• Wed. May 11th, 2022

Airline industry consolidation king Doug Parker steps down as Covid crisis ends

ByKimberly A. Brochu

Dec 7, 2021

Doug Parker always had a languid, slow drawl, “aw shucks” demeanor that made it seem like everything came easy to him and he would handle it at his own pace.

What he accomplished, more than anyone, was the consolidation of the American airline industry in the twelve years following the terrorist attacks of 9/11. During that time, no one has done more than Parker and his management team to create the industry it is today, with three global network airlines replacing six.

It is not unreasonable to call Parker the main architect of airline consolidation in the 21st century, although its biggest merger – American with US Airways – came after failed attempts to merge US Airways with Delta and United.

Today Parker announced his retirement as CEO of American, the world’s largest airline. The number of people surprised is nil. Parker was an airline CEO for 20 difficult years. In an interview with CNBC, he said, “It’s something we’ve been looking at for some time.” The pandemic delayed his retirement, he said, but now he’s leaving with demand returning.

In other words, Parker is retiring after successfully going through a second crisis. During both, many pundits and investors predicted the demise of the airline industry. But very visibly, when the pandemic arrived, the four major airlines – American, Delta, Southwest and United – were all run by people who had run airlines after the terrorist attacks. Nobody panicked. All four seemed to know what to do. They all anticipated the eventual return of travel, including business travel, despite predictions to the contrary from overworked investors and tech advocates who were so certain Zoom would replace business travel. You must laugh.

Now travel is returning, albeit at an uncertain pace. In response, in June Southwest CEO Gary Kelly announced that he would retire in February. On Tuesday, Parker announced he would retire in March. Both men will remain presidents. In Parker’s case, he named his successor, Robert Isom, in 2016. Isom is another familiar and experienced airline executive. He is adept at managing operations; now his strategic vision and leadership will be tested.

Parker’s story spans 35 years in the airline industry. Parker earned an MBA from Vanderbilt in 1986 and went to work as a financial analyst for American Airlines. In 1991 he went to the North West. In 1995 he went to America West, where he became CEO ten days before the September 11 attacks.

On September 22, 2001, Parker failed to secure bailout funds for America West from the new Air Transportation Stabilization Board. “It was a bad day,” he recalled in a 2013 interview. “I’m 39. I’ve been CEO for a month. Now I will liquidate. It’s not going to look good on the resume.

On the flight back to Phoenix, a depressed Parker went to the back galley and spoke with a flight attendant, a single mother, who asked him how it went. “I couldn’t lie to her,” he said. “I told her, ‘They don’t want to do it’… She just looked at me. She said, ‘You can’t do that. I have been doing this job for 15 years. That’s what I do. I set up my daycare around it. I can’t do anything else.

“I realized it wasn’t about me,” Parker said. “Management’s job is to serve the people who do what it does.” In October, America West secured a $60 million federal grant and in December secured a $380 million loan guarantee, allowing it to survive and its management team to begin a merger quest.

They pursued a merger with American Trans Air in 2004, but failed. Then they turned to bankrupt US Airways. The following year, US Airways emerged from Chapter 13 with Parker as CEO. The reorganization involved cutting costs and bringing in the aggressive young management team which included Parker, Scott Kirby and Derek Kerr. In the first revenue report in January 2006, the figure that stood out was the 28% increase in revenue per available seat mile. He said that these people might know what they were doing.

But the quest for fusion had just begun. In 2006, the team sued the bankrupt Delta Air Lines, embarrassingly failing and giving the impression that they weren’t ready for prime time. But the team learned that they needed employee support. They failed in a subsequent merger on United: United’s CEO leveraged their attempt to secure a merger with Continental, which brought both a Newark hub and an inadequate management team. So in 2013, together with the American Airlines unions, the America West team organized a merger with American.

It hasn’t been easy at American. At 21st century, Delta has become widely regarded as America’s finest airline. United – now led by Kirby – became the airline of the moment, capitalizing on the previous management’s strategic mistakes and restoring the brand’s image.

In some ways, American appears to lag behind its competitors. However, it has newer aircraft, while its competitors have yet to modernize their fleets. Additionally, American aggressively expanded its partnerships on the east and west coasts, hoping to go beyond a build where its California hub was in Phoenix and its New York hub was in Philadelphia.

As for Parker, he kept trying to work with the workforce, not always successfully, although the effort was there. One of the first public statements about her retirement came from Sara Nelson, president of the Association of Flight Attendants.

“Doug Parker has played an outsized role in shaping the airline industry in a post-9/11 world, only bailing airlines out of bankruptcy rather than bringing them on board,” Nelson said Tuesday. When negotiating with Congress for an industry bailout during the pandemic, a joint effort by unions and airlines, “No other CEO has worked so hard, spent so much time with the Congress or the administration, or felt the urgency to keep people connected to our jobs,” Nelson said.

Parker was not the greatest airline CEO of all time. He wasn’t even America’s greatest CEO: it was Bob Crandall. But when it came to industry consolidation, while US Airways’ Ed Colodny was accomplished, Parker worked on a bigger stage and never had an equal.