American CEO Doug Parker Steps Aside After a Remarkable Run

American

It wasn’t long after I started as a pricing analyst at America West Airlines that I first met now-American Airlines CEO Doug Parker. At the time, pricing and revenue management fell under the finance umbrella, and our holiday party was at our VP’s house way up in north Scottsdale. I was just standing around and drinking a beer, when I started talking to this guy with floppy hair.

It never dawned on me that this person was our CFO, but sure enough, he was. Doug couldn’t have been more unassuming, and he seemed interested in our conversation, the contents of which I’ve long forgotten. The only thing I really remember from that interaction is that I instantly liked him.

I couldn’t have known at the time that Doug was destined for one of the most impressive 15 year runs as CEO that the industry has ever seen.

As I think everyone knows by now, Doug took over as the CEO of America West 10 days before 9/11. That might have been a convenient excuse for our troubles, but America West was already in a concerning place before that. When the .com bubble burst in 2000, our high-fare gravy train ended. We were a spill carrier, and there wasn’t much spill to be had. The idea of profit-sharing had already begun to fade, but it was positively gone after 9/11.

The stories have been told many a time, but it didn’t take long for the reality to set in that America West wasn’t likely to be around much longer, and that meant our jobs would be gone as well. Yet despite that likelihood, there was something comforting about knowing our senior management team was on the case. They were dealt a losing hand, but they weren’t about to fold.

Once the bailouts were finalized, we had breathing room, and that created a limited opportunity for us to fix ourselves. Under now-United CEO Scott Kirby’s leadership, we completely remade our pricing strategy. I can remember pushing the button that would delete our entire fare structure and feeling a mix of anxiety and relief. We would either sink or swim, and while it was Scott that masterminded this plan, Doug as CEO had to buy in or it wouldn’t have happened. He put faith in the right people at the right time to make the right decisions.

While all this was going on, I had submitted an application to get my MBA at Stanford, and Doug was willing to provide a letter of recommendation. I was scheduled to hear if I made it on a certain date, so I told people to meet me a bar on Mill Ave in Tempe near headquarters so we could drink either way. I didn’t expect it, but sure enough, Doug walked in and had a drink as I found out I was going to be sitting on the waitlist.

I’m sure Doug knew that would be meaningful to me, and that I wouldn’t forget it. I imagine there are many stories like these out there, but they just don’t get told. That’s because he doesn’t do it for recognition or some corporate purpose. It’s just who he is.

I was fortunate enough to get off the waitlist in the fall of 2002, and my time at America West was done. The airline as a whole couldn’t have been nicer about me packing up and leaving so quickly. It felt like leaving family behind.

After I left, I watched from the sidelines as the core team of Doug, Scott, Derek (Kerr), Elise (Eberwein), and Steve (Johnson) took little America West to the stratosphere. Doug was always a big proponent of consolidation to lead to a more stable and successful industry, and he wasn’t just talk. The team engineered the buyout and then ensuing successful makeover of US Airways. They took a swing at Delta and failed, but that didn’t deter them. They navigated the Great Recession (just barely), and then they got close to doing a deal with United before Continental — which CEO Jeff Smisek obnoxiously called “the pretty girl” to US Airways’s “ugly girl” — snatched that away.

That left American as the only real option, and the team engineered a truly impressive feat, getting American’s unions to buy in before the deal was done. By 2015, America West — granted, under a slightly different name — was the biggest airline in the world.

Of course, this was a team effort, and I’m fairly certain Doug wouldn’t want it to be considered any other way. After all, none of this happens without that group. But when you’re the head of that team, you get the recognition… as well as the blame. Had Doug left shortly after the American merger, I think you’d see universal praise for a remarkable career. (Ok, let’s say “nearly” universal praise since former American CEO Tom Horton would probably disagree, but I digress.)

There’s little question that the last 5 years have been very different. With no mergers to be had or deals to engineer, the job was about trying to rebuild the monstrous American, an airline which had been neglected and mismanaged for years. Doug always cared deeply about labor and personal relationships, but even the old US Airways East pilots and their crazy shenanigans couldn’t hold a candle to American’s dysfunction.

When Scott Kirby was let go and subsequently went to United — a whole sordid affair in its own right — a lot of the hard-charging energy he brought to the commercial team in particular disappeared. Doug continued to step further and further back from the day-to-day running of the airline, and there was a general sense of stagnation. During the pandemic, he spent much of his time in DC, lobbying for payroll support while Robert Isom, president for the last 5 years, ran the airline.

The thing is, as I said before, when you’re at the top you get the credit and the blame. And as American struggled with bloated costs, revenue issues, poorly-executed projects like the Oasis retrofit, and labor groups so angry that they turned down extra money to fly during the holidays — the pilots did, at least — the blame all piled up on Doug. And ultimately, that’s where the blame should fall. As President Truman said, “the buck stops here.” The last five years have created a somewhat more complicated legacy for Doug, and that’s really unfortunate.

