American Airlines CEO discusses airline industry

Returning to his alma mater, Robert Crandall, chairperson and CEO of American Airlines, addressed a full house Wednesday in Steinberg-Dietrich Hall. To accommodate the huge audience waiting to hear the Wharton graduate, the speech had to be simulcast to a different room. "The program was very interesting," said Wharton freshman Morgan Vandagriff, vice president of the Wharton Transportation Association. "It was a candid assessment of America's current position in the market and it's plans for the future." Crandall told the audience that the key to success is not only to be smart, but also to apply various skills, work hard and take responsibility for one's actions. "The best part about my job is the privilege of making decisions and the rewards of management," he said. In discussing what makes the airline industry unique, Crandall emphasized the differences between consumer behavior toward airlines and toward other industries. "It is difficult to build grand loyalty because consumers feel all airlines are the same," he said. "People will fly any airline, just as long as it takes them where they want to go and when they want to go." Crandall also discussed the inefficiency of cutting prices to attract more customers, explaining that when an airline sees a competitor cut its prices, it will automatically match the reduced rate. An employee of American Airlines since 1973 and its chairperson since 1980, Crandall has seen a trend in consumer behavior and believes a more efficient method of luring customers from the competition is through "schedule frequency." Since customers, according to Crandall, will fly whichever airline offers the most convenient flights for them, adding more flights to the schedule is the best way to attract a greater market share. Several Wharton students said they received valuable insight into the industry from Crandall's presentation, describing it as a valuable management lesson. "Although he was industry-specific, you can apply the same concepts in a variety of different industries," Wharton freshman David Danish said. Crandall warned audience members that the airline industry is one that is "easy to enter -- but [one that you] leave on a stretcher." He explained that the barriers to entry are practically non-existent but that competition among the major airlines is stiff. Discussing the recent strike by American Airlines pilots, Crandall said he feels the pilots will accept the airline's most recent contract proposal. "The modified contract is more favorable to the union than the one recommended by the Presidential Emergency Board," Crandall explained. "If they don't accept it, then Congress will most likely impose the PEB contract, which is less beneficial." Neysan Rassekh, president of the Wharton Transportation Association, said the way Crandall handled the labor situation exemplifies his success as CEO of the world's second-largest airline. "He is an incredible CEO -- he kept the company profitable despite problems with the pilots and dealt with them successfully," the Wharton sophomore said. Crandall was the last of four speakers participating in the Musser-Shoemaker Leadership Lecture Series for undergraduates.