Delta CEO Offered Merger Tip to US Airways CEO

CHARLOTTE, N.C. ( TheStreet) - Who is giving US Airways ( LCC) CEO Doug Parker his best advice when it comes to merger implementation?

Asked Monday at an investor conference what he needs to be careful about as he oversees the merger of US Airways with American ( AAMRQ.PK), Parker cited advice from Delta ( DAL) CEO Richard Anderson.

Anderson's words, Parker said, were "Adopt and Go," which summarizes the importance of "taking the larger airline's systems and processes and overlaying those on the smaller airline." Parker recalled a mistake following the 2005 US Airways/America West merger, when "we had largely the America West management team, and we had some systems better than US Airways and we put those in place." Most notably, the merged carrier chose America West's Shares reservations system over US Airways' Sabre system.

Despite intensive employee training, Parker said, it is difficult to overcome the impact of practices that have been "part of the infrastructure for over 20 years." As a result, putting Shares into place meant that "processing time slowed down dramatically." This time, he said, "we will do our best to avoid that. Unless there is a compelling reason to go with the smaller system, we will go with 'adopt and go'."

Both Delta President Ed Bastian and United ( UAL)CEO Jeff Smisek, speaking at the same investor conference where Parker spoke, expressed support for the merger. "We believe that mergers in this industry generally are a good thing if done well," Bastian said. "For us, it's going to be a positive. It's just another form of continuing to maintain discipline in a business that will continue to be as competitive as ever."

Smisek, meanwhile, said "there've been too many business plans chasing too few customers and that's been unhealthy for everybody (so) industry consolidation has been good.

"We don't worry about losing the title of 'world's largest airline' because we never really cared about that title," he said. "We want to be the world's leading airline."

Parker acknowledged that the new American will not have as many routes to Asia as either Delta or United. He noted that both benefitted from treaty agreements, following World War II, giving predecessor airlines rights to establish hubs in Tokyo. It is wrong "to suggest that we grow a standalone Asia network to be like United and Delta have," Parker said. "You can't go back and reverse history."

However, he said, the integration of the American and US Airways domestic systems will create passenger flows big enough to support more flying to Asia from various hubs. "We think there's a great expansion opportunity there," he said. Some of it will be accommodated on American's Oneworld partners, including Japan Airlines and Cathay Pacific. "The real issue is to make sure you can get customers to where they want to go," Parker said. "Oneworld has that."

Overall, new American is likely to grow internationally. "The industry has not matured internationally," Parker said, noting that he foresees "relatively modest growth early on as we get our legs underneath us - as we move forward we'll see." Domestically, he said, the industry is mature, with growth likely to replicate GDP growth.

Parker also said that no decision has been made on the livery for the new airline. In January, American unveiled new livery after two years of development.

"Most of our customers don't care what the outside of the airplane looks like," Parker said. "It doesn't affect their purchase decisions. (But) it's really important to employees, who care a lot about it, and I care about that."

"We'll take some time and talk to people and put that on the list of a number of things we have to figure out," he said.

-- Written by Ted Reed in Charlotte, N.C.

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