This morning, American Airlines announced the upcoming retirement of CEO Doug Parker on 31 March, 2022, bringing a 35-year career in aviation to a close.
Succeeding Parker will be American Airlines President Robert Isom, a 20-year airline veteran.
A legacy of merging and running airlines
Doug Parker began his career at American Airlines in 1986, where he worked as part of American CEO Bob Crandall’s “Brat Pack” with analysts who would go on to run airlines themselves: Tom Horton (who ran American), David Cush (Virgin America) and Ben Baldanza (Spirit Airlines).
The Brat Pack was a team of financial analysts trying to hone in on data and get to a more granular level of information than had been analyzed before. It was effective, and Parker was wooed away by Northwest Airlines in 1991 to build a similar team.
Parker continued his rapid ascent in 1995, when he joined America West Airlines as CFO. Only six years later, after stints in sales, operations, and finance, Doug Parker was named Chairman and CEO of America West only a week before the 9/11 terrorist attacks in New York City.
It’s at this point that Parker’s legacy becomes a bit controversial, depending on your perspective.
In 2005, America West merged with US Airways, with Parker taking the reigns of the combined company. From that point on, it appears as if Parker was hell-bent on running the largest airline in the world and made plenty of attempts to do so. US Airways attempted a hostile takeover of Delta Airlines in 2006 while Delta was in bankruptcy protection. This attempt failed. Parker then attempted mergers with United Airlines in both 2008 and 2010, rebuffed only when United decided to merge with Continental instead.
American Airlines declared bankruptcy in 2012 and US Airways acted swiftly, even going as far as securing tentative labor deals with American’s labor groups. In December 2013, it became official: Doug Parker found his merger, American Airlines would fold into US Airways (although they kept the American Airlines name), and Doug Parker finally ascended to the head desk of the largest airline in the world.
The biggest merger made the least sense
American Airlines was a monolith. US Airways were smaller and more nimble. It seems like a match made in heaven, a nimble organization hopefully capable of making decisions to break the monolithic structures in place at American Airlines to drive efficiency and scale.
Realistically, though, US Airways and American Airlines couldn’t have been a worse match.
Customers were not excited. There was considerable overlap with both routes and hubs between US Airways and American. The tentative labor agreements secured by US Airways before the merger were effective and got the deal done, but they hurt the combined airline because crews operated separately for years, making it difficult to operate as a unified airline.
With all that said, it’s easy to point at all that and come to the conclusion that Doug Parker wanted to run the world’s largest airline and didn’t know what to do once he had it. But it doesn’t tell the whole story.
Looking at Doug Parker’s legacy through the correct lens
I’m biased. I’m a pretty loyal customer of American Airlines. My perspective is jaded by my experience as a customer. I’m trying to set that aside as a blogger and make sure I share the right perspective. To understand Doug Parker’s legacy, you need to understand what he was trying to accomplish.
Doug Parker wanted to run the world’s largest airline and make it profitable.
That could actually be the entire article right there. For Parker, it was that simple. The decisions he made had one goal: to make the world’s largest airline profitable.
Through that lens, he did a good job. He made American profitable. But even that doesn’t tell the whole story.
The Glory Days of Modern Aviation
Let’s go back to 2015-2019. Airplanes had never been as fuel-efficient. There had never been as much data as there was about flight-by-flight profitability. Airfares had never been lower. American struck, retiring older jets and making the largest airplane order in history, which was widely praised at the time.
Airline profits, not just at American, but at almost every airline soared. Between 2015-2019, American Airlines profits totaled roughly $15 billion. American leveraged their success to the hilt, counting on the golden age of modern aviation to continue unabated, allowing American to plan exciting new routes like ORD-Krakow and PHL-Casablanca.
…and then COVID struck
All of a sudden, American’s debt load was a millstone instead of the smart usage of debt it had been only months before. Losses mounted, and, similar to Doug Parker’s first months as an airline CEO after the 9/11 attacks, he was again in Washington to plea for assistance to keep the airline afloat.
But here’s the thing. It ruined everything for every airline. I can’t lay American’s losses at Parker’s feet any more than I can credit him for the successes during the golden days.
The financial legacy of Doug Parker
I think it’s fair to summarize Doug’s legacy from a long career in aviation as follows: He was aggressive when he saw M&A (merger & acquisition) opportunities. When the economic environment was favorable, his airlines made as much profit as possible. When the economic environment turned sour, his preference for debt hurt his airlines, but he was an effective lobbyist and secured the assistance to ensure his airlines survived.
Maybe that’s the best way of summing up Doug Parker’s legacy: no matter the environment, he and his airlines survived.
Doug Parker’s legacy with his staff
I’ve met Doug Parker on a few separate occasions and always found him fun to talk to and very personable. One of his first moves when he took the reigns at American Airlines was removing the walls separating the executive suites at American headquarters so he could be closer to his people. When you manage hundreds of thousands of people, you’ll absolutely have some detractors, but most people I know at American have said that, to a person, he was a nice guy and would always be sure to drop into hub stations to say hi to everyone as he traveled around the country.
