Work remains for US Airways CEO Doug Parker

US Airways CEO Doug Parker has spent the past 10 years attempting to stay a step ahead of the industry's next daunting challenge.

From Sept. 11 to the economic downturn, through bankruptcies, mergers, fees and cutbacks, the volatile industry has demonstrated both its fragility and resilience.

The tenure of Parker, who took charge of US Airways' 2005 merger partner America West only 10 days before the terrorist attacks, has been marked by merger talks -- only one of which was successful -- fuel-price spikes and complicated labor negotiations.

Parker continues to wrestle with some of the same issues that dominated the past decade, although it's widely believed that the airline today is in a better place financially than it was two years ago. Infused with $2.6 billion in cash, $2.2 billion of which is unrestricted, US Airways so far has been able to ride out the most recent spike in fuel prices. It's done so by adjusting capacity early and often to more closely match the ebb and flow of customer demand. It's also relied on ancillary revenue sources such as baggage fees and fewer competitors in the industry.

On Sept. 1, 2001, Parker, then 39, was named chairman, president and chief executive officer of America West. A veteran of American and Northwest airlines, Parker had served as chief financial officer and chief operating officer for America West.

He had experience in a number of areas, but he had never had any dealings in government relations. At the time, he thought that detail was insignificant because America West was small and didn't often have to appeal to Congress.

Ten days later, all that would change.

The attacks of 9/11 shook the foundation of the industry, causing seismic shifts in the way consumers perceived air travel. For two days, the Federal Aviation Administration kept all flights grounded. Parker recalls looking out of his Tempe, Ariz., office, which planes fly past frequently, and seeing none.

But a lack of revenue had an even more profound impact on America West.

"We definitely did not have enough cash on hand to make it through the winter under those terms," Parker said.

Parker spent much of the next three months in Washington, D.C., lobbying legislators to pass the Air Transportation Safety and System Stabilization Act, which, among other things, provided loan guarantees to the airlines. On Dec. 28, 2001, America West received $380 million in federal loan guarantees.

In the years after the Sept. 11 attacks, the industry reinvented itself. Several airlines filed for bankruptcy, including US Airways, which filed twice.

In September 2005, America West finalized its purchase of US Airways, which was in bankruptcy.

"US Airways was on the verge of liquidation," Parker said, adding that if America West didn't pick up the pieces, one of its competitors would. "And that would have made our problem even larger."

Despite its battered financial state, America West changed its name to US Airways because it had more name recognition among travelers, Parker said.

In 2008 and 2009, the airlines were criticized for adding new fees, such as one for checked baggage. Although many passengers dislike the fees, US Airways maintains that the ancillary revenue helped it return to profitability in 2010.

Parker says the airline has no intention of repealing the fees -- but there are no plans to expand them, either.

"It's been difficult for the customers who we trained that you buy a ticket, and here are all the things that come with it," Parker said. "It wasn't the best business model. I think we've settled on a model that works, which is, for the most part, you pay for your own ticket, and if you want to check a bag, that's extra."

Yet the airline's costs have increased dramatically this year.

In March, the monthly average price of U.S. Gulf Coast jet fuel was about $3.13 per gallon, compared with $2.11 per gallon in March 2010.

Looking to the next decade, Parker said US Airways would remain a standalone airline or be half of the next big merger.

Whichever it is, he'll be proud, he said.

"After 9/11, I remember reading some Fortune 500 article that made me sick to my stomach," he said. "Just as a statement of fact almost, it said America West and US Airways will certainly not survive. I was thinking to myself: 'What the hell do you know?' The fact that we are here 10 years later having merged those two airlines and numerous others have fallen by the wayside, I feel really good about that."