Aviation Doug Parker: The man who will be king By Arnie Weissmann / June 19, 2013 Share 1 -- There is surprisingly little official biographical information about US Airways CEO Doug Parker. On the airline's corporate website, you'll find a paragraph summarizing US Airways performance milestones and a string of career moves that trace the outline of his meteoric rise through the aviation industry. He first became CEO of an airline when he was just 38, but you're left to deduce even his age by counting backward from the year he graduated college. He's now 51. I think. His Wikipedia page doesn't provide much more detail; in total, it's just 13 lines long, less than half the length of Delta Air Lines flight attendant Katherine Lee's page. (She's the one who wags her finger as the safety video voiceover says, "Smoking is not allowed.") Although he is an outgoing leader and has made bold and unconventional business moves, he has not cultivated a big, public persona along the lines of airline chiefs from Pan Am's Juan Trippe to American's Bob Crandall to Southwest's Herb Kelleher to Virgin's Richard Branson. Though highly regarded by the aviation community -- Kelleher, in particular, is a big fan -- outside the US Airways hub cities of Phoenix, Charlotte, Washington and Philadelphia, he is little known by the public. That's likely to change. Thanks to a merger agreement with American Airlines that will close sometime in the third quarter, he will become CEO of the "new" American on the very day it becomes, by many measures, the largest carrier in the world. And when that happens, well, the world tends to pay a lot more attention to the top executive of the world's largest airline than the fifth-largest U.S. carrier. For Parker, it is a return to American, where he began his career working under Crandall from 1986 to 1991 among an executive team that spawned three additional airline CEOs: current AA chief Tom Horton, David Cush of Virgin America and Spirit's Ben Baldanza. From there, he moved to Northwest, where he put in four years as vice president and assistant treasurer. His big break came when he joined America West Airlines in June 1995 as senior vice president and CFO. He worked his way up to executive vice president of the corporate group, then COO, before being named CEO and chairman just 10 days before 9/11. There is one telling sentence in his official bio that perhaps reveals what he sees as his defining contribution to commercial aviation: "Parker has been one of the most vocal proponents of airline industry consolidation, which has provided a more stable and competitive industry for employees, customers, communities and stockholders." While he might get arguments on specifics regarding employees, customers and communities, of late stockholders have been very pleased. And one place where Parker is well known, outside his hub cities, is Wall Street, where he has on several occasions impressed investors and analysts with robust returns and bold attempts at consolidation -- sometimes with airlines that didn't, at the time, share his enthusiasm for coupling. Having worked for both regional and large airlines, Parker became keenly aware of the economies of scale that can benefit big, legacy airlines. In 2005, as CEO of a somewhat weakened America West, Parker negotiated a merger with an ailing US Airways. Though his carrier was the smaller of the two partners, he emerged as the CEO of the new US Airways and went on to prove the value of scale, demonstrating that even combining two financially challenged airlines, if done well, could result in a profitable carrier. The America West-US Airways integration was barely complete in 2007 before he began what would be an abortive hostile takeover of Delta when it was in bankruptcy. Failing that, Parker attempted to merge with United in 2010. He finally found a willing partner in American several months after it entered bankruptcy in 2011, and following more than a year of negotiations, a merger between AA and US Airways was announced in February. Certain decisions were made fairly quickly: The combined company would retain the name American, its headquarters would remain in Fort Worth and theAAdvantage loyalty program would take over Dividend Miles. US Airways would drop its Star Alliance membership, and American would retain Oneworld status. Although almost all of the either/or decisions leaned toward maintaining the American way of doing things, there was a notable exception: Doug Parker, CEO of the smaller partner, would run the megacarrier as CEO and, ultimately, chairman of the board. While at America West and US Airways, Parker made a habit of meeting with workers frequently and distributing videos of those town halls, including ones in which he faces hostile questioning from employees who believe he built up profitability on their backs. Indeed, US Airways has traditionally had lower labor costs than other airlines. But at a recent US Airways media event, Parker heaped praise on the employees of both airlines, and representatives of the pilot and flight attendant unions were on hand to publicly bless the merger. Absent were the mechanics, who set up an informational picket at Phoenix Sky Harbor Airport to remind journalists that some segments of labor were still feeling neglected during the merger process. Their contract, however, will not expire until after the merger is complete, and a picketer said they were not, at the time, contemplating a job action. While Parker's history might provide some clues to where he will steer the new American, past performance is not necessarily predictive. He agreed to two interviews with Travel Weekly to explore his plans and ideas for the new American Airlines. In person, Parker appears both easygoing and energetic, and younger and more boyish than his official photograph would suggest. During the course of the interviews, he discussed where he plans to focus his energy initially, what he sees as American's role in an increasingly globalized