American Airlines CEO Doug Parker In Conversation With CNN's Richard Quest

Transcript

Richard Quest:Right, well, Doug very kindly agreed to completely empty his schedule for the rest of the day, and he'll be here taking questions until late after lunch.

Doug Parker:Yeah, right. Happy to be here.

Richard Quest:And please think of questions that you'd like to ask as we go through our discussion. Doug, I'm going to entreat you to ask for relatively short answers simply so that we can cover more ground.

Doug Parker:I'll do my best.

Richard Quest:I want to know— I was reading your presentation to the JPMorgan conference. You talk about a structural fundamental change in the industry. Why do you believe that's happened and what's it based upon?

Doug Parker:Well, I mean, the change that's happened is the industry that, you know, at least that I've grown up in, that the one of the, you know, make a little bit of money and then all of a sudden lose more than that in the next, in the coming years, and these continued cycles of boom and bust where the busts are really worse than the boom, that industry and all the things that came with that has, is gone. That has been transformed. It's happened. You can see it in the data. those who take the time to look at it. It's, you know, the earnings that American Airlines are making today are so much higher than anything the company had made in the past. It's obvious that something fundamental has changed, and it's not due to oil prices. It's not due to the economy being stronger, because those things are not much different than they were, say, in 2005. But in 2005, the industry lost $28 billion, and in 2015, we made $18 billion. It is a night and day difference. It's happened in our business. That means dramatically different things for how we manage and how— and for what we do for our customers.

Richard Quest:So besides consolidation within the industry, what are the other components of that structural change?

Doug Parker:Well, look, the biggest component is getting the industry to be able to meet our customers' needs. The fact of the matter is, in that 2005 airline industry in the United States, we had 7 hub-and-spoke airlines flying around trying to be what consumers wanted, none of us able to do it. That is, take them where they want to go, when they want to go, anywhere around the globe. Now we have 3 airlines that can do that, not because 4 of the airlines went away, because those 7 networks were combined into 3 much stronger ones. Stronger in a way that it's stronger for the consumer, still intensely competitive, but they can provide the utility that consumers want and still be competitive. And in the past, when it was that fragmented, we simply weren't able to have an industry that was functional.

Richard Quest:We won't be able to put your theory to the test until the next downturn. Really, in the sense of once there is a downturn, does the black ink become red ink? So we'll have to wait for the next downturn, which, if Donald Trump is right, is going to be around the corner. But so you're not gambling, but you're banking quite a lot on the fact that there has been this fundamental change. You firmly believe it.

Doug Parker:Yeah, I think you have to believe it, because if you don't, you're going to fall behind. If you don't believe it's changed and all you want to do is say, well, I can't really trust this, so I'm going to hold back because I've got to wait till the downturn to make sure that it's true, you're going to get to the downturn in a lot worse shape than everybody else because the other airlines have figured this out and they're investing in their product, they're investing in their team, and we're doing the same thing and we're going to do it faster than them and better than them. But, you know, if you try and hold back and not really believe it or just kind of hope it's true, But not believe it in your gut and your heart, you're going to do the wrong things for your shareholders and for your company.

Richard Quest:Wall Street doesn't believe it yet, do they? The valuations are not reflecting what you say is the new economic fundamentals.

Doug Parker:I don't believe they are, but, you know, fair enough. That'll come over time. We'll prove it. But it's certainly based on what we see and what we project for our airline. All the equities seem undervalued.

Richard Quest:You talk about a leap of faith, which is a fascinating phrase. I mean, not giving any— you know, the leap I can understand. It's the faith bit, and I'm not putting a religious connotation into it, but faith implies you're not sure, but you're going to hold on and let go and just go for it.

Doug Parker:Yeah, that's what we have to do, because so much of the history that's ingrained in all of us and all of our team members, you know, from pilots to flight attendants to management, the history makes it hard for you to really believe. So you've got to just have faith that it's true, because if you— if— and that means just wiping out everything you've learned in some cases, and that takes some faith.

Richard Quest:I have to say, this is an extraordinary interview that it's already got underway. I mean, I can honestly say I've not had too many CEOs sitting in front of me saying, you've got to believe in it. I, you know, I believe the evidence is there. But it's really in here that I've got to actually move forward, which is what you're saying.