I can’t fault the guy for that. Based on everything I’ve heard, he cared about the people he led as best as he could.
Doug Parker’s legacy with his customers
I’ll give credit where it’s due here: the integration between the American Airlines AAdvantage and US Airways Dividend Miles programs was fairly smooth. My full-time career is in finance, more specifically software and data management. I cannot imagine the scale of the task in front of the new American leadership, but they got it done, in no small part thanks to Maya Leibman, now American’s Chief Information Officer. I’ll give credit to Parker on that one.
If I’m going to give credit, I need to hold the customer service legacy of Doug Parker to account.
There have been countless moves made in the name of profitability under the leadership of Doug Parker that were awful for American Airlines customers.
The erosion of American Airlines AAdvantage
The American Airlines AAdvantage program was an industry leader among loyalty programs. Benefits were generous, status was straightforward, and award charts were clearly stated and the airline actually followed them.
Today, AAdvantage has been sliced and diced, optimized not to maximize customer enjoyment but rather airline profitability. I can’t honestly say that it’s wrong of them to make those changes, looking through the correct lens (as stated above). But, as a customer, it has been frustrating to experience devaluation after devaluation. Even more than that, it never even seemed original (until this year), it was like American just copied whatever Delta or United did.
Regardless of the business case for it, AAdvantage miles are less valuable now. American has an award chart but doesn’t appear to follow it any longer. Oneworld Explorer “round-the-world” awards were taken away overnight, leaving friends of mine hanging in the middle of trying to book a trip. Status is harder to earn and can be purchased purely by spending money, regardless of how often you fly. Earning lots of miles by flying is nearly impossible except for those holding American’s top-tier status. A program founded to reward customers who flew most often has been changed into a cash-back program to reward spenders. That’s fine, I guess, but it just means it’s no longer a program for me, as I do not spend hundreds of thousands of dollars.
Ultimately: the AAdvantage program used to be a salve for operational issues and a reason to keep flying the airline despite everything that frustrated me. Today it’s a shell of its former self, redefining loyalty into a unilateral measurement of money spent instead of an admittedly amorphous concept encompassing spending and frequency, both of which are important. American and Doug Parker would probably agree that they would rather have a customer who purchases 6 $2000 fares than one who purchases 1 $12000 fare. Frequency matters, but the new AAdvantage program no longer reflects that.
The densification and de-amenitizing of airline cabins
I’ve tweeted this before but will say it again: any airline CEO who believes that it’s acceptable to put customers into a 3-4-3 seating layout on a 777-300ER with 18.5″-wide seats for a 17-hour flight should only be able to say so immediately after flying that flight in coach themselves.
American Airlines leadership has seemingly taken every opportunity to remove things from the customer experience onboard. 737 seating capacity went from 150 seats to 170 seats today. American’s new “Oasis” interior, further modified by calling it Kodiak, removes seat pitch (the distance between seats) and papered over it by also saying that this wouldn’t make a difference to customers because the padding on the seats was thinner too! While academically and scientifically this was correct, American has to realize their customers flat out don’t believe it when we sit on hard seats and feel like we can count the hairs on the person’s head in front of us.
American customers got used to the seatback screens they saw on domestic aircraft. It was a nice way to pass the time during your flight on a screen that was much bigger than a personal phone. It was also nice to have a screen at every seat for families with children who did not own a tablet device for each child. American has just finished making an enormous bet that customers won’t care that they no longer have screens and spent millions of dollars ripping them all out on narrowbody aircraft.
Left in the cavity of the seat, where the screen used to be, is a personal device holder. Sorry if you only own one tablet and have multiple kids. Sorry if you have to pay for American’s very expensive wifi and try to get some work done on your phone, you will not be able to watch a movie.
It’s the one area where American did not follow United or Delta, both of whom will have seatback screens on their entire domestic mainline fleet in the next few years.
Segmentation and basic economy
Basic Economy is one of the single biggest acts of war against the customer in the history of travel (resort fees by hotels being the other). Instead of providing value for higher fares, airlines decided to punish customers for choosing a lower one. American went just as far as the rest of the airlines. The basic economy virus spread from domestic flights to international ones and will soon spread to premium cabins.
American has made a lot of bets in recent years. They made a big bet, during COVID, that travel demand would return slowly and gradually. As a result, they allegedly kept pilots on the payroll but didn’t have them flying often enough to keep their certifications current. This bet failed spectacularly when they ran out of pilots and had to cancel numerous flights in the summer of 2021.