Doug isn’t gone for good. He will stick around as chairman, but Robert will slide into the CEO role. There is no surprise here. Ever since the decision was made to go with Robert over Scott as the heir apparent, the CEO job was Robert’s to lose. The board must be happy with him, and now we get to see if he’s planning on doing anything different.

Will this be a true continuation of what’s already been happening at American? Or has Robert felt hamstrung, unable to put his complete stamp on the organization? At this point, the assumption is that it’s a continuation of what we’ve already seen, but you never know for sure. We should really get a sense of where this is going when Robert announces his direct reports and executive team.

So, we wait, but in the meantime, we should unquestionably be celebrating the successful career of Doug Parker. I know that emotions have remained raw for several at American for a variety of reasons over the last 5 years, but if you step back and look at this from above, you find someone who cared about employees, fought to save their jobs, and built a team that created the biggest airline in the world from almost nothing in a short 15 year span. That is a remarkable achievement.

26 comments on “American CEO Doug Parker Steps Aside After a Remarkable Run

  1. Its American Airlines so I understand where Cranky’s coming from here (the bias is obvious). Doug Parker may be a nice guy, but the last few years he has run AA into the ground. Its telling I would trust Spirit or Frontier more to get where I am going when I need to get there. Hopefully once he is not running AA, someone can turn this around. It was done at United once Smisek was gone, so maybe it can happen here as well.

    1. Parker hasn’t “run AA into the ground”. He’s a talented, seasoned industry executive, but unfortunately, brought the USAirways way of doing business to the merged company, which you’ll find clearly across Project Oasis and Kodiak and the “cheap”, “penny pinching” approach to doing business that have been a service hallmark of American’s turnaround since it filed for bankruptcy in 2011, something it should have done six or seven years earlier. American has a formidable network, brand, and reach, but it needs a new marketing plan and needs to focus on soft product and customers more and hopefully that will be a feature of 2022 and beyond. It needs to harmonize the Flagship Business product, seat-wise, add some additional soft product enhancements, and revisit its customer service ethos.

    2. Absolutely right. Parker was great as head of a small regional but a complete disaster at running a large airline. The only reason that the painfully inept Board retained him is because the over-consolidation of the airline industry meant that even Parker couldn’t sink AA. Don’t get me wrong, he seems to be an extraordinarily nice guy and would be fun to have some beers with but that doesn’t mitigate the enormous damage he and his team did to USAir and later American. Installing him on the board will simply perpetuate the terrible calls that AA management has made since the merger: rewarding someone for monumental incompetence will do nothing to right the ship and make for good decision making in the future.

      My disdain for Parker’s lack of ability aside, great story and thanks for sharing.

  2. Great story, CF! Love him or hate him, no one can say Parker’s tenure was boring.

    To have your time as CEO bookended with 9/11 and a global pandemic (to say nothing of the aftershocks of Nicolas, Kasher, and filing BK), and flown through it all is something.

  3. thank you for the fascinating color about your career and the intersections you have had w/ some of the top airline leaders.
    I’m sure there can be a case made for anybody in a position of leadership as a good person and plenty of people will say that about Parker.
    However, as much as Parker loved (and maybe still loves) consolidation, the results of business strategies matter. While pre-merger AA might have been a mess, AA under Parker has consistently been at the bottom of the U.S. airline industry in multiple metrics except size. After 10 years as the head of a company, you either have to get the right people in specific roles to fix the problem or you personally own the problem. American isn’t as bad as some say they are in comparison with United (esp. service) but they are worse in other metrics (largely financial). The back and forth between AA and UA has gone on for decades and will persist; the critical issue for both now is increased competitive capacity growth in major markets. Having worked closely with now CEOs of 2 of the world’s largest airlines might feel good but it would be more notable if one or the other took their company to an industry leading position in the metrics that define business.

  4. Hear hear for a more balanced POV on Doug Parker’s tenure and accomplishments. Others are apparently keen to judge his success by AA’s ability to run a senior elite friendly (unrealistic) frequent flyer program (cough VFTW cough). Doug Parker has created one of the biggest airlines in the world. Is it perfect? Is it the most profitable? Does it have the best in-flight product? These are all valid questions, and it is certain there is room for improvement. But if you go by who all made an appearance in Doug’s “appreciation video” it is clear that this is not a man who is seen as the terrible airline business leader some are making him out to be.

    As I wrote in another comment section: “It is instructive to see that many (MANY!) industry luminaries felt good enough about Doug Parker to make an effort and appear in the video. Sure, he is retiring and so nice things will be said. But all these people said “yes” when asked if they wanted to appear. And came up with something nice and meaningful to say. They didn’t have to. They choose to do so.”

