I wrote earlier this year that I didn’t think American Airlines CEO, Doug Parker, would survive the summer. Now into October, it looks like that prediction may be true, depending on one’s definition of summer.
Change Appears Imminent
Lucky from One Mile At a Time, among others, reported CEO Doug Parker’s ouster may be imminent on Boarding Area this week. He’s not alone. Some reasons why now look to be a better time than ever come from three key areas: Labor, Stock Performance, Partners.
I have extensively covered the outcry from American Airlines flight attendants and mechanics which, still, do not have a new contract. Even Bernie Sanders jumped in the fray regarding the mechanics deal, sure to garner support from at least half the country interested in labor matters this upcoming election cycle.
The stock has not improved, not at all. I recently bought some shares because how much worse can it get, right? (I may not want to find out.) Recent market adjustments have closed the gap with American’s peers, but that’s not a result of poor performance on their part, nor improved performance on American’s.
Partners have left the building. LATAM, which was in play for a joint venture with American until the Chilean government put a stop to it, appeared to be very cozy with American Airlines. However, with the failure of the JV, LATAM was clearly still in the market for an investment of some sort – one that American has made in foreign carriers in the past. Delta filled that role and severely diminished American’s South American strategy as the airline will now not only be a part of Delta’s portfolio but also leave the oneworld alliance. Adding insult to injury, Alaska Airlines is also distancing themselves from American with redemption opportunities going away while some codeshares will remain.
Replacements Are Already Turning Down the Job
Matthew wrote that Scott Kirby, United’s President and COO, has already stated he won’t be moving back to Dallas to take the job. It’s interesting that Parker’s imminent departure appears to be such a foregone conclusion that others are already turning down the job.
Does Kirby have an axe to grind with Parker and company? Yes, I believe so. Lucky reported the following turn of events prior to Kirby moving to United:
“Kirby also talked a bit about how his actual departure from American happened, which he describes as the biggest surprise of his career:
In late spring 2016 American CEO Doug Parker said he was planning to retire and that he wanted Kirby to take his place
Three months later, Parker walked into his office and read off a piece of paper that Kirby needed to transition out of American”
I can imagine that Kirby might have welcomed an opportunity to prod Parker some amid his current set of challenges.
Lucky notes that American will have to find an American citizen to run the carrier, which is entirely draconian in my opinion but absolutely correct. He points to Robert Isom as a possible replacement but I believe that investors and employees will want wholesale change. It’s already been clear that labor is unafraid of challenging Isom, though I give credit to the man for facing management himself, unlike Parker.
Just as United CEO Oscar Muñoz came from an adjacent industry with no direct ties to Jeff Smisek or the business, I think this would be the best way to go for American Airlines as well. While finding someone who has had success in the business before, like Richard Anderson formerly of Delta Airlines, I don’t think anyone short of Gordon Bethune could get the carrier back on track at this point – pardon the pun.
While a talented person could argue that any month with sunny skies and temperatures in the northern half of the US reaching upper 80s sounds like summer to them – I will have to admit that my prediction that Parker would be out before fall has been proved wrong. That said, it doesn’t appear like I was off by much. The street, the competition, labor – even partners – are unhappy with American. When the competition is ready for someone new at the helm just to make it more exciting, Parker has sunk as low as he can go.
What do you think? Is Doug Parker’s reign coming to an end? Who should replace him (and the team)? What changes would you hope would come to fruition as a result?