Why Doug Parker's Legacy Hangs on a US Airways/American Merger
CHARLOTTE, N.C. ( TheStreet) -- A lot of people stand to win or lose depending on the outcome of the Justice Department's effort to block the merger of US Airways (LCC) and American Airlines (AAMRQ). But I don't think anyone has as much at stake as US Airways CEO Doug Parker.
Parker began running America West in 2001, just days before the Sept. 11 terrorist attacks. His first task as CEO was to spend weeks in Washington, begging for money so the airline could survive. Soon after the patient was stabilized, Parker turned his attention to seeking a merger, which has remained a high priority for the past nine years.
Five attempts have been made public, starting with the failed 2004 effort to merge with bankrupt ATA. So far, the only success in this prolonged endeavor has been the 2005 merger between America West and US Airways, which combined two weak airlines into one that is viable.
The deal was a big step up for America West, but the new US Airways doesn't amount to much as a global competitor, despite a nice trans-Atlantic hub in Philadelphia and a nascent Latin America hub in Charlotte.The only way to get where Parker wanted to go was - and remains -- a merger with American, Delta (DAL - Get Report) or United (UAL - Get Report). This is not a new thought, by the way: Every US Airways CEO for the past four decades has known that the airline lacks a hub big enough to assure it can keep pace with bigger competitors. Parker began trying to bulk up almost as soon as the ink on the US Airways/America West documents was dry. The 2006 attempt to merge with Delta might have been one of the wackiest merger efforts in history. I will never forget my amazement during a press conference where attorneys retained by US Airways assured reporters and analysts that the DOJ would approve, even though it was obviously anti-competitive and would have resulted in a single airline dominating both Atlanta and Charlotte, the only two hubs in the Southeast. Talk about eliminating competition on one-stop flights -- which is the basis for the DOJ complaint against the proposed merger with American. The vast majority of flights within the Southeast, home to about 80 million people, would have been on the same airline. On a conference call with reporters on Aug. 13, the day the suit against American/USAirways was announced, Assistant Attorney General Bill Baer was asked about previous airline mergers the DOJ had opposed. In his response, Baer commented on the 2006 bid for Delta, saying, "We were looking seriously at the hostile bid for Delta when that got abandoned
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts