America West CEO to Face Difficulties in Merger

TEMPE, Ariz. (AP) -- Eleven days after taking over as chief executive of America West Airlines in September 2001, Doug Parker had to abruptly shift his focus from improving the carrier's poor reputation among customers to fighting for its survival.

The night before the Sept. 11 terrorist attacks, Parker and his new management team celebrated their plans for the carrier over drinks, only to wake up the next day to find that the already ailing airline industry had sunk into deeper turmoil.

After securing a $429 million government bailout loan that probably saved America West from bankruptcy, Parker succeeded in improving worker morale and changing the Tempe-based airline's reputation as a carrier that delays flights, loses luggage and leaves customers waiting.

Now, the 43-year-old Parker will be tested by America West's plan to take over Arlington, Va.-based US Airways and stitch together two geographically distinct airlines into one designed to better compete with lower-cost rivals. Analysts say Parker will face difficulties combining the two carriers' work forces and capturing an estimated $600 million in savings from the merger.

Even though America West is the acquirer, the US Airways name will survive and be used when the nation's seventh- and eighth-largest carriers are combined to create the No. 6 airline. Two trips through bankruptcy court reorganizations apparently were not enough to tarnish the more recognizable US Airways name.

''We will leapfrog ourselves from one of these airlines that's doing OK but still struggling to one that is well positioned for the future and has the critical mass, I think, to be around forever,'' said the gravelly voiced Parker, who will serve as chief executive of the combined company.

Under Parker's leadership, America West cut costs and overhauled prices, but perhaps his biggest accomplishment was repairing employee morale, which suffered under his predecessor, William Franke.

Many attribute his success to his low-key, genuine manner. Parker has a reputation for candor, chatting up crews while on flights and eating lunch with pilots in between training sessions at the company's headquarters.

''He is in private what he is in public,'' said Bill McGlashen, president of the America West Association of Flight Attendants. ''There isn't a persona change.''

McGlashen noted that before America West got the first airline bailout loan following the terrorist attacks, Parker told federal officials he could not ask his employees for concessions and got them instead from vendors.

Some of Parker's favorable reputation with employees may be due to having worked at unionized airlines before, noted McGlashen.

After receiving his MBA from Vanderbilt University in 1986, Parker worked in a series of management positions at American Airlines before moving to Northwest Airlines in 1991. He spent four years at Northwest as vice president and assistant treasurer and as vice president of financial planning and analysis before he joined America West in 1995 as chief financial officer.

Jim Bradford, dean of Vanderbilt's Owen Graduate School of Management and a friend of Parker's, said Parker has a disarming, everyman quality that appeals to employees at all levels.

''He is not a CEO with an entourage and an ego to match,'' said Bradford.

Kris Garrett, whose sons attend school with Parker's children, said Parker works hard to be inconspicuous at his boys' baseball games. ''I see him trudging through the dirt, carrying batting equipment,'' said Garrett, regional CEO for JP Morgan Chase. Parker and his wife, Gwen, have three children - two boys and a girl - ages five to 10 years old.

Parker takes his kids to a homeless shelter once a month to celebrate the birthdays of children who live there. He was disappointed when he missed one of the parties because he was busy working on the US Airways acquisition, Garrett said.

Parker's people skills will be needed when confronting the challenge of combining 24,000 US Airways employees with America West's 14,000. Executives from both airlines said they hope to remove an unspecified number of jobs from the combined company through attrition.

Some America West workers worry they might end up with less flexible work schedules, because employees of the older US Airways would water down the seniority pool. ''That will challenge every one of his skills,'' said Ray Neidl, an airline analyst for Calyon Securities.

Parker himself is blunt when discussing America West's past operational problems.

America West had reached a low point about a year before he took over as CEO. A computer glitch led to the cancellation of 160 flights and left 1,000 passengers stranded. That prompted a plan to improve customer service and aircraft maintenance.

''We had done a disservice to ourselves by not running a good airline,'' Parker said. ''That perception was still there even in 2001, even though we had been running a good airline for six, nine months as of when I took over.''

Franke, who hired Parker from Northwest Airlines in 1995 and helped groom him to run America West, said his successor's nature is forthright.

''If you don't self-confess to the problem, you are never going to come to grips with getting it right,'' said Franke, who now runs a private equity firm.

It's important that Parker fixed the airline's operational problems, because he couldn't integrate both work forces while trying to overcome customer service difficulties, said Andrew Inkpen, a professor of management at Thunderbird, the Garvin School of International Management in suburban Phoenix.

Parker turned a demoralized airline into a marginally profitable carrier, Inkpen noted. ''In this industry, that's saying something,'' he said.

Still, Inkpen is skeptical of the prospects for succeeding after the takeover. He questioned whether the combined company will be able to capture the savings expected.

Parker said critics of the merger haven't seen all details, which were enough to raise $500 million in equity and another $650 million from partners. Savings will come from stable labor costs and from taking 59 planes out of the combined airline's fleet, he said.

If the deal happens, America West shareholders will own 45 percent of the combined carrier. The new investors will have a 41 percent stake. And U.S. Airways creditors will own 14 percent. Existing US Airways shareholders are the big losers: their shares will be worthless.

Michael Roach, a co-founder of America West who now works as an airline consultant, said Parker is setting out to create a new future for the company, rather than having to react later to changes in the industry.

''I think he and his team are by far the best team that America West has had,'' Roach said.

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