Doug Parker - A Transformational Leader in a Tumultuous Business

This week’s MSLD 631 blog is a story about leading system wide change. This is a topic that has a very personal story, one that covers a period from 2001 to 2006 and one that I continue to monitor. The story is about how a special CEO, Doug Parker, at a small airline (America West Airlines) that I worked for, moved up the chain from humble beginnings and transformed three airlines (America West Airlines, US Airways and American Airlines) along the way. An argument could be made that he has transformed the entire industry with his vision of consolidation which dates back to 2001 when he became CEO of America West Airlines (AWA). “In recent years Parker’s strong views about the value of mergers and consolidations in restoring the industry to profitability have earned headlines.” (Wise, 2008).

Quick Rise to CEO Status

               DP’s (we called him DP or Parker when I worked for America West) first airline ironically was with American Airlines, employed as a financial analyst (1986-1991). Parker then took a significant step-up at a smaller Northwest Airlines as Northwest Airlines Corp.’s vice president and assistant treasurer (1991-1995). In 1995 he left Northwest Airlines for yet a smaller airline AWA as chief financial officer. By the end of August 2001, DP found himself the CEO of a struggling airline. “In 2001, at age 39, Parker was named CEO of the carrier dubbed “America Worst” for its poor operations and service.” (Schlangenstein, 2013). Shortly after rising to the pinnacle of struggling AWA, 9-11 occurred and how he handled the crisis that followed at AWA began his storied journey as a transformational leader.

            Days at America West Airlines

               I officially retired USAF in November 2001. I was working as a contractor for Motorola when I received a call from a former colleague asking me if I would be interested in a full-time position at AWA as a technical writer for maintenance manuals. My background was in aircraft maintenance and I had written many maintenance training courses, so surely I could learn how to be a technical writer for maintenance manuals. I applied and to make a long story short, they liked my interview and attitude and offered me the job. To be honest, the decision was not a slam dunk. The airline was still reeling from the 9-11 attacks and AWA survival was very shaky in early November 2001. The fact I would be working what seemed like a great team and a manager who was participative was very appealing. In addition, there was a lot of positive chatter about the new CEO Doug Parker in the local news and with my prospective teammates, so I decided to take a chance at something that could be great.

Within a few weeks of starting, DP announced in an online corporate video that he was going to Washington to make a case for the Government Assistance Program for the Airline Loan that was being made available to the airlines. His speech was very upfront and to the point and made it clear that without assistance we would likely not survive. There was something about that video that brought a calmness to an unsettling proposition. He was more than charismatic, he was charismatic and authentic. You could believe what he said and that probably made all the difference when he approached Congress.

When DP made the trip to Washington, the feeling in our organization was that DP would succeed, and succeed he did. He got a loan for over $380 million to continue operating the airline until passengers regained their confidence to fly again. DP was the only airline CEO that was successful in building a case for the loan. He must have had a level of maturity rarely seen by a 37 year old CEO do convince Congress that we were a good risk for the loan. “America West Airlines won approval Friday for $380 million in loan guarantees, becoming the first U.S. carrier to get federal loan support after Sept. 11, but under stringent conditions that include giving the government the right to buy one-third of its common stock..” (Peltz, 2001). When DP pulled this off he garnered the respect of all AWA personnel. DP proved he had skills!

Much of what DP learned about running an airline he learned from Robert Crandall, the CEO of American at DPs first stop in the airline industry “Although Parker made his name running America West Airlines and, later, US Airways, he cut his teeth at American. He held various financial management jobs between 1986 and 1991, when the legendary Robert Crandall ran the airline…One of Crandall’s hallmarks was effective operations—the basic blocking and tackling airlines must do to get people and cargo from point A to point B on time.” When DP returned to be the CEO of American Airlines in 2013, one of his first observations was “…in returning to American two years ago after a 22-year absence, he found a carrier whose operations he considered lacking.” (Bounds, 2015). One of his first goals was to reestablish the basic blocking and tackling techniques that his old boss Crandle had instilled into him as a core requirement for effective operations.

Parker’s Vision of Consolidation Come to Fruition

            Only four years after taking the helm of AWA, he managed to be the first CEO to venture into the world of consolidation. He had been touting that consolidation was needed for the industry to become healthy again and he put his money where his mouth was. The day he announced that AWA and US Airways was joining forces we couldn’t believe it! We were excited and a bit surprised that he pulled it off! Just four years removed from the real chance of AWA becoming just another airline to meet its fate, and we were going to be the 4^th largest carrier with a large international presence! And then in 2013, another announcement that US Airways and American were merging! DP you did it!

What was the Secret to Doug Parker’s Success

            Much of what DP learned about running an airline he learned from Robert Crandall, the CEO of American at DPs first stop in the airline industry “Although Parker made his name running America West Airlines and, later, US Airways, he cut his teeth at American. He held various financial management jobs between 1986 and 1991, when the legendary Robert Crandall ran the airline…One of Crandall’s hallmarks was effective operations—the basic blocking and tackling airlines must do to get people and cargo from point A to point B on time.” When DP returned to be the CEO of American Airlines in 2013, one of his first observations was “…in returning to American two years ago after a 22-year absence, he found a carrier whose operations he considered lacking.” (Bounds, 2015). One of his first goals was to reestablish the basic blocking and tackling techniques that his old boss Crandle had instilled into him as a core requirement for effective operations.

In addition to having a great coach in Crandle, he has sought the advice of the one and only Herb Kelleher; the legendary CEO of the world’s greatest airline, Southwest Airlines (SWA). He is actually a ‘hero’ of DP “Every time I get a chance to be with him, I watch and soak up as much as I can.” (Bounds, 2015). Interestingly enough I also worked at SWA. I can see parallels between the two Airline universes of SWA and AWA, and now American Airlines. Great teamwork at both airlines.

Can DP do it again at American Airlines? Well he has had some really good mentors in Crandle and Kelleher and I know he has the charismatic charm and authenticity going for him, so my money is on him.  DP certainly has the right approach in my view. Shortly after becoming CEO at American, he removed the security guards and did a makeover on the hallway and entrance into his office. The doors to his corner office remain wide open.  “The change is emblematic of the cultural shift that Parker is trying to implement at the world’s biggest airline. The message to employees seems to be: Got a question? Come on in and let’s talk.” (Bounds, 2015).

DP is well known for his ability to build teams “No doubt he will lead the company toward making necessary innovations a reality with a focus on team building, his signature management style…he truly wants divergent views at the table and has created a culture where differences in opinion are handled respectfully” (Wise, 2008). Leading by example is also in his bag of leadership tools “Parker made news after the US Airways-America West merger when he refused a bonus based on America West’s performance the previous year because he felt it was unfair to US Airways employees whose salaries had been cut. More recently, he made a large personal investment in company stock.” (Wise, 2008).

Summary

The exercise of reliving my experience at AWA and US Airways under DP has brought a new dimension to this experience when I reflect on this week’s MSLD 631 reading assignments. Based on what I know about mergers between airlines, the reason airline mergers is tricky business is that often the cultures between the airlines are different. Brown (2011) supports my view “…implementing cultural change can be extremely difficult and time-consuming. Given the problems associated with culture change, most OD practitioners suggest that major changes to the culture should be attempted only after less difficult and costly solutions have been ruled out.” (p. 409).

The merger with US Airways was particularly difficult due to the very strong union membership being very distrustful of management.  I don’t see any evidence that DP has used any type of formal OD interventions or has used professional OD practitioners. Looking ahead to next week’s reading assignment provided some clues. Mergers don’t fit into a OD strategy. “Organizational transformation (OT), on the other hand, may be defined as drastic, abrupt change to total structures, managerial processes, and corporate cultures.” (Brown, 2011, 399). He does keep in very close contact with those of his graduating business class at Vanderbilt, has legendary coaches and mentors in Crandle and Kelleher, and he has the basic tools and skills of a transformative leader. I’m doubling down on DP!

References:

Brown, R. D, (2011). An experiential approach to organization development (Eighth edition.). Upper Saddle River, NJ: Prentice Hall.

Bounds, J, (2015, July-August) How Doug Parker has transformed American Airlines. D CEO. Retrieved from http://www.dmagazine.com/publications/d-ceo/2015/july-august/doug-parker-american-airlines-ceo-entrepreneur-of-year.

Schlangenstein, M, (2013, Mar) The best read on new American CEO Doug Parker that you’ll find online. Bloomberg. Retrieved from http://skift.com/2013/03/11/the-best-read-on-new-american-ceo-doug-parker-that-youll-find-online/

Wise, N, (2008, Fall Edition) Riding out the turbulence. Vanderbilt Business. Retrieved from https://magazine.owen.vanderbilt.edu/riding-out-the-turbulence/