more John Robson’s people said yes. A number of other airlines offered their own versions of peanuts fares; Continental, for instance, introduced “chickenfeed fares,” which the wags at Texas International quickly dubbed “
chickenshit fares.”

There was one drawback. The very success of peanuts fares strongly suggested that the airlines could manage their own affairs—that they could stimulate their own markets, widen the population of people who had shared in the privilege of flying, even create jobs and demand for new airplanes. But as delighted as he was at the outcome of peanuts pricing, Lorenzo did not want John Robson or anyone else in Washington getting the wrong idea about his intentions. Lorenzo went out of his way to say that peanuts fares were a limited, isolated demonstration of the virtues of flexibility in government regulation. They were
not
, he emphasized, an argument for doing away with it.

Lorenzo figured that Texas International would be annihilated in five minutes without the CAB. He could barely handle a single upstart such as Southwest Airlines, let alone survive being surrounded by them. Just as ominously, up the road a piece, in Dallas, American Airlines and Braniff had hundreds of airplanes between them. They sat there like caged gorillas. And United Airlines, the biggest in the United States, flew planes to all 50 states. It could suffocate a little carrier like Texas International if it ever had the freedom to do so.

Even to an innovator, even to Frank Lorenzo, the system was fine just as it was.

CHAPTER 3

NETWORK WARRIORS

A
mong the personality types reigning in American corporations, the aggressor is commonplace. He has an instinct for the jugular. He wishes to dominate. He enjoys the battle as well as the conquest. He breathes inspiration into his subordinates. He seizes on the unexpected. A vastly different species, the bureaucrat, is just as frequently found, and in his own way is as essential to corporate success. He thrives on detail. He revels in systems and processes. He emphasizes reaction over action. On occasion these divergent traits combine in a single executive. One such individual was C. R. Smith, who built American Airlines. Another was the executive who would later follow Smith to the top of American. His name was Robert Crandall.

Crandall would ultimately become the most feared and powerful man in the global airline industry. His very appearance intimidated people. He had thick lips, a hard, lean body, and blue eyes that flashed intensity, all bearing him a resemblance to the rock star Mick Jagger. He slicked back his hair with “greasy kid stuff,” his part so perfect it looked as if you could cut your wrists on it. Crandall’s canine teeth hung lower than the surrounding teeth. “Fang,” some people called him, though not often in his presence.

Appearance alone did not account for Crandall’s sobriquet. Crandall
simply loved to triumph over his adversaries, to vanquish them utterly, to run up points on the scoreboard. “Go ahead,” he told a marketing group. “
Be ruthless. Be driven. Don’t let anything get in your way.” Though no fan of professional sports, he went out of his way to invoke Vince Lombardi, Lou Holtz, and other coaches whose teams he rarely watched but whose ruthlessness he admired. At a company dinner dance Crandall once cried, “We’ll
crunch our competitors so hard even Lombardi will hear it, and nobody will need a hearing aid to know we knocked them off their feet!” And with that he commanded everyone to the dance floor.

He pounded his desk, sputtered when he shouted, and spit out the vilest curse words—not merely the
hell!
and
son of a bitch!
typical of the executive vocabulary but caustic and abrasive words like
fucker
and
cocksucker
, with a plume of blue cigarette smoke trailing behind or gathering overhead. Crandall was aware that
he inspired fear in many of the people who worked for him. He once joked that when turning to the mirror while shaving, he expected to see
black wings.

But while seized with such emotion, Crandall also had a passion for logic and analysis—for hierarchies, systems, and structures. Let the other guys play poker;
Crandall loved bridge, the logician’s game. Crandall settled in a region where country and western and rock and roll reigned supreme, but he brooded to the rational scales of Mozart. Typographical errors, word
misuse, and grammatical lapses hit him like strikes to the brow; they signaled untrustworthiness. Order was everything. At home his shop
tools hung precisely, even if he was seldom there to use them. In later years, he ordered the placement of four custom-made podiums at strategic locations, for quick shipment wherever he happened to be giving a speech; Crandall refused to speak from any lectern failing to meet his specifications. If he noticed his wife’s purse sitting on the kitchen counter, he might pry it open for inspection; finding it in the same condition as any purse, he would dump it out and reorganize it, throwing away the bits of grit that had accumulated in the creases at the bottom. “It
drives her batshit,” he would remark with a raspy nicotine cackle.

Above all, Bob Crandall was stricken with personal ambition. Was there a moment, he was once asked, when he realized that he wanted to run American Airlines? “Yeah,” he answered. “
When I was born.”

• • •

Robert Lloyd Crandall came into the world at the midpoint of the Great Depression, on December 6, 1935.
His father was rescued from unemployment by Franklin Delano Roosevelt’s Civilian Conservation Corps, which caused the family to abandon its Rhode Island roots and travel to wherever the work was. Later his father sold life insurance from territory to territory. In his 12 years of public education, Crandall attended 13 schools.

He would later say that his peripatetic youth taught him how to meet and relate to new people. But it also taught him to fight. As a youngster Bob Crandall was
a fat boy with quick fists. Every time he got to a new school, he felt an intense urge to get into a scrap.
A decent fistfight was the only way to break in, he thought, the truest path to acceptance. Bob Crandall also studied, working hard to get good grades. Report cards, after all, were a kind of scoreboard in a competition of peers, a way of ranking oneself against another. Forty years after his graduation, an interviewer began to inquire about his academic record. “What kind of grades did you—?”

