University of Arkansas

Walton College

The Sam M. Walton College of Business

Episode 55: Doug Parker

Doug Parker is the CEO of American Airlines Group Inc. He has served as the CEO of multiple airlines and has led companies through challenging times like 9/11 and the Great Recession. Doug also serves as the chairman of the Airlines for America (A4A) Board of Directors and sits on the International Air Transport Association (IATA) Board of Governors.



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Episode Transcript

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00:07 Matt Waller: Hi, I'm Matt Waller, Dean of the Sam M Walton College of Business. Welcome to Be Epic, the podcast where we explore excellence, professionalism, innovation and collegiality, and what those values mean in business, education and your life today. I have with me today, Doug Parker, who is the chairman and CEO of American Airlines. Thank you so much for taking time to visit with me today. I really appreciate it.

00:38 Doug Parker: Absolutely, it's an honor, happy to be here.

00:41 Matt Waller: So, Doug, you have been CEO of several airlines, but what's really interesting is you've been CEO through really challenging times, like 9/11, the Great Recession, but one thing I would like to talk to you about is you were chairman and CEO of... Well, you were at America West, USAir.

01:04 Doug Parker: Right.

01:05 Matt Waller: You were at USAir right before the merger. The merger occurred, and then you became CEO and chairman of the combined company.

01:14 Doug Parker: Correct.

01:15 Matt Waller: And one of the big challenges when you merge two companies like that is the cultural differences between the companies.

01:23 Doug Parker: Yeah.

01:23 Matt Waller: And trying to get the cultures aligned is very, very challenging, and from all I've read and heard, you've done a superb super job of that, so I'd love to hear a little bit about the story and how you've gone about doing that.

01:37 Doug Parker: Sure. Well, thanks. I hope that's true. It's not easy, it takes a lot of work. The two airlines, US Airways and American did indeed have different cultures in place. They had come from different places. American had always been one of the, you know, this large... One of the larger airlines in the United States and in the world, and they had a lot of pride in that regard, despite some challenges they had gone through. US Airways was just kind of struggling, we wanted a much more resilient group of people and when we you put them together as we did, we saw it as American. Each of them had their pluses and minuses. American was much more methodical and indeed, I think... Everyone who was here would agree, maybe... Perhaps even more pride than was warranted, because living a little too much in off of the laurels of the past as the industry had changed. US Airways had some benefits to bring to the table in that regard, the culture we had there which was move faster, be willing to make some mistakes, a bias for action.

02:40 Doug Parker: But also, they had a lot to... We had a lot to gain from the American culture in terms of structure and... Look, we had to bring it together in a way that, trying tried to get the best of both. I think we did that. Part of it also was... The a challenge was much of the senior management, much of the highest management, myself and others, mostly your management came from the smaller airline, US Airways. We had to work to make sure that we didn't walk into the larger airline acting as if we had all the answers and we worked really hard to make sure we didn't do that. Kept the best of the best from American, let them know how much we needed them, and that we needed each other. So, look... And then we brought in a lot of people from outside, which, take all that together, you have the best of the best from in the two airlines, and then bringing in some outside influence. But I think we built a really, really nice team. Very happy with the culture we have in place now.

03:34 Matt Waller: So, Doug, when you were... When you came into this merger, what kind of a timeline did you think it would take to really integrate the two cultures and to really come out with the new culture that you wanted?

03:47 Doug Parker: Yeah, we didn't put a timeline on it, 'cause we know that it's a process, and it's still a process. It's... Culture is a moving target all the time. What we really wanna make sure we have is a culture that is driven around making American the best it could can possibly be, making sure that we have leaders that understand that their job is to give the frontline team the tools they need to go to do their jobs that they do so well, To be servant leaders who are making sure that we are creating an environment that allows our frontline team members to go take care of our customers, and that'll take care of our shareholders.

04:31 Matt Waller: Well, you know, Peter Drucker once said, or he's known for saying that culture eats strategy for breakfast every day.

04:39 Doug Parker: Yeah.

04:40 Matt Waller: But if you don't have the right culture in place, it's very hard to have a strategy that works. Coming from my background, I was familiar with the things that American Airlines was doing a long time ago, especially in the area of operations research, scheduling airplanes, the early online reservation systems and frequent flyer mile type systems.

05:08 Doug Parker: Right.

05:08 Matt Waller: But just applying quantitative methods to business, American has been an early pioneer in that. Is that still a part of the culture and strategy today?

