This spring American Airlines CEO Doug Parker told employees in Phoenix at a Crew News session that he only sought to merge US Airways with another carrier when it became necessary to survive since United and Continental had merged and Delta and Northwest had merged. He said that doing so was always about how to create an airline that would always be there for employees, and not for himself.
That was in response to an employee who asked Doug Parker about his legacy and how he’d want to be remembered. He recently told a condensed version of this story to Business Insider‘s Benjamin Zhang.
9/11 Made Parker Realize the Importance of Government Subsidies and Taking Care of Employees
Doug Parker began his answer with a tribute to Southwest Airlines co-founder Herb Kelleher. He then recounted joining America West in 1995 as Chief Financial Officer, and being promoted to CEO on September 1, 2001 — 10 days before 9/11.
He described what mattered to him before 9/11,
Through that time, I’m proud of that, I was proud of being a CEO at that age. Really happy with where I was in life. Frankly the way I got myself there was doing what most people in corporate America do which is I’m just gonna be really good at my job, be better than the other people, build a good job, get myself promoted because I’m competitive. I want more responsibility. I want to take care of my family. Those were the motivators, and I’m not ashamed of that, that’s what motivates a lot of people. Then 9/11 happened.
After 9/11 Doug Parker says they “were going to liquidate America West, not just file bankruptcy, we didn’t have any cash. If we didn’t get a government loan guarantee none of us would be here. We’d be somewhere, we wouldn’t be in this room. America West would go away post-9/11.”
Doug Parker testifying on the need for subsidies to the US airline industry in 2001
He shares the story that the Air Transportation Stabilization Board had rejected America West’s application for funds. He was flying DC – Phoenix after receiving a fax at the end of the day on Friday that their application was “not approved at this time.” He says he was down on himself. He gets up and goes to talk to flight attendants almost every flight, what would he tell the crew?
While he couldn’t reveal that the government had turned them down, he went to the back galley and told the one flight attendant there that things weren’t going well, “I don’t think we’re going to get this. It doesn’t look good.”
The flight attendant tells him he “can’t let that happen.” She’s a single mom. She structured her life around the job. She was counting on him. And he says “that conversation..is what’s been driving me since.”
America West started a new application, returned to DC Monday morning, and re-applied for an ATSB loan because “I would have been fine, but what I realized was that flight attendant – all of you – are so dependent upon leadership to go take care of the company for the benefit of all the people that are out taking care of each other and customers, and that’s my job, to take care of the company for the people that are in our care, for the team members.”
Parker Says 9/11 Made His Goal to Protect Employees, And That’s Why He Merged With US Airways and American
After sharing his notions of management’s role to be taking care of employees, he lays out his goal of creating the union vision of job security for life, and explains that’s what the mergers were really about — and never about him.
I swear to you, I didn’t for a moment ever think about my career anymore, and all the things we did which I know some people think he orchestrated to get himself to be CEO of American, all we were doing was trying to get all the people who were at America West airlines into a safe harbor, into a place where they didn’t need to worry about whether their company was going to be there for them. Into a place where they knew that as long as they show up and do their job as well as they do the company would be there for them forever.
He says that since other airlines filed bankruptcy, they brought their costs down and America West no longer had an advantage. The America West business model would no longer work. They didn’t earn as much revenue with their smaller network.
Parker described their merger with US Airways as simultaneously “a really risky thing to do” yet the only way to provide security to America West employees.
And then at US Airways it wasn’t possible to pay employees as much as at American, Delta and United because of lower revenues than United and Delta especially after their mergers. So they went out and sought a merger with American,
We knew that the only way to make this work was to do a merger. We went and fought like crazy for a merger with American Airlines that didn’t want to merge with us. And we did that again I promise you, that wasn’t trying to get management to get bonuses. That was just something we couldn’t not do because that was the way to go take care of this team. And what I knew was that if we did that I could be able to tell everybody and look you in the eyes and say “you don’t have to worry about your job anymore.” …
“What drove me from 9/11 till the merger with American Airlines was not my.. was never once.. and I would have left for goodness sakes. The mission was to make sure we got people to safe harbor.”
