Doug Parker will retire in March as CEO of American Airlines, the airline that he made the world’s largest through a series of mergers that led to a massive consolidation of the US airline industry.
Parker, 60, will be succeeded by Robert Isom, who has served as the company’s president for the last five years. Parker will remain as chairman of American after stepping down as CEO.
Parker is the longest serving US airline CEO as well as one of the most important executives in the airline industry in the last 50 years. He was the architect of a series of mergers that reshaped the industry. Those moves made the airlines more profitable but led to fewer choices and often higher fares for passengers.
Over the last 20 years the 10 major US airlines have been consolidated down to only four – American, United (UAL), Delta (DAL) and Southwest (LUV). Between them they carried about 80% of of the US industry’s air traffic before the pandemic, and slightly less since then due to restrictions on international air travel. American alone handles 23% of the miles flown by passengers on US airlines.
Parker started as CEO of America West Airlines, then the nation’s eighth largest airline on September 10, 2001, the day before the terrorist attack that grounded all US airlines. He navigated his company through that crisis, the industry’s most challenging period until the arrival of the pandemic in 2020.
Under Parker, America West would then go on to buy two larger airlines — US Air and American — when both carriers were in bankruptcy. In each case, the combined airline kept the name of the larger company. Other airlines responded with mergers as well.
While Parker has said he believes the US airline industry is essentially done with the merger trend he helped to lead over the last 20 years, American recently announced an alliance with JetBlue, which the US Justice Department has sued to block on the grounds that it unfairly reduces competition.
In addition to questions about reduced competition, American has struggled with service problems this year as it tried to respond to leisure passengers’ pent-up demand for travel. Its service melted down in October and earlier in the year, blaming the disruptions on a lack of adequate staffing. The thousands of flight cancellations stranded hundreds of thousands of passengers.
The financial assistance that American and other airlines received from the federal government meant it couldn’t lay off staff during the pandemic, American and other airlines offered early retirement and voluntary separation packages to trim staff and limit labor costs when travel essentially ground to a halt in 2020. It and other airlines have had trouble filling all the positions since then. Unions at the airlines, including its powerful pilots union at American, has blamed poor management for the service and staffing problems.
Pandemic delayed retirement plans
Parker said Tuesday he felt it made sense to retire after 20 years as CEO.
“This is something we’ve been looking at for quite some time,” he said in an interview on CNBC. “Frankly the pandemic delayed it a little bit. There’s always work to do. We’re on solid financial footing. The recovery is underway. Demand is coming back. So this feels like exactly the right time. We know we have the right person.”
American has lost $14 billion since the start of 2020, excluding special items such as financial assistance it and other airlines received from the federal government. The company’s long-term debt has soared 60% to $36 billion during that time, although those loans and sales of additional shares to raise cash has left the airline with more cash on hand that it had going into the pandemic.
But Isom said he is excited by the outlook for the airline going forward, despite the two years of deep losses and mounting debt.
“We’ve done a great job building American to not just survive the pandemic but to thrive once business returns,” Isom said on CNBC. “As we look at 2022, it’s all about having the most reliable airline possible for customers as they come back and then returning American to profitability as soon as possible.”
But he said he couldn’t predict when that return to profitability would occur.
“It’s going to depend on demand coming back,” Isom said. “What I do see is that when demand comes back, American is going to do very well.”
Shares of American (AAL) rose 2% in morning trading on the news.