McKinsey hosted former American Airlines Chairman and CEO Doug Parker for a podcast on “leadership lessons” and maybe it just tells you all you need to know about the pablum that comes out of an increasingly irrelevant McKinsey in the AI era but I found it interesting because of the creative histories Parker likes to tell about his legacy.

No one did more to drive consolidation in the U.S. airline industry, to get the airline industry hooked on government subsidy, or to destroy passenger experience. And he did this while furloughing more workers than anyone else in aviation history, and destroying more shareholder value than any other CEO than any airline in history.

He destroyed $30 billion in shareholder equity by levering up the balance sheet to fund $12.4 billion in stock buybacks, whle selling more than $150 million in company shares himself, driving up costs at the airline while employing a strategy of chasing Spirit and Frontier. The legacy of poor performance was greater than the bankruptcies of Pan Am and TWA comibed, and the airline was kicked out of the S&P 500.

Keep that in mind as we examine his claims in this interview,

• America West was on the verge of collapse when Parker first became CEO. He went to the government for a bailout and got it. Arguably, everything bad for society in the airline industry that follows flowed from that.

  Parker notes that without that subsidy, he’d never have acquired US Airways (poisonous labor relationship, attempted to charge passengers for water) and never would have acquired American (eviscerated the inflight product and route network, retreated from New York and Chicago).

  

• He claims that he viewed his “responsibility as getting our employees into safe harbor. I swear I never once again thought about my career and my next job. The mission now was to take care of our employees.”

  But he did not do a very good job taking care of employees, furloughing more during the pandemic than any other airline ever (when Delta and Southwest didn’t furlough anyone, and while keeping much of the taxpayer money meant for employees for themselves).

  And he very much did ‘think about his career and next job’. His attempt to merge US Airways with United in 2008 was killed when then-United CEO Glenn Tilton made clear that Parker would not get to run the combined airline.

• Parker somehow thinks that US Airways had the better reservation system than American, but they went with American’s because they were larger and more employees knew how to use it. That’s some strange rewrite of history.

  

  They kept the America West system when they took over US Airways and went months unable to sell partner tickets. On integration day the problem wasn’t employee training – the website and kiosks did not even work. I managed to fly because I paid $5 to a Skycap for my boarding pass, even though I did not have checked bags.

  
  Credit: randomduck via Wikimedia Commons

  The US Airways system was great for frequent flyers, because it lacked capabilities and so much pricing was done manually. You used to be able to get agents to price South Asia awards as North Asia, first class awards as business class, and people (not me!) even sometimes ticketed awards without mileage deduction. This was not a strong platform.

  These are largely archaic mainframe systems, and we thought at first that we should pick the better of the two systems. But we learned that if the better of the two belongs to the smaller airline, you now have twice as many employees who don’t know how to use that system. So we didn’t make that mistake the second time. Absent something really compelling that says otherwise, just use the American system and throw away the US Airways one—adopt and go.

  

• Here’s how Parker describes his board relationship:

  Their job is to ensure management acts in the best interest of shareholders, so our goals were always aligned. The board must be able to do its job. They add a lot of value when you let them do their job. What that meant to me was to communicate candidly all the time. I was never worried that something I was going to say was not absolutely in line with what the board wanted.

  We could disagree about tactics, but the intent was always the same—we cared about creating long-term shareholder value. I think our board got to the point where they realized, “Okay, we don’t need to worry about checking their work. What we need to do is help them make the right decisions and mitigate risk.” So that’s how we worked.

  I was lucky to have outstanding board members who understood the strategic situations that I described at the time and were therefore willing to let us take these pretty large risks at the time.

  No one lost as much shareholder value in airline history as Parker. He built a board that never held him – or anyone else – accountable. That seems to have been the priority, because in Parker’s own telling the board lacked airline experience and that had “an impact on their deliberations and their ability to understand.”

Do how we understand these old decisions today still matter? Parker is retired from American (though he’s a board member at Qantas – it matters for our friends Down Under!). So maybe just let him have his stories.

On the other hand, though, it matters what lessons we draw about what works and what doesn’t work in the airline industry. Parker overpaid for American Airlines in bankruptcy and cut short the bankruptcy process. That got him control of the airline, and he lucked out that fuel prices dropped so for awhile it looked like things might work out alright.

But reducing the quality of the product chased away customers. Scaling back the route network, because the product was uncompetitive, hurt them even more. Unable to compete against United and Delta on the coasts, their cobrand credit card – which had been driving more charge volume than any other airline’s – fell to third place.

In 2017, Parker declared that the airline would ‘never lose money again’. His apresentation laid out that the airline was on autopilot to earn $3 billion to $7 billion per year and would average $5 billion annually into the future.

There’s been 20% inflation since then – just staying even should mean $6 billion in ‘gimme’ profits. Yet the new CEO’s compensation package describes $2.5 billion in profit as the target and a home run to secure the greatest possible bonus as $5 billion.

CEO Doug Parker thought American could get away without installing power in legacy US Airways planes. He was shocked by the outcry when they cut American Airlines meals to US Airways levels back in 2014.

He greenlit a their new ‘Oasis’ domestic product with less legroom, smaller lavatories, and ripped out seatback entertainment and didn’t even bother to try it until it was in the market for over half a year. It was such a disaster that they even went back to retrofit planes they’d already retrofit, because of problems they didn’t anticipate as a result of not building a mockup before deploying it. That’s not leadership to be emulating!

If you want to understand why American Airlines underperforms today, you need to understand Parker’s leadership. You need to understand Parker’s decision to fire Scott Kirby, who became CEO of United, in order to retain Robert Isom as the future CEO. And you need to understand his building of a board that doesn’t hold management accountable.