The need to coordinate reservations among multiple cities—indeed, among multiple airlines—added still another dimension of complexity. For most of their history the airlines had been scheduled like railroads: numerous stops along a single line, with passengers boarding and disembarking at each stop, sometimes to board a second flight on a different airline flying in a roughly perpendicular direction. Confirming the itinerary for a single passenger traveling on two connecting airlines required no fewer than 20 separate communications, making the airlines, even in the 1940s, among the world’s biggest users of leased telephone lines.
But what if the entire process could be automated?
In the early 1940s the technical people at American contacted the major makers of adding machines and other computational equipment. American wanted a machine that could tell reservationists when particular flights were sold out and, just as important, when cancellations had once again made seats available. Not a single contractor would touch the job. There were too many variables, and the data changed too quickly. Although it was 20 years before the expression “real time” came into use, that, in a nutshell, was the realm in which American needed to operate—with a machine that could simultaneously receive and deliver information to and from hundreds of remote terminals, giving each location the benefit of the latest data entered into the system from any other location.
So American’s technical people undertook the effort on their own, creating a grand contraption of tall cylinders, each representing a different flight on a different day. The cylinders were filled with marbles, one for every unsold seat. With each reservation a button was pressed and an electrical signal sent, opening a hatch at the bottom of the cylinder through which one marble was emptied. Conversely, the cancellation of any reservation caused a marble to be electrically released into the top of the cylinder, restoring the seat to the unsold inventory of the flight. The machine was ungainly and impractical, but it vividly demonstrated a potential solution.
After some additional experimentation, American convinced the Teleregister Corporation to join in. Together the companies developed a phalanx of switches, relays, and plugs, which they called “the brain.” This room-sized device in turn was hooked to hundreds of little terminals that looked like adding machines. Reservationists were issued stacks of notched metal plates, which they inserted into their terminals as a way of notifying the brain which flight they were inquiring about. The brain responded with a signal that illuminated a green light, when seats were available, or an amber light, if the flight was sold out. A few years later, in 1952, the ganglia of wires and relays were replaced by a crude, homemade memory device—a giant grinding wheel, covered in aluminum and sprayed with an oxide, on which millions of tiny electrical charges could be deposited. American’s Magnetronic Reservisor was nicknamed Girlie, because, it was said, she “told all.”
The Reservisor, installed at American’s LaGuardia Airport reservations center, was a technological marvel but still only a marginal improvement over books and blackboards. There was no way to attach an individual’s name or phone number to a particular reservation; reconciling the passenger manifest with the electronic seat inventory remained a laborious manual process.
The advent of jets in the late 1950s made efficiency in record keeping even more essential while also making it more onerous. The speed of jet travel encouraged more business and leisure travelers to fly on impulse, demanding even more up-to-date inventory records and faster communication. American tried to keep up by adding more terminals and more reservationists, but this only slowed the process more while creating, according to an internal company report, a cost problem of “alarmingly unfavorable proportions.” C. R. Smith was despondent.
Meanwhile IBM was absorbed in a Cold War project for the federal government called SAGE—Semi-Automatic Ground Environment, a rather innocuous name for the system that controlled the giant luminous screens used to monitor incoming nuclear bombers. SAGE enabled war planners to sit in a semicircle and play nuclear simulation games. It was one of the first real-time applications of computer technology.
One day in 1953 an IBM sales representative named Blair Smith, finding himself on an American flight sitting next to C. R. Smith, discovered that their surnames were only the first coincidence. Smith of American explained his frustration in managing reservations while Smith of IBM betrayed his eagerness to make a sale. Before long IBM had a contract to apply the war-making technology of SAGE to American’s computer reservations problems. IBM called the project SABER, for Semi-Automatic Business Environment Research. For nearly a decade the project engineers toiled. Along the way, in 1959, an American executive flipping through a magazine stopped at an ad for the 1960 Buick LeSabre; he transposed the last two letters of the acronym and called the system Sabre. It would become, in every respect, the weapon that its name implied.
Sabre came to life in an office in suburban Westchester County, New York, late in 1962. At the time only 14,000 or so commercial computers of any kind were operating in the United States, nearly all of them issuing payrolls, compiling financial data, or solving massive scientific equations. None was engaged in computing in real time. Overnight American’s reservation system was transformed from an adding machine to an instantly updated list of seats sold and available on each flight, including the name of every reservation holder and his or her phone number, special meal requests, and rental car or hotel information. Sabre was hailed as the world’s most complex commercial computer, a “space age brain.”
With airlines competing on the basis of Polynesian pubs and all-steak flights to Florida—competing, in short, on the basis of anything but price—American Airlines achieved a marketing triumph with its instantaneous and reliable telephone reservation system. Almost immediately American began gaining market share on the other airlines, including its archrival, United Airlines.
