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American Airlines, obsessed with debt and growing pains, turns to the new CEO




It will soon fall to Robert Isom, a longtime American Airlines Group Inc.

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executive, to chart a new course for the world’s largest airline.

Mr. Isom will take over as CEO of American on March 31 after Doug Parker, who put American together through big movie deals to form the world’s largest airline in service, retires. Mr. Parker will remain chairman of the board of American.

Mr. Isom has to address a number of issues. The airline’s operations, which he supervised, have lagged behind competitors in recent years. The relationship with the unions has been controversial. Before the pandemic, investors became uneasy as the airline̵[ads1]7;s stock performance flagged.

The pandemic created new challenges. American already had more debt than its rivals after refreshing its fleet, then accumulating billions to survive last year. And in the race to increase and capture growing travel demand this year, American has stumbled at times, resulting in thousands of canceled flights, which has annoyed passengers and crews.

“Our expectations are high,” said Captain Eric Ferguson, president of the Allied Pilots Association, following the announcement of Mr. Isom’s new role. “American Airlines has consistently lagged behind the industry both operationally and financially, and that performance needs to be corrected.”

Mr. Isom has told employees that he does not want to change the airline’s strategic direction, but will work to improve operations and bring the airline back to profitability.

“This is no excuse. This is a matter of management leadership. But I want to say that the level of complexity that is in the industry today is unique,” Mr. Isom told pilots at City Hall shortly after his appointment was announced. ask for a little patience, a little understanding. It’s our job to fix it. “

“The level of complexity in the industry today is unparalleled,” Robert Isom, pictured in 2020, recently told pilots.


Photo:

Elaine Thompson / Associated Press

Industry observers have expected Mr. Isom to become CEO; the question was only when. Mr. Parker said the board has felt confident in Mr. Isom for years. “We did not feel the need to do a search,” he said.

American stocks have risen 15.2% this year – more than many rivals – although airline shares have been hit in recent weeks by concerns over the new Omicron variant of Covid-19.

In an interview earlier this month, Mr. Isom said that American is positioned to thrive when demand returns. Despite major setbacks this fall, American has run as well or better this year than before the pandemic in terms of delays and cancellations. The airline’s fleet of relatively young aircraft and a more domestic-focused network could give it a boost as rivals have also taken on more debt and faced their own battles increasing, analysts have said.

The emergence of Omicron presents a new challenge. The increase in cases has dampened the demand for lucrative transatlantic travel, and may further delay a long-awaited improvement in business travel as large companies delay bringing employees back to offices. The situation has also strained the airline’s crew, and airlines canceled hundreds of flights during the Christmas holidays.

Analysts expect next year to be another tough year as the industry struggles with staffing constraints that could limit expansion and delays in aircraft deliveries. American said earlier this month that it will have to trim international flights next summer due to delays from Boeing Co. in the delivery of the new 787 Dreamliners, which American has anticipated after retiring many other widebody jets.

Mr. Isom quoted these frustrations and other flawed products in his discussion with pilots: “We’re talking about aircraft – when ever I have not been able to trust suppliers to do their job? When have we not been able to get pillows and blankets, or you know, plastic cups? ”

Mr. Isom has been a core member of the close-knit group of leaders who lead American. He has played a key role in the airline’s strategic decisions in recent years: assisting engineering partnerships with Alaska Air Group Inc. and JetBlue Airways Corp. as American says will help fill the network, for example.

In mid-autumn, videos showed crowds of people at airports across the country after American Airlines canceled hundreds of flights due to bad weather and staff shortages. Screenshot: WSOC-TV via AP

After taking an MBA from the University of Michigan, he worked for Mr. Parker as a financial planner at Northwest Airlines and took him to America West in 1995. Richard Anderson, who became Northwest’s CEO, recruited Mr. Isom to return to Northwest. Five years later, he decided that his structured thinking – as a major in mechanical engineering at the University of Notre Dame – would make Mr. Isom well-suited for the job of running Northwest’s large business in Tokyo and later overseeing customer service operations.

While Mr. Isom has not shown any other airline executives’ noise, he brings both commercial and operational expertise, Mr. Anderson said.

“The big personality piece is not him,” but that may be an advantage, Mr. Anderson said. “He was always very good at [employee] break room. It’s always a good test. ”

Hyatt Hotels Corp. chief Mark Hoplamazian said he coordinated closely with Mr. Isom throughout the pandemic. Mr. Isom’s travels to America’s operational hubs to visit employees throughout the pandemic prompted Mr. Hoplamazian to return on the road to visit his hotels as well, he said.

After Mr. Parker designed a merger between America West and US Airways, he asked Mr. Isom to help turn around operations at the newly combined airline. The two airlines’ systems were not fully integrated, and employees struggled with two sets of procedures.

Doug Parker will remain chairman of the board of American Airlines Group after resigning as CEO.


Photo:

Alex Brandon / Associated Press

Peter Crist, an executive recruiter who has known Mr. Isom for decades, recalled receiving a phone call from Mr. Isom at 6 p.m. 23:00 not long after he became US Airways’ chief operating officer. A blizzard had stopped flights on the east coast, and Mr. Isom had gone to the airline’s Philadelphia hub to help.

‘I said, Robert, what are you doing? He said: ‘I’m in baggage claim. I’m trying to get this airport up and running, ”Mr. Crist recalled.

Investments in hiring management and airport workers, upgrading equipment and software and other efforts paid off. US Airways had the worst performance at the time of any major airline in 2007. In 2008, it was among the best.

Among the airline’s executives, Mr. Isom is known for drilling into details. A metric known as d-zero – when planes push back from the gate just in time or early – became a cry under Mr. Isom, although it is something the American has struggled with at times.

Mr. Parker and Mr. Isom have created a bit of a strange couple in the C-suite. Mr. Parker helped recreate the industry that hunted for transformative deals, but in a tribute video honoring him for a lifetime achievement award earlier this year, U.S. leaders claimed him for his tendency to be late for important meetings and lose things as the driver’s license, the car. keys and iPad.

Kerry Philipovitch, who worked for Mr. Isom in American until 2019, recalled that Parker and CFO Derek Kerr wondered how early Mr. Isom arrived at a corporate event, pointing out his best parking spot.

Ms. Philipovitch said: “It’s Robert. He works very hard. He’s coming early. “

In personality tests American leaders take, Parker said he registers as a conceptual thinker, so he has tried to balance it by surrounding himself with people like Mr. Isom, whose results have shown that he is more analytical and structured and who is skilled . on putting processes in place and implementing plans.

‘I probably appear more relaxed than I am. Robert appears more intense than he is, “said Mr. Parker. “For the team, I know it’s like that at times, how do these guys do this, they seem so different.”

Write to Alison Pages at alison.sider@wsj.com

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