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Apr202008

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Peter Goodman, writing for the Daily Times in Pakistan, penned a piece entitled: Time to ask Milton Friedman?. Goodman writes: “So firm was his regard for market forces, so deep his disdain for government, that Mr. Friedman once said: If you put the federal government in charge of the Sahara Desert, in five years there would be a shortage of sand.”

Nearly 15 years before the airline industry was deregulated, Friedman was calling for government to take its hands off of the industry. What if there was no government interference with the airline industry when the jet engine was introduced. Would today’s construct be better or worse than it is? So as we begin the process of congressional hearings on the Delta-Northwest transaction this week, I am troubled, concerned and worried for the industry.

On Tuesday night of last week, FOX Business had Robert Crandall, former Chairman and CEO of American Airlines on as a guest to discuss the Delta-Northwest deal specifically and industry issues generally. While it looked like the Bob Crandall we all looked up to as we learned the airline business and how to think about it, the words were more Lou Dobbs. A most disappointing interview with a person I once admired, but a precursor of things we will begin to hear I am afraid.

Just not much to say.

Added on April 21, 2008

When I posted last night and ended with the mention of Robert Crandall’s appearance on FOX Business, I did not know that an op ed piece would appear in today’s New York Times. Crandall pens a piece entitled Charge More, Merge Less, Fly Better - New York Times. For a guy who was admired for being a most aggressive competitor and willing to employ any tactical and strategic action to give his American Airlines an advantage – I just find his words to be, well – you be the judge. For some they will be refreshing, for others they will be anything but. At least he mentions that fares have to go up.

I will take Friedman because many of the issues that Crandall cites have needed fixing since the industry was deregulated.

Reader Comments (2)

I wonder if Robert Crandall would have the same opinion if it were American who were merging with NWA? Crandall had a great career as AA's CEO and is responsible for making AA an industry leader; but only because of deregulation. AA would not be where it is today if hadn't been so innovative (Sabre, AAdvantage, etc) during the 80s and, to some extent, the 90s. Now Crandall says the industry needs more regulation? What is especially curious is his focus on the legacy carriers. He completely dismisses the LCLFs. He maintains that a Delta/NWA combination and a UAL/CAL combination will leave only 3 major carriers. That's arrogance. Southwest, AirTran, and JetBlue, to name a few, are better operations than the existing carriers at this point. There is more than enough competition in this market. And yet he believes that airlines need more pricing power. A combination of mergers and cutting capacity will achieve that. Regulating who flies where and when is not the answer, unless of course you want to protect AA's interests who by far has the most to lose right now.

Finally, Crandall decries code-share agreements with international carriers. His response is to blow up these treaties and protect our turf. Well the world has changed and if American carriers are going to compete with the Lufthansas of the world, the answer is not regulation and isolation. The better solution is to allow US carriers to become strong again.
Mr Crandall is getting a lot of exposure on CNBC, FOX, and other outlets and will no doubt be heard in Congress in the coming weeks. I only hope that those asking the questions inquire about his true motivations, which I believe are protecting AA's interests and creating the right environment for the launch of his own air taxi service. He's clearly biased.

04.21.2008 | Unregistered Commenterswissair

Swiss

I have been troubled since I first saw his interview on FOX the day DL-NW was announced. Wow. The guy that has fingerprints over many marketing innovations that are still used in the industry. The man that ultimately had to address bias in the reservations system he helped design to give American Airlines a distinct competitive aadvantage. And I am not talking about making phone calls as that has been addressed.

You are right, no CEO during the early years of deregulation had the same reputation that Crandall had. I always looked to him as the embodiment of the hard nosed, market driven and commercially innovative leader that was needed during that time. And the same CEO is what we need today only the issue is not about Lubbock, it is about Lisbon.

I agree with you completely on your statement that he dismissed Southwest, jetBlue and AirTran. Wasn't Southwest the largest US domestic carrier in 2007 in terms of passengers carried? To make broad statements like this and not address competition in the US domestic market is just, well.....

About the only thing that makes sense from him is the air traffic control system and possibly a revisit of the bankruptcy laws. But even there, he sits on an FAA Advisory Board if memory serves me.

I sure do not want to believe that somehow his is protecting current AA's interests through his comments. But you know these words are not much different than Mike Levine's criticism of the United-US Airways attempt in 2000. To hear Levine criticize that deal when he taught the industry about code sharing and benefits derived from it that were learned from Northwest and KLM were hollow. And he did work for Northwest.

The best I can tell from Crandall is that maybe he wants to the new Chairman of a new Civil Aeronautics Board.

04.21.2008 | Unregistered CommenterSwelbar

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