05:19 Doug Parker: It is. It is. It's something we're proud of being, you know, back then, this kind of information is power World, American was great at by making sure we had better information than others. It's harder to do now, and again, that's kind of what I was... A little bit of what we had to work through in that, in today's world, what we need as much as anything is speed in terms of ability to get to our team and get our team the tools they need. American, for all of its benefits throughout the years, had gotten itself to a position where the labor relations had gotten to a point where it was just, it made it really hard to... And it got into the product itself. We had to address that. And so much of what we've been working to do is to do just that, get the leadership team to, in some sense, focus a little less on just the numbers and the math, and more on going out there and taking care of the team and making sure that we have leaders that yes, understand the analytics and understand how the way the operational excellence, but that really understand the way to do that is to give the team the tools they need to do their job and let them go and that's the transformation that is has taking taken some time.

06:39 Matt Waller: That's really interesting, yeah you have, because it used to be that you could use something like operations research and analytics as a... It was like a sufficient condition for a competitive advantage. But today, you have to have it, and now you have to do all kinds of other things, for example, getting tools to people to be able to do their jobs.

06:57 Doug Parker: Yeah, and it moves faster. And so, putting these two airlines together is a big job, of course. And then, we knew that going in. But what it means is, when you're doing that, so much of the effort we put forward is just integration, taking two systems that do the same thing but doing them in different ways at two different airlines, and making them one system that can do that at the combined airline. That's a tremendous amount of work, a tremendous amount of effort from IT, but as our CIO likes to say, that's... When we're doing that, we gotta work on integration, not innovation. So we had to spend years, three or four years, working on integration, not innovation at a time that the industry was innovating more than it ever has. So we found ourselves falling behind and in some and... Which was really foreign territory for American.

07:43 Doug Parker: The Good news is we're... That's behind us, and we now have the ability to go catch up, and we are quickly, and indeed, what's also nice in today's world is you can leap frog. It's a Couple of years now it is almost a new generation, so we find ourselves two or three years behind somebody, we can actually do... We can go put in place something better than they have in place, and that's where we are now. But yeah, I was here when American was the king of operations research and Sabre and all that... And all those types of innovations they are rightfully proud of. But those days are behind us and we're not trying to figure out how we make American Airlines a company that has a competitive advantage based on technology. We're trying to make American Airlines that has a competitive advantage based upon the product we deliver, that includes the best technology possible.

08:31 Matt Waller: It's amazing because technology and analytics, it used to be the transfer of those capabilities took years.

08:41 Doug Parker: Yeah.

08:42 Matt Waller: But now with software as a service and information being ubiquitous, nearly.

08:48 Doug Parker: Right.

08:49 Matt Waller: It really isn't anymore. But trying to get your employees and trying to get a competitive advantage through the product, per se, really takes a huge focus on the customer.

09:04 Doug Parker: Right.

09:05 Matt Waller: And I would imagine then that was a part of the cultural change you were going for as well.

09:11 Doug Parker: It is. And again, I mean, again, American in particular, they had it had a nice focus on the customer. And It always has, it still does, so... But yeah again, it gets back to what it is, indeed that the customer values and making sure that we're delivering those things instead of just working to do what we think the customer may be asking for. So in today's world, much of what that is, is, as it always has been, "Get me there on time with my bags. That's the product that I'm most interested in." That's absolutely still the case, but and it's, as the industry consolidated, there are now fewer of this, but that can provide much more utility to customers. There is those these three large global carriers, American, United and Delta can pretty much take anybody anywhere around the world, so we need to compete on product. We need to have a product that can compete with the ultra-low-cost carriers on price where we need to, but also can deliver to our high value customers the product that they value.

10:16 Matt Waller: So many industries, in some ways, are easier to manage than this, because you're at the mercy of things like weather, for example. It makes it more challenging, 'cause you can do everything in your power to get people on time to certain locations with their bags, but if the weather's bad enough, it doesn't work.

10:38 Doug Parker: Yeah, that's... That's one what we haven't been able to break yet in this business. And we do everything perfectly and we're still gonna have some failures, some inability to transport customers where they wanna be and on time, because of weather. What we can do and what we're working to do much better, as is everyone in the industry frankly, is providing much better information to the customer as that happens. And doing a much better job of re-accommodating customers as that happens. This is where technology makes a huge difference. And not that long ago, if your flight was delayed, you didn't know that until you showed up at the airport. We're very obviously a much... We're obviously all much better at that now. And things such as your bag not making an airplane was something you would only discover by standing and waiting at a carousel until every bag came off and you realize yours wasn't there. Now, we alert customers in-flight. Those types of things are the kind of initiatives we need to keep working on, weather will always be an issue, we'll get better at it, but weather is always gonna be an issue.

11:47 Matt Waller: Doug, in September of 2001, you were named chairman and CEO of America West.

11:54 Doug Parker: Yes.

