US Airways’ CEO talks AMR, industry conditions at National Press Club

US Airways CEO Doug Parker spoke today on the effort to merge with American Airlines and of industry conditions.

This is a running tally of the comments and Q&A.

Parker:

  • Was introduced as a good poker player, citing Herb Kelleher. Parker responds: I’m not particularly good. Herb is just very bad.
  • Our country needs a practical and sustainable airline policy.
  • Team at US Airways is doing a phenominal job. Producing record revenues, yields, strong load factors, new records in every operating measure. Credit goes to 32,000 employees. I can’t thank them enough.
  • You might ask if US Airways is doing so well on its own, why talk so much about mergers? We don’t need to merge but we owe it to employees and other stakeholders to become as strong and as viable as possible.
  • Previous mergers have led to increased traffic, cost reductions, better competition.
  • Employees will have better opportunities.
  • American Airlines sat out these mergers and have missed opportunities. It is not the largest airline in the world anymore or even close to it. Delta and United have surpassed it.
  • Finally American resorted to bankruptcy. Bankruptcy does allow airlines to negotiate to contracts, renegotiate and terminate contracts and debt. Bankruptcy cannot fix a revenue problem or network deficiencies through organic growth.
  • American can fix these only through merger with US Airways. American’s Cornerstone strategy doesn’t regain previous strength. There is a big hole on the Eastern seaboard.
  • American is steadily losing share to Delta and United. It can only be gained back by merging with US Airways which is strong on east coast.
  • Merger will enable both airlines to become stronger. Networks are complimentary and little overlap, so no need to scale back services.
  • A new American would be able to provide connecting services through Philadelphia, Washington and Charlotte rather than backtracking through Chicago, which passengers won’t do.
  • American is now in fourth or fifth place in most regions. A combined carrier would become first or second in most areas.
  • Almost all analysts concluded American’s Cornerstone strategy won’t fix problems.
  • Why isn’t it happening? Timing is everything. We believe a merger should happen within bankruptcy to avoid many costs that would occur outside bankruptcy.
  • US Airways is here now and ready to do this now. There is no guarantee it will be later. We believe the action for merger is now. We want a fair chance to present our plan.
  • We are certain any objective analysis will conclude merger with US Airways is best for the bankruptcy process.
  • According to American, the bankruptcy process is because of the unions–they are the “offenders.” My experience with these unions in supporting the merger is to the contrary.
  • The compensation gap between the US Airways proposal and the American proposal is not that large. The unions understand the future for American is a strong carrier.
  • Everyone knows what the right answer is. The public has a lot at stake in the outcome. There are 100,000 jobs at stake here.

Q&A

  • Indeed we are still working through seniority integration issues with US Airways-America West pilots. This is still tied up in court and once it does, we’ll resolve it.
  • Since that merger, a law has been passed that requires binding arbitration before a merger.
  • Flight attendants contract: we reached an agreement with negotiations but membership rejected it, so we have resumed negotiations.
  • Seniority of AA-US will be left to the unions that will be fair to all employees.
  • The two networks will produce revenues that can’t be produced today.
  • The only opposition to this merger is the senior management at American.
  • Would like to seek merger approval before the end of the year.
  • No route divestitures will be required.
  • You can’t have an airline that has high costs and lower revenue than competitors. It happened at old US Airways. (By implication, now happening at American.)
  • A merger with American-US Airways will increase revenues and allow higher wages to all employees than either airline can do alone.
  • Things like baggage fees are for those who want to check bags and get charged for it. Baggage check-in, the conveyor belts, the carts, the baggage returns are very costly. It’s the right model for the business today.
  • We’ve brought in all previously out-sourced reservations agents back into the USA.
  • The 3-hour tarmac rule is a great example of what happens when we in the industry don’t do a good job. We in the industry did a horrible job in several cases of taking care of our customers. This was forced upon us because we didn’t do a good job. But not sure it’s truly benefited the customer.
  • Federal government should lower taxes and fees on airlines. 20% of your ticket are taxes and fees. Don’t raise taxes and don’t do things that make it harder to compete. Government regulation and government intervention make it hard to compete.
  • If merger goes through, combined carrier will remain in oneworld alliance. This would also create a much more balanced alliance between oneworld, Star and SkyTeam. oneworld has fallen behind, just like American Airlines.
  • Movies on board are a complete waste to offer. People prefer their own personal devices with their own movies.

5 Comments on “US Airways’ CEO talks AMR, industry conditions at National Press Club

  1. AMR continues to bleed money, having just reported they lost some $241M in the second quarter of this year.

    http://www.star-telegram.com/2012/07/18/4107427/amr-posts-241-million-loss-in.html

    Parker claims that a merged AA-US will have increased revenue and will be able to pay higher wages. Is he serious? AA had an increase in revenue in the second quarter this year compared to the same period last year (total revenues 2011Q2 = $6.1B, 2012Q2 = $6.4B and still lost almost a quarter of a billion dollars). Increased revenue for an airline only means more paying pax and cargo flew, but expenses also goes up, it is far from an increase in profits.

  2. I have seen a (successful) airline merger in which the executives of the to be taken over airline were promised a lot of cash if the merger went smooth. When it got known they quickly distantiated themselves from it, but since then I’m also interested in the personal interest of the people involved. And if what they say is objective.

    Will Doug Parker and his team early retire if AA takes them over ? Probably. What happens to the rest of the workforce, who knows?

    • Parker and his team will be the surviving management and US Airways is taking over AA. This is just like America West taking over US Airways.

      • I’m still hoping AA is not merged with US, Scott. It will be bad for compitition within the airline business, and bad for the flying public. Merging two airlines famous for bad customer service will not make them any more responsive to those customers who are the real people who are (collectively) paying the bills.

  3. Basically a lot of things that you’d expect Parker to say. Nothing too surprising I have to admit. Except for this bit: “Movies on board are a complete waste to offer. People prefer their own personal devices with their own movies.” Regarding music I see his point, but regarding movies I’m not quite so sure…

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