    I am by no means an AA fan boy. I choose my tickets on the basis of Cost, Convenience and Connectivity. And AA is just fine. Not the best. Not as bad as others make them out to be. Doug built a formidable airline. It is certain that there is lots of room for improvement. But that is true for any large scale company.

  5. Thank you for sharing your personal interaction with Mr. Parker. Money moves the world, but personal relationships are what we recollect at the end of the day. I think it’s quite telling that Gary Kelly of Southwest has repeatedly referred to Mr. Parker as “my very, very good friend.” High praise indeed, from one former CFO to another. One former CEO to another. One Chairman of The Board to another.

    We are at a generational crossroads in the industry. The old guards at United, American, and Southwest have yielded sway. The ULCC model is inexorably gaining share. As Spirit, Frontier, Allegiant, Breeze…..et al continue their assault on the legacy carriers and Southwest, will Mr. Franke be the next great visionary in the industry? Certainly, his puppeteering at Indigo Partners is turning heads, filling seats, and gaining share. Over time, will Delta and United become boutique airlines? Will JetBlue continue its unmolested dining on American? Can Southwest steal business travel from the Big 3 while simultaneously losing business to the ULCCs? One think for certain is that a new cast of characters will be calling the shots as the industry enters the next generation of deregulation.

    1. For those who are unaware, it was Bill Franke who hired almost all of the team that engineered the America West/US Airways/American mergers.

    2. MissTheMasters–

      “We are at a generational crossroads in the industry. ”

      Not just with regards to the carriers themselves, but also the workers at each.

  6. Granted, this was a one time, isolated event and may or may not be typical of AA. Or, even significant, But it mattered a lot. To me. So I feel a small debt of gratitude to AA.

    A few years back, I took a trip from FAT to JLN via DFW to attend a wedding. We were a bit late getting into Dallas and of course, had to sit in the penalty box for a few minutes. By the time we got to our gate, the time for the connecting flight was in five minutes. Naturally, we disembarked at gate A1 and the plane to Joplin was at gate Z699.

    I figured we were toast. I was already contemplating either being stranded overnight or else renting a car for the 300 or so mile drive. But we moseyed over there as quickly as we could.

    We got to the gate. Was pretty deserted. But plane was there along with one agent. He asked my name. I told him. he said “yes yes…we held it for you…get your butt on”.

    And we made it.

    Okay. So I’m a once-every-two-years flier, granted., But I never forgot that. So guess who will get first and last look next time I want to go somewhere.
    ——
    Also. Can you set the record straight once and for all about HP/US? Some say it was America West that took over US (“The mouse that ate the cat”). Others say it was a merger of equals. Still others insist that, no, US, in fact took over America West.

    1. Matt D – It was most definitely America West buying US Airways. US Airways was days away from liquidation and would have disappeared if not for America West stepping in. The senior management team was nearly entirely the America West team and headquarters was moved to Tempe. There is no other way to look at this.

      1. Thanks Brett. That’s what I thought. Now, next time someone argues the point, I have some ammo to back it. I mean not like you weren’t there or anything. Right?

        1. I think some of the confusion stems from the fact that much of the financing for the merger was secured by Bruce Lakefield, US Airways’ CEO at the time. But all of that financing was contingent on the merger with America West. Some of it also comes from the fact that America West wasn’t too far away financially from a possible bankruptcy filing itself (and had prepared for that possibility), although it was in much better shape than US Airways. America West knew it had to grow or be acquired to survive. It had tried to buy American Trans Air, but lost out to Southwest’s deeper pockets (probably a blessing in disguise in 20/20 hindsight). The way the America West/US Airways merger was structured required very little cash from the acquiring carrier, and was basically financed by others (as I pointed out above). America West also had to be the acquiring carrier to avoid a “snap back” provision in US Airways labor contracts to bring wages up to pre-bankruptcy levels, which would have spelled disaster for the new company. If you want more detail, you might want to read this book.
          https://www.amazon.com/American-Airlines-Airways-Creation-Largest/dp/0786477830

    2. Matt, It was HP that acquired US. It caused significant consternation amongst the US faithful. The HP loyalists never really felt like Mgmt had their backs as they were the acquiring carrier. HP adopted the US brand because it had a greater reach (albeit at the time US was not a well regarded brand by many in the traveling public). It was then the HP company, now named US, that took over AA. It is pretty amazing that the airline Ed Beauvais, recently deceased – and probably has not properly received his recognition in the industry as a visionary – and Michael Roach and Mike Conway built and started flying in 1983 has become the largest airline in the world.

  7. Great article Brett. I know this guy has a personal connection to you, but that’s ok.

    American gets a bum rap in my opinion, and so does Parker, but what those guys did was build the strongest geographic and hub network in the world. Look at what they have – a giant central hub at DFW, medium sized (if competitive) hub in ORD, a rapidly growing SE hub in CLT, and mid-sized hubs in PHX and PHL. Smaller but still important operations in LAX and NY.

