American Airlines CEO is facing pressure

When American Airlines exited bankruptcy in 2013, its new boss vowed to trounce rivals within a few years. These days, those competitors are delivering the beating.

American is underperforming Delta Air Lines and United Airlines on profit margins and on-time arrivals. Investors are punishing American’s stock, sending the shares to the biggest decline this year among U.S. transportation companies. To add insult to injury, a plague of summertime flight cancellations has angered passengers and sullied American’s brand.

It’s far from the outcome Chief Executive Officer Doug Parker envisioned when, as head of US Airways, he engineered a merger with American in a New York bankruptcy court and took the

reins of the combined company. While Delta and United reap the rewards of a decade of airline

consolidation and greater pricing power, American’s declining performance has solidified its status as the industry laggard.

“I get the question, ‘At what point does the board say enough is enough and we need more drastic change? “’ said Jose Caiado, an analyst at Credit Suisse. “I get that question a lot these days.”

The board hasn’t shown any signs of displeasure, Caiado said. But an 18% share drop this year through Aug. 30 gave Amer- ican a market value of $11.7 billion, less than a third of Delta’s.

American shares slumped last week to the lowest since Parker took the company out of bankruptcy in December 2013 by merging American and US Airways.

Adjusted net income at American has tumbled 44% since then, the only drop among the four biggest U.S. carriers, according to data compiled by Bloomberg. Looking ahead, American expects a pretax profit margin of as much as 7.5% this quarter, compared with a forecast of up to 16.5% at Delta and 12% at United.

Wall Street analysts are grasping to explain the lag.

Stifel Financial’s Joseph DeNardi questions the sense of urgency “to do anything, to make any significant changes.” Darryl Genovesi of Vertical Research Partners sees a lack of account- ability. At Wolfe Research, Hunter Keay says there isn’t enough attention to detail and praises the job done at United by American’s former president, Scott Kirby.

Customers, meanwhile, are reeling from operational snarls, worsened by the grounding of the Boeing 737 Max and a labor standoff with mechanics and ground workers.

Exhibit A could be Bonni and David Lipton. They got a text from American around 1:50 a.m. Aug. 23, telling them their flight about six hours later had been canceled. A second text arrived soon after, saying they couldn’t be rebooked.

The couple wasn’t traveling alone. They had bought tickets for 28 people from Newark, New Jersey, to the Turks and Caicos Islands for a family celebration. American couldn’t rebook their flights that day — or any of the next three, which covered the entirety of their planned stay.

“This trip can never be recreated,” Bonni Lipton said. “It’s done. One and a half years of planning and all that money and all that excitement gone.”

Parker — who is paid only in company stock — said there is “absolute accountability” and “absolute urgency” to correct the shortcomings.