American CEO Doug Parker Goes Across the Aisle to Discuss The Most Important Part of His Job

When I went up to the Bay Area a couple weeks ago to speak at Stanford, I had an ulterior motive. Doug Parker, CEO of American, was speaking earlier in the day and I was hopeful I could get some time with him. The last time I did an Across the Aisle interview with him was in April 2013 when he was CEO of US Airways (part 1), (part 2). I think it’s safe to say a lot has changed since then.

Our interview was broken up into a couple of different pieces because of the demands of the day, but I was able to get enough time with him to fully discuss what he considers the most important part of his job. Here’s our full discussion, edited just to make the pieces fit together.

Cranky: The last time I spoke to you for the blog was nearly 3 years ago at the last US Airways leadership conference. I remember you said you spent most of your time on employee communications. Is that still the case?

Doug Parker: Absolutely. Maybe even more.

Cranky: Even more?

Doug: Well it depends how you define employee communications. If I’m not out talking to employees, everything we’re doing is designed to figure out how we

Cranky: So it’s not true what the anonymous internet commenters say that you’re specifically sitting at your desk trying to screw them?

Doug: *laughs*

Cranky: …because I find that anonymous internet commenters are generally totally right.

Cranky: But seriously, what do you find is different about employee communications at American. Obviously the scale is bigger, but what are the challenges?

Doug: It’s not so much American vs US airways, but really it’s just the merger itself. The integration is hard work and it’s not particularly fun work. It’s a grind. Projects that in a normal environment would be the biggest projects of someone’s life… we have 50 of ’em going on. And the result when they’re done is simply ok, now what used to be two is now one and it still works.

The hardest part is not so much American vs US Airways. There’s just so much change for everyone, you need to make sure you’re out there explaining it. There’s a transformation that’s happened in our industry that I know that everyone hasn’t embraced or figured out is that this industry is now capable of standing on its own two feet. We have a business model that can work.

But back to transformation, we can’t forget the past. And it’s really hard to get people to let go, realize the world’s changed, and move forward. A big part of the challenge is just trying to convince people that everything they’ve learned up until now isn’t going to [be the case] in the future.

Specifically to American, the biggest challenge so far vs what I’ve been used to is the labor-management history. That is just hard for people to recognize is behind us. We’ve brought in a lot of new management, and the people who couldn’t quite get there went and did something else, but it’s really hard with the employees. It’s really hard to trust management that the world has changed and that we shouldn’t view each other as enemies instead of as on the same time. It’s going really well, I’m not discouraged by it, but it’s just fascinating on how that history is so hard to get past. But we will.

Cranky: What’s more interesting to me is it’s not even just management vs labor in the historical context of it. It’s also labor vs itself. You can look at what’s been going on with the flight attendants where their previous leader they think has gotten too close to management and they don’t even trust their own. [Ed note: Here’s the union’s missive against its former president, Laura Glading.] So how do you rebuild that? Is it just time?

Doug: Yeah, it’s time, but you can’t simply let time happen. You have to be out talking all the time. This Laura [Glading] issue is fascinating. It’s a real symbol of what I was trying to describe. Laura left the union and is now helping the company as an independent consultant on an issue that’s important to the company and to all our flight attendants, which is this Middle East issue. But some of the flight attendants got upset both at management for retaining her and at her for working with us as if somehow we’re enemies.

That wouldn’t have happened at US Airways. At US Airways we hired Bill McGlashen who was an [Association of Flight Attendants] national leader and former America West union leader. And no-one said a word. But it happens at American because there’s still this view that union and management are enemies, and it doesn’t seem right in that culture for someone from the union, once they’re out of the union, that management might want to have them help them to learn from them. So anyway, we’ll get past all that. That was eye-opening to me. I thought we were further along than that. I mean, you follow the industry closely enough, guys like Lee Moak, [former] head of [the Air Line Pilots Association].

Cranky: Yeah, I was talking about him yesterday.

Doug: Yeah, he worked really closely with Delta while he was there, got really good things done for Delta pilots while he was there as a result, and is now working as a consultant on the same [Middle East] project.

What I’ve been telling the team from the time I showed up is I’ve never seen… I haven’t been in a company for a long time where the union is mentioned so much among the management team instead of employees. This isn’t trying to be pejorative, there’s a big history that created all this and it’s well-documented. But it had gotten to the point where it was management and union, not team, not management and flight attendants and pilots and mechanics.

