US Air CEO de­fies Buf­fett Adage see­ing Amer­i­can on top

The Pak Banker - - COMPANIES/BOSS -

Doug Parker, re­turn­ing to the car­rier where he be­gan his ca­reer, has a vi­sion: He sees Amer­i­can Air­lines (AAMRQ) vault­ing to the top of the in­dus­try's ma­jor fi­nan­cial bench­marks just three years af­ter the merger he or­ches­trated with US Air­ways Group Inc.

"I love the busi­ness," Parker said. "The busi­ness we do is hard. I like the chal­lenge of the busi­ness, the lo­gis­tics. I like how ev­ery­thing is im­por­tant in it." US Air­ways has re­ported an­nual prof­its since 2010 and is ex­pected to main­tain that streak this year and next on a stand-alone ba­sis.

Don't take his vi­sions lightly. Parker was chief ex­ec­u­tive of­fi­cer of the eighth­largest U.S. car­rier and the youngest air­line CEO in Amer­ica when he be­gan call­ing for con­sol­i­da­tion in the U.S. Twelve years later, the in­dus­try is about to shrink to three air­lines with in­ter­na­tional reach, and the 51-year-old US Air­ways CEO was cen­tral to mak­ing that hap­pen.

The man poised to run the new Amer­i­can as it be­comes the world's big­gest air­line is pro­pelled by a mix of re­lent­less de­ter­mi­na­tion, prag­ma­tism, pa­tience, risk, en­ergy and a kind of Rea­ganesque con­fi­dence that tends to rub off on a room.

Asked at an in­ter­view at Bloomberg's head­quar­ters in New York whether he has some­times felt like ac­tordi­rec­tor Ben Af­fleck, who said at the Os­cars that be­ing knocked down is less im­por­tant than get­ting up, Parker looked quizzi­cal for a moment and re­sponded, "I've never felt knocked down."

That's quite a state­ment for some­one who be­came CEO of al­ready strug­gling Amer­ica West Hold­ings Corp. 10 days be­fore the 9/11 at­tacks; was caught up in air­lines' deep­est cut­backs in fly­ing since World War II; had his com­pany dissed as "the ugly girl" amid three re­buffs by po­ten­tial merger part­ners; and was el­bowed away when he first sug­gested that US Air­ways take over bank­rupt AMR Corp.'s much- big­ger Amer­i­can. "From the time I started in this busi­ness, peo­ple would say, 'It's the air­line busi­ness; it's ro­man­tic and we don't make money,'" Parker said. "But none of that ever made sense to me. It's not ro­man­tic. It's bad busi­ness."

Speak­ing quickly, in full sen­tences with few pauses, Parker gives the im­pres­sion of some­one who knows where a para­graph ends be­fore he even starts, much as he says he al­ways knew air­lines would have to con­sol­i­date to sur­vive.

The son of a Kroger Co. meat cut­ter who rose to vice pres­i­dent, Parker re­ceived an MBA at Van­der­bilt Univer­sity and said he's not an "air­line geek" who "breathes jet fuel." In­stead, asked why he likes the job, he talked about the com­plex­i­ties, from fi­nance to mar­ket­ing to op­er­a­tions to main­te­nance.

"I love the busi­ness," he said. "The busi­ness we do is hard. I like the chal­lenge of the busi­ness, the lo­gis­tics. I like how ev­ery­thing is im­por­tant in it." The odds against Parker can't be over­stated. War­ren Buf­fett likes to say that the air­line in­dus­try, as a whole, hasn't made a penny since the Wright Brothers flew at Kitty Hawk. The Berk­shire Hath­away Inc. (BRK/A) chair­man has sworn off air­line in­vest­ments since a 1989 in­vest­ment in US Air­ways that he once dubbed a "mis­take."

Parker will need to blend two air­lines with al­most 94,000 em­ploy­ees, more than 900 main­line jets, eight hubs and 99 mil­lion loy­alty plan mem­bers. He also must build a com­mon iden­tity for em­ploy­ees, woo back cor­po­rate fliers lost to the wider net­works of United Con­ti­nen­tal Hold­ings Inc. (UAL) and Delta Air Lines Inc. (DAL), and re­pair op­er­a­tions that left Amer­i­can last among seven ma­jor U.S. car­ri­ers in on­time ar­rivals in 2012.

"The ex­e­cu­tion of this has got to be close to per­fect," said Ge­orge Ham­lin, pres­i­dent of Ham­lin Trans­porta­tion Con­sult­ing in Fairfax, Vir­ginia. "You have com­pa­nies with dif­fer­ent cul­tures, a lot of dif­fer­ent sys­tems. There's an aw­ful lot of mov­ing parts. And one of the par­ties in this mar­riage has come some­what un­will­ingly."

Some be­lieve Parker can pull it off. Four­teen of 15 an­a­lysts sur­veyed by Bloomberg rec­om­mend buy­ing Tempe, Ari­zona- based US Air­ways, which has more than tripled since AMR's bank­ruptcy fil­ing on Nov. 29, 2011; one has a hold rat­ing.

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