American’s employees did not exactly greet Sabre with joy. The Transport Workers Union expressed concern that employees would be “slaughtered by the new mechanical monsters.” C. R. Smith deflated such anxieties by promising that not a single reservationist would lose a job upon the arrival of Sabre. It was an easy promise to keep because, as Smith knew, those jobs were occupied almost exclusively by women and turnover was so high that the rate of natural attrition would almost perfectly match the pace at which the new computer system would be connected.
There was one additional value inherent in the Sabre system. As a company technical report dryly noted, Sabre “will be extremely useful in supplying management with abundant information on day-today operations.” It was an understatement. From its first day of operation Sabre began accumulating reels of information, the most detailed information ever compiled on the travel patterns emanating from every major city—by destination, by month, by season, by day of the week, by hour of the day—information that in the right hands would become exceedingly valuable in the industry that American sought to dominate.
Those airlines that ignored the computer revolution did so at tremendous peril. One was Trans World Airlines. In 1966, four years after American was on-line with Sabre, clerks at TWA were still taking reservations by hand, on index cards. It was in that year that TWA hired a 30-year-old Bob Crandall from Hallmark Cards as its manager of credit and collections, though he would not stay in that position for long.
TWA had contracted with Burroughs Corporation to develop a massive airline reservations system called George, as in, “Let George do it.” Yet even after $75 million had been spent, a staggering sum in the late 1960s, George was way behind schedule, and TWA continued lagging badly in the race to fill empty airplane seats. Finally Crandall was given the job of whipping George into shape.
Crandall impatiently listened to the excuses from the Burroughs people. George, they insisted, was almost ready. Just six more months! they begged. But Crandall recognized that massive computer systems reach a point at which they have either sprung to life or never will. There was no evolutionism or
gradualism, no such thing as “almost ready.” So in the spring of 1970 Crandall ordered a wall erected through the middle of TWA’s computer center in suburban New Jersey. To one side he confined the Burroughs engineers, with their beloved if moribund George. “You’ve got six months,” he told them. On the other side of the wall IBM was brought in to begin work on a new system. After precisely six months George was still not working. Crandall and his people went to the Burroughs side of the computer room, turned off the power, and told everyone to go home.
Crandall was summoned to a meeting with the chairman of Burroughs. The jilted executive glared at the smart-aleck young executive who had brought such loss and embarrassment to his company. “Young man,” the Burroughs chief told Crandall, “your career is over.”
Well, not quite—although within two years, by 1972, Crandall had hit one of those career plateaus that nearly every executive encounters while climbing the pyramid of corporate power. Passed over when a new chief financial officer was appointed, he grew angry and disillusioned. Convinced that TWA had lost its way, he decided to quit.
He was drawn to Bloomingdale’s with the siren promise that he would succeed the incumbent president, Marvin Traub, as chieftain of the retailing giant. But Crandall found retailing exquisitely boring. Inventory automation didn’t begin to approach the intellectual challenge of airline reservations. Nor did he particularly like managing low-wage, low-skill workers. And he perceived a caste system in retailing in which merchants were Brahmans and everybody in the back office was scum.
Bob Crandall had to get back to the airline business. It had everything he wanted from a career. Later on he would observe that “the airline business is fast-paced, high-risk, and highly leveraged. It puts a premium on things I like to do. I think I communicate well. And I am very good at detail. I love detail.”
Happily an offer came quickly, from American Airlines. In April 1973 Crandall began work as the chief financial officer in American headquarters on Third Avenue in midtown Manhattan, practically next door to TWA. The headquarters staffers fully expected to see the new finance man, late of Bloomingdale’s, strolling into American outfitted in the height of fashion—a wide tie, no doubt, and wide lapels. They were surprised, and a little disappointed, to see that their new colleague wore a skinny tie and narrow lapels. Very little of the fashion culture, it appeared, had worn off on Bob Crandall.
By coincidence, within days of Crandall’s arrival American sank into a leadership crisis. Improbably, the enabling event was Watergate.
When C. R. Smith had left American to become Lyndon Johnson’s secretary of commerce, he had been succeeded by George Spater, a melancholy-looking lawyer with wire-rimmed glasses. Whereas C.R. was famous for firing off memos from his own typewriter, Spater kept his office door closed because he could not abide the clatter of typing. Smith, recognizing the value of celebrities in consumer marketing, had hobnobbed with Clark Gable and Carole Lombard at the opening of Gone With the Wind in 1939; Spater, probably the most erudite man ever to run an airline, spent his free time immersed in the writings of Virginia Woolf and the arcana of medieval plain-song.
In 1971, three years into the job as chairman, Spater was anxiously watching American stumble. His insular management style had bred executive infighting below him. The great Sabre computer reservations system had begun to atrophy; in a standoff between the finance and marketing departments over who controlled Sabre’s budget, much of the budget simply went unfilled. Worse, the widebodies were still flying half-empty. American’s east-west route system was old and stale, denying American any meaningful participation in the one great growth market of the era—the north-south vacation traffic stimulated by the development of Florida and other warm-weather climes. American Airlines needed a bold stroke, a merger perhaps, or a big new series of routes.