world, his views on both government regulation and IATA's New Distribution Capability (NDC) plans, and his thoughts on future relationships with travel agents. He also considered how an executive who has focused most of his career on consolidation will run the world's largest airline when there's little likelihood of consolidation in the foreseeable future. Excerpts from the combined two interviews are below. In the following Q&A, the original transcript has been edited for length, and the chronology has been altered to keep dialogue about specific topics together, though the topic might have recurred in intervals during the course of the conversation. Travel Weekly: In the past, American Airlines was known for innovation and for introducing new paradigms: hubs, yield management, loyalty programs. These were game-changing practices, and competitors were often playing catch-up. Today, it seems as if it's Delta that has the biggest vision and most coherent strategy. It's ahead on developing international joint ventures; it patiently executed its New York strategy that involved acquiring some of your US Airways assets; it bought a refinery; it gave itself more fleet flexibility. It seems to be able to think outside the box when it needs to. Will the new AA do more than play catch-up, or will it tend to its own garden? In what areas might it reclaim the lead as an industry trendsetter and innovator?Doug Parker: The reality is that Delta and United have a head start on the new American. Delta did its merger in  and got that all integrated, and they're off and running and using their scale to their benefit, I think in a very nice way. United, a couple years later, is still fighting a little bit through their integration, but they're getting that behind them. I think you'll see more things out of United, and we've got to get there -- we'd better get there. So we do have some catch-up to play. But it's not innovation catch-up; it's scale. It's getting our network to where it can compete with those two networks. Combine [US Airways and American], get them together, because all those issues you describe are extremely important, but they work because Delta has a scale and reach that we don't have. So that's where we need to get our focus, getting these networks combined. And what I do believe is that we will get to the point where we will have three truly global airlines, global alliances that provide customers pretty much the same schedule. We always match on price. Customers care about schedule and price, and they'll be equal. You'll see much more competition on the levels of customer-care and product issues. And yeah, the new American's going to be innovative and ensure that we have a product that's as good or better than carriers throughout the world. Because we're going to have to. TW: Economic trends show tremendous growth in China, India, South America, even some countries in Africa. Oneworld hubs -- Tokyo, London -- are formidable and can create a good backbone to build an international network, but they are "old money" centers. I recently heard Willie Walsh [CEO of International Airlines Group, holding company for British Airways and Iberia] say that London Heathrow's going to be passed up by Dubai next year as the busiest hub and that he doesn't expect Heathrow to be in the top 30 in 15 years. Now, he may have other reasons for saying this ...Parker: [Laughs] He may. TW: ... but if you want to retain the distinction of "largest airline in the world," what are your plans to become relevant to the changing, globalized world?Parker: First off, on the alliance front, we're really happy about being a part of Oneworld; it's a great group of airlines. We also think very highly of Star, by the way; we've enjoyed being a part of that alliance. But now I think we have a nicely balanced set of alliances among Star, Oneworld and SkyTeam. We all can get people out across the globe. As to the broader question, what are we going to do to compete with the new world of international carriers? That's a big issue for U.S. carriers in particular. A lot of that's about government policy and giving us the ability to compete with carriers that have governments that give them more support than we get from ours. That's less an American Airlines-specific issue and more of a U.S. carrier/government policy issue, which all of us -- Delta, United and us -- care about, and we're working very hard together to impress upon our government the need for a national aviation policy that won't put us at a disadvantage to carriers from foreign countries that get [government] support. TW: You have a lot of experience with mergers and attempted mergers. Going forward, can you imagine other mergers, or are we nearing the end of consolidation and into the age of joint ventures? Etihad CEO James Hogan went so far as to say the time of alliances is past, which is perhaps a separate issue, but he's now taking equity positions in other airlines, and Delta is investing in other airlines, as well. Is that the new model? Is American-US Airways the last big merger?Parker: Well, certainly in the U.S. industry, I think it is. Three large global network carriers will be intensely competitive, and it's hard to imagine any of the three of us having further consolidation amongst the three of us. There may be other consolidation with smaller airlines over time, but I think these three larger mergers would constitute the last of the big network carrier mergers. If there's more large-scale merger activity, it would be with international carriers, and we're going to need changes in laws for them to be truly mergers as opposed to investments. I don't foresee that happening anytime in the near future. But if indeed those laws are changed, I think there are all sorts of opportunities for the same kind of thing you see happening in the United States happening on a global scale, and for all the same reasons it made sense here. It provides better utility for consumers. It gives us the ability to fly