“Straight A’s,” he snapped, as if he were reliving the thrill of a championship ball game.

And he worked, and loved doing so, from the moment of his first job—digging out a basement for a new home, a boy and his shovel, blistering his hands and sweltering in the heat of a North Carolina summer; he was not yet an eighth grader. In later years Crandall found himself working in grocery stores. Because such stores opened early and closed late, he could get in a lot of hours before and after school. As a checkout clerk he enjoyed seeing
how fast he could ring up a pile of groceries. His high school annual for his graduation year of 1957 said he was most likely to be found at the grocery store. His “pet peeve” was listed as “Democrats.” The yearbook editors also observed that he was “
noted for arguments.”

A slimmed-down Bob Crandall worked his way through the University of Rhode Island, where he loved staying up until all hours debating—religion, current events, anything that could set off a round of intellectual jousting. With a scholarship to the Wharton School, he earned his M.B.A. while holding a job that allowed him time to study: the 5
P.M
.–to–2
A.M.
shift as a supervisor at WFIL-TV in Philadelphia. Before long he landed at Eastman Kodak, in the credit
department, collecting money from film processors around the country.

But it was not photography, and certainly not bill collecting, that most captivated Crandall’s interest. It was computers. Kodak had installed a state-of-the-art electronic system for tracking the money it had coming in. In 1960 Bob Crandall found himself one of the few executives in the country—in the world, really—with responsibilities in a new field of management called data processing.

He moved on to Hallmark Cards in Kansas City, which operated a computer system that monitored the sales of individual illustrations and inscriptions on a store-by-store basis: a four-line happy-gram with a rose might be going briskly in Sheboygan, for instance, while a five-line message with a violet was doing well in Los Angeles. The system alerted Hallmark’s marketers when a price change was called for; if a particular package of 25¢ cards sold out faster than predicted, the next package might be shipped with 35¢ price tags.

Crandall was in awe of Hallmark’s system. As he once explained, “
They sold the shit out of greeting cards.” But Crandall knew that Hallmark would not keep him forever. An urgent need for massive computer systems, the biggest ever built, was emerging in another industry.

An airline seat is like fresh food—a grapefruit, say—in that it spoils after so much time on the shelf. Every empty seat taking off on every flight is a spoiled grapefruit and exactly as valueless. Both required time, effort, and money to create, and both came to a wasteful, meaningless end. And on an exceedingly large number of flights, the sale of one last seat, according to the First Rule of Airline Economics, could easily decide whether the plane flew the entire distance in the red or the black.

As the builder of American Airlines,
C. R. Smith had agonized continually over the problem of matching passengers with seats before the latter perished upon departure. The trick was to balance reservations against inventory, a far greater task than it might seem. At first, in the early 1930s, a single ledger had passed from hand to hand as agents in a central office recorded reservations and erased those that were canceled. With the advent of the DC-3, as the fleets and schedules of the airlines swelled and as the seating capacity of
each plane increased, a single book became impractical, so multiple books were maintained. These had to be reconciled frequently—a massively time-consuming process—and even so, each book was inherently out-of-date at all times. Books gave way to chalk and slate boards and eventually to electric light boards. More and more agents were crammed into the reservations offices, with the line of sight to the blackboard limited by the space between structural support columns—22 feet in most buildings of the time. Some agents peered through opera glasses. Teletypes clattered. Clerks known as “card boys” scurried from desk to desk, eventually to be replaced by mechanical conveyors. One blackboard gave rise to multiple blackboards, which quickly encountered the same problems that multiple ledgers had caused. A science called “
reservations theory” was born to cope with the exponentially worsening challenge, but to little avail; as with so much else in the airline business, there was no economy of scale in handling reservations. The more the airlines grew, the less efficient they became.

The need to coordinate reservations among multiple cities—indeed, among multiple airlines—added still another dimension of complexity. For most of their history the airlines had been scheduled like railroads: numerous stops along a single line, with passengers boarding and disembarking at each stop, sometimes to board a second flight on a different airline flying in a roughly perpendicular direction. Confirming the itinerary for a single passenger traveling on two connecting airlines required no fewer than
20 separate communications, making the airlines, even in the 1940s, among the world’s biggest users of leased telephone lines.

But what if the entire process could be automated?

In the early 1940s the technical people at American contacted the major makers of adding machines and other computational equipment. American wanted a machine that could tell reservationists when particular flights were sold out and, just as important, when cancellations had once again made seats available. Not a single contractor would touch the job. There were too many variables, and the data changed too quickly. Although it was 20 years before the expression “real time” came into use, that, in a nutshell, was the realm in which American needed to operate—with a machine that could simultaneously receive and deliver information to and from hundreds
of remote terminals, giving each location the benefit of the latest data entered into the system from any other location.

So American’s technical people undertook the effort on their own, creating
a grand contraption of tall cylinders, each representing a different flight on a different day. The cylinders were filled with marbles, one for every unsold seat. With each reservation a button was pressed and an electrical signal sent, opening a hatch at the bottom of the cylinder through which one marble was emptied. Conversely, the cancellation of any reservation caused a marble to be electrically released into the top of the cylinder, restoring the seat to the unsold inventory of the flight. The machine was ungainly and impractical, but it vividly demonstrated a potential solution.