    Both Delta and United have large holes in their networks. Delta is very constrained in the center of the country. Having only Atlanta, MSP, and SLC limits them significantly in these areas. United has nothing in the SE, and for them to serve the Caribbean and Latin America, you have to connect through Houston or EWR. Cumbersome.

    What Parker et al also did in terms of bankruptcy was genius. They basically leveraged Airbus and Boeing against each other, and made them carry the paper to fund AA out of bankruptcy. By doing so, they called the shots, not the creditors. Neither manufacturer wanted to see the headlines that the world’s largest airline was dumping them and buying from the other, so they were willing to do it the way Doug wanted. And it worked, and in doing so they got their other costs down.

    All of the airlines face serious challenges right now, with labor issues, COVID, and the growth of ULCCs. Except for higher end business travelers, the rise of online self-ticketing meant a race to the bottom. The average passenger is not willing to pay an extra $15 each way for more room, or better amenities. It’s as if Dillard’s or Macy’s has to sell their merchandise at Walmart prices. It doesn’t work to keep Dillards/Macys quality and service at Walmart prices, but airline passengers have proven conclusively that all they care about is price.

    Some of you may quibble about that last part, but I can’t tell you how many flights I’ve been on where the more-room seats at the front are empty and the squashed ones at the back are completely full…and the people in the back were not willing to pay an extra $29 to move up. It’s the reality of flying today.

    Parker is leaving the framework of the company in good hands, from the network/hub layout to the interline agreements to the metal. As a person with well over 5 million miles on various airlines, I say…

    Thanks Doug.

    1. Let’s face it — airlines are a lousy business, for the vast majority of employees and passengers and for the taxpayers who prop them up. But for the Doug Parkers of the industry, it’s not so bad. Press reports say he’s been averaging a little under $20 million a year, and that he’s accumulated $60 million in AA stock. Not bad considering that AA shares have performed pretty badly since the USAir merger, even before the pandemic, despite a record bull market.

  8. As someone who has lived in the Phoenix area for over 40 years, I’ve seen America West and Doug Parker fairly close up, not only as a resident, but as someone who knows people who work or worked for the airline and its successors. All I can say is that its history has been nothing short of remarkable, and Doug Parker has been a major part of that history for a long time.

    I go back to the Ed Beauvais days. His recent passing was noted here with some nice tributes. Then there was the bankruptcy (America West’s only one), which brought in Bill Franke, who was despised by and large but did what had to be done. However, in many ways, Franke’s biggest contribution to the America West was to assemble then-young talent like Doug Parker, Scott Kirby, Derek Kerr, Robert Isom, et. al. to run the airline. Franke had virtually no background in the airline industry before he came to America West. As Scott Kirby observed in the Parker tribute video, these guys were too young to know what they dreamed America West could become was impossible, so they made it happen. The small Arizona airline used the bankruptcy process to grow with a minimum of cash outlay. I’ll leave it to others to answer the question of who took over whom. But suffice it to say that a lot of the narratives one reads are driven by the egos involved, and aren’t usually very objective.

    The American Airlines of that era wasn’t the perfect airline many of its apologists claim it was. It also has to be mentioned that the bulk of the aircraft orders that brought on American’s talked-to-death debt load were made by the pre-bankruptcy management of Gerard Arpey, Tom Horton, et. al. not this one. Those orders were necessary because American had deferred ordering new aircraft.

    As was noted above, the growth sector of the current U.S. airline industry is the LCC/ULCC space. The legacies are stagnant and/or losing share overall. Different airlines have dealt with that reality differently. Only time will tell what the future holds. Unlike some observers, I don’t think it’s a crime for airlines to adopt different business models. I don’t see many complaints about Alaska and Hawaiian’s lack of in-seat screens (which seems to be 95% of the determining factor about the customer experience on airline blogs). Only American gets bashed for that choice.

    On balance, Parker has had a remarkable run. Has he been perfect? Have any of us been perfect? So all the best to one of the people who was instrumental in shaping the airline industry we know today.

  9. I loved it when Dougie made a failed takeover attempt at acquiring the pretty girl at the dance. Keep Delta my Delta all day everyday.

  10. My question is, was it Doug’s decision to change the livery to the ugly new one they have? Cranky left out this important detail!

    1. The new livery (which I think is a small improvement over the old one’s cut-up patchwork of color, even though the tail is too busy for my tastes) was designed before the merger announcement.

    2. JB – I’m not sure why this is an important detail, but as noted by others, this was done pre-merger. The new team actually let employees vote on whether to keep the new livery or switch to a really ugly hybrid version.

      1. It’s just important because I know how you feel (and I agree) with “Ugly Flag Colors” livery in your trip reports. I didn’t realize this happened before his tenure.

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