Doug Parker:Right. Um, again, I mean, I can't stress enough how different it was from the past. And because it's so different from the past, you know, if we, if we get the, the biggest challenge to transformation is people's memories. If we could just wipe out everybody's memories, it'd be easy. Of course we can't. And the history is so much different than the future that if we want to maximize the value in the future, we've got to get people just to do everything they can to forget When we talk about the way in which you've put together—

Richard Quest:and I'm gonna, I'm gonna divide the, our time together into big issues for industry-wide, and then we'll talk about American specifically— um, the consolidation, that's— do you now believe it's pretty much— I mean, Alaska snapping up Virgin America, that's pretty much it?

Doug Parker:Yeah, again, for, for For our world, you know, the hub-and-spoke networks, we're certainly— it's done. You know, American, Delta, United, 3 large hub-and-spoke networks in the United States. I think there won't be further consolidation of those. Whether or not some of the other transactions take place, I don't know. It's up to those airlines and what they think makes sense going forward. But I don't think it's a huge strategic change to the industry like Getting 7 hub-and-spoke carriers that were inefficient to be 3 hub-and-spoke carriers that were efficient was to the business. So while it may happen, and while it's important, of course, to those companies and their shareholders and their employees, it's not going to have the kind of transformational effect that what we went through over the last 10 years did.

Richard Quest:Consumers' perception of the effects of consolidation is different to the reality, isn't it, in some senses? Consumers believe fewer airlines has been bad for America, and yet the reality is fares have fallen in many markets. I happened to book a ticket last night, fully enough on your airline, from Las Vegas to Los Angeles. Do you know how much it is?

Doug Parker:I'm afraid to ask.

Richard Quest:Actually, you shouldn't be afraid to ask; you should be weeping.

Doug Parker:I know.

Richard Quest:Sixty-two dollars.

Doug Parker:Okay, I know. That's what I was afraid you were going to say.

Richard Quest:Sixty-two dollars.

Doug Parker:Right.

Richard Quest:Same day booking.

Doug Parker:Right.

Richard Quest:But can I— I thought I was about to be raped and robbed when I went online. I was shocked.

Doug Parker:Yeah, it's an incredibly competitive business, and consolidation hasn't done what some were concerned it would do. We got sued, for goodness' sakes, from our own government for this transaction because they feared it was not, you know, in the consumer's best interest. And fortunately, we convinced them that was not the case. You know, there's just this perception that, you know, the larger the airline is, the less consumer-friendly it is. And the reality is nothing— is absolutely the opposite. We now have an industry that can be profitable. That means we can invest in the product. We're competing like crazy on the product now, something US airlines haven't done in the longest time. And on top of that, as you've just noted, we've got a business that It has so many— has so much ability for airlines to come in with different business models and make a difference, and we need to compete with all of them. So, you know, what you experienced was a fare that American Airlines is likely matching someone else on, not a fare we would have put in the market, but that's okay. That's what competition is, and we need to— and there's so many low fares out there that it's good for consumers.

Richard Quest:Do you wish The Big 3 versus Gulf 3 row, argument, case, whatever you want to call it, would now just go away?

Doug Parker:Not, not now. It's not over yet.

Richard Quest:Right. But I mean, do you regret having started this thing?

Doug Parker:Oh goodness, no. It's, it's incredibly important. Probably the largest threat to US commercial aviation that I've seen in this business.

Richard Quest:So you're not rowing back from your position?

Doug Parker:Oh goodness, no. We're as, we're as We feel as strongly about it as we ever have. We're continuing to talk through the U.S. government about it. They continue to listen. It's a huge, huge competitive issue for us and one that needs to be addressed.

Richard Quest:Are you disappointed that you haven't had a decision yet or a result yet?

Doug Parker:I understand the process, and it's a long process, and it's a difficult process. And we're— again, the U.S. government is engaged. They're listening. They're getting all the information they need to take it to make a decision. So somehow I'm not— we're actually pleased with the reception we've gotten in Washington.

Richard Quest:We're gonna come to American in a second. And de Juniac as head of IATA, yeah, good decision?

Doug Parker:Oh yeah, look, I don't know him well, but I think it's great for IATA. I mean, certainly someone of that pedigree, you know, running a large global airline, doing other things in his past. I was, I was pleasantly surprised to see that he was, that he was the new chair.

Richard Quest:Do you think the US airlines should be more engaged with IATA? I mean, you're all involved, but one always gets the feeling that you're involved because you're the largest airlines in the world and therefore you have to be involved, but actually it's not really relevant to your works.

