New American Airlines CEO vows to make merger work

  • Posted: Monday, December 16, 2013 9:45 a.m.
American Airlines and US Airways seem an unlikely couple, even to Doug Parker, who now leads the combined carriers. The company is the second-largest airline at Charleston International based on passenger volume.

FORT WORTH, Texas - American Airlines and US Airways seem an unlikely couple, even to the man who took over the combined company after they completed their merger last week.

Doug Parker says, however, that American's buttoned-down, corporate culture will be the perfect complement to his scrappy US Airways, where "we sometimes fire before we're ready."

At his spartan, temporary office in American's Fort Worth headquarters, the longtime US Airways CEO sat down for a wide-ranging interview.

Q: Do you see a gap widening between people in first- or business-class and leisure travelers in the back of the plane?

A: No, I don't necessarily. You described it as the front versus the back, and the reality is all the seats in coach are not the same, and customers prefer certain ones over others and are willing to pay more either through loyalty or just paying more for a ticket in order to get a better seat in the coach cabin.

I don't see a gap first versus coach as being a major change going forward.



Q: What are your biggest challenges in making this merger work?

A: It's two complex organizations that need to be melded into one over time. That's the biggest challenge by far. It's not easy, but we have people that have done it before. We have consultants on board who've done this with other carriers, so we'll learn from what we've seen at others as well as what we've seen ourselves.



Q: Were Justice Department officials right when they said the merger would cause prices to rise?

A: Airline prices are like prices in other businesses: They track with supply and demand, and we're not reducing any of the supply. Prices may change because demand changes, or they could change for any number of factors like costs going up, but this merger shouldn't have an impact on prices one way or another because we're not taking out any seats.



Q: Will you still compete chiefly on price?

A: We know that something around 25 percent of our customers will go to the lowest price irrespective of time or inconvenience. In a low-margin business like ours, you can't give up 25 percent of your customers, so we have to match on price.



Q: What's the new American's frequent-flier program going to look like?

A: Nothing yet to announce. What we do know is this: Customers immediately will be able to combine their miles and use their miles to fly on a larger network.



Q: Would you raise the number of miles needed to earn a trip, or change to a point system?

A: I don't know. It's going to be important to compete on the in-flight product, it's going to be important to compete for frequent fliers, who will have now three real options to travel around the world.



Q: Are you worried about competition from the fast-growing Middle Eastern carriers?

A: They're a real threat. This is a global business and one where we have to compete globally. We can't ignore any global threat and we can't be asked to compete on different terms.



Q: Do you mean the U.S. subsidies for foreign airlines that buy Boeing planes?

A: That's one thing. There are a number of areas: their (lower) taxation versus the taxation the U.S. government puts on U.S. carriers; the access they're getting (to closed markets).



Q: Can U.S. airlines ever provide the same level of service as the best Asian and Middle Eastern airlines?

A: Of course we can. On the ability to get people to more places, to do so safely and efficiently and with seats that are as good or better than anyone else's in the world - the things customers really care about - we can. They do have some advantages, but we can compete against those carriers, certainly on like routes.

Q: You said recently that US Airways has more of a bias for action than American. What did you mean?

A: The culture of American is probably a little more buttoned down than the US Airways culture, but that has some real benefits. The US Airways culture is, I think, a little more open and does have a little more bias for action. That also means we sometimes fire before we're ready.



Q: You also said that if the DOJ lawsuit stopped the merger, it would have been less exciting to go back to the way things were.

A: I was certainly thinking, "How do we motivate the team?" (He had promised US Airways employees pay raises, and senior executives stood to get jobs with the new company.) It was going to be a lot harder to go back and tell them, "Well, now we're back to where we were."



Q: Tell us about yourself. Do you have any hobbies?

A: I used to run, and my knee now is down to not much cartilage, so I do the elliptical (exercise machine) instead. Most of what I'm doing, if I'm not working, is with my family. I have three kids: one in college, a sophomore in high school, and a girl who's in eighth grade.

Q: Finally, why do people love to hate the airlines?

A: I don't know. It's something we need to get past. It affects the people that work at the airlines. We have people out there every day who do just amazing things to help get people from Point A to Point B. It's a noble job. It drives commerce, it gets people to go see their loved ones, it gets people to be able to see the world.

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