BusinessWeek
Selected highlights:
Selected highlights:
During Bob Crandall’s long tenure as CEO of American Airlines, the airline was truly an innovator—so much so that employees at AA had a certain swagger about them. They knew they were the best and brightest of the industry. It was on Crandall’s watch that American created one of the first frequent flyer programs in the industry, developed the most sophisticated reservation system of its time, and pioneered the concept of “yield managementâ€â€”using sophisticated algorithms to constantly reprice fares to maximize the revenue for each flight. Labor relations was another matter, but Crandall knew—and knows—his business.
Crandall doesn’t mince words about the industry’s condition:
Our airlines, once world leaders, are now laggards in every category, including fleet age, service quality and international reputation. Fewer and fewer flights are on time. Airport congestion has become a staple of late-night comedy shows. An even higher percentage of bags are lost or misplaced. Last-minute seats are harder and harder to find. Passenger complaints have skyrocketed. Airline service, by any standard, has become unacceptable.
For his part, Crandall doesn’t believe that mergers are the salvation of the industry:In my view, the arguments in favor of consolidation are unpersuasive. Mergers will not lower fuel prices, they will not increase economies of scale for already sizable major airlines. They will require major capital expenditures and are likely to increase labor costs. Finally, they will disadvantage many employees, who incentive to provide good service will be further reduced.
Crandall says airlines and their unions should be required to settle disputes in binding arbitration.“The threat of binding arbitration would encourage both labor and management to adopt more moderate positions than has been true in the past while simultaneously moving all airlines closer to labor cost parity."
Revising U.S. bankruptcy laws to...“...deprive failed carriers of the right to use lower costs to undercut the fares offered by their more prudent rivals, forcing both management and labor to face the twin specters of liquidation and unemployment.â€
Here’s the most intriguing of Crandall’s ideas: Return the industry to a greater degree of government regulation, at least on fares.“Unfettered competition just doesn’t work very well in certain industries, as amply demonstrated by our airline experience and by the adverse outcomes associated with various state efforts to deregulate electricity rates. In my view, it is time to acknowledge that airlines look and are more like utilities than ordinary businesses."
Crandall notes that the extreme view would be to...“...establish minimum fares sufficient to cover full costs and produce a reasonable return. While I would fully support such an approach, the idea is deeply offensive to those who cling to the belief that the markets can solve everything.â€