Tuesday, June 3, 2008

Memo to Airline CEO's: Have you counted the paper clips?

Donald Nyrop did.

Donald Nyrop became the youngest president of a U. S. Airline in October, 1954, when he took the reins of Northwest Airlines at the tender age of 42. Early on, his department heads became aware that cost control and precision in budgeting were the name of the game for Nyrop. He needed capital to modernize the airline's fleet and lenders were dragging their heels, waiting to see how he would do. He needed to replace the old, tired DC-3's and DC-4's with new and more economical DC-6's, DC-7's and Lockheed Electras. He needed snow bird destinations in warmer climates to boost revenue in the winter months. He needed permanent certification of the routes to Honolulu and the Orient.

But first, he needed to get the bankers attention by improving the ratio of operating revenues to operating expenses.

That meant counting paper clips. And staples. And pencils. And cellophane tape. An article in the August, 1956 issue of the Northwest Airlines News*, an employee publication, was devoted to office supplies costs. In it employees were asked, "Have you thrown away a pencil when you could have used it a while longer?" The article then went on to list the costs of various office supplies in the preceding year:

Paper clips: $150.13
Staples: $843.20
Pencils: $8,005.69
Tape: $1,583.31

Granted, it is not 1956 anymore. Deregulation has spawned more airlines flying ever bigger, fuel guzzling aircraft traveling over ever longer routes, criss-crossing the globe. But 24 of those airlines have declared bankruptcy in the past year. Most of the existing "legacy" carriers have emerged from bankrupcy once, only to face it again. Mergers, once seen to be the vehicle to save the day, have become tentative. Alas, it is way too late now to start counting paper clips again. And I don't think we'd have any luck coaxing the legendary Donald Nyrop out of retirement.

*The NWA History Centre has archived copies of Northwest Airlines News going back to the 1940's. http://www.nwahistory.org/


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