Yet His Primary Focus Has Been on Mergers — and Growing His Role Has Seemed to Matter a Lot
So is it fair that Parker only became interested in mergers after other airlines had merged and forced his hand? And that it was never about his role becoming CEO of a larger airline, but about employees?
American Airlines was actually the sixth try for Doug Parker to take over another carrier, and the second successful one. He was CEO of America West and merged with US Airways while the latter was still in (its second) bankruptcy.
Parker sought to merge with bankrupt American Trans Air in 2004 during ATA’s first bankruptcy. (ATA ultimately raised cash selling Chicago Midway gates and nonvoting shares to Southwest instead.)
Then in 2006 with Delta in bankruptcy US Airways sought to take over the larger carrier. That deal, even if it had gained traction, was unlikely ever to have passed regulatory scrutiny since the combined carrier would have controlled the only two meaningful hubs in the Southeast (Atlanta and Charlotte). Delta’s campaign to fight the hostile takeover attempt was called “Keep Delta My Delta.”
In 2008 United CEO Glenn Tilton merely offered Parker “a senior operating role and to put him on the potential chief executive candidates list if he meets certain performance goals.” Tilton effectively stuck a knife in any potential deal with Parker that way, though he preferred to merge with Continental in any case.
US Airways management thought they could take over United with the same playbook that had worked when America West took over US Airways, getting suppliers to kick in cash but crucially generating funding for the deal via a co-brand credit card contract. Then-President Scott Kirby huddled with the head of Barclays in the US, where he discovered just how big the Chase-United tie-up was. That ended the co-brand deal funding angle.
The United-Continental merger only happened two years later when a potential US Airways tie-up again became a stalking horse. (Continental CEO Larry Kellner hadn’t wanted to do a deal with United. Pushed out, that left Jeff Smisek to become CEO of the combined carrier.) In the second attempt at a US Airways-United deal Parker was reportedly willing to become CEO but not Chairman right away.
US Airways pursued American Airlines through its bankruptcy. Far from resisting a deal, American CEO Tom Horton claimed that he approached Parker at Conquistadores del Cielo about doing a deal.
Horton, though, wanted to consider any merger from a position of strength after exiting bankruptcy. Parker got the unions on his side with big promises, and the Pension Benefit Guaranty Corporation on his side by offering a proposal in bankruptcy that didn’t include terminating pensions. The creditors’ committee sided with Parker — and Parker finally was able to become CEO of the world’s largest airline, the culmination of a decade of strategic focus on merging.
Parker’s Legacy Going Forward
Parker says his goal now is “to build a culture of caring for our team.” He shares that he wears a wrist band “that says CECFTM, which is a terrible acronym because it doesn’t say anything, but it stands for Create an Environment that Cares for our Frontline Team Members. That’s what our mission is. Every day one of our officers sends a note to other officers about what they did that day to create an environment that cares for frontline team members.”
Parker insists management congratulate themselves for doing things for employees, yet flight attendants, mechanics, and others across the company don’t see it. Ultimately American’s management wants employees to like them, but doesn’t give them a mission that’s larger than themselves to work towards.
His legacy was to make American Airlines a third class airline in the US. Delta and JetBlue — and even United — should have a birthday party for Parker to thank him for all the good he has done for them.
…. or maybe they should celebrate him on each date where he got pulled over for drunk driving and lived to tell the tale while making AA into a third choice at best.
His legacy should be as GUWonder stated above is he is the only CEO with 3 DWI convictions and still have a airline job. Should this have been an employee or crew member unable to cover a flight or shift (because in jail) they would have been terminated!
By reducing the size of the bathrooms, his legacy will be that he made making the mile high club even more difficult
Parkers first order of business was to disrespect all American Airlines retirees by down grading their promised travel benefits. Maybe the next CEO will down grade his promised benefits!
