At American Airlines’ investor and media day last October, Doug Parker made two bold statements:
- He insisted that shares of American Airlines stock will reach $60 by November 2018
- He proclaimed that the airline will never again have a year where they lose money
Regarding the $60 share price claim, Parker made the bet with Sam Buttrick, who is an airline analyst at a hedge fund. Parker and Buttrick have known each other for years, so the bet was that American’s stock would hit $60 by the time Buttrick turned 60 on November 25, 2018. They bet a bottle of wine on it.
Well, we’re now a couple of weeks past that deadline, so how did American do? Not well, and Parker has admitted defeat, though rather than giving Buttrick a bottle of wine, he’ll take him to dinner and pay for drinks.
As of the time of this post, American’s stock is at under $34 per share.
At the time the bet was made, American’s share price was in the high $40s. So Parker was betting we’d see a ~25% increase in stock price. Instead we’ve seen a decrease of over 25%.
As a point of comparison, over the same period United’s stock is up about 50%, and Delta’s stock is up about 10%.
Doug Parker has no doubt had an amazing career. He started at America West, and now runs the world’s largest airline, having been the CEO at the helm of two big mergers. I find him to be an incredibly likable guy, and I have the utmost respect for his lifelong career in the airline industry.
But at this point:
- He has disappointed Wall Street, and hasn’t met his own expectations; the share price is just over half of what he suggested it would be, and he doesn’t really have any good excuses
- Employees aren’t happy — at this point only 26% of employees think that American management makes the right decisions to support frontline employees
- And, well, I think we know how many of us customers feel nowadays…
In spite of frustration from Wall Street, employees, and customers, somehow this guy still has a job? Is being the CEO of American Airlines in fact a tenured position, or…?
I’m not just trying to pick on Parker here. At this point American needs a CEO who has a vision for the airline, who gives employees clear focus about the direction the airline is headed. Or at least a CEO who can fake that.
For the past few years, American has been sending nothing but mixed signals to both employees and customers.
While I believe American will eventually decide on a vision (I mean, they have to, right?), at this point I don’t think Parker will have enough respect from employees to execute on that. Years ago the airline adopted the “Going for Great” slogan, though it’s something they’ve dropped since.
If American decides to go in a more premium direction, no one will take Parker seriously. If they go in a less premium direction, well, I don’t think that will work well for American. Their costs are way too high to be able to compete with the low cost players in the markets, be it Spirit, Norwegian, or the Chinese carriers.