Moving and shaking an industry
US Airways chief and Bethune have a meeting of the minds
By BILL HENSEL JR.
Copyright 2007 Houston Chronicle
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Doug Parker, US Airways' chief executive, shook the airline industry with his hostile bid for Delta Air Lines.
Gordon Bethune, the former head of Houston's Continental Airlines, is no stranger to shaking things up.
They were thrown together after Parker's move in November for his Tempe, Ariz.-based airline to acquire the bankrupt Delta.
Delta's unsecured creditors committee hired Bethune, formerly chairman and CEO of Houston-based Continental, to help study that deal.
If US Airways' move for Atlanta-based Delta proceeds, it is expected to trigger other airlines to pair up. That could include Continental and United, which already were privately talking when the proposed US Airways deal was unveiled.
The next few weeks are expected to be important in terms of whether major industry changes will be coming.
Bethune and Parker met for breakfast last week in New York City. During that two-hour meeting Bethune asked questions and Parker answered.
"I thought it was a great meeting," Parker said. "It was refreshing to talk with someone who understands full well what we are trying to accomplish, appreciates challenges and is good at assessing management talent and depth."
Two days later, US Airways sweetened its offer by almost $2 billion — to cash and stock worth $10.2 billion. Parker said the new offer would expire on Feb. 1 unless supported by the creditors, who play a key role in determining the airline's future.
Bethune characterized his role as that of a facilitator.
"I made an assessment of where he was," Bethune said. "I am not hired to negotiate for the committee. I am just giving some friendly advice."
The veteran executive, who retired from Houston-based Continental at the end of 2004, is to be paid $250,000 for 10 days work.
Parker said Bethune didn't appear to have specific marching orders from the creditors committee.
"He seemed pretty open-minded, and he knows enough about this industry to already have some views," Parker said. "It seems he came of his own accord without any direction from anyone else. He was there doing what the committee asked him to do, which was come ask questions of management."
Bethune, who is chairman of Aloha Airgroup, has said he thinks the airline industry will consolidate. The outspoken executive said having a large number of major carriers leads to instability for employment and pension matters.
Parker obviously believes in consolidation and says his experience shows the benefit of consolidation.
Parker, a former executive for American and Northwest airlines, went on to head up America West. In 2005, he led the merger of America West with US Airways.
"We took two airlines, neither one particularly strong, to build an airline that is going to have higher profit than any other network airline in the United States," Parker said.
But that job is not complete. The airlines are still basically operating individually. Parker said he hopes to have an operating certificate for the merged carrier from the Federal Aviation Administration by mid-2007.
"We think our team has done a fantastic job of merging America West and US Airways," Parker said. "We are 15 or 16 months into it and have consolidated all the airports, all the systems, and our people are working exceptionally well together."
Parker acknowledged there have been problems, however, like combining the carriers' Web sites.
Delta's management has vowed to emerge from bankruptcy later this year as a stand-alone company.
Delta's board rebuffed
the original bid by US Airways. Delta CEO Gerald Grinstein at that time said it raised overwhelming regulatory and labor issues.
However, the creditors committee — which includes the likes of Boeing Co., where Bethune worked before coming to Continental — has far more influence than management in this matter.
Bethune, who meets with some members of Delta's creditors committee Friday, made it clear he knows whom he reports to.
"I know Parker and I like Parker, and I know Grinstein and I like Grinstein," Bethune said. "But I work for the committee."
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