Doug Parker:Oh, I don't know that that's true. It may be less relevant to US carriers than it is some of the other airlines. I don't know why that is, but it does feel sometimes like IATA is more important to some of the non-U.S. carriers than it is to the U.S. But it doesn't mean it's not important to the U.S. carriers. It is important to us. I mean, we attend those meetings. I think large— I think in some sense it's because much of what IATA is working on are kind of global initiatives that we work on so much with our own federal government. And our own regulators and already have established positions upon and are working through. But that doesn't mean, you know, things like, you know, climate change initiatives, you know, that are global issues— IATA is incredibly important and we're intensely engaged.

Richard Quest:Are you surprised, since you mentioned the federal government, the FAA reauthorization has turned into such a political dog's breakfast?

Doug Parker:Am I surprised? Surprised?

Richard Quest:Disappointed.

Doug Parker:I'm disappointed.

Richard Quest:I mean, I've looked at some of the amendments that are now on this bill. It's extraordinary. Things that have got nothing to do with aviation or are ever likely to have aviation involved.

Doug Parker:Yeah, well, anyway, look, it is tough to watch, and it's not, I don't think, in the interest of aviation, but it also isn't law either. I mean, this is how our process works at times.

Richard Quest:But your speech to the chamber was very strong. As you methodically went through all the arguments against that that were being put forward, that basically you destroyed the argument saying, you know, frankly, that Delta's put forward as being— were you disappointed that Delta broke ranks?

Doug Parker:I wouldn't characterize it that way. I'm disappointed that the entire industry doesn't see what— well, at least that Delta doesn't see what everyone else in the industry sees. It's so important to the future of commercial aviation. It's one of the things that's holding back U.S. airlines versus other carriers and systems around the world is our air traffic control system. We should be ahead and we're way behind. And, you know, everyone that looks at it understands that. I think Delta actually understands it. The issue there, the only thing I can imagine is they view the status quo as relatively favorable to them versus the others.

Richard Quest:Right.

Doug Parker:because they have an operation that's not nearly as impacted by the inefficiencies as the rest of us are, and they're trying to maintain the status quo for parochial reasons.

Richard Quest:But their fundamental view is, you know, if I look at Richard Anderson's letter to Chairman Schuster and I look at your comments, is their view is the system works, it's too big to tinker around with, and every other system that's tried the privatization model whatever one we want to call it, has been on a much smaller scale than the United States.

Doug Parker:Yeah, all 3 of those points are wrong. Um, and in, in response to your request that I keep my answer short, I won't reply to all of them. Just, I will simply point out that every other single airline in the United States disagrees, and we certainly wouldn't be in favor of things that did what Delta said it would do if we believed that. So you need to ask yourself, why is it Delta believes something that no other airline in the United States believes, and I don't think it's because they have different facts. I think it's because they have a different agenda.

Richard Quest:Which is what?

Doug Parker:Doing what's best for Delta Airlines. What's best for Delta Airlines is for the rest of us to live in an environment that is relatively more harmful to us than to them. Atlanta doesn't have these problems.

Richard Quest:But the other places do have these problems.

Doug Parker:Yeah, the biggest problem is primarily, you know, up in the— in the Northeastern part of the United States. Yeah, Philadelphia, Newark, LaGuardia, JFK. I mean, Delta has big operations there, but it's not relative to where their flying is. And look, I'm only speculating. I don't know that that's what they've said, but it's the only thing that seems to make sense, because nothing else makes sense. They don't have facts we don't have. They're an airline like we are. And every other one of us, every one of us has come to a conclusion that's Dramatically different from there.

Richard Quest:Let's talk about your integration, the American Airlines integration. It was a— the integration of the reservation and the passenger-facing systems, flawless. You must have been very pleased that went. Did you have a sleepless night when it was about to happen?

Doug Parker:Yeah, you know, as is rational, I believe. You know, what we've seen, including the one that, you know, we did at US Airways America West, Is these these integrations can go you know not go well, and when they don't, it results in really bad circumstances for your customers. So yeah, we were we were we were very much worried about it, even though we knew how well prepared we were. So there wasn't a lot of sleep that night. But gosh, what a what a what a phenomenal job our team did. We we didn't cancel a single flight the day we cut over. By far the best reservation system integration that's ever been done, and it was the most complex. It was 2 systems that were dramatically different and 2 airlines that were larger than we've ever done this before. So that's, you know, look, it's history and we're really happy it's behind us. But what it shows is what a— how well the team at American Airlines is coming together. That's one of these amazing, you know, cross-functional projects that touches every part of the airline. It obviously touched both airlines. So the 2 teams had to work together and they did it. They just hit the ball out of the park. And that gives us great confidence going forward that we have the right team in place that's working together to do the best things for America.

