Crandall replies to American Airlines Pilot

An exchange between an American Airlines pilot and the ex CEO reproduced in the Dallas Morning News.

Reproduced here is a letter written by a pilot and the response of Mr Robert Crandall of American Airlines. Recommended as essential reading for all…..

From the pilot, name not given:
Dear Mr. Crandall:
I read with great interest recent news articles quoting you regarding the ongoing conflict between labor and management at American Airlines.
The problems of the last few days are a reflection of long standing feelings of anger and frustration amongst the pilots.  While I cannot speak for all, I am certain many do not feel as though they are a valued resource to the corporation.  They have been referred to as “bricks” and “cost units” worthy only of exercises described by certain management figures as “kicking the can.” 
The fact is the pilots of American are highly skilled, trained professionals directly responsible for the safe operation of over two thousand flights daily.  Their contributions merit a plan which includes them as part of a solution to what ails American.  All too often the pilots are described only in terms of being a problem or an impediment to the success of our company. 
I’m interested in the future of AA.  Most specifically, I’m left to wonder if it’s a future which includes me and my colleagues as assets or instead as nameless, faceless liabilities.  Thus, I simply ask you the following:
1.)  What long term, big picture solution do you see to the challenges which face AA and the Allied Pilots Association?
2.)  How can American begin to address our network deficiencies?
Thank you in advance for your attention and interest in American Airlines.
Very Truly,
 [Name withheld]
Robert L. Crandall response:
I have your recent note, and am pleased to share my thoughts. I am going to digress into history a bit, but will return to your question regarding my recent remarks after doing so, and will try to speak, as well, to your inquiry regarding the best long term plan for the Company and all its employees.
Let’s begin by stipulating that during the years I led American my goal was very simple: I wanted American to be the best airline by every measure:  service quality, size, and profitability.  I thought then and think now that the only way to win in business is to produce a better product than the other guy for the same or a lower price.  Moreover, I thought then and continue to believe that in a service business, every employee has an important role to play in forging the chain of favorable experience that builds customer loyalty and that every employee deserves the respect of every other and of every leader.
Now let’s do a very quick dip into history.  In the early 1970’s, when I joined the company, its market share had fallen into the range of about 10% of the domestic market, and it had few if any international routes.  It was, at the time, a slowly failing domestic carrier locked in an intense struggle with its pilots about something then called – from memory – the hard 75!!
Although that dispute was eventually settled – in ways that are lost to my memory – the Company’s overall situation was more or less stable through the 1970’s.  There was little growth, and there was great frustration throughout the Company about the lack of career opportunities and the difficulty of establishing differentiation against our competitors. Then, in 1978, deregulation occurred. 
When that happened, those of us responsible for the Company’s long term future decided that we needed to do something to deal with the long term lack of growth and the  increased competitive threat that new entrants and charter operators posed. We proposed something called the growth plan, which posited that if we could grow at costs equivalent to those of the new entrant carriers we could leverage the value of new planes and routes with our existing brand identity and do very well.
To make that happen, we needed the cooperation of existing employees and the unions that represented them.  After long discussions, all the unions agreed to new contracts which modified restrictive work rules and allowed hiring new employees at different pay scales (a practice, I might note, that many companies in other industries are now emulating). With new agreements in place, we bought lots of new aircraft and set out on an aggressive expansion plan that – together with lots of other creative things done during those years – eventually vaulted American into a position of clear industry leadership.
The key point is that the favorable outcome we achieved depended on a high level of cooperation and collaboration which was in turn made possible by lots of communication and consultation. It would be naïve to believe that everyone was happy about every decision and about every aspect of the way in which every dispute was resolved. But there was – for many years – a shared conviction that we were doing most of the right things and that the industry leadership we sought would be in everyone’s interest. As a consequence, we found ways to make our flights run on time, to lose fewer bags, to sustain fewer customer complaints and to make more money, which was widely shared by means of a broad based profit sharing plan.
Things began to change in the very late 80’s and early 90’s, and have not been the same since.  I retired in 1998 because new initiatives of any type – routes, aircraft, systems, or service approaches – were typically held hostage to individual contractual modifications desired by one group or another and because of increasingly vitriolic personal attacks by one or another of the unions on the property.
In the years since, the Company has been involved in constant turmoil, a large part of which can be attributed to the contractual modifications adopted after the dreadful events of September 2001, the subsequent bankruptcies of each of the Company’s major competitors, the Company’s declining competitive success and what many employees perceive to be inappropriate compensation payments to Company executives.
However one wishes to apportion responsibility for the current situation, I think there are a few truths that everyone with a stake in American’s future should take to heart: 
1. The company’s labor costs have been higher than those of its competitors since the major airline bankruptcies early in the last decade.  Each of the Company’s major competitors used bankruptcy to achieve lower labor costs than those provided for in the so called consensual agreements – and used their bankruptcy experience to lower many other costs as well. The Company sought – rightly or wrongly – to rectify the cost problem without declaring bankruptcy itself, but was unable to persuade the unions to accept the changes needed to lower labor costs. Moreover, because it did not take bankruptcy action, it suffered other cost disadvantages relative to its competitors.  As a consequence, the Company lost money for many years and is now smaller and less well positioned financially than its major competitors. 
