On this historic day, with the announcement of the $11 billion American Airlines-US Airways merger, Doug Parker recalled that he started his airline career at American Airlines in 1986, and that from his own cubicle he could view Tom Horton’s cubicle.
Some 27 years later, after Parker’s stints running AmericaWest and US Airways, he will reunite with Horton for a short while in the boardroom of the new American Airlines. Parker will be CEO and a board member, and he’ll become chairman when Horton, the current American Airlines CEO, vacates the merged airline’s chairman post at the first annual meeting of shareholders.
The two airline veterans, who are said to be friends and clashed over a merger scenario for months, shared their plans for the merged airline at conference call with analysts and the press this morning.
Horton spoke first, then Parker, and when he finished his initial remarks, Parker asked Horton if he had anything else to add.
Horton quipped that Parker had outlined the same plans as Horton had done a few minutes earlier.
“It just took you longer to say what I said,” Horton said.
Horton characterized Parker as a “first-rate leader.”
“I’m pleased to partner up with Doug to take the new American into the future,” Horton said.
Parker characterized it as a “great day” for the two airlines, adding that he “couldn’t be more excited.”
Rationalizations and strong feelings
“This is the last major piece to fully rationalize the industry,” Parker said, meaning a US Airways-American Airines marriage completes the consolidation cycle after the Delta-Northwest and United-Continental mergers.
Horton provided some color on what the process has been like since AMR Corp. declared bankruptcy in November 2011.
“We’ve been looking at US Airways for 20 years now,” Horton said somewhat lightly, adding that in the summer of 2011 it became increasingly clear that American needed to restructure.
Then Horton talked about strong feelings — and disagreements — espoused by both parties.
It became “clear US Airways had a strong feeling about this,” Horton said in a classic understatement about Parker’s push for a merger.
Horton said, however, that American Airlines “had a strong feeling to get our house in order. Later in the year (2012), we ramped up our dialogue and signed a non-disclosoure agreement in the middle of 2012.”
“We’ve been working hard to get the labor contract right,” Horton said. “When they were squared away, it became clear that this was the right deal at the right time.”
All of this came about with a lot of prodding from Parker, the unions of both airlines, and the AMR Corp. creditors’ committee, among others.
The timetable and lessons learned
Horton said the merger, which is expected to close in the third quarter of 2013, pending regulatory and bankruptcy court approvals, will create better feed for American’s global network, and that “more people will be able to get more places more easily.”
With more than $1 billion in annual synergies hoped-for, the airline would be sustainable and profitable, enabling American to invest in products and service the way the “top-tier players” do, Horton said.
The new labor agreements would provide stability, and fleet orders would give American the flexibility to operate “the right aircraft at the right time.”
Parker noted that the merged airline would have more than 100 million frequent flyers.
“That clearly is a huge asset that we can use to our advantage,” Parker said.
Follow the big guy
Parker said he’s learned some lessons from the 2005 AmericaWest-US Airways merger that would help in the American Airlines-US Airways merger. Among them is the fact that it is easier to adopt the technology and processes of the larger airline than the other way around, unless there is a compelling reason not to.
Although it is early, Parker said his guess would be that US Airways would adopt American’s reservation system, Sabre, for example.
Asked to comment on what he learned from US Airways’ failed attempt to woo Delta, which ultimately decided to merge with Northwest several years ago, Parker said he came to understand that “we got in too late” and didn’t have the all-important support of the employees.
He didn’t make those same mistakes in pursuing American Airlines.
What’s in store now?
Parker said he believes that the two airlines would have a single operating certificate 18 months after the transaction closes, and that the reservation system migration would be completed by then, as well.
“It will look to consumers like one airline by then,” Parker said.