I can’t speak to how much he has or hasn’t done for his employees, but given the way he has seemingly sought to destroy the comfort levels of the airline, to me his legacy will be one of taker, not one of giver, not one of caring at all…for many people he will be seen as someone who has, at every opportunity, seen that he does every thing he can to make a flight on AA just as uncomfortable as possible. I’m certain anyone who has to fly coach on AA has cursed him time and again…and honestly, MOST people fly coach…maybe not most people in HIS world, but most people in THE REAL WORLD fly coach.
What always surprises me is this: Nearly every other business has REAL PEOPLE who test their products and give honest answers to the questions about how they like or don’t like a product, pros cons, price comments, comfort levels fittings, etc. I’ve been sent surveys for everything from a hamburger at McDonalds to Walgreen’s asking if I like the detergent I buy, I am sent surveys by my insurance companies and my automaker, many go so far as to offer me freebies for my time and replies. Has boy genius there ever considered asking consumers what they really think of his product compared to OTHER airlines? I doubt it…I’m sure his FA’s think the airline is fine.
It’s funny reading this because I was talking to an executive at a major company in the industry who told me a much different story about how Parker ended up as CEO of American.
Years ago, many people in the industry thought of Doug as the dumb CEO at America West who wouldn’t make it very long. So at one point, this prominent industry consultant jokingly told Doug, while making fun of him, that he should set his eyes on merging with AA. Who knew that dummy Parker at the time took the joke seriously and actually went on to become the CEO of the largest airline in the world
I’m not going to try to psychoanalyze anyone (and I suggest others restrain from such nonsense, too), but Parker has done more good for airline workers than anyone else in the industry. He and Scott Kirby are the primary reason why the industry consolidated after 9/11. He didn’t win every battle, but even when he lost, he forced consolidation. This has been unquestionably good for airline workers. Salaries and job security has skyrocketed as a result of consolidation. And Parker personally saved tens of thousands of jobs at America West and, especiallly,, at US Airways, which would have been liquidated has America West not bought that airline.
On the other hand, frequent flyers complain and moan about consolidation. The reality, of course, is that prior to consolidation, flyers could game the system to get WAY more than they paid for. Very few people are sufficiently self-aware to understand this, so when these unsustainable perks go away, they complain. I would suggest these complains are, largely, insane — especially since Parker and other airline execs have allowed savvy frequent flyers to STILL get much more than they paid for. The “genius” of their strategy was shifting the cost of these perks from their airlines to the co-branded credit card companies. So while the game has changed, and it’s become somewhat harder to get into premium cabins for free or cheap, the overall situation for savvy frequent flyers is still extraordinarily good. There is no better value on ANYTHING in America than air travel if you have half a clue as to what you’re doing.
Parker and the other senior executives are sincere in their desire and vision for an employee focused culture. The problem, and it speaks to the leadership skill of the executive leadership, is it is not being executed all the way to the front line. It’s getting stuck somewhere in the middle-top. Further, front line managers are mostly content with the status quo and have no desire to change.
Parker readily admits culture change takes years. But it seems an excuse for complacency because not much has changed.
It’s “insane” for the industry/company’s customers/passengers to complain about things the customer/passenger doesn’t like about a company or industry?
You have to be insane to think that customers shouldn’t complain and should instead all be reliable examples of Stockholm syndrome.
Well you got what you wanted. No one wanted to give legacy AA management a chance. All of you thought that anything legacy AA was trash. At least Horton and company knew about maintaining a quality brand and you can see that as they were emerging from bankruptcy (seat back entertainment through out the fleet, most domestic first class seat pitch ETC) Even NY was a cornerstone etc.
So stop complaining now.
@ GUWonder — Name me an industry, any industry, where it is easier than the airline industry to get extraordinary value out of your purchasing dollar. I can’t think of one and, believe me, I’ve tried.
Going into a debate with those making insane claims and expecting anything rational and productive to be the outcome of the exchange is generally a waste of time and a sign of insanity. It’s almost on the same level as entering into an online war of words with the con-artist -in-chief Donald Trump, Giuliani or the rabid fanboys of one or both or them.