Richard Quest:So the next stage is— besides the product, we'll deal with product at the end— the next stage is to bring together the operational systems.

Doug Parker:Right.

Richard Quest:How's that coming along?

Doug Parker:Oh, it's great. Look, the reservation system gets all sorts of attention and focus for good reason. It's the biggest high-exposure area for customers if it doesn't go well. But that's just one of hundreds of systems that we've cut over, and they've all gone flawlessly. So we do have some more behind-the-scenes things to do. The biggest one, you know, kind of inside baseball, is a flight operating system, but it has huge ramifications to our pilots and flight attendants and allows us to integrate them finally. So that's important, another really big project, but I suspect we'll be able to manage that as we've managed the others.

Richard Quest:A key component of your— of this Putting these 2 airlines together has been— obviously the key component is the employees and the decision to go for— to offer basically profit sharing. Yeah, you chose 5%. And the argument of whether you go more on the profit sharing and less on the basic goes— or more the other way around. Why did you decide to do less on the profit sharing, more on the basic?

Doug Parker:Well, what we actually decided was to do nothing in profit sharing. And to have higher wages. That's how— that's as we went and did the merger, negotiated with our employees for joint collective bargaining agreements, would ask them, you know, look, would you rather have a higher base wage and not have profit sharing or have the profit sharing plan you have in place and a lower base wage? And each of them, again, given the history they've seen, looked at it and said, well, profit sharing doesn't have that much value, so I'll take the higher base wage. And we thought that was right too. You know, this is a business that has been volatile over time.

Richard Quest:Right.

Doug Parker:And indeed, it's—

Richard Quest:And you're right, they made the wrong choice.

Doug Parker:I know. And that's— and that's— and so as I finish, what you'll see is that's what— that's what— it was a big part of what happened. So that was the choice that was made. And, you know, those are negotiations. And in the old world, you know, as an airline, you would have said, hey guys, you signed up for it. It's a 5-year contract. We'll deal with the next contract term. But what was happening was, as we talked to the team, they got it. I mean, analytically, you know, I spend a lot of my time going out and talking groups of employees, and I'd go into this conversation and explain it and why it's better, you know, to know that you have, you know, you get it every couple weeks instead of waiting till the end of the year. And they'd nod their heads, and you could see if I talked long enough, I could try and kind of get them there. But, you know, you're getting to their brains and not their hearts, and both of them matter. And it had this unintended consequence of no profit sharing felt like we didn't want to bring everybody together, and we didn't value what the team was doing to To to participate to to create the profits by not having them participate in a profit sharing plan, and that was never that was never the goal. And it was it was so that nor is that what we wanted to have at all. So look, after a lot of consideration or talking to a lot of people, the real answer is we listened to our team, and what you what we heard was yeah, we get it, but it still didn't feel right. So we just put it in place. We put in place a program. We didn't no negotiations. No one had to. You know, nothing, nothing in exchange for this. We just told everyone, and we're, you know, 90% unionized organization. We just told everyone, look, this is, this is what we want to do. We're going to do it. No need to give us anything for it. This is what we think is the right thing to do. So we did.

Richard Quest:There won't be many decisions that will be in that sort of billions of dollars that you'll make just like that, will there?

Doug Parker:Yeah, it wasn't just like that. It was a tough decision.

Richard Quest:No, but I mean in terms of, you know, that you unilaterally Vis-à-vis your employees that you decide you're going to hand over that much money?

Doug Parker:Yeah, it was way up there. You know, that's clearly board level, and it's so nontraditional that it was— there would have been nothing wrong. It wasn't a moral issue. There's nothing morally wrong with saying, hey, we negotiated a contract and we're going to live by the contract. That's perfectly fine. It just didn't feel right nonetheless.

Richard Quest:If you're— again, if you're right about the structural change in the industry, Then over the next few years and few contracts, the percentages will be the negotiating point, won't it?

Doug Parker:Yeah, I don't know where it's going to go negotiating-wise. We may be that our team decides they'd like to have even higher wages. I don't know that. What I know is part and parcel of this whole conversation where we started is when you when you see right now that you're that you're losing some employees over this profit sharing issue, and you believe like we do that the industry has been transformed. And you're trying to get people to take that leap. This was inconsistent with that, and it didn't, it didn't feel right to ask people to stay where they were for the next 3 years.

