Digging into news items more today, I have found more explanation for this desire to have Tom Horton remain as Chairman of American Airlines.

Apparently it is the American Airlines Board of Directors who are pushing for this and some even for an executive chairmanship and in the interests of “protecting” the board on the promises of revenue synergies being promised from the merger.

What’s interesting to me is that the board, largely unchanged over the last year, wasn’t pushing for this kind of conservatorship more than a year ago.

Questions I would ask are these:

1. Why is Doug Parker’s track record of return on investment at US Airways inferior to Tom Horton’s track record given the profits that Parker and his team have realized with an inferior airline network?
2. Why is it preferential to put controls on Doug Parker in this merger that we wouldn’t, for instance, put on Tom Horton himself in a stand alone exit from bankruptcy?
3. Why are AA’s interests valued so highly in this merger and US Airways interests so low?
4. As an unsecured creditor, would I not want to see the management team in charge be the people who have the best chance for success in the marketplace and who do return shareholder value since my “payback” will largely be in the form of an equity stake in the company?
5. And, if #4 is true, why would I want to constrain that with leadership that while fiscally good has ignored the revenue picture for 10 years or more?

I sense overreaching by the board and when I consider the composition of AA’s board of director’s, I think I know why.  AA’s board is dominated by financial interests who favor conservation of capital in all situations.  They are one of the most conservative boards you could find on an airline and most independent directors lack direct airline experience.

US Airways board is very different.  It is seeded with airline experience, entrepreneurial experience and is generally more diverse both in geography as well as industry.

Again, let me point out that Doug Parker is no fool.  He has an excellent education and has had excellent multi-airline experience which was founded on a long stint in finance at American Airlines itself and has since managed America West/US Airways for a 12 year tenure with great success in returning a disadvantaged airline organization to health despite severe industry economic challenges and ever increasing competition from very large SuperLegacy airlines.  that’s the guy you bet on and that’s the guy you don’t hamstring.

If Doug Parker or his team were foolish, unwise or inexperienced, they would not have achieved consistent successful results that largely outshine the rest of the industry.

And I would remind AA’s Board of Director’s that they chose to ride the Gerard Arpey horse and they chose to ride the similar legacy in Tom Horton with the results of a company entering into bankruptcy because of an inability to lead and an inability to generate increasing revenues.  The strategy was waiting for other airlines’ costs to rise and meet their own.  What makes you think your entity is so much more valuable today than it was 14 months ago?

Filed under: Airline News, Mergers and Bankruptcy by ajax