A Harvard Business Review podcast begins framing the discussion of the US Airways takeover of American Airlines in this insane fashion,
Leading firms through a merger is a complex, daunting, and emotionally charged undertaking. The stakes are sky-high, and careers and livelihoods often hang in the balance. But done well, the results can lead to a happy ending for all involved.
The discussion is over Harvard Business School professor David Fubini’s case study Merging American Airlines and US Airways. Parker spoke to Fubini’s class, maybe the professor was charmed a bit. He ends the interview suggesting “certainly Doug, in this case because he had been a former CEO, actually employed many of those approaches [that make for a successful top leader] really well.”
Indeed Parker managed to alienate customers, employees and shareholders yet somehow managed to survive. Here by the way is the story Parker tells himself about his own legacy and the merger.
Would you believe that fleet migration as part of the merger was only just completed in May?
Insights About The American Airlines – US Airways Merger
How US Airways management brought the focus on exact on-time departures over other considerations to the airline,
[T]he culture of running the airlines were quite different, as we were just already indicating. American Airlines was very focused on customer service and its service to business travelers in particular. For example, it was quite famous for the fact that it allowed its captains to hold the plane, if indeed it felt it was appropriate to accommodate a business traveler or a set of travelers who might be coming in on an airline that had been delayed, and so therefore they would hold the plane. US Airways was, “No, we fly when it said we’re going to fly and not a minute later,” because their theory was that they ran such a tight network that a 10-minute delay at the beginning of the day would turn out to be a two-and-a-half-hour delay by the end of the day
US Airways leaders thought American was highly inefficient and made bad business decisions, but their route network gave the plenty of money that allowed them to make mistakes. More broadly, US Airways managers just thought they were smarter than American managers.
I recall immediately after merger close, on the inaugural flight of the new Airbus A321T aircraft with three cabins that would serve premium cross country routes, a legacy US Airways Vice President telling me that first class would quickly be dropped and made no sense for the plane. A couple of years later the Senior Vice President for Los Angeles (also legacy US Airways) told me she clamored for more first class seats to sell.
[T}he US Airways people would say, “Look at those American Airlines people. All they care about is wealthy business leaders who can afford their inefficiencies, and we have just got to fix this things.
…US Airways wanted to apply its approach to managing an airline to a broader airline.
Things Herr Professor Gets Wrong In The Interview
Fubini notes that every major airline went through bankruptcy before American. And while it’s true that American spent too long as an inevitable bankruptcy waiting to happen it’s not true that every major airline went first (or at all). Southwest Airlines, the largest carrier of domestic U.S. passengers, never went to the courts.
Claiming that Doug Parker “had been the CEO of US Airways for some time, actually, ever since they bought America West” (emphasis mine) gets things backwards, Parker became CEO of America West in September 2001 and acquired US Airways (with financing from a new co-brand credit card partner). Like US Airways-American, it was another case of the smaller airline taking over the larger one out of bankruptcy.
And in the interview Fubini imputes way too much importance to the story about letting employees pick the new American Airlines aircraft paint job.
American Airlines had these iconic silver airplanes, and they had decided to change what’s called the livery, which is the entire look of the airline. And they’d spent a lot of money actually developing the new look of the American Airlines.
And Doug Parker said, “Look, before we go ahead with this, let’s put this to a vote of the entire employee population.” And people are slightly aghast because they’d spent fortunes actually developing this new livery. But he said, “No, no, I want us to see if this is one airline. So I’m going to put it to a vote.” And of course the new airline livery was voted on positively, and that’s why every American Airlines plane now you see has this white look in a different, much more up-to-date logo.
BRIAN KENNY: I liked the silver, but that was just my opinion.
DAVID FUBINI: Well, I’m sorry. You would have been out-voted.
Parker told employees he was letting them decide on aircraft livery because the decision didn’t matter and the choice wasn’t ‘new or old, US Airways or American’ it was whether to keep the new American livery as it is or keep the new paint job but the old American Airlines tail which looked horrible. It was such a limited choice precisely for cost and not to do over the process.
While the results were close it was always expected that ‘keeping the new American Airlines livery’ would win because that’s something that American employees saw as theirs and there were more legacy American employees than legacy US Airways employees.