Richard Quest:So let's talk about this, the relationship between the airline and its employees and how you get it to be more than lip service, because I do not know any CEO that doesn't say their employees are the most important people, that they couldn't run the business, whatever it is, a department store or an airline, without them, and they are valued beyond anything else. And their employees will say that's a heap of shit.

Doug Parker:Yeah.

Richard Quest:So how do you get them to believe that you mean what you say?

Doug Parker:You, you act instead of talk, um, and you, and you do, you make, you do actions that back up, um, those statements. Um, You do things like adding, you know, profit sharing plans even though there's— even though it's not a contractual obligation. And what we've been trying to tell our team is, and our management team, is, you know, look, we've got— this is no fault of anyone's, you know, forget how we got here, but the employees of US Airlines have a real hard time trusting their employer, their management team, because of everything we've gone through. Tearing up contracts, you know, furloughs, terminating pensions, it's hard for people to trust you no matter what you say. What you need to do, what we need to do, what we're trying to do is find things that really feel different to people. Positive surprises is what we're saying. Just go and try and find things that are positive surprises to the team, something they really didn't expect, they hadn't seen before. It can be little, it can be big, but it's just all of these things matter. And the corollary to that is if you do something that's negative surprise, something that hurt an employee and they didn't expect it, they didn't make sense to them, it just wipes out so much of the good we're trying to accomplish. So it— look, it's incumbent upon management to have the right attitude, to be communicative, and to really act in the ways that are consistent with the words you said, as opposed to saying the words.

Richard Quest:You may have answered this question with that last one, but I'm going to just go to it. So if I understand you right, the duty, the incumbency if you like, is on management to prove to workers now that actually they can be trusted?

Doug Parker:Initially, it cuts both ways. But yeah, look, a couple quick stories if I can. You know, one, one we did, we had a large pay increase for our gate agents. And you know, I know some, in some parts of the airline, we had some management who thought, who looked at that and said, look, you finally got what you wanted. You've been complaining, you know, you've been complaining We've been complaining about pay for a long time. Here's a— these are 30% pay increases overnight. Here's the pay increase. Now go do your job. That's one way to handle it. Another way to handle it is— and I know we had hopefully more managers that did this— is to walk up to that same employee and say, look, I am so happy working for a company that can do this for you now. We haven't had a company that could do that in the past. We have it now. And I know how hard you've worked. I know how this— how hard this has been on your family. So I'm so excited. Yeah. To be able to give you this 30% pay increase, that agent's ready to run through walls for the for the company, for that for that manager, and take care of customers. And it makes all the difference. So yeah, management needs to do it. The way it cuts both ways, I talked to one of a member of our team who said, "Look, I did it much that way." Amazing thing is, one of our employees said back to me, "Well, I just I just I'm just waiting for when you guys take it away." So you know, look, we've got that's again, it's not that employee's fault. We've got to understand that's the history, and as painful as that story is, it highlights the opportunity. We've all got to get to the other side, for us, to the other side of this, for this leap, so that we can really start moving forward and quit worrying about, you know, things are going to go away, or like, I can't trust the good times, because when we do that, we're going to miss the opportunity of getting to really good times.

Richard Quest:It seems to be the most damaging thing, and I fly more than most, and I talk to more flight attendants on board planes than most, is you— with many of the carriers, you don't have to scratch them very hard before they will say something bad about the management or the previous administration or the way in which they lost something in a previous thing. That's your big— not your problem, but that's the legacy's problem, right?

Doug Parker:That's the history I'm talking about.

Richard Quest:And that— and you don't want people, your flight attendants, when I go and chat to them in the galley, saying that.

Doug Parker:I, I have— I'm under no delusion that they can't wipe out their memories. It was so painful and it went on for so long, you can't ask them to not, to not remember it. What we want people to do is look forward more than backward, uh, and to recognize things have changed, recognize the management team has a different attitude, uh, than other management teams have had in the past, uh, that we care about our team, that we want to support the team, want to give them the tools to do their job because they're fantastic at it.

Richard Quest:Some, some anonymous questions from people In the room, wonderful. By the way, does anybody have a question that they'd like to put directly before we do some email questions? Let's have some light. Anybody got a question?

Doug Parker:They gave you all.

Richard Quest:Oh, wait a minute. There's a lady over there. I'm from China. My name is Julie from Travel Sky. China market is getting more and more important, but the China carrier is. Non-OneWorld member. Air China belongs to Star Alliance, and China Eastern and China Southern goes to SkyTeam. So what's the strategy of American Airlines in China market?

