A (Very Brief) Moment of Recognition and Thanks: American and US Airways

As we all start to figure out what a merger of American and US Airways will mean — for travelers generally, for frequent flyers, for investors, for employees — it’s worth noting just how far we’ve come.

Of course, in the immediate term I think we have little to worry about, as I told USA Today.

“In the short-term, frequent flyers will benefit from more routes and more choices, and a management that will likely want to reassure them that the benefits they’re used to won’t change,” says Gary Leff, co-founder of the frequent flyer community Milepoint.com and author of the ViewFromTheWing.com blog.

The actual work to integrate the airlines — culture and IT — will be hard and likely painful. And over time some of the value we’ve come to enjoy in each program will get harmonized away.

But I think it may be worth doing a little bit of celebrating — for one day only — and wishing congratulations to the major players involved here.

Back in May 2010 I called American a bankruptcy waiting to happen.

Since that time they did indeed file for bankruptcy. They’ve done a great deal to get their house in order, reducing costs and pursuing a business plan which — whether it would have been successful or not as a standalone entity — was clearly focused on building a premium product and serving its customers well.

When the filing first happened, Doug Parker thought he could swoop in and grab them on the cheap. The initial offer was rumored to be that American’s bondholders would get just 50% of the company. American did the hard work over the past year that made it clear the airline was worth a whole lot more than that. So bondholders will get 72% of a combined company that will be worth between $10 billion and $11 billion dollars.

The people at American, not least of which its Chairman Tom Horton, deserve a great deal of congratulations for that.

And Doug Parker deserves his congratulations as well. The man worked at American Airlines after getting his MBA, and then at Northwest, and joined America West as CFO in 1995. He became Chairman of America West in September 2001 — one of the darkest times in the airline industry.

Since then he acquired US Airways — which had been through bankruptcy twice in the last decade — and turned it into a profitable airline.

Throughout his tenure it’s been clear he wanted to grow bigger. He sought to merge with United more than once, one time supposedly coming close with the only thing scuttling the deal that he wouldn’t have been the one running the company. He sought to merge with Delta out of its bankruptcy. But he persevered and now has taken his shot.

He returns to American Airlines, where he began his career, and will become its CEO — and likely in May 2014 its Chairman as well.

And so Congratulations to Tom Horton — for serving his company well, for helping to bring it back to health and for navigating a favorable deal for its creditors. And to Doug Parker, newly the most successful member of Conquistadores del Cielo.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. And in the process, Mr. Parker removed entertainment from all domestic routes except Hawaii. He removed food on almost all flights. He began charging for soda and water, which was rescinded only after public uproar. He has replaced Airbus and Boeing aircraft with Embraer. In other words, he removed almost all reason to fly with them. Luggage delivery is abysmal in Boston and PHL. AA had issues, no question, but the past year has shown a great renaissance – I’m hopeful the changes for the good will continue, but I tend to doubt it with Mr. Parker at the helm. I wonder if alcohol will be served over New Mexico in the future.

  2. I really want to like this guy but his choices in business typically suck.
    I’m prepared for the possibility of his ruining Americans product & service levels and quality of FF program
    My lifetime elite status will be worth less with the new added tiers and I am dreading his very existence without him setting foot in Dallas as new CEO
    UGH!!!
    Im prepared to burn my miles and take my tens of thousands in spending every year elsewhere
    Of course I am praying on a stack of bibles that he doesn’t do as much damage to the company as I suspect
    Here we go!

  3. @Tony – I could have made a killing if I had timed it right. But up until the past few days had no reason to believe the equity holders would get anything. And in the end they look to be getting more than I imagined even then. So no I didn’t. But then I rarely invest in individual stocks at all, just broad-based mutual funds.

  4. @ Gary – I ask because the thought had crossed my mind – there was a sense that US Air might overpay in exchange for Doug Parker at the top. But of course hindsight is 20/20.

    The best time to speculate, really, was in fall 2012 before these rumors really started heating up and AAMRQ was ~.40. Given that the merger between AA and US has been talked about for some time now, it would have been a perfect time to speculate while the price was attractive.

    The wave of airline consolidations in the US is now over… but anything major overseas brewing?

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