The Wall Street Journal is reporting that Tom Horton, CEO of AMR (the parent of American Airlines) is in talks to become Chairman of a combined American Airlines/US Airways airline.
This is a big indication to me that things are likely almost wrapped up for merger discussions. Gary (View From the Wing) and I had a discussion about this in general a few weeks back. You see, I was still a bit disillusioned, most likely because of my somewhat unseemly man-crush on American Airlines. I figured there was still a small but reasonable chance the American Airlines management team would be the controlling group in a merger with US Airways. I felt this way despite being familiar with all the facts and clearly understanding Doug Parker’s intentions.
Gary was nice enough to bring me back to reality, reminding me the only reason Doug Parker would be in favor of a deal where US Airways’ stake in a combined entity kept getting smaller was if he got to run the combined airline. And, he’s 100% right on that. Doug Parker’s ego is way too big to want to play second fiddle. I was holding on to hope that something crazy would happen and Doug would get shown the door even though I knew better. But, the one thing Gary and I couldn’t figure out was what was Tom Horton getting out of this whole deal. In theory, if they emerged from bankruptcy as a stand-alone airline he stood to recognize some large amount of compensation (most likely shares in the new airline). That was unlikely if there was a merger in bankruptcy and he ultimately was not in control any longer. Quoting from the article:
Mr. Horton’s future is being debated by AMR creditors and others because Doug Parker, US Airways’ chairman and chief executive, is widely seen as the person who would run the combined airline as CEO. US Airways, in a November merger offer, proposed Mr. Parker assume the chief executive and chairman posts in a combined airline, one of the people said.
No surprise here, Doug proposed that he should be the one who gets all the marbles. It was widely reported years ago that he walked away from a merger with United Airlines because he wasn’t going to be the one running the combined airline. The article goes on to state more of the obvious:
The outcome of the discussions is crucial for Mr. Horton, 51 years old, who could be left without a job if the airlines merge. It appears Mr. Parker has the inside track, according to people close to the matter, and US Airways has mandated that any deal include him as CEO. Scott Kirby, US Airways’ president, appears poised to take the No. 2 management role should the airlines combine, though it hasn’t been discussed much at this point, one of these people said.
While the unions may not like Tom Horton, I think he should get a lot of credit for getting American through bankruptcy a much stronger airline. His team has rolled out a number of enhancements that has American profitable and competitive once again, something they haven’t been for quite some time.
And, it makes sense he should be compensated for that. It just wasn’t clear to me exactly how that was going to happen. While I expect his role in any decision-making to be minimal (remember, Doug’s ego), the role of Chairman will most likely come with a decent (and deserved, IMO) compensation package.
The fact that there are enough leaks about this part of the negotiation again suggests to me strongly that a merger is very close. I’m not a religious man, but it seems like a good time to start praying that at least the current AA culture survives, since I don’t regard the US Airways culture as a very happy, nor customer friendly one, at least as compared to American.