During the 1980s, the United States aviation industry was going through severe financial and operational difficulties. The 1970s oil crisis, deregulation, and a series of recessions all had a significant impact on the market. As a result, carriers were driven to save as much money as they could. One airline executive that was determined to cut costs was Robert Crandall. The former president and chairman of American Airlines introduced a series of measures to help his airline amid the challenging time.
A small but big difference
There is a particular cost-cutting measure performed by American Airlines that has become a legend within the aviation industry. In the 1980s, Crandall had the idea of removing just a single olive from every dinner salad served to the carrier’s passengers during their inflight meal. He argued that the customers would never even notice such a move.
In turn, the company would be able to save some money. The initiative paid off. According to The New York Times, the airline saved $40,000 a year with this measure.
This approach has been adopted by many companies when it comes to money-saving efforts. For instance, there are now often fewer potato chips in bags and smaller chocolate bars on supermarket shelves. However, unlike American Airlines’ move, these measures are more noticeable by the consumer.
There isn’t any industry like this
This cost-saving initiative is just one of many that were introduced by Crandall during his tenure. In an interview with Time in 1991, the executive spoke about how the airline business is unique compared to other industries. The nature of the market makes it difficult for management to respond.
“Running an airline is not like making dog food. In the dog-food business, if you get a recession, you just close a couple of plants and make less dog food for a while. Nobody cares where you make it. They buy it in all the same places. But it doesn’t work that way in the airline business. You cannot inventory a backlog and slow down production for a while. We make our product every day. If you reduce capacity, your costs rise,” Crandall said, as reported by Time.
“Let me give you an example: let’s say an airline has three flights a day out of a city, which is our average. Say you have a flight at 8 a.m., another at noon and one at 5 p.m. Let’s say I eliminate the flight at noon to cut costs. Now, none of that business is going to fly on my 8 a.m. flight or my 5 p.m. flight. It all goes on my competitor’s flight at 12 o’clock. So the result of reducing capacity is to increase my unit costs.”
Thinking out the box
Speaking of dogs, Crandall once fired a dog to save on costs. This move came about after a review on spending.
“It’s true. We had a cargo warehouse in the Caribbean, and we had a guy there guarding it all night long. I was reviewing the budget, and I wanted to reduce costs. My people said we needed him to prevent thefts. So I said, Put him on part time and rotate his nights so nobody knows when he will be there. And the next year I wanted to reduce costs, and I told them, Why don’t we substitute a dog? Turn a dog loose in the warehouse,” Crandall added in Time’s report.
“So we did, and it worked. Now the following year, I needed to get the costs down some more, and my guy said, Well, we’re down to a dog! So I said, Why don’t you just record the dog snarling? And we did. And it worked! Nobody was really sure whether there was a dog in there or not.”
The businessman added that he is opposed to spending too much money on airport expansions because it costs a lot of money. He said that when a city decides to build or expand a site, they sell bonds that are guaranteed by the airlines on the basis of long-term leases. He explained that capacity draws activity only if it is added in the right areas where people want to travel. However, many cities feel that if they construct an airport big enough to be a hub, it will become one. Yet this is often not the case.
Always need to be mindful
Over the decades, airlines have been forced to implement cost-cutting measures following events that lead to passenger downturn. For instance, ABC News highlights how United Airlines removed grapefruit juice from its bar menus as part of a $200 million cost-cutting program a short while after 9/11.
So, following the initial impact of the global health crisis, which is seeing the grounding of inefficient jets, there may be more similar saving policies in place across airline services. Just like Crandall’s olive technique, there may already be aspects taken away without customers even noticing.
What are your thoughts about Robert Crandall’s cost-cutting approach at American Airlines during the 1980s? Do you feel that the measures were worth it for the carrier? Also, have you noticed any other small items being taken away from an airline’s services in recent times? Let us know what you think of the events in the comment section.