Spater developed a strategy to compete, but he could fulfill his plans only at the sufferance of the federal government. Moreover, any doubt about the government’s continued dominion over the airlines had been very recently lain to rest when Richard Nixon, in his first few days in office, personally interposed himself in the intricacies of a long-simmering CAB case over which airlines would receive new routes over the Pacific. Nixon had made himself lord and master over the airlines’ growth.
In the fall of 1971, with American’s problems weighing heavily on his shoulders, George Spater was contemplating a dinner invitation from Herbert Kalmbach, the personal lawyer of President Nixon. Spater knew that Kalmbach was handling much of the fund-raising for Nixon’s 1972 reelection drive and that in addition to representing President Nixon, Kalmbach did legal work for archrival United. Spater agreed to meet Kalmbach at the 21 Club in New York. Over dinner Kalmbach told him that anyone giving $100,000 to the Committee to Reelect the President (later known as CREEP) would be regarded as being in a “special class.”
Spater brooded. Though he wanted no favors from the Nixon White House, he worried that failing to contribute would expose American to the risk of unexpected action. It was terra incognita, Spater would later explain. “I think sometimes the fear of the unknown may be more terrifying than the fear of the known.” Corporate campaign contributions were (and are) illegal, and Spater was not the type to break the law lightly. He was known as a man of sensitivity and integrity. He had written articles on morality and ethics.
While wrestling with his dilemma, Spater received a hauntingly strange nudge from C. R. Smith, the venerated former chairman. In an envelope Smith had placed four checks written on his personal account, each for $5,000, dated about one month apart and payable in cash. In a note accompanying the checks, Smith cryptically wrote that he figured that Spater might be needing some extra funds about then.
Spater knew precisely what Smith meant. He wasted no time in having a trusted aide cash the checks and pay a visit to CREEP headquarters, a block from the White House. “Here’s five in cash,” the American operative told Hugh Sloan, the campaign finance chief, turning over an envelope full of $100 bills. “There will be more.” One by one the remainder of C. R.’s checks were likewise cashed into $100 bills, each a few weeks after the next, followed by another trip to campaign headquarters.
Because the contributions involved Smith’s personal funds rather than American’s corporate funds, no laws had been broken. But the Nixon people reminded Spater that American remained well short of its quota. Having already taken one step down the icy slope, Spater then slipped into outright illegality, authorizing the payment of an additional $55,000 through a series of off-the-books transactions involving a Middle Eastern business agent and a safe at American’s headquarters in New York. That money too went to CREEP as a pile of $100 bills.
A few months after Nixon had been handily reelected, a list of unlawful donors to CREEP was obtained through a lawsuit by Common Cause. George Spater immediately went public, making American Airlines the first of a dozen major American corporations to confess to campaign finance illegalities; as a consequence of exposing himself to the first flash of publicity, Spater was spared from criminal charges by Archibald Cox, the Watergate special prosecutor. The role of the $20,000 in checks from the beloved founder C. R. Smith in priming the pump at CREEP was never publicly revealed; it was a secret kept even from most of the top officers at American. George Spater alone took the fall for American on Watergate. Sacked by American’s board of directors, he moved to England, immersed himself in literature, and died a few years later.
C. R. Smith, his reputation unblemished in the affair, returned to the chairman’s suite at American until a new successor could be found. There was no one fit for the job inside the company; Bob Crandall and the other senior officers were too green, particularly for the top job at so troubled a company. In an unusual move the board chose Albert V. Casey, an outsider though a well-rounded executive of stellar reputation. He had served as president of Times Mirror Company and publisher of the Los Angeles Times, and had worked in the railroad industry as well.
Crandall, suddenly, had a new boss to impress if he wished eventually to become the president of American. He received a boost from no less than C. R. Smith, who, in retiring from the chairman’s position for a second time, left behind one of his trademark typed missives. It contained a thumbnail evaluation of each of American’s senior officers. Though he had worked with him only briefly, the old man wrote of Crandall, “One of the brightest young financial men I’ve ever met. Formerly with TWA. Entirely competent.”
Casey had the opportunity to learn this for himself even before his appointment was publicly announced. Crandall made a point of visiting Casey’s temporary apartment in New York with a big, thick binder under his arm. In the book Crandall had organized all the particulars of American Airlines—its routes, financial results, fleet, fares. He and the new boss sat down and turned the pages together, one by one.
Crandall had made himself a valued advisor. Soon Casey was looking for a new senior vice president of marketing, a powerful position, a first among equals in the ranks of American’s senior vice presidents. Casey asked Crandall to help him evaluate candidates for the job, only to find that during the interviews Crandall displayed a more impressive grasp of airline marketing than any of the people under consideration. Casey readily gave the marketing job to Crandall. After only one year at American, Crandall had become the most powerful of the company’s senior vice presidents, one step away from the post held by Casey himself.
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