US Airways’ Parker: A Smart Bid for American

Getting American's unions onboard first was a savvy move

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US Airways’ Parker: A Smart Bid for American

On paper, it was a great fit: West meets East in an expanded route structure, and the economies of scale to compete with both low-cost carriers and larger legacy competitors. But combining the two airlines’ employees and cultures proved to be anything but smooth. Even seven years later, US Airways doesn’t have combined contracts for both groups of pilots and flight attendants.

Parker’s failed hostile takeover of Delta further advanced his education. Delta was in bankruptcy in 2007 when Parker tried to woo creditors with what eventually would be a $10 billion bid. The deal foundered largely on intense opposition from Delta’s unions. In the end, Delta spurned LCC’s advances and merged with Northwest instead.

After the failed merger and in the midst of contentious labor negotiations with his own two groups of employees, Parker took another hit: He was arrested for driving while intoxicated and going 20 mph above the speed limit. Hours later, his mug shot was all over the news.

“You need to know embarrassed and sorry I am about this,” he wrote in a letter to US Airways employees. “I have let down all of you and also my family. And that is something I will have to live with irrespective of the outcome.”

Parker remained committed to his search for the right merger partner. In 2010 he turned to United. But in the eleventh hour, United chose to merge with Continental Airlines, leaving Parker at the altar yet again.

In announcing the score, UAL CEO Jeffery Smisek couldn’t resist a jab at Parker’s expense: “I recognized that United was the best partner for Continental,” he said. “And I didn’t want him [United CEO Glenn Tilton] to marry the ugly girl; I wanted him to marry the pretty one.”

Parker fired back in a letter to US Airways employees: “As one of you simply put it, ‘Why are we the ugly girl?’ The answer, of course, is we are not, and there’s no better evidence of that than our recent performance,” he said.

The bottom line: In his 11-year tenure at the helm of LCC, Doug Parker certainly has endured William Ernest Henley’s “bludgeonings of chance,” but he has always emerged even tougher. He’s passionate, focused and at times seems bigger than life. When he commits to a task, he gives it all he’s got — and that includes the play for American.

Make no mistake: A lot of things have to happen on all sides before any deal could get done. Parker noted in a letter to US Airways employees that “the news does not mean we have agreed to merge with American Airlines. It only means we have reached agreements with these three unions on what their collective bargaining agreements would look like after a merger, and that they would like to work with us to make a merger a reality.”

But Parker is far better-positioned to bring off this deal than he was when he made his Delta and United bids. First and foremost, he’s reaching out to the unions and has gained their preliminary support. Second, American’s Horton may have shot himself in the foot with his bid to void union contracts, cut 13,000 jobs and radically slash wages and benefits.

It doesn’t hurt that Parker’s plan would save more than 6,000 of the jobs American plans to cut while boosting its ability to compete with other major carriers.

As of this writing, Susan J. Aluise did not hold a position in any of the stocks named here.


Article printed from InvestorPlace Media, http://investorplace.com/2012/04/us-airways-parker-a-smart-bid-for-american/.

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