Doug Parker:Yeah, well, it's a OneWorld issue that you just described. We at OneWorld, you are correct, do not have a domestic Chinese partner, something that we'd like to correct over time. But it's not fair Fatal or anything like that at this point. It would be a plus. It allows it would allow us to feed our flights in and out of China better than we can today. But where we fly, so anyway, the answer to your question is what we do is we fly to really big markets that don't require a tremendous amount of feed: Beijing, Shanghai, and and have you know by the way in the region you know fantastic partners that can connect to to many many points throughout Asia between you know Cathay and. And others that we can, we can serve much of the region well. But yeah, that's, that's, that is one, there's one issue at Oneworld that we would like to address over time.

Richard Quest:How important is Oneworld to you?

Doug Parker:Extremely. Yeah, it's because it's valuable to our customers. You know, it's important to customers. Like I say now, there are 3 airlines and 3 networks that can pretty much get you anywhere you want to go around the globe. At any point in time. And, you know, we don't fly all those places, but our partners do.

Richard Quest:But you've got your JVs, Pacific and Atlantic. You're going for a JV down to Brazil, obviously, with IAG and LATAM. So I— so if you're balancing the JVs versus the alliance, well, I know it's not an either-or, it's a both, right? But if you have to balance them between— I mean, whether—

Doug Parker:I don't view it as a balance. I mean, the JV is just a— is it— it's just a more intense alliance. You know, it's not just code-sharing anymore. It's— it becomes even more efficient for the consumer because we're able to be efficient with our metal. But they're the same thing. They're just a matter of how you— how you divide up the revenues.

Richard Quest:An anonymous question: American has an extensive network, includes many smaller markets served by regional carriers and smaller aircraft types. What's the trend for these markets? Will the mainline take a larger role in serving them?

Doug Parker:Oh yeah, I mean, it's one of the great things about the hub-and-spoke networks. When we, United, and Delta all are the only airlines that are going to serve markets of those of, you know, small to medium size around the United States ever, because there's simply not enough traffic on those markets to fly point-to-point. What you need to do is have hub-and-spoke systems that take them into large hubs and then distribute them outside. I don't know that there's huge growth You know, the number of cities we serve is, you know, in a couple hundreds now in the United States. So it's— it's— I don't know there's much growth there, but I also think they're very important to our network. So I expect you'll see maintained.

Richard Quest:Let's talk about the product. Yeah, and you've got a variety of new plans. Basic Economy. Yeah, what's this all about?

Doug Parker:Well, this is about— this is about, you know, You know, your fare from LA to Vegas. There are a number of airlines out there today that we need to compete with on fares that don't have the same product we do and— or anything close to it. But we can't ignore their fares because the consumer looks just to the fare and oftentimes overlooks the product attributes until they fly the airline. But even then, they— the fare is so is such a compelling factor that we can't ignore it. So, you know, really good competitors like Spirit Airlines do a really nice job of enticing customers with very low fares and then doing things to upsell throughout, you know, a model I think we're all familiar with. We can't ignore that fare or we lose passengers in and out of our markets. So we end up matching that today. We end up matching that fare. But we still— you still have all the attributes. Is if you'd paid a higher fare. You still get frequent flyer miles, still get an assigned seat. You get a number of things that, you know, perhaps one shouldn't get if all we're doing is trying to match that product. You're still going to have a better product. We're not going to change the configuration of the aircraft. We're still going to have more pitch. We're still going to have, you know, a much more efficient product and better on-time results and all those things. But, you know, maybe you're not going to get an assigned seat. Actually, not maybe. That's what the product is. It takes out some some of the attributes that those who are paying more deserve, and those that want to simply purchase the Spirit kind of fare wouldn't have on those carriers.

Richard Quest:So it's an extreme— so by, for example, by putting basic fares, it's a way of putting the airline into all the different segmentations.

Doug Parker:Yeah, it's a way to offer to consumers the lowest possible fare so long as they're willing to accept You know, a somewhat lesser product. You know, you're not going to have a seat assignment until you show up at the airport. You're not going to board with until everyone else has boarded. Those types of things.

Richard Quest:Mint JetBlue, you may have seen this morning. You're probably traveling, but JetBlue has announced it's increasing the range of mint that it's offering flatbed Seattle. Down to the Caribbean. Would you look at— an anonymous question— would you look at extending your flatbed offerings within the United States besides just New York, LA, San Francisco?

Doug Parker:Yeah, well, perhaps. I mean, to date we haven't considered that. The A321T product is by far the best product in the domestic United States. Have you flown it? You ought to if you haven't. It's fantastic.

