Doug Parker, US Airways: AMR Structural Network Problems Can Only Be Fixed Through a Merger with US Airways

July 18, 2012

US Airways Chairman and CEO Doug Parker presented at a National Press Club Luncheon in Washington, D.C. Mr. Parker discussed the current state of the airline industry, the positive impact of mergers for the industry and the benefits of a merger between US Airways and American Airlines. Mr. Parker was joined at the head table at the National Press Club by the leadership of American Airlines' three unions, representing 55,000 American Airlines employees: Captain David Bates, President of the Allied Pilots Association; Laura Glading, President of the Association of Professional Flight Attendants; and John Conley, International Vice President and Assistant to the International President, Jim C. Little, of the Transport Workers Union.

Mr. Parker discussed the benefits of mergers in the industry. He noted how mergers have benefited United and Continental, Delta and Northwest, Southwest and AirTran, and America West and US Airways. In addition, Mr. Parker pointed out that there are real advantages to combining airlines for employees, customers and communities:

"All four combined airlines provide better networks and are now profitable. By combining complementary networks to provide more attractive and efficient service, mergers have led to increased traffic, cost reductions, and vigorous competition ... The benefits of this trend extend way past the bottom line: there are real advantages to combining airlines for employees, customers and communities. Employees will benefit from greater job security and more long-term opportunities if they're working for a successful airline. Customers will gain more flight options at better times to more places. And whenever two airlines combine, they open the communities that they serve to many more new travelers."

Mr. Parker outlined the fundamental network challenges that stem from American Airlines' "cornerstone" strategy, which focuses on five large cities instead of a comprehensive network. Mr. Parker described how American Airlines has lost market share across the United States and why the cornerstone strategy does not address the network deficiencies of American Airlines versus United and Delta:

"Simply put, American has hubs in Dallas, Chicago and Los Angeles to connect people around the United States, and strong international gateways in both JFK and Miami. But that leaves a large hole in the network up and down the East Coast. This means American cannot easily serve the popular and highly lucrative East Coast region, which causes it to miss out on an enormous source of corporate business, as well as all the consumers who travel up and down the Eastern seaboard."

Mr. Parker explained how a merger with US Airways solves American Airlines' network challenges and creates a more comprehensive network. In particular, he noted that the networks are complementary and combining them would result in significant benefits to all stakeholders, including customers, communities, US Airways shareholders, American Airlines creditors and employees:

"A combination with US Airways would create such a network. We've taken a long, hard look at American, and we know that together we can build the greatest airline in the world—an airline that can compete more effectively with the networks of United, Delta and others. Together, American and US Airways can connect more communities and provide greater benefits for American's creditors and US Airways' shareholders than either airline could on a standalone basis. Furthermore, we would also save thousands of jobs and offer better compensation and long-term opportunities for employees of both airlines."

Mr. Parker highlighted American Airlines' merger protocol, which American Airlines recently announced it was ready to move forward with, and reiterated his desire to present US Airways' plan to American Airlines:

"All that we want is a fair chance to present our plan, and to compare it to all others in a process that doesn't disadvantage any of the options, and that determines the best plan based on what is best for the owners of AMR—its creditors. We understand there may be as many as four other airlines included in this merger analysis project, and we welcome the competition. We are certain that any objective analysis will conclude that the best plan for the creditors, employees and customers of American is a merger with US Airways during the bankruptcy process."

Mr. Parker praised the efforts of American Airlines' three unions – the Allied Pilots Association, the Association of Professional Flight Attendants and the Transport Workers Union – to support the merger:

"The decision by those labor leaders to come out in support of a merger was an unprecedented move on their part, and I think is one of the great untold stories of this process so far. Some people improperly characterize their support as being driven by US Airways' willingness to pay their members more. But as they will tell you, the gap between our proposals and American's is not very large. Their support is not driven by short-term gains, but rather by the fact they have taken the time to study the long term strategic underpinnings of each plan. They have hired advisors to help them and they have listened and led. In the end, they have supported this merger because they understand the best thing for their members is a strong, competitive merged airline with a long-term strategic advantage.

The employees of American Airlines are lucky to have these forward-thinking leaders representing them and I'm proud to be working with them."