FORTUNE 500 2007  
FORTUNE 500    

Onboard the wild ride of Doug Parker

At 45, the US Airways chief turned a dog into a moneymaker. But along the way, his sky-high ambitions have run into the harsh realities of the airline business. An exclusive look at the education of an aviation wunderkind.

Barney Gimbel, Fortune writer

(Fortune Magazine) -- "Shut up, Doug!" hissed the blond businesswoman across the aisle. "It's not your job to tell passengers anything. Let people make decisions who know what they're doing!"

The weird thing: We were aboard a US Airways flight, and Doug happens to be the CEO. The woman lecturing him? She's Elise Eberwein, his head of customer relations, human resources, and communications. Her boss had rushed into first class, declaring, "The airport is closed! The airport is closed!" It was late January, and Doug Parker was heading to Washington to testify before Congress. As he plopped down in his seat, almost knocking over a plastic cup of red wine perched on the duct-tape-covered armrest, he added, "It's snowing in D.C. Our alternative is Boston."

Game On: Parker and his wife, Gwen, root courtside for the Phoenix Suns, their hometown favorite.

"Jeez, Doug," explained Eberwein, a former flight attendant. "We don't know for sure we're going to Boston yet. There's a rule of thumb: Don't tell the passengers anything until you're sure of it. Otherwise they'll panic." (In fact, the plane did land in Washington.)

It was just one of many vivid lessons in the past year for America's most precocious and controversial airline executive. Parker, 45, has shot to fame in the industry and on Wall Street for successfully combining his ailing America West and the twice-bankrupt US Airways (Charts, Fortune 500), a merger that industry watchers had taken to calling Project Dumbbell for its leaden prospects. Parker has managed to prove them wrong. US Airways (revenues: $11.6 billion), a company consistent only in ranking at the bottom of the industry in customer service, generated more profit last year than any carrier except Southwest.

Yet Parker's progress has been marked by many harshly educational moments as an airline chief. His recent hostile bid to take over Delta Air Lines (Charts, Fortune 500) foundered under blistering attacks by Delta loyalists and high-profile scrutiny by Congress; his pilots and mechanics have rebelled at his efforts to combine the workforces of America West and US Airways; his company's operational shortcomings contributed to several episodes in which tens of thousands of passengers were stranded; and he suffered the side effects of his newfound celebrity when his arrest for drunken driving lit up the financial wires. During his past year's adventures, Fortune was along for the ride, granted unusual access to explore what it's like in a job that has elements of glamour but also thankless challenges.

Parker is the one to watch, according to the previous generation of airline wizards. "He has an effervescence and a joie de vivre that I really like," says Herb Kelleher, the legendary co-founder of Southwest Airlines (Charts, Fortune 500) (who also established an industry standard for whiskey consumption and sent Parker a supportive note after his arrest).

"He's fun to be with, but he's not fun to play cards with. I'll tell you why: He's an excellent poker player." But Parker is not an operations guy with jet fuel in his veins ("No, I don't know how many flights we've got from Phoenix to Albuquerque"). He's a strategic player with a big idea and as much nerve as a test pilot in pursuing it. Rather than dreaming of global expansion of routes and fleets, like the pioneers of old, Parker wants to combine overlapping carriers and then drive costs down by putting fewer planes in the air. That's not a totally original idea, or a politically correct one, since it could lead to higher fares, but it may bring about a more stable industry.

Says Gordon Bethune, the former Continental (Charts, Fortune 500) chief who turned it into a top performer: "We've all known consolidation was the answer to a lot of the industry's problems. It's just that Doug's the only one with the balls to go and do it."

The plan was to to stay up all night. It was late one evening last June, and Parker was sipping a margarita at the rooftop bar of the Peninsula hotel in New York City. It was hot outside, his tie was off, and he was trying to recruit two of his colleagues to keep him company until four the next morning, when he planned to catch a ride to the airport. Sleeping for a couple of hours, he said, wouldn't make any sense.

That night he and his top deputies, a close-knit group of four friends, had reason to celebrate. Parker had just delivered the keynote speech to a Merrill Lynch transportation conference, where he was the star of the show. The company's stock price had more than doubled in less than a year. As the waitress came around for last call, I playfully asked him what airline he wanted to buy next. This was a throwaway question - after all, who in his right mind would try to pull off two airline mergers in two years? Parker just smiled.

Half a year later he was still smiling. It was late January, and Parker had just announced his hostile $12.7 billion offer for Delta, and he was waiting to hear if the carrier's creditors committee had accepted the offer. We were in his office at the company's headquarters in Tempe, Ariz., a small room with a panoramic river view and the Phoenix airport in the distance. Why, I asked him, had he launched an assault on the Atlanta carrier even before enjoying the fruits of his new Southwestern-based empire? "It's not what we're supposed to do," he said, leaning back in his chair. "We're supposed to maximize value. Here's a chance to do it." He