American retired countless aircraft in 2020 due to COVID, which wasn’t necessarily a bad idea, but demand roared back in 2021, sooner than expected. American ended up in a situation where they could operate effectively when things were going well but it quickly fell apart when delays began. Whether it was the weather at DFW, a shortage of certified pilots, or reserve staff timing out across the entire airline at the end of October 2021, American did not maintain operational margin for when things went wrong. While some of those things are certainly outside of the airline’s control (weather, etc.), planning for when things go wrong is part of being a leader. Yes, it can hurt profitability but it gets your customers where they need to go.
The credit card pitch
I hate the American Airlines credit card pitch and acknowledge that it will not go away for a long time. Credit card companies and airlines are tied together now, and airlines cannot exist without credit card partners (heck, Citi helped bankroll American’s bankruptcy by purchasing $1 billion worth of AAdvantage miles to give the bankrupt airline much-needed cash). The credit card pitch is great for the airline (card issuers pay a lot of money for that partnership), it’s great for the flight attendants (who get paid money for each successful credit card application, money that the airline itself doesn’t have to pay), but annoys the large majority of their customers. It creates an odd relationship between frequent flyers and the airline, because the more you fly on that airline the more you’re probably going to be annoyed at the credit card pitch.
I have been awoken at 5:45am for the credit card pitch, I have had a flight attendant invade my personal space and wave a credit card application between my face and the screen in front of me, nearly hitting me in the eye, and I’ve witnessed many flight attendants who didn’t really seem like they cared about customer service during the beverage service ALL OF A SUDDEN TURN SPARKLY AND WONDERFUL as they told falsehoods about some of the card benefits to try and get more applications in.
The harshest criticism of Doug Parker’s legacy: who is American Airlines today?
I’m of the personal belief that most companies are capable of being good at one thing. I also realize it is really hard to be a full-service airline, because you need to serve wildly different markets: the passenger who finds a cheap fare to Vegas and flies you once a year who is sitting on the same plane as a million-miler who spends a little more to try and keep their status and improve their spot on the upgrade list.
When I look at American as dispassionately as I can, I see an airline that is trying to be many things.
- When I look at American’s seating configurations and restrictive basic economy fares, I see a low-cost carrier. Actual low-cost carriers like Spirit, Frontier, and Allegiant are better at being low-cost carriers than American is. It’s just a pure unfortunate fact that LCCs can dedicate 100% of their time to the LCC market and American cannot.
- When I look at American’s 777-300ER business class cabin, their Flagship Lounges, and amazing airline amenities like Flagship First Dining, I see a luxury carrier going toe-to-toe with the premier airlines in the world for coveted business passengers.
The LCC proposition is that you may not enjoy the flight but they’ll typically get you there on time (and this has been true, Spirit Airlines was an industry leader in on-time percentage during the golden age I mentioned above). A premium carrier is about enjoying the trip. It’s very hard to do both.
American Airlines needs to decide who they are. If you put low-cost carrier and luxury carrier at opposite ends of the spectrum, things like removing seatback screens and reducing AAdvantage to a complicated cash-back scheme tend to move things towards the low-cost carrier side more than the luxury side. But American isn’t getting its customers to their destinations on time like a low-cost carrier should.
Enticing customers to pay more for a ticket has to be about more than the threat of a miserable Basic Economy experience, because the regular Economy experience simply isn’t that much better, especially as narrowbody aircraft are deployed on long-haul routes.
My plea to Robert Isom
Do not run the airline from a spreadsheet. You’re an industry leader because you have years of experience developing the nuance needed to carry this airline forward. Listen to your people, but also seek out your customers, not just the happy ones but the ones who are thinking of trying out other airlines. There is a difference between nothing being actively wrong and Something Being Right. American customers are ready to be loyal to their airline again but the calculus has changed, for most, and American will need to earn it.
There seems to be a metric of Customer Inevitability that American is betting on, where customers will stay with the airline, no matter how much they hate the changes made. Don’t fall for it. It leads to the oft-said critique of American Airlines, that their executive leadership believes the Schedule is Our Product. In other words, someone in Dallas can hate every decision American makes but ultimately they’ll grit their teeth and fly American anyway because only American flies nonstop where they need to go and the schedule is too convenient. Delta came in and deployed the A220 (with seatback screens!) on DFW-LGA. United flies to LAX. It’s not as easy as it used to be, customers have more options now.
I get it, American is betting big on their schedule and customer inevitability providing a consistent revenue stream, and it’s likely it will work out for you, at least for a while. But, then again, your bets about pilots not needing to be certified and planes being retired didn’t really work out and American paid a big price in the eyes of its customers. Don’t be so quick to assume your old pre-COVID models apply as strongly to today’s COVID-endemic world.
Godspeed Doug Parker
Enjoy your retirement and congratulations on a long career in aviation. Even though I’ve disagreed with some of your decisions, the large majority of my flying as a business traveler and a travel blogger has been on American during your time as CEO. Your planes and your airline have carried me to wonderful memories. Godspeed and good luck.