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Two years after merger, American Airlines’ CEO sees “a lot more to do”

An American Airlines 737 taxis from Terminal D to a runway for departure at DFW Airport.
An American Airlines 737 taxis from Terminal D to a runway for departure at DFW Airport. Star-Telegram

It has been a busy second year of wedded bliss for American Airlines and US Airways.

The two carriers, which merged on Dec. 9, 2013, successfully integrated their reservations systems, combined frequent flier programs, logged record profits and achieved a single operating certificate.

And the new American revealed plans to build a $350 million headquarters campus in Fort Worth that will open in 2018.

“What we thought the merger could create, which is great value for our customers and our employees and our shareholders, has happened. But that doesn’t mean we’re done,” said Doug Parker, chief executive officer of American Airlines Group. “We’ve got a lot more to do and I feel good about the path we’re on. But we haven’t finished the job yet.”

Interactive: Two years of the new American Airlines

Plans for next year include introducing a new premium economy class on international flights and combining more computer systems such as flight operations. Management also needs to negotiate joint labor contracts with its mechanics and ground workers’ unions.

In a wide-ranging interview with the Star-Telegram this week, Parker offered his thoughts on topics from competing with low-cost rivals to seeking tax incentives from the city of Fort Worth for its new headquarters campus. Here are some excerpts.

On fulfilling the goals set out at the beginning of the merger:

“I feel very good that we’ve done what we said we were going to do and the merger has the benefits that we suggested it would have. There were all sorts of people who questioned whether, 1. We wanted or intended to do what we said we would do, and 2. We were capable of doing what we said we would do. The first one was the Department of Justice suggesting we weren’t really going to grow the airline and close hubs and now it is here, two years later, we have every hub in place and every one of them has grown and not shrunk. We’ve added 8,000 employees to the two airlines combined to what they had separately and we’ve added flights to more markets. We’ve done exactly what we said we were going to do. We said that it would be good for employees at both carriers and it has been. We’ve added employees and not shrunk. Every contract we’ve done has resulted in double-digit pay increases for the employees that have signed on to those contracts. So we feel very good about that.”

On combining passenger reservations systems in October:

“We couldn’t be happier with the work the team did to integrate the two reservations systems and do so with virtually no customer disruption. We know there were a lot of people watching who were concerned about our ability to do that and we never denied the fact that we were really concerned about it. It’s a difficult project and other airlines have failed at it... As I told the team going into it, ‘No matter what happens tomorrow, you guys have done a phenomenal job getting us into good shape.’ We expected it would go well but you never know in these things.”

On what’s left to integrate from US Airways:

“We’ve been pleased with all the integration milestones so far. We’ve either hit or exceeded our goals to date on things like single operating certificate, merging the frequent flier programs, single reservations systems. Those are all very big deals and they’ve gone very well. As to what’s left, there are still some really big projects but it’s behind the scenes. Things like getting our flight operations systems combined...And we still have to get some labor contracts done. We don’t have all of our joint collective bargaining agreements yet but we expect we will get those done.”

On upcoming labor negotiations with mechanics and ground workers unions:

“We just began and there is just a lot of work to do on the new contract. I’m hopeful we will get through the contract negotiations. There are nice pay increases waiting for our employees when we get them closed, so that will hopefully compel us to get them done because all of us want to see that happen.”

On keeping the Tulsa maintenance base open:

“Tulsa is extremely important to American Airlines. We will have a large maintenance operation in Tulsa forever. We’re certainly not looking to figure out ways to do anything other than keep Tulsa about the size that it is now and help it grow over time. ... Right now, we have more than enough people there but we’re not going to go figure out ways other than to keep it the same size. It is an important part of American’s operations.”

On seeking tax breaks for its new headquarters campus in Fort Worth:

“We had other communities that were trying really hard to motivate us to move. ... When other communities were trying to persuade us to go other places, the right thing for us to do for our shareholders is to ask Fort Worth to see what they can do to get us to stay... Fort Worth could have said, ‘We don’t care if you stay here or not,’ but they didn’t... We never considered leaving the Metroplex.”

On the future of regional carrier Envoy Air:

“They are extremely important to us... The issue we were having with Envoy was their prior cost structure. We didn’t have the opportunity to grow that business because we had other lower-cost growth alternatives. The Envoy team including the pilots figured out a way to become competitive and now here we are delivering new airplanes and they’re back to growing. It was always going to be an important part of American’s feed but it was unclear if it was going to be important and shrinking or important and growing. And thanks to the new contracts in place, it’s important and growing.”

On chasing the customer who wants cheap fares:

“We will be price competitive. We have to be. This is a business where the majority of our customers, the majority of our revenue comes from passengers who are extremely price sensitive and fly us once a year. And as much as we value our frequent fliers, we can’t ignore those who are entirely price sensitive, particularly those flying in and out of our hubs. We have to be price competitive and we will be and that will always be the case.”

On the introduction of premium economy to international flights:

“We’re a global airline that needs to meet the needs of customers and that means having different products as best we can, providing different products for customers that value different things. The more choice we can provide, the better.”

On operations at Dallas/Fort Worth Airport:

“DFW is definitely our largest hub and an extremely important part of our network. It’s a bit of a challenge to operate as a connecting hub given the design, but American’s figured out how to do that long ago and we’re making improvements to what was already in place and we’re actually running a really nice operation out there as of late.”

On the issue of government subsidies for Persian Gulf carriers:

“We made our case to the administration and they are studying the issue and we are waiting to hear back. I think they understand how important this is. The actions by the (European Union) earlier this week reinforce how big a threat this is... This is a trade issue and it’s not a political issue. It’s one that we laid out the facts that there is violation of the trade agreement and we would expect to hear something back sooner rather than later.”

Andrea Ahles: 817-390-7631, @Sky_Talk

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