Soon it will be up to Robert Isom, a long-time executive at American Airlines Group Inc., to set a new course for the world’s largest airline.
Mr. Isom will take over as CEO of American on March 31st after Doug Parker retires, who brought American together through blockbuster deals to become the world’s busiest airline. Mr. Parker will remain Chairman of the American Board of Directors.
Mr Isom will face a number of problems. The airline’s operations, which he oversees, have lagged behind its competitors in recent years. Relations with the trade unions were controversial. Prior to the pandemic, investors became restless as the airline’s stock performance plummeted.
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The pandemic has created new challenges. The Americans already had more debts than their rivals after their fleet was refreshed, and then piled billions more to survive last year. And in its race to resume and meet growing travel demand this year, American has stumbled intermittently, resulting in thousands of canceled flights angering passengers and crews.
“Our expectations are high,” said Capt. Eric Ferguson, President of the Allied Pilots Association, after announcing Mr. Isom’s new role. “American Airlines has always lagged the industry operationally and financially, and this underperformance needs to be corrected.”
Mr. Isom has advised employees that he will not change the airline’s strategic direction but will work to improve its operations and bring the airline back to profitability.
“This is not an excuse. This is a question of management leadership. But I must say the complexity that the business has today is unprecedented,” Isom said shortly after the announcement of his appointment in front of pilots in a town hall. “So I ask for a little patience, a little understanding. It’s our job to fix that. “
Industry watchers expected Mr. Isom to become CEO; the only question was when. Mr. Parker said the board had been confident about Mr. Isom for years. “We didn’t feel the need to conduct a search,” he said.
American shares are up 15.2% this year – more than many of its competitors – despite concerns over the past few weeks of concerns about the new Omicron variant of Covid-19.
In an interview earlier this month, Mr. Isom said American was in a good position to thrive when demand returns. Despite major setbacks in the fall, American has done as well or better this year in terms of delays and cancellations than it did before the pandemic. The airline’s fleet of relatively young aircraft and a more domestic-focused network could give it a boost as competitors have also taken on more debt and face their own struggles, analysts said.
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Nonetheless, the emergence of Omicron poses a new challenge. The surge in cases has dampened demand for lucrative transatlantic travel and could further delay a long-awaited rebound in business travel as large corporations postpone the return of their employees to their offices. The situation has also tightened airline staff, with airlines canceling hundreds of flights over the Christmas holiday weekend.
Analysts expect next year to be another difficult year as the industry grapples with staffing shortages that could limit expansion and delays in aircraft delivery. American said earlier this month that it will have to cut international air traffic next summer due to delays in deliveries of Boeing Co.’s new 787 Dreamliners, which American counted on following the retirement of many other wide-body aircraft.
Mr. Isom cited these frustrations and other product supply bottlenecks in his discussion with pilots: “We’re talking about airplanes – when could I never rely on suppliers to do their job? When couldn’t we get pillows and blankets or you know plastic cups? “
Mr. Isom was a core member of the close-knit group of executives that lead American. He has played a key role in the airline’s strategic decisions over the past several years, including helping develop partnerships with Alaska Air Group Inc. and JetBlue Airways Corp., which American says will fill its network.
After receiving his 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 chief executive, recruited Mr. Isom to return to Northwest five years later, betting that his structured mindset – like his engineering degree from the University of Notre Dame – would make Mr. Isom a good choice for the job who ran Northwest’s big business in Tokyo and later oversaw customer service.
Although Mr. Isom hasn’t shown the bragging rights of some other airlines, he brings with him both commercial and operational expertise, Anderson said.
“That big personality piece isn’t him,” but that can be a benefit, said Mr. Anderson. “He’s always been really good at that [employee] Break rooms. It’s always a good test. “
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Mark Hoplamazian, chief executive of Hyatt Hotels Corp., said he had been in close coordination with Mr. Isom throughout the pandemic. Mr. Isom’s trips to American’s operational centers to visit staff during the pandemic prompted Mr. Hoplamazian to head back to visit his hotels as well, he said.
After Mr. Parker planned a merger between America West and US Airways, he asked Mr. Isom to reverse the operations of the newly combined airline. The two airlines’ systems were not fully integrated and staff faced two procedures.
Peter Crist, an executive recruiter who has known Mr. Isom for decades, recalled receiving a call from Mr. Isom at 11 p.m. shortly after he became US Airways’ chief operating officer. A blizzard had disabled flights on the east coast, and Mr. Isom had gone to the airline’s hub in Philadelphia 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,” recalled Mr. Crist.
Investments in management and airport personnel, equipment and software upgrades, and other efforts paid off. US Airways had the worst on-time performance of any major airline in 2007. Until 2008 she was one of the best.
Among airline executives, Mr. Isom is known for delving into the details. A metric known as d-zero – when flights are pushed back from the gate right on time or early – became a rallying cry under Mr. Isom, though Americans struggle with it at times.
Mr. Parker and Mr. Isom are a naturally odd couple in the C-suite. Mr Parker helped reshape the industry in the hunt for transformative deals, but in a tribute video honoring him for a Lifetime Achievement Award earlier this year, American executives ripped him for his tendency to be late at important meetings come and lose things like his driver’s license or his car keys and iPad.
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Kerry Philipovitch, who worked for Mr. Isom at American until 2019, recalled that Mr. Parker and CFO Derek Kerr were amazed at how early Mr. Isom was arriving for a corporate event and pointed out his best parking spot.
Ms. Philipovitch said, “This is Robert. He works really hard. He will be there early.”
In personality tests conducted by American executives, Mr. Parker said he enrolls as a conceptual thinker in setting up processes and executing plans.
“I probably come across as more relaxed than I do. Robert looks more intense than him, ”said Mr. Parker. “For the team, I know that sometimes it’s the way these guys do it, they seem so different.”