It’s rational for (and to expect) consumers to complain about companies/industries with whom they may have done business and found to be lacking in one or more way.
Ask any employee from AA ,or US AIR ,what they think about PARKER ?they all will say he destroyed AA,that’s his legacy !!!!
@Penny +1
@GUWonder +1
Parker was walking around in the desert (well Arizona), suddenly he has vision that his duty was to care for the inferiors (ie employees) working for him. From that day, Parker was imbued with that divine goal that employees needed a secure jobs. His virtue was so strong that it almost glowed. Right, Parker is on a huge ego trip. Moreover, it sounds like he has a god complex.
Ask any American or Us air employee about what they think about Parker ?he destroyed AA,where are the stock holders ??
Parker is not fundamentally a bad guy, he just is not an effective CEO. I think he wants to help employees and shareholders and his comp is all stock based so he walks the walk. But he is just not getting the job done.
How much total compensation will have Parker gotten from his role as the head of American and the airlines he headed before it, by the time he leaves American?
Gary, I don’t ever want to be “that guy” on typos, but in graf 3 I know you’d want to get Herb Kelleher’s name right. RIP
@colleen – catching my typos is appreciated!
Actions speak louder than words. Also, narcissists never recognize the problem is them. It’s always someone else’s fault that things happen. Carney started the “great decline” of American Airlines, Parker will be the end of it. When you say you care about your employees and do just the opposite, that’s lip service only. If I didn’t live in Dallas, I would never fly them. I wish for the days when AA, DL, and United had hubs here. Those were the days, competition is a good thing.
Ken Hoover
You wish for the days when AA, DL, and United had hubs in Dallas?
When did United have a hub in Dallas?
“Oasis” Torture Tubes; Removal of IFE; destruction of AAdvantage; downgrading of domestic first class; and miniature lavs is what the is legacy is unfortunately.
I don’t know how he treats his employees, but I do know how I’ve been treated as a customer. I haven’t been to sleep in 2 days. Traveling from Cleveland, OH to Jackson, MS, we sat on the plane in Dallas Fortworth, TX for an hour before we were told to get off the plane and we could get on another plane because something was wrong with the computer. When we got off the plane and went to the ticket counter, we were told that we had to get the next available flight, the next day at 10:00 P.M. (after we waited to fly standby and were told that the flight was full). The women at the ticket counter were nasty and uncaring. We ended up taking a flight to Shreveport, LA and a couple who were really strangers to me, rented a car and drove me to Vicksburg which was the last leg of travel to my family reunion. I ended up getting there about 2:30 a.m. when I was scheduled to arrive at 4:23 p.m. the day before. However, my bag was in Jackson! When I called to ask for the phone number to the Corporate HQ, I was told by the woman on the call that the only way to contact them was to go to AA.com. After getting nowhere with her, I looked it up online. Only to be told by a recording to go to the website! I’m DONE! I WILL NEVER FLY AA EVER AGAIN! My meds are in my bag and I’m suffering leg cramps from all the walking but I felt even worse for a young lady traveling with a baby and another lady who got to the counter to find that her $1000 ticket from LAX to Jackson was changed and she wasn’t told until she got ready to board. So if you’re planning to travel, PLEASE consider ANY airline other than AA!
Parker’s legacy at AA: turning AA into the world’s largest ULCC while combining the worst aspects of LAA and LUS.
The US Air Management Cancer has been more destructive to this industry with their anti-consumer strategies than constructive.
There is no way that Doug Parker’s legacy at AA will be remembered as fondly as he imagines in his head. All CEO’s will be remembered for their performance result, and Doug isn’t performing as well as he claims.
I don’t fly often, but it’s fascinating to hear such various opinions about this airline and its leadership. Thank you all for the education.
Please stop posting pics of Doug Parker from 2001
@Will – it’s a photo of Doug Parker asking for government subsidies in front of Congress, I use it for a reason. He says the turning point in his career was going out and getting those subsidies in 2001. Using a photo of him in Congress seemed right on the mark, no?