Honeymoon of merged American, US Airways management may be short
BY MITCHELL SCHNURMAN The Dallas Morning News
Sunday, February 17, 2013
2/17/13 at 4:12 AM
Many public companies divide the roles of chairman and CEO because they believe it's a better way to govern. American Airlines and US Airways are doing it for more self-serving reasons: to save face and close a deal.
A merger agreement between the airlines was signed last week. Under the deal, US Airways' Doug Parker will be chief executive of the combined company, while American's Tom Horton will become chairman.
On the surface, this may sound like they're splitting the baby. In practice, the CEO and his team will have the power, making daily calls on operations and deciding which American managers stay.
The real tip-off on management control: Horton's appointment will be for a limited time.
American will need Horton to lead the company through bankruptcy and close the merger. But if he stays any longer, that will be too long, according to one expert.
"These situations create an inevitable power struggle," said Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware. "They've been fighting each other for control of the company, and when it's over, someone has to exit. You can't have two chiefs."
Elson prefers that companies have a separate chairman because that divided structure balances leadership. He and other experts studied corporate boards and found that about half the U.S. public companies split the role, and many had highly effective governance.
One analyst applauded the prospect of Horton remaining. He pointed to airlines that had independent chairmen and much stronger stock returns since 2007.
"Though Mr. Horton is deeply unpopular with AMR's labor unions, we think his presence on the board would be a clear positive," wrote Hunter Keay of Wolfe Trahan, an investment firm.
The problem is that Horton and Parker just finished a public showdown, and they have different visions and management styles. Many merged companies have tried to share the top role, but Elson said it's almost always a mistake.
That's because it's human nature for former leaders, and their allies, to defend past decisions. That often undermines new initiatives, unwittingly or otherwise.
American also has a demoralized workforce that has clashed repeatedly with Horton and his team. One indicator of the silos within the company: Union leaders spent six weeks negotiating labor deals with US Airways, and American management was in the dark.
Parker will tackle the corporate culture immediately because the honeymoon lasts only so long. And while Horton is around, he'll be a lightning rod for many union employees.
Horton could make contributions, especially on international fronts, where Parker and US Airways have limited experience. Horton helped establish joint ventures with major airlines in Europe, Japan and Australia and could shore up those relationships. He's still chairman of Oneworld, the global alliance that feeds international traffic through the U.S. network.
Horton also did the heavy lifting in a grueling bankruptcy, which should be worthy of some reward. (Look for bonuses, later.) American secured long-term labor deals despite union unrest. And because Horton pushed so hard for a stand-alone plan during the reorganization, he extracted a good price from US Airways: American stakeholders will own more than 70 percent of the combination in the $11 billion deal.
Giving Horton a role is akin to a good recommendation, although it's already stirred a backlash.
"Apparently it's like T-ball - even the leader of the losing team is going to get a trophy," wrote Vicki Bryan, a Gimme Credit analyst and frequent critic of American management.
Horton became CEO on the day that American filed for bankruptcy, but he's been part of the senior leadership for years. So he's the face of a disappointing past, a time that people are eager to leave behind.
Sometimes, that break is a requirement to a fresh start. Last month, Chrysler was hailed for its remarkable turnaround. Under new owner Fiat, the car company went from near death to a sensation, and from a government bailout to paying off its loans.
Original Print Headline: 2 Airlines' Management Honeymoon May Be Short