US Airways CEO Doug Parker, after three failed attempts at major mergers, is approaching a deal to combine with AMR Corp.’s American Airlines and form the world’s biggest carrier.
Parker, 51, has applied lessons from his previous efforts, shifting tactics in pursuing the bankrupt AMR. The two companies are working on final details and their boards may vote on the deal later this week, people familiar with the matter have said. Parker is expected to lead the combined company.
The deal would mark a career achievement for Parker, the longest-serving CEO among large U.S. airlines. It also would complete the industry consolidation that he began in 2005 when his America West Holdings Corp. merged with US Airways, reduce the number of full-service U.S. carriers to just three and bolster airlines’ ability to raise fares.
“He learns from his past mistakes,” Gordon Bethune, the former CEO of Continental Airlines Inc., said in an interview. “He’s done this the right way, and it’s showing.”
US Airways began its pursuit in January 2012, less than two months after Fort Worth, Texas-based AMR sought court protection. The airlines agreed last week on post-merger leadership and the division of equity, people familiar with the matter have said. Parker would become CEO, and American’s Tom Horton would become non-executive chairman, the sources said.
With US Airways now the fifth-biggest U.S. airline, a merger with No. 3 American would push the combined carrier to the top spot by global traffic, passing United Airlines and Delta Air Lines Inc., both of which eluded Parker in the past.
“Parker has been the No. 1 backer of consolidation,” said Bob Mann, a former American Airlines executive who now runs aviation consultant R.W. Mann & Co. “He doesn’t mind getting his nose bloody if he thinks it’s the right thing to do.”
Big test came quickly
Parker was hired in 1995 as America West’s chief financial officer. His tests began almost as soon as he became CEO in 2001, 10 days before the Sept. 11 terrorist attacks. Parker testified before Congress in support of a $15 billion airline-aid package as travel demand shriveled, saying America West risked bankruptcy. It secured a $380 million federal loan guarantee.
The man known as a fierce competitor at salsa-making contests and go-cart races at US Airways’ annual media day drummed up $1.5 billion to fund the America West-US Airways deal from backers that included planemaker Airbus, former Air Canada parent ACE Aviation Holdings Inc., and two hedge funds.
“He’s not a distant, standoff-ish kind of guy,” said Bethune, who was running Continental when Parker took the helm at America West. “He’s a really bright, forward-thinking man and a great manager.”
Parker, whom US Airways declined to make available for an interview, had less success with his follow-on merger efforts.
His hostile 2006 bid for then-bankrupt Delta faltered after two months, as creditors and employees balked. In 2008, former United parent UAL Corp. walked away from talks with US Airways, saying a combination wouldn’t produce enough savings and that it wanted to explore a deal with Continental.
Parker was back in talks with United in 2010, only to be left at the altar again when Continental CEO Jeff Smisek jumped in and persuaded UAL’s then-CEO, Glenn Tilton, to do the deal that created United Continental Holdings Inc.
“I didn’t want him to marry the ugly girl,” Smisek said at the time, as he became CEO of the new company. “I wanted him to marry the pretty one, and I’m much prettier.”
Parker also saw Southwest Airlines, the fourth-biggest U.S. carrier, widen its advantage over US Airways by buying AirTran Holdings Inc. in 2011. Southwest already was the largest operator on domestic routes, and a lack of trans-Pacific flights meant that US Airways also was falling further behind United, Delta and American and their international networks.
With no other targets left at the top of the U.S. industry, Parker set his sights on a weakened American in bankruptcy.
Parker and President Scott Kirby gained early support from American’s unions, which were feuding with Horton. US Airways took an unprecedented step by securing tentative contracts with the labor groups in April, when Horton was still pushing for AMR to exit bankruptcy and then consider combinations.
“It’s important in an ideal world to have the company, the constituents of the bankruptcy, principally labor, on your side,” Kirby said at a March airline conference.
That was one lesson from the Delta experience. A second was to gain the backing of creditors of a bankrupt target as soon as possible. US Airways won support for an American merger from a group holding about $1.5 billion in AMR debt.
Investors have been betting that Parker would succeed, even before he publicly acknowledged interest in AMR. US Airways shares have more than tripled since Nov. 28, 2011, the day before AMR’s bankruptcy filing. The stock fell 2 percent to $14.46 on Monday, after closing at a 52-week high of $15.16 on Jan. 8.