Nonetheless, we’ve gotta get past that. The management has to get past that too. What I tell our team is that unions are a positive thing. They represent our employees on things like contracts so our employees don’t need to worry about it. They represent our employees on things like grievances vs the contract so individuals don’t need to worry about it. But from managements’s perspective, there should be 5 people on the management team that are dealing with union employees. When you have contract negotiations, grievances… but very few of us should talking about the union unless we’re in a negotiation. So at any rate, we’re getting there.

Cranky: This is an employee communication question but also an industry at large question. You hear a lot of times [front line employees] saying “well, we’re still not where we were in 2000.” It was a different industry back then, things were different. But you do see some of the same things today. You see tremendous profits, you see labor asking for more and more as you’d expect, and then you see frills creeping back in in a variety of different ways. How do you avoid getting to the point where the economy falls off the edge and you go back to your loss making ways? And how do you explain that to your employees? Is it really different now?

Doug: It’s really different. And what you’re getting at is the same struggle we’re getting at with our team trying to show them it’s different. First, you can just look at the numbers. Again this is the history problem. It gets characterized the way you just did. There were years in the past where you made money and then you do things like give it to labor, add airplanes, and all of a sudden you lose money.

Cranky: And that’s why I say this is a communication question. So how do you explain it?

Doug: It’s a really challenging communication problem. Because the reality is now you’re making money again and now you’re seeing employees get increases, and now you’re seeing older airplanes being replaced with newer airplanes, but just look at the numbers for goodness sakes. In the past, the most American Airlines ever made in one year was a billion dollars, might have been two. In 2014 we made $4 billion. In 2015 we’re going to make… something a lot more than that. [Ed note: Since our interview, American announced earnings of $6.3 billion for 2015 excluding special items.]

That’s the big difference. The world where we’re producing proper returns. You start to make decisions for the longer term. We’ll be competing much more on product going forward than the old days when we were all just trying to survive. All of this is largely related to consolidation because at least 3 of us have networks that can take people all over the world. What’s going to determine which airline you fly is who can deliver a product that the customers value.

Because of that too, the way you think about labor relations is just so different from how it was in the world. And it’s hard to get people to forget the old world. That’s part of the transformation. What’s really interesting about it is because some of the things we need to do in the new world are exactly the things that at US Airways we said “we don’t need to do that.”

Cranky: Like product investment?

Doug: Yeah. We didn’t need to have the same product as those guys, because [customers are] not going to avoid US Airways because we don’t have the same wine. But now you know, we’re all competing on that level and it’s important. The same token, we lived at US Airways telling our people “I hate it but we can’t pay you what American, United, and Delta pay because we don’t have the same revenue generating capability.” We can’t say that anymore. It’s a bigger change than I would have thought. It just keeps coming up. We talked about the Laura [Glading] thing, and it’s like, “wow, we’re so far past that,” but we keep getting pulled back.

Cranky: And you talk about the history, but labor, they see the profits come in and they want a larger piece, which is naturally how it works and how bargaining has worked. Then they end up having to give it up when times get tough again. So how do you get to a point where you say “look, we can’t give you all of this, but we can give you some of this and it’s sustainable.” Is it the same thing, you have to just keep saying it over and over?

Doug: Yeah, this was another one of these aha moments for me. We gave our agents, it was something like a 30 percent pay increase for the new contract. And one of the team came back and reported that they were talking about this and telling people it’s great, and it’s great to be able to work for a company that can do this now. But one of the employees said “I’m just waiting until you take it away.” And you’re like, “what?!”

Cranky: Because that’s how it’s happened before.

Doug: I know. Nothing about what we see going forward is ever about taking that away. That’s the old world. And you feel sorry for that person because you want them to be excited and they say “oh, you’ll just take it away.” But we’ll get past that. But the history is so deep and it’s been so long. That’s another one of these examples….

I’m not trying to make it sound like I’ve figured it out and others can’t see it. It’s just a perspective you can’t see unless you’re looking at financials over time. But I’m telling you it’s nothing like we’ve seen before.

Cranky: But if you’re on the front line, even if you see it, you don’t have that trust.

Doug: Exactly, and that’s the right point.

Cranky: Even if they could see… well, they can… you do show them the spreadsheets. That’s what you did with the merger, right? But they’re still like, “wellllll….”

Doug: Right. I know, so we’ve gotta earn the trust. You do that by doing trustworthy things and you do it by doing the right thing and we’ll keep doing that.

Cranky: Thanks Doug. Have a good flight.

And with that, Doug was off to the airport for his flight back to Dallas/Ft Worth.

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