 If American is to succeed in the years ahead, it must pay wages and benefits, and operate using work rules, which produce labor costs equivalent to or – while American gets itself back on track  –  lower than those of its major competitors. In the long run, no successful service company can offer compensation and working conditions that are materially different than those of its competitors.
 2. Over the years, and in recent months, there has been a great deal of discussion about the word “respect”. It’s an important issue, since every one of us desires and deserves respect from our colleagues and our leaders. It’s also something that requires careful definition.  When two groups have differing opinions on a subject, the disagreement implies nothing except that there are multiple views about the probable results of a particular decision. During my years at American, I was often frustrated by the fact that however courteously a negative response to a particular proposal was couched, the response was characterized as disrespectful.
The third paragraph of your letter addresses the issue of respect by observing that pilots have been referred to a “bricks” and “cost units”. While I fully agree that such characterizations are inappropriate, I hope you and your colleagues have focused on the fact that the author of those particular quotes is no longer with the Company.
Here’s the bottom line on “Respect”.  Every employee – from fleet service to chairman – deserves the respect of every other employee. Respect requires courtesy, and any employee, or any employee group that speaks ill of another renounces their own claim to either. And finally, respect implies a willingness to settle disputes within the context of the protocols of law and process that free societies from the grip of anarchy.
3. You go on to observe that “the pilots of American are highly skilled, trained professionals directly responsible for the safe operation of over two thousand flights daily.  Their contributions merit a plan which includes them as part of a solution to what ails American”.  I find nothing in that statement with which I  disagree, nor with which Tom Horton or other senior executives would disagree.  But I’m not clear about why you think the pilots do not have a major part of the plan going forward.  The pilots, as you well know, recently voted down the Company’s LBFO. That proposal, if approved, would have awarded the pilots a generous piece of equity, would have allowed the pilot group a substantial voice in the governance of the new company and did not – so far as I know – impose conditions materially different from those in effect at other major airlines. Thus, I was and remain mystified as to why the pilots – having turned down an agreement materially better than the company’s original proposals, are now angry that alternative proposals are being implemented.  Wasn’t that always the clear alternative to approval?
4. In recent days, the airline has not run well, and it seems clear that is true – in whole or in part – because pilots are expressing their unhappiness in various ways intended to reduce the systems reliability.  Such actions (1) are disrespectful of other employees, customers and management, (2) are dismissive of the protocols of dispute resolution, (3) reject any notion of accepting responsibility for the decision to turn down the LBFO and (4) imply that the pilots believe their business judgments about what is and is not competitively sustainable are superior to those of management.
In my opinion, these actions are very ill advised.  If the pilots want respect, they must be worthy of it. Among other things, they must recognize that threats are contrary to law and protocol, must accept responsibility for their own actions and must acknowledge the rights of those with leadership responsibilities. Additionally, it seems to me, they should think very carefully about whether their actions are consistent with the long term interests of the community of which they are a part  – that is, the Company – and the long term well- being of themselves and their families.
Acting in ways which will weaken American in today’s circumstances is harmful to everyone with an interest in the Company’s long term health, which certainly includes American’s pilots.
5. Now let’s turn to the future.  American, although weakened, remains a substantial company.  Its reputation, although less good than it once was, remains favorable with most travelers.  It has strong hubs, substantial alliances, fully developed systems, good facilities and orders for many airplanes it can acquire on favorable terms. It has various ways in which it can strengthen its domestic and international route system including expanded alliances, combinations with other carriers and organic growth initiatives.
To realize that future, American’s people must once again unite around a common vision.  Management must articulate the vision and lead the way, but others – including particularly the pilots – must set aside individual agendas and follow the lead.
What does that mean, specifically?
As a first step, I think everyone has to give management a shot.  Tom Horton has been in charge for only 10 months.  He cannot be held responsible for every decision and action taken during the last decade.  He’ll have to earn your respect, but he deserves a chance to do so.
Second, everyone needs to understand that it’s management’s job to identify and weigh alternatives, and to recommend a course of action.  In the world as it is, management is getting lots of help – from the Board, the Court, and the Creditors. Since the decisions being made are very important, and will impact every employee, their opinions should be given careful consideration. There are many forums – including participation in the court process — in which employee views can and should be taken into account.  Management should listen carefully, but employees need to understand that it’s management’s job to decide and that acting in ways intended to undercut management’s role can only be counter-productive.
While the decision process is underway, everyone at American should be doing everything possible to improve performance, so that the post-bankruptcy company – whether American as it is or American combined with other entities – will have the broadest possible base of customer support from which to launch the renaissance every employee should be hoping for.
When the bankruptcy is over, every employee should strive to be the best they can be. Management should plan carefully, communicate broadly, do all it can to facilitate excellence, remove roadblocks to accomplishment, and encourage achievement. Every employee should recognize that every task is important and must be done well, that every commitment must be kept, and that every customer must be well served.
I hope these comments are responsive to your letter.  I sincerely believe that cooperation among everyone who hopes for a better future for American is the only route to success, and hope everyone will come to share that view.
Bob Crandall
September 23, 2012
(Mr. Crandall went to work for American Airlines in 1973 and became its president in 1980. In 1985, upon the retirement of Al Casey, Mr. Crandall became CEO and chairman as well of American and its parent AMR, which was formed in 1982. He retired from all positions and the AMR board in 1998)