GOVERNANCE AT 30,000 FT.
November 9, 2017/Published by Kimberly Simpson
American Airlines Group director Alberto Ibarguen recently led a fireside chat with the company's CEO and Chair Doug Parker during the NACD Florida Chapter's season kick-off event at Miami International Airport. With more than 100 in attendance, the program featured insights into the highly competitive airline industry along with some key considerations for directors.
A New Day for the Airline Industry
From 1978 until deregulation of the airlines, the airline industry yielded no return on capital; however, since the merger of American Airlines and US Airways less than four years ago, American has generated $20 billion in profits. Three airlines - American, Delta and United - are now leading the pack in rationalizing and leveraging the hub model to offer passenger service across the globe while generating positive returns. Parker insists this is the industry's "new normal" and spends a geat deal of time convincing constituents that the industry is not simply experiencing a temporary "up" in a long-term cycle.
Parker explained that the company must now invest in its people and its products, taking a long-term view of the business. For example, American invested in new aircraft and now has the youngest fleet of any U.S. airline. With regard to employees, many of whom are unionized, Parker raised wages in the middle of a contract term in order to fulfill his promises to them during the merger. He expalined, "I use the 'look them in the eye' test when it comes to the 120,000 people on the American payroll," emphasizing the importance of transparent communication with employees. Another area of investment is data protection, and the board routinely raises the issue of cyber risk.