Schnurman: New blood for a new American Airlines
By Mitchell Schnurman
This is like Jerry Jones taking over the Dallas Cowboys — business edition.
It’s OK to cringe a bit. Doug Parker’s scrappy little airline goes by the stock symbol LCC, short for low-cost carrier, and pays some of the lowest wages in its class. American Airlines, the takeover target, still high-steps around like something special in the air, bankruptcy or not.
American held Thursday’s news briefing in the swank Admiral’s Club in Terminal D, about a month after announcing a rebranding campaign and new designer uniforms, even while the merger decision was looming.
The best parallel with Jones? Bum Bright said he sold to the rough-edged oilman, because the down-and-out Cowboys needed new blood. Fast-forward a generation, and it’s once-proud American Airlines that needs a transfusion.
The similarities don’t go much further. Jones came to Big D from Arkansas and brashly served notice that he’d handle everything from jocks to socks. Parker, a finance guy with an MBA from Vanderbilt, was deferential and loose, even subdued, in his coming-out party.
He won control of an airline almost twice as large as his, and he didn’t preen about it.
Parker will be chief executive of the new American, and he shared the stage and credit with Tom Horton, American’s CEO and soon-to-be odd man out. He said the deal couldn’t have happened without Horton’s support.
Horton will be nonexecutive chairman for less than year, helping in the transition and trying to not overstay his welcome.
“The reality is this isn’t about me or Tom,” Parker said, echoing a line that Horton used in the same context.
Here’s the more pressing reality: “You need to have one leader and only one leader that the rest of the airline sees,” Parker said, adding that Horton “was nice enough” to agree.
“And don’t mess it up,” Horton shot back, in one of the few moments that seemed unscripted.
Horton and Parker said they had been friends for 25 years, dating to the time they sat in nearby cubicles as young financial analysts at American. They exchange Christmas cards, and they worked together in the final months to make the merger happen.
But beware of revisionist history. US Airways won American in a dogfight, in a deal that was more hostile than consensual. US Airways was relentless in winning over union leaders, Wall Street and creditors. For months, Horton tried to hold back the tide by insisting that American exit bankruptcy as a stand-alone company and then look at combinations.
In an interview with my colleague Cheryl Hall, Horton said he had talked to Parker about a possible merger before the bankruptcy and the day that American filed. So Horton thought he had a gentlemen’s agreement for a stand-down.
That was wishful thinking.
Mergers aren’t new to Parker. In 2005, he started a wave of industry consolidation by combining America West and US Airways. He tried, and failed, to merge with Delta and United (twice). This wasn’t a guy to put on call waiting.
But it does sound like the American way. American sat out the merger wave, missing chances for Northwest and Continental, and showing no interest in US Airways. Horton has said American studied all options and took some to its board, but it never pulled the trigger.
While American analyzed, US Airways pounced.
It’s natural for the executives to paper over their differences today, because bigger issues are ahead. Merger disruptions are likely and inspired employees can minimize them. That’s where Parker has another advantage.
The labor-management feuds at American put Horton at odds with the unions and gave Parker a chance to reach separate deals. Those agreements provided instant credibility to US Airways’ bid, and a bond appears to have formed already.
Even in their prepared remarks, Parker devoted much more time to employees. Horton cited four compelling advantages to the merger: a larger network, more profits, more investment and the certainty of long-term labor contracts. All are true, but they sounded pretty cold.
In contrast, Parker told analysts and then reporters that the one thing that makes him “happiest” about the merger is what it means for workers. A bigger network with more revenue means good jobs, more opportunities and a path to higher pay and benefits, he said. US Airways workers, who’ve been underpaid for years, will finally get raises.
American workers have already seen their lot improve. American had to scale back its planed cuts in pay and jobs in response to the US Airways agreements.
At the news conference, Parker gave a shout-out to 14 union leaders and thanked them, one by one. After it ended, he embraced a pack of pilots and posed for a group shot, with smiles all around.
As they broke up, someone noticed that Horton wasn’t there. Parker waved to him and the group reconvened, and Horton and Parker stood side by side, surrounded by the uniforms.
It was a nice gesture, but it looked like an afterthought.