American Airlines is floundering, but its IT leadership can't be handed the blame. The company was once a pioneer in IT innovation, and while that trait is widely seen as necessary for survival in today's economy, it is not always enough to overcome larger market forces, writes Larry Tieman, former senior vice president at FedEx.

Tieman recalls in a post at InformationWeek that in the mid-1980s American Airlines had a top-notch IT team, led by Max Hopper, one of the creators of the Sabre reservation system. Its C-suite was packed with leaders who knew their way around IT.

"Hopper's organization, which went far beyond IT, was built around Sabre, which AA owned and which generated revenue on each booking. In 1985, about 10,000 reservation agencies used Sabre to book flights for all the major airlines. Sabre generated more profits for AA than its flights did," Tieman writes.

The company launched a highly innovative loyalty program, a low-fare search function, and other revenue-generating products in the 1980s.  However, in 1990 its parent company went into the red, and today it is seeking bankruptcy protection.

"AA may have had the best IT in the industry, but IT couldn't solve the industry's core cost and labor issues," Tieman writes. There was only so much IT could do in the realm of revenue management because airline ticket prices are determined in large part by forces beyond IT's control.  

While its IT innovations gave the company a competitive advantage, but only in the short run. Other airlines tended to copy American in swift measure. 

"AA in the 1980s was an IT-savvy company with a history of IT-based innovation. But those innovations were on the periphery of its core business and, ultimately, they couldn't change the fundamental economics of the industry," Tieman writes. "By the 1990s, AA was in financial trouble; it was experiencing fallout from its CONFIRM travel reservation system project, combining airline, hotel, and rental car information; and its top IT talent was leaving the company. It failed to duplicate the kinds of breakthrough innovations of the 1980s and became just another airline battling other airlines, fuel costs, labor trouble, and price-conscious customers."

For more:
- see Larry Tieman's post at InformationWeek

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