Richard Quest:I can't afford it. Oh yeah, I'm on 60. I've got a $62 fare to Los Angeles.

Doug Parker:It's a little more than $62, but anyway, live flat service, the transcon markets are great for it. It's doing really well in those markets. Unclear as to whether or not it makes sense in some other markets, but if it does, we'll certainly expand it. It's just you need a very high concentration of people that are willing to pay for that product, and New York-LA certainly does it. New York does as well.

Richard Quest:Another anonymous question. By the way, anybody got a question that they want to— yes, catch it. Put your hands up if you've got questions so I can see if we've got other people that we— that I— that want to be called upon. You stunned them into silence. Yes, sir.

Doug Parker:Yesterday there was a very heated discussion about innovation and the viewpoint that US airlines are not innovative on a global scale and have not been.

Richard Quest:Can you talk a little bit about Why that perception exists and whether it's accurate or not?

Doug Parker:I wish I could have participated in that heated discussion.

Richard Quest:It was Peter's point that the US carriers have not innovated as much. They were leaders but are not leaders as much as they have been in the past.

Doug Parker:Okay, perhaps. And, you know, to that I would say much of what we've been talking about this whole time, which is we were going through a period that didn't allow that to happen.

Richard Quest:Right.

Doug Parker:And also didn't encourage it to happen. You know, when you have 7 network airlines that none of which can provide to the customer the utility to get them where they want to go, you don't end up competing on product. You end up just flying where you fly and you're going to get your customers because of where you fly. So, but now it's entirely different now. This transformation now that I've talked about has us in a position where, look, there are 3 airlines in the United States that can pretty much take you anywhere you want to go. What matters the most is the product. What you're seeing now is, yes, some of it's catch-up, so it may not look innovative because we were behind, but you got to catch somebody before you can pass them, but huge investment. While it may not seem like something no one else has done before, no one's done it at this pace and no one's done it in this scale that we're doing. $3 billion we're investing in American Airlines over and above aircraft. We're We're bringing in one aircraft every 4 days. One aircraft every 4 days. You know, almost, almost 100 airplanes a year just in replacement of older aircraft. That's bigger than a lot of airplanes— airlines that you know, and we're just doing that in our spare time.

Richard Quest:Okay, so the important part of what you just said, of course, is this— the idea that one has to do the catch-up. You can't lead and get ahead before— you put it better than I did. But at some point then, You're saying to your staff, your senior management, all right, we've got to where the others are. Now I need you to go out and blue sky think, and now I need you to take me to where they're not even yet.

Doug Parker:Oh, we're doing it already. I don't want to pretend like we just have to catch them, but, but we do have to catch them. And the things that we're doing that are more innovative are less visible. They're IT issues that are going to allow us to do better things for customers. customers without, you know, having to interact with an individual or having to wait for the information. So, look, we have a lot of things underway that we're not just waiting until we catch everyone else. But, look, I'll put it again, this may be the best way to put it is, you know, when I took over this job, one of the things that was probably maybe as shocking as anything to me was going and visiting with our partners at BA and JAL and Qantas and having them tell me You know, look, your product is not up to our standards. You know, I guess—

Richard Quest:Were they that polite?

Doug Parker:Some.

Richard Quest:I'm sure Alan Joyce—

Doug Parker:They're all really polite. So, yeah, no, we all get along well. But look, I mean, this is, you know, coming from US Airways, the American product didn't look to be certainly that inferior. But you get— but you go talk to those airlines that are partners of yours, that are important partners, and they have a concern about the airline we're flying. because they're putting their customers onto our metal and it's not— it doesn't meet their standards. You know, that's a big deal. So look, it's all changed. I mean, when I did see Peter down in Australia, we took a 777-300 down there, and I don't want to speak for Alan, but I feel comfortable because I heard him say it. You know, that product's as good as anything in the world. And, you know, that's coming from Alan, so that's a high standard. So look, we're getting there, and we're doing things like that other US carriers aren't doing, like taking our flagship Admirals Club lounges and turning them into, you know, restaurants as though you'd see in London or in Sydney, and, you know, doing that in Dallas and JFK and LA and other places.

Richard Quest:So this fascinating part to finish on, this idea that you started with, that the 3 US carriers— and you're the first CEO of all of them really that I've actually heard to Described it, recognizing that the others are moving and you've got to move too. Yeah, you see their moves. I mean, Delta was probably ahead. United, when they finally work out who's running the airline and they've sorted and, and, and that's all going well, that'll move forward. But that's what you've got your eye on, isn't it?

