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US Airways, left at altar 3 times, nears deal with American Airlines

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By Bloomberg News
Monday, Feb. 11, 2013, 6:21 p.m.
 

After three failed attempts at major mergers, Doug Parker, chief executive officer of US Airways Group Inc., is approaching a deal to combine with AMR Corp.'s American Airlines and form the world's biggest carrier.

Parker, 51, has applied lessons from his previous efforts, shifting tactics in pursuing the bankrupt AMR. The two companies are working on final details, and their boards may vote on the deal later this week, people familiar with the matter have said. Parker would lead the combined company, the people said.

The deal would mark a career achievement for Parker, the longest-serving CEO among large U.S. airlines. It would complete the industry consolidation that he began in 2005 when his America West Holdings Corp. merged with US Airways, reduce the number of full-service domestic carriers to just three and bolster airlines' ability to raise fares.

“He learns from his past mistakes,” Gordon Bethune, the former CEO of Continental Airlines Inc., said in an interview. “He's done this the right way, and it's showing.”

US Airways began its pursuit in January 2012, less than two months after Fort Worth, Texas-based AMR sought court protection. The airlines agreed last week on post-merger leadership and the division of equity, people familiar with the matter have said. Parker would become CEO, and American's Tom Horton would become non-executive chairman, the people said.

With US Airways the fifth-biggest U.S. airline, a tie-up with No. 3 American would push the combined carrier to the top spot by global traffic, passing United Airlines and Delta Air Lines Inc., both of which eluded Parker in the past.

“Parker has been the No. 1 backer of consolidation,” said Bob Mann, a former American Airlines executive who runs aviation consultant R.W. Mann & Co. in Port Washington, N.Y. “He doesn't mind getting his nose bloody if he thinks it's the right thing to do.”

Hired in 1995 as America West's chief financial officer, Parker's tests began almost as soon as he became CEO in 2001, 10 days before the Sept. 11 terrorist attacks. Parker testified before Congress in support of a $15 billion airline-aid package as travel demand shriveled, saying America West was at risk of bankruptcy. It secured a $380 million federal loan guarantee.

The man known as a fierce competitor at salsa-making contests and go-cart races at US Airways' annual media day drummed up $1.5 billion to fund the America West-US Airways deal from backers that included planemaker Airbus SAS, former Air Canada parent ACE Aviation Holdings Inc., and hedge funds Par Capital Management Inc. and Peninsula Investment Partners LP.

“He's not a distant, standoff-ish kind of guy,” said Bethune, who was running Continental when Parker took the helm at America West. “He's a really bright, forward-thinking man and a great manager.”

Parker, whom US Airways declined to make available for an interview, had less success with his subsequent merger efforts.

His hostile 2006 bid for then-bankrupt Delta faltered after two months, as creditors and employees balked. In 2008, former United parent UAL Corp. walked away from talks with US Airways, saying that a combination wouldn't produce enough savings and that it wanted to explore a deal with Continental.

Parker was back in talks with United in 2010, only to be left at the altar again when Continental CEO Jeff Smisek jumped in and persuaded UAL's then-CEO, Glenn Tilton, to do the deal that created United Continental Holdings Inc.

Parker met his wife, Gwen, when she was working as a flight attendant at American, which recruited him when he was earning his Masters of Business Administration degree from Vanderbilt University in Nashville, Tenn. One of his co-workers at American was Horton.

A former football player and track athlete as an undergraduate at Albion College in Albion, Mich., Parker and his executives join US Airways employees each year in dressing up for Halloween.

Parker appeared last year as South Korean rapper Psy — of “Gangnam Style” video fame — complete with baby blue tuxedo jacket, black pants and sunglasses, and danced in the US Airways headquarters parking lot. Isom and Chief Financial Officer Derek Kerr, both wearing yellow jackets, joined him. “He's got the right personality to lead a team,” Bethune said.

“He would do a great job at American, and probably give it the juice it needs.”

--With assistance from Mary Jane Credeur in Atlanta . Editors: Ed Dufner, Kevin Miller

 

 
 


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