US Air CEO defies Buffett Adage seeing American on top
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.