AA's mangement team must be really really bad when even Mitch turns on them!
I'm not really in favor of a AA/US merge, as I am in favor of removing your buddy Tom Horton and friends. IT is time for them to go.
7576FO
US Airways brings the fight to DFW
Posted Wednesday, Jun. 20, 2012
BY MITCHELL SCHNURMAN
[email protected]
It's not personal; it's just management.
And it's one reason that US Airways' CEO Doug Parker is being treated as if he's riding to the rescue.
Parker came to North Texas on Monday to make his case for a merger with American Airlines. He brought along American's three union chiefs and their unconditional endorsements, met with newspapers in Fort Worth and Dallas, and also made the TV news.
It takes chutzpah to bring a road show into American's hometown, especially while American execs are fighting for their professional lives. But it also takes nerve to go after a rival that's almost twice as large and to strike a deal with the unions right under their corporate parent's nose.
With Parker and US Airways, you can't rule out anything, and that's part of their appeal. These are the upstarts who have changed the conversation, the risk-takers who want to change the game.
They're willing to bet the company on a plan to create the world's largest airline, even if it takes years to combine unions, fleets and computer systems. Standing pat is no way to get ahead, and swinging for the fences at least inspires people.
Labor leaders said they embraced Parker's plan because it offers a vision for the future. They acknowledged that a merger wouldn't be a panacea, because their members still face concessionary contracts. But the cuts wouldn't be as deep, giving them a fighting chance against the United-Continental and Delta-Northwest combinations.
In contrast, American management has proposed staying the course and building up its "cornerstone" strategy to expand in five crucial business hubs. Its plan depends largely on lowering labor costs, which sounds a lot like 2003.
American's lack of imagination has opened the door wide for Parker, who learned from his failed overtures to Delta and United. He's going for American early, and he's going hard -- locking up the unions first and then talking to bondholders. On Monday, he hit the media in DFW and then visited lawmakers in Washington.
He's keeping US Airways' merger talk top-of-mind, even with the bankruptcy judge scheduled to rule on American labor contracts Friday.
American CEO Tom Horton eventually said he's willing to consider a merger, but the comment came so late that it sounded reluctant. In theory, American execs could lead a merger after Chapter 11, but would their heart be in it?
"You got to want the people that think it's a good idea to do it," Parker told the Star-Telegram.
Labor leaders said they would back the US Airways team, even if American matches its contract offer. It's not just the merger that won them over; it's Parker's plan to share the gains.
He estimates that a merger will produce $1.2 billion in added revenue and cost savings. He wants to use that to pay for new labor contracts and to pay off bondholders, so the merged company is the one that emerges from bankruptcy.
Horton has said that a stand-alone American can add billions, too, by growing the cornerstone markets and cutting labor costs. American doesn't see much gain from adding US Airways, and eventually, the bankruptcy court will decide which plan is more credible.
Parker said he is confident that no other reorganization could produce as much value because the combined network would be so much larger. American's stand-alone strategy can't close the gap with United and Delta, he said.
"It can only be fixed one way: through a merger with US Airways. But the good news is it can be fixed, and can be fixed like that," Parker said, snapping his fingers.
Mergers often bring changes in management, too. United is now led by Jeff Smisek, previously CEO of Continental. Delta CEO Richard Anderson spent 14 years at Northwest, three as CEO. Parker was CEO of America West when it merged with US Airways, and America West had one-third the revenue and less than half as many employees.
The upshot is that the biggest companies don't own all the talent or the ideas. And there's an argument that American management has played it too safe for too long. When Southwest Airlines agreed to buy AirTran in late 2010, that was a signal that organic growth would be hard to come by. Yet American stuck with the cornerstones and hasn't budged much in bankruptcy.
American still has to submit a reorganization plan, and so does US Airways, if it's allowed to do so. That could happen in July or August, and details will be scrutinized. How would US Airways make a profit if it's paying a higher rate to American workers and bumping up its own low-paid staff? How would it merge seniority lists?
American's plan will face skeptics too. Many doubt that American can pick up market share in the most competitive cities, where it's losing ground.
Union leaders said they didn't back US Airways because of personality conflicts at American. Even Parker touched on that subject, saying he is friends with American execs and had worked with them. It isn't personal, he said.
"This is about a model that's better," Parker said.
How do you separate that from the management team that championed it?
Mitchell Schnurman's column appears Sundays and Thursdays. 817-390-7821