11:55 Matt Waller: 10 days later, 9/11 occurred, and it affected everything. None more so than the airline industry. So that must have really thrown a wrench into your plans to become chairman and CEO and then 10 days later, 9/11 occurred.

12:15 Doug Parker: Yeah, absolutely, but where I sat... I mean, fortunately, we didn't have... America West didn't have aircraft involved in the terrorist attacks, but we were affected in a different way. Our business, I don't know how many people are will still remember this, but people did not fly for months. There was just a fear of flying after 9/11 that had airplanes flying around with 25% load factors. A business that usually has 80% load factors, all of a sudden had over two-thirds of our traffic just go away because people didn't wanna fly. That has a huge impact on your financial performance. And we, at America West, were not in the strongest shape and found ourselves working really hard to go get a government loan guarantee to save the company which we were able to do, thankfully, and keep it afloat. But yeah, we spent a lot of our time back then working just to save an airline which, fortunately, we were able to do. And much of what we ended up doing since then is trying to get those...

13:20 Doug Parker: That team of people who almost didn't have an airline or a job because of no, nothing other than the fact that they happened to work for the company that wasn't as strong as the others to be in a safer harbor, to get into a stronger company. That's why we merged America West into US Airways, to make America West stronger and able to withstand things like that, and why we merged Us Airways into American, to make US Airways able to compete long-term. So I'm really proud of the fact now that those people that were at America West and then at US Airways are now in a safe harbor. We now need to work on giving them a company that they know that is... That cares about them, that will be there to support them, give them tools they need, reward them for the jobs they do well, thank them for doing a the job well, let them know that what they do is incredibly important, so that they go home at the end of the day feeling fulfilled. So it's been a journey getting there.

14:11 Matt Waller: You're still a young man for a CEO and Chairman of American Airlines, but when you became Chairman and CEO of America West before this big challenge, you were only about 37, 38?

14:29 Doug Parker: 39.

14:30 Matt Waller: 39? From my perspective that's very young.

[chuckle]

14:36 Matt Waller: So you have a long history of being a CEO and Chairman in this industry in particular, and this industry requires lots of leadership skills and capabilities. But going through something like you went through with 9/11 in particular, leadership really, I mean, the rubber meets the road in a situation like that. What are some leadership characteristics you think that have really helped you?

15:08 Doug Parker: It's business is a team sport, and I like working in teams. I like building teams, I like seeing teams succeed, I like working with teams of people that have diverse backgrounds and capabilities and seeing how the sum of us can do so much more than we can as independent individuals. Sometime... Well, at least when I was back in business school a long time ago, there was at least some view that the way you get ahead is being cutthroat, and that's not how business works. The people that do that maybe can get away with it for a while, but it doesn't last a career. People that succeed in business are those that understand that relationships matter and that the people you work with at any point in time are gonna make a difference in ways you'll never imagine until 15 years later. And you can't guess who they are, you can't go and try and say, "Oh, that person's gonna be important so I'm gonna be nice to them." You just need to treat everyone with respect and do your job well and do it in a way that it has respect for others.

16:13 Matt Waller: Wow, I think that is so, so true. And yet, in some ways it's... Even though it's simple, in a way, treating people well, developing them, it does take effort 'cause you have to spend time with people, you've gotta think from their perspective when possible, and think about how to encourage them and strengthen them and that...

16:37 Doug Parker: Yeah, that's... I don't know, I think that's the a fun part. People are different, you can't treat all people the same, you can treat everybody with respect. But as a leader, some people are motivated by different things. And that, again, I think that's the fun part is working to build teams and understanding the differences of your team and understanding how to get the best out of people and getting people excited about working together instead of as independent forces, and then seeing what... And then, and what's really neat is when you see even those that were skeptical maybe about how this team stuff is gonna work when it all clicks and they see how well we all do when we work together and the light turns on, that's fun.

17:21 Matt Waller: Doug, what are you excited about for the industry and for American Airlines going forward this year?

17:28 Doug Parker: What I'm excited about is that we're finally through much of the integration process. That was hard work, it's important work, but most of that is behind us now. We're... And we're able now to go use the investment we're making about moving forward it's as we now are able to innovate instead of integrate. We're able to go and invest in growth, not just integration, and we're well positioned for that. And I feel very good about how we have the airline positioned, and I'm very excited about what the future means for American and our team.

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18:03 Matt Waller: Thanks for listening to today's episode of the Be Epic Podcast from the Walton College. You can find us on Google, SoundCloud, iTunes, or look for us wherever you find your podcast. Be sure to subscribe and rate us. You can find current and past episodes by searching beepicpodcast, that's one word, that's B-E-E-P-I-C podcast. And now, be epic.

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