Doug Parker:Yeah, that's a big part of what we tell the team, you know, this whole leap of faith thing. I go through and try and convince been some, with some real data that the world's changed. But if then we end it with, look, if that's, it doesn't matter if you believe that or not because our competitors have figured it out. And, you know, Richard figured it out at Delta. He had a 5-year head start on us. They merged 5 years before us, but he figured it out, you know, saying things like, you know, we're, you should treat us not as an airline but as a high-quality industrial company. When he talked to his shareholders, was saying exactly what I'm saying in just different words.

Richard Quest:It was saying, we're—

Doug Parker:forget what that stuff you've seen in the past. That's not who we are anymore. We're moving forward with an entirely different direction. We're moving forward like a real company that's going to take care of its customers and take care of its employees and recognizes its employees are a big part of its product. And they did it. So, yeah, so some of what we're doing is— if we don't do it, it's— that's why I keep saying it doesn't matter if we have to do it because the others are doing it already.

Richard Quest:In the 30 years I've been covering this business. I've seen airlines go from hero to zero and then back up to hero again. Yeah, you've seen the same thing.

Doug Parker:I mean, I was— I might have been the hero and the zero at times.

Richard Quest:Yes, but American has been up there. Yeah, came down again. So, so what you're saying is perfectly possible and feasible to take it back up there again?

Doug Parker:It's not only perfectly possible and feasible, it's happening. It's going to happen. I'm positive it's going to happen. You can just see it. It's, um, we're bringing in New airplanes. We're bringing in a new product. We're getting our team fired up and excited. It's it's not it's not if it's just when it's happening.

Richard Quest:In you started in this business in nineteen eighty six eighty six yes that so the anonymous question was correct. No, that wasn't the question. That wasn't the question.

Doug Parker:I can pass that one. Yeah. I know my birth date too.

Richard Quest:Sorry?

Doug Parker:I know my birth date as well if you want that. No, go ahead.

Richard Quest:I wasn't planning on sending you a card, but I'll happily do. If you could give your 1986 self some advice about the airline industry when you were starting out, what would that advice be, and would you have listened?

Doug Parker:I probably wouldn't have listened back then. Look, my advice to anybody starting out, you know, in this business is the value of relationships, and it's It's hard to recognize when you're forming them how important they are, but when you've been in the business as long as I have, you recognize how valuable it is. I know there are people I worked with when I started in 1986 that I had no idea were going to matter a hill of beans to my career or my company's prospects, but they did. Thank goodness that we as a team treated people with respect because when it came time to wanting to get done a merger, for example, and all of a sudden you find on the other side of the table representing, you know, the flight attendants or the pilots or some such group, someone that you worked with 20 years ago who you haven't seen in 20 years, but they remember you as someone who is trustworthy and forthright, that makes a huge difference. So the message I always give people is this is a huge team effort. You can't Try— I see people show up and try and think, oh, who's the most important person? I want to get to know them. That's not what I'm talking about at all. What I'm talking about is treat everybody the same because you have no idea who's going to be important in the future. And if you try and guess, you're going to screw it up. So treat everybody the same all the time and you'll— it'll serve you well. And so long as you do that, you're going to find you're going to feel really good about it in the future, even if you don't— even if that doesn't come natural. the right thing for you to do. Just out of self-serving reasons, you should do it because it's going to serve you well in the future.

Richard Quest:CAPA had a story, I think yesterday or the day before yesterday, that pulled together the ICAO statistics along with the OAG statistics that does now prove— not that you needed any proof, but it does prove you are running the largest airline in the world, what somebody on this panel described as the leading airline in the the world. I realize it doesn't matter to you that it's the largest, does it? I mean, it's— you don't—

Doug Parker:We want to be the best. Largest doesn't necessarily mean the best. You don't have to be the largest to be the best.

Richard Quest:You want to be the best.

Doug Parker:We want to be the best.

Richard Quest:How long do you give yourself to turn it around?

Doug Parker:What, one, that's, that's an ill-defined term, of course. I'm not sure that, well, you know, it's aspirational. And one that, you know, you'll never be certain you've gotten there. We know we're not there yet. I'd like to be— I'd like to have people saying that we're in that— we're in the consideration set within the next couple years. I think we can do that, 2 to 3 years.

Richard Quest:You'll be back in 2 to 3 years to tell me how you're doing.

Doug Parker:All right, I'll see you then.

Richard Quest:Sir, thank you very much indeed.

Doug Parker:Thank you, Richard. Thank you.

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