people on one network all around the world to eliminate inefficiencies. And that, I think, would be good. But we're a long ways from that. TW: As regards international regulatory bodies, do you think that they're going to be increasingly favorable to granting immunity requests for joint ventures?Parker: I don't know for certain. As an industry, I think we've done a good job of holding the line with the U.S. government, and that position hasn't gotten worse. But we've been holding the line while other governments have been progressive with their aviation, so relative to the rest of the world, we have indeed lost ground, and we've got to do some catch-up with our aviation policy. TW: Do you have any joint ventures in mind?Parker: No, nothing. Nothing currently. TW: Do you mean nothing you can say on the record?Parker: No, no. We're focusing on getting this merger done. TW: What did you learn from the Delta-Northwest and United-Continental mergers? What will you try to emulate that they did right, and what will you try to avoid?Parker: Well, we've learned that those mergers work. Both of them have done an excellent job of using their new scale to attract consumers that neither of them could have attracted independently. Corporate clients. They can offer connections they didn't have before. So the model of a larger scale and a global scale works well. We certainly want to emulate that, and we will. They've had their share of growing pains getting there; putting two airlines together is difficult. We know that, and we certainly appreciate that. We've learned from [the US Airways-America West] merger, we've learned from watching them, and we hope that we'll be able to do this as well as anybody's ever done it before. We certainly have the team in place, we have labor contracts in place, and that helps a lot. We're going to work hard to minimize disruption to our employees by doing our best to adopt everything [that the larger carrier, American, currently does] and have it stay in place so we don't have to disrupt more of our employees than we have to, or processes and procedures. So all these things, we think, are in our favor to be able to do this as well as possible. But as well as possible still may mean some disruption, unfortunately. Then it's going to be our job to make sure we mitigate that as fast as we can. Look, it's going to be difficult, and I'm hopeful there's no disruption at all, but if there is, our job will be to mitigate it. What we can't do is say, "Gee, disruption is not something we want to bear, so therefore I'm not going to get these airlines integrated." Because [in merging] there's so much value for consumers and the communities we serve and for our employees. We have to do it, so we'll do it, and we'll do it the best way we can, in a way that minimizes the disruption. TW: Any one mistake that occurred in other mergers that makes you think, "We are not going to make that mistake again"?Parker: No, not necessarily. I think the biggest thing is our adopt-and-go mentality, which says we're going to take what's in place at American and leave that in place, unless there's a compelling reason not to, and also put it in place in the smaller airline. That keeps the bigger airline largely not disrupted, and we think that will help a lot. We didn't do that as a philosophy the first time around with America West and US Airways, and I think some of the disruption we had was due to that. But who knows? We didn't do it, so I can't say for certain that's what it was. But anyway, there's nothing that I think, "Oh, what a terrible mistake that was." I think everyone's done their very best, worked very hard. You know, circumstances vary among carriers, and if it were easy, we wouldn't be having this discussion. It's hard to do, but it's a cost of getting all these benefits, and our job's just to make sure we manage it well. TW: The biggest challenge in past mergers seems to involve integrating the airline reservations and passenger service systems. It seems to be making Southwest and AirTran very nervous, and United even lost some of its functionality for a while. So what were the lessons learned to make it smoother?Parker: The reality is that that's the most complicated part of any airline integration. What we're focused on is making sure that we integrate first and make enhancements later. Adopt-and-go means most of the employees won't see a change at all. But look, it's an issue we know we're going to have to deal with. We've done it before. That certainly helps a lot, to know that we've done it before and know what some of the larger issues are, but it's one of those things that you have to get through. The longer you wait to integrate, the more customer confusion you'll have, with reservations residing in two different systems. TW: Your first quarter this year was, as regards profitability, record-breaking. To what extent do you attribute that to the general economic recovery?Parker: Well, some. But, you know, most industries right now are not producing record profits, so I think it's a combination of the economy doing better, but also a major restructuring of our business that has us now hitting peak earnings before the economy is at its peak. We have an industry now that's so much stronger than it's ever been before, so the peaks are going to be higher, the troughs are going to be higher, and that's really good news for the industry. TW: One of the results of the capacity discipline that we've seen over the past few years is not only emphasis on scaling aircraft size to actual demand on routes, but also a reduction in the actual number of flights. There are fewer choices on the display screens than in the past. Some concern has been expressed that this drop in output actually causes demand to drop, that airlines are, in the words of analyst Henry Harteveldt, "firing passengers" by turning their backs on certain kinds of passengers, including cost-conscious leisure travelers. So if, in some sense, deregulation turned air travel from a luxury product into a commodity for the masses, are airlines trying to turn back the clock and make air travel a higher-end product again?Parker: Look, this is our business. There is so much choice out there for consumers, particularly leisure consumers, who have many different opportunities to get from Point A to Point B, no matter where they are. Far more choice than anywhere else in the world, because of the number of hubs we have across the United States as well as the point-to-point carriers that also provide service. So while there may be, in total, fewer flights, that's because we had a completely dysfunctional business in 2008 and 2009 that lost billions and billions of dollars. And now we have a much more rational but intentionally competitive business that will have three carriers that can provide customers global opportunities to go anywhere in the world. I mean, really, I can't imagine a more competitive industry that has more choice than the U.S. airline business. Just think of any two points in the United States, and go do your screen check of how many options you have. They are numerous, all times throughout the day, any day of the week. Just because it's fewer than there were before, when we had far too many, doesn't mean there aren't enough now. TW: Further to the topic of screen displays, there's quite a bit of controversy around IATA's Resolution 787, also called the New Distribution Capability. Among the concerns are that data gathered from consumers' past behavior will be used to construct offers that don't provide the full spectrum of choices available to them. So what's your take on the benefits and potential dangers to the airlines in rolling out the NDC?Parker: I'm not the expert on this. I can tell you that our perspective, like virtually every other carrier, is we need distribution methods to be efficient from a cost perspective and have the ability to merchandise the right product at the right time. So we want all of our products and our ancillary products distributed across as many channels as possible in a way that works for all consumers and agents and online travel agents. The existing model doesn't allow for this. The existing GDS model doesn't provide that type of choice or that transparency because it can't sell all the products we want to sell. From our perspective, IATA's New Distribution Capability is simply about creating a standard that allows all suppliers and distributors to exchange information so the customers can be presented with the most relevant and compelling offer. It's simply a set of standards for exchanging information that's meant to increase choice. TW: There's also the related issue regarding the ease of buying airline tickets online. The airlines seem behind the curve compared with other online shopping experiences. One can buy just about anything from Amazon -- a book, a coffee maker, a mattress -- with just a few keystrokes, but nothing related to travel or air travel seems simple and easy. So will we be seeing the largest airline in the world working to make online transactions easier?Parker: Absolutely. Ease of purchase is one of our key tenets. The difference [between buying air] vs. other products is that we just provide much more choice. For most items you're buying online, your choice is, do you want red or blue? Or do you want small, medium or large? That's an easy product decision to make, and you're done. Our choices are: What time of day do you want to go? Where do you want to go? What airports do you want to connect over? What airline do you want to take? Do you want first or coach? Do you want window or aisle? We provide many, many more choices, and that's good for consumers, but those choices take some time to get through. That's one point, and the other point is that if you're going through an online system that's GDS-based, you're not going to have the ability to target consumers the way sellers of other products do. Those are itinerary-based systems that don't allow us to target to the consumer the way that other products can. An Amazon, for example, could go look at your past purchase behaviors and target exactly to you. It should take a little longer because we've brought a lot more choice, but in some sense, we're constrained by some archaic GDS systems. We keep working to make it as good as we possibly can, and most of that means being able to go direct to consumer and allow the consumers more choice. TW: On the topic of consumer-direct, travel agents, both on the corporate and leisure side, are among those expressing the most concern about the New Distribution Capability. The agent-airline relationship is complicated. It's had ups and downs. In what ways might that relationship change between agents and the new American, if at all?Parker: Oh, I think you'll see a nice change. Again, as we move now to an industry where we really have three large global carriers who can get customers pretty much anywhere around the globe, that makes it easier for us to work with the travel agent community. It also makes it important for airlines to have great relationships with those agents and those agencies, which we intend to do. You'll see the new American working really closely with all of our partners, including travel agents and travel agencies, to make sure that we're providing the services they need to provide to their customers. TW: After combining the AA and US Airways fleets, do you see yourself trimming down the number of different aircraft you fly?Parker: What we'll do is modernize and yeah, American's MD-80s will go away, our older 737s are going away, so that will be a small reduction, but there will still be a lot of fleet types. There'll be a very modern fleet and, I think, a really good fleet. TW: Your career path has taken you, in a relatively short time, from leading a regional U.S. carrier to being CEO of the largest airline in the world, and there must be more differences than simply scale in the jobs of leading airlines of different sizes and range. Could you walk me through how your challenges have changed from leading America West to US Airways to what will become the new American?Parker: First and foremost, the fundamentals are all the same. At America West, we learned that what worked best was getting out and communicating with our employees. America West was an airline that was different than others. It had a different business model, and we needed to get out and explain to our employees why that was and what we needed to all be doing together to make sure that airline stayed in place. We communicated often and let them know who we are and what we could and couldn't do. And in doing so, we gained a great appreciation for what they do and made sure that we in management gave them the tools they need. So those fundamentals are the same irrespective of the size of the airline. It was helpful to do it first in America West. At a much smaller airline, you can do those things easier. As you get into larger airlines, the problem is being able to continue to scale that up; you know, you don't have more CEOs and now you need to communicate with 100,000 people instead of 10,000. That gets harder. We've been able to do that at US Airways with the help of a communications team that created really great vehicles for us, not the least of which is going out every month a couple times, talking to pilots and flight attendants in training, and filming it and letting our employees watch their colleagues asking questions to me and others about what's going on. We do a lot of that, and we're going to need to do that in American on a bigger scale, letting the team know who we are, what the airline is, where we're headed and what's important to us. We need them to take the airline where we want it to be. And as long as you do that, we have a phenomenal set of employees who can deliver the product. There are other issues that, as you get bigger, become a little more difficult, but again, the fundamentals are the same. Just get out and make sure your team is engaged and make sure they understand where the airline is headed and what their role is in it, and get them excited about the future and then give them the tools they need to do their job. We can do that at the bigger airlines just as well as we could do it at the smaller airline. TW: In an interview with Travel Weekly about 12 years ago, Maurice Flanagan, the chairman of Emirates when Emirates was first making its big ventures overseas, observed that legacy airlines grow and grow and grow because they have to. They can't stand still, certainly not as public companies. But then it reaches a point where no one person, no one CEO, can really understand the complexities of his entire business. Do you think that's true?Parker: Oh, I think it's true. I think that's true in pretty much any size organization. You know, I certainly don't try to understand all the complexities of this business. I have some appreciation for the complexities, but I don't by any means try to understand them all or manage them all. That's why it's really important to have a great team that does understand those issues and manages those things on their own. And, yeah, that becomes more important in a bigger airline as it becomes more complex. But, again, I get back to: The fundamentals are the same. We need people in place that can understand each of those complex issues and can manage them well and can make sure they are managed. And then our job is mainly to make sure that we're all strategically headed in the right direction. TW: This will be your second merger, and you put a lot of time and energy into two failed merger attempts, as well. Unless the regulatory environment changes significantly regarding international airline mergers, it's unlikely you'll be involved in a merger any time soon. In the past, you have run airlines with the idea they were also being prepared for merger; will it be different to operate an airline without the expectation that it will merge with a larger entity?Parker: It wasn't about consolidation for the sake of consolidation. From a strategic perspective, it has been our view that the industry was too fragmented and needed consolidation so that we could provide the services our customers were telling us they wanted. The airlines that I've happened to work at have been smaller in scale, and would benefit. Now the strategic issues will be different. You're right, that will change, and it will be different issues that become the right strategic positioning. I'm not certain what those are going to be yet, but that's the fun part. TW: You must have some thoughts about what you anticipate is going to be the most rewarding aspect of your new job. What is it? And what worries you the most?Parker: The most rewarding will be returning American to its former position as the best airline in the world. I know that's what it felt like when I worked there back in the late '80s. I know that's what the people of American are used to and are longing for. We're really excited to see it return to that rightful position. It's not there now. Everyone at American knows it. Part of the excitement behind the merger is getting the airline out of bankruptcy, merging, getting the scale we need to compete with United and Delta, and then working together to make it not just a competitive airline but the best airline. That's really exciting. What concerns me the most? I don't know. I don't know. I feel extremely confident in our ability to [return American to its former position]. While there are all sorts of concerns in this business, there are none I don't think we can manage, and nothing that I sit and worry about. The foundation has been laid for us. Between the restructuring that American has done through its bankruptcy and the merger of these two great airlines, we've got the foundation in place to go build the best airline in the world, and that's what we intend to do. Email Arnie Weissmann at firstname.lastname@example.org and follow him on Twitter.