Resurgence of US Airways a Merging of East and West

US Airways has benefited from its willingness to adopt some elements of the low-cost-carrier template and abandon others.

A failed deal with ATA Airlines that would have given America West Airlines a major Chicago hub at Midway was the best thing that happened to the company, Chief Executive Douglas Parker said.

"I think about that sometimes," said Parker, president and CEO of the newly merged US Airways. At 43, he is the youngest chief executive of a major carrier. He sat down with the Tribune this month in a conference room inside the shiny Tempe office tower with US Airways' name emblazoned across the top. Last year it bore the America West logo.

"We would have been consumed," he said of the near-pact with ATA. "Part of what made this deal come together was that that deal failed. Because we went after that, people knew we were interested."

The failure left America West open to buying US Airways a few months later, a marriage that created the nation's fifth-largest carrier and one of its most financially healthy.

And though he's still working on knitting together the two airlines' fleets, crews and cultures, Parker's interest in growing further has not waned. His airline has been mentioned as a possible partner for Northwest Airlines or Delta Air Lines, both of which have filed for bankruptcy. While such discussion is conjecture, it makes sense, Parker said.

"We clearly demonstrated that putting two companies together could create a lot of value," he said.

Parker said the most attractive partners are those in bankruptcy, carriers that the court gives the flexibility to reduce labor costs and get rid of unwanted airplanes.

Wall Street analysts expect US Airways will report a second-quarter profit Thursday, on the heels of a $65 million first-quarter profit. Expectations are that the airline will have a profitable year, despite merger-related costs of $125 million and record fuel expenses.

Last year, it lost $537 million on revenue of about $5.1 billion according to the airline's financial filings.

The US Airways-America West union succeeded because US Airways had cut so much in bankruptcy, and America West had a clear plan, said airline consultant Michael Boyd.

"US Airways on the East Coast was a cadaver," he said. "Angry people. Angry customers. A route system that was getting chopped to pieces. It was a mess. And for whatever reason, America West bought them. And they're making money."

He credited Parker with having a plan for joining the two and being able to execute it.

"Parker goes in there, decides what he wants to do and does it," Boyd said. " And everyone beneath Parker understands what Parker wants done. Therefore, things get done.

"He's re-engineered his debt. He's trying to put these airlines together. And it is messy. Don't kid yourself. There were major issues there. It's a very tough thing to put together, but they are doing it."

Parker has spent his career in the airline industry. After receiving a master's in business administration from Vanderbilt University in 1986, he joined American Airlines. Five years later he moved to Northwest, and in 1995 joined America West.

He was on the executive fast track there. Less than two weeks before the Sept. 11, 2001, attacks, he was named chief executive.

Hybrid performer

The carrier he has built has elements of two models: the full-service of legacy carriers and the slimmed-downed expenses of discount airlines. It has a low-cost structure, hubs, international reach and a regional network of a mainline airline.

Even more, Parker may have shown the industry the best way to do an airline merger, historically a messy, expensive process, and start earning money from the onset.

Elk Grove Township-based United Airlines' path out of bankruptcy involved three years of cutting costs: dumping pensions, renegotiating labor deals and turning unwanted planes back to leaseholders. The carrier eliminated 25,500 jobs and cut $7 billion in total spending.

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