From CNN Money
The man reshaping the airline industry
US Air CEO Doug Parker's bid for Delta is just the latest in a series of bold moves in the 45-year-old executive's turbulent career.
By Chris Isidore, CNNMoney.com senior writer
December 7 2006: 2:20 PM EST
NEW YORK (CNNMoney.com) -- US Air CEO Doug Parker, who enjoys bungee jumping and running with the bulls in his "spare time," is ready to take the airline industry along on his next wild ride.
The shakeout in the airline business since 9/11 has catapulted Parker from being the newly appointed CEO of a small carrier, America West, to being the longest-serving chief executive of a major U.S. airline - all in little more than three years.
After taking the helm at America West just 10 days before the Sept. 11 attacks, he found his airline facing liquidation - and pleading for a federal bailout. But barely four years later, Parker engineered America West's stunning purchase of the assets of bankrupt US Airways (Charts), keeping the US Air name for the surviving carrier.
Now, with the dust not even settled on that deal, Parker has made a hostile bid for Delta Air Lines (Charts), also struggling to emerge from bankruptcy. If he's successful the deal would create one of the world's largest airlines, if not the largest.
The hurdles are high. The bid for Delta, originally worth $8 billion in cash and stock, is now worth about $8.7 billion due to the rise in US Air stock since the offer was announced Nov. 15. Parker still has to convince Delta creditors, a U.S. bankruptcy judge and regulators to sign off on the deal, and creditors and bankruptcy judges can be notoriously difficult audiences.
Many observers, including both critics and supporters of the deal, argue that if he does nab Delta, that would spark a round of deals that would consolidate six of the largest carriers down to just three or four.
Parker, 45, said the upheaval in the industry is what he likes most about his job.
"We all like to joke we should be in a different business," he said. "I certainly enjoy it. What I enjoy is how dynamic it is - it's constantly changing, it's extremely competitive."
Parker started in a bit more sedate corner of the industry, landing a job in finance at American Airlines in 1986 after getting his MBA from Vanderbilt University.
He worked in a department that included a number of future top airline execs, including Gerald Arpey, CEO of American parent AMR Corp. (Charts), and Jake Brace, CFO of United Airlines parent UAL Corp. (Charts)
"Even within that environment, Doug stood out as one of the brightest and smartest guys in the group," recalls Ben Baldanza, CEO of Spirit Airlines, who was another one of the young lions at American. "I knew he was a brilliant guy and good change leader since the first time I met him."
Parker said he learned a great deal at American but soon got restless. So in 1991 he moved to the much more troubled Northwest Airlines (Charts), joining its finance department as a vice president.
The downside at American, said Parker, was there were "so many people there and it was so structured, it was hard to make a difference. There wasn't much to fix. So I ended up going to Northwest and there was a lot to fix there. I found I liked that a lot more."
Parker then found himself on the team of Northwest executives in Wilmington, Del., on July 4, 1993, waiting for word about whether to file for bankruptcy. An 11th-hour concession from the pilots union avoided that filing.
"I'm happy to report I've never been in a bankruptcy court. That was a close as I got," he said. "I've had a lot of meetings with bankruptcy lawyers, but I've never had to be in court. Knock on wood."
New CEO, new crisis
He moved from Northwest to America West as CFO in 1995, and became the Phoenix-based carrier's president in 2000. The airline was struggling with losses and operational issues even as the industry as a whole enjoyed its last profitable year before the 2001 recession sparked a drop-off in business travel - and that was before 9/11.
2001 was the year Parker got tapped as America West's CEO, starting the new job on Sept. 1. The company had improved its finances and things like on-time performance, and there was a fair amount of optimism in the room when Parker and his new management team went outfor drinks across the street from the office on the evening of Sept. 10, 2001. One of the things they felt good about was the $200 million in financing they had just lined up for the company.
Parker was getting dressed just before 6 a.m. local time the next morning when he got a phone call from his sister about the first plane hitting the World Trade Center. He watched a few minutes of the coverage before he left the room to continue getting dressed when his wife ran in to tell him about the second plane. His system operation and control people immediately called to say all planes were being grounded.
"I remember being elated to learn all our planes were safely on the ground," he said. "Later that day, once we started having conversations with FAA and DOT, who were telling us the skies were not going to be reopened the next day, it quickly became clear to a number of us that this was going to have a real impact."
The airline's new financing had disappeared, and it was left with significantly less cash on hand, even relative to its size, than other carriers.
When Parker spoke to the America West board before being named CEO, he remembers telling them the one area he didn't have much experience in was government relations, but he didn't think that was much of an issue for an airline its size.
But he was soon attending meetings at the White House, and he testified before Congress on Sept. 19, urging both direct help for airlines and loan guarantees from the new three-member Air Transportation Stabilization Board.
"We were the poster child for the ATSB program. We literally were an airline that could raise money before 9/11 but with the capital markets closed couldn't raise it," he recalled. "Without a loan guarantee we were going to find ourselves liquidating."
The $380 million loan guarantee was approved on a split vote, with a Treasury official voting no because he thought the government would end up on the hook for the loan. America West had the breathing room it needed to survive, and the federal government controlled a third of the company.
But profits were elusive, and the carrier sank back into the red in 2004 as fuel prices soared. The industry overall? A staggering $42 billion in losses from 2000 to 2005.
In response, Parker and his team slashed costs and fares at America West, making it more of a low-fare carrier than most of its larger competitors, and staying out of bankruptcy court that four of the latter were forced to visit.
He used the bankruptcy process to cut costs and get out of aircraft leases when he bought US Air in 2005. And he's counting on the same advantages to make the Delta deal work.
"All else equal, we would have preferred to wait," he said. "The timing of this is not because we think it's better to do three airlines into one rather than two. We actually plan to get the US Airways-America West integration complete before we start trying to integrate Delta into. But so much of the value that is created is because one of the airlines is in bankruptcy, we didn't have the luxury of waiting."
Some of the deal's critics question whether he's biting off more than he can chew this time.
"I like the guy a lot, I think he's brilliant, but I think it's a mistake," said airline industry consultant Michael Boyd. "Putting these airlines together is going to be very messy, very inefficient. He sees a window of opportunity and wants to jump through it. But that window may be on the 48th floor."
And others question whether he'll even get the chance to try to do the deal. The Delta pilots were protesting Wednesday outside the closed headquarters of the old US Air near Washington. The pilots there, as well as those at US Air and America West, are all represented by a powerful union, the Air Line Pilots Association. Convincing pilots that the seniority lists can be merged without hurting them will be difficult.
Meanwhile, for its part, Delta management is wooing creditors to win their support to emerge from bankruptcy as an independent airline. Parker will have to convince creditors to accept US Air stock that's already nearly tripled since it started trading in September 2005.
Then there are regulatory hurdles. Ray Neidl, analyst with Calyon Securities, says he sees only a 30 to 40 percent chance of the deal winning regulatory approval, since some markets in the South and East Coast would lose most of the competition they now see. And there are competitive issues that go beyond this deal.
"Washington will look at this very carefully. They know it's going to set off a round of consolidation," Neidl said. And even if regulators start to send a signal that a deal could be approved, US Air would face the risk of another carrier making its own deal for or with Delta.
So Parker still has plenty of turbulence ahead of him - the kind he enjoys, the kind he's done such a good job creating for the airline industry.
As for bungee jumping, or running with the bulls in Pamplona - which he did in 1995 - he doesn't have time to relax that way any more.
"I like doing things that get your blood flowing," he said. "But it's been a while since I did either one of those things. I have three little kids - I'm now a little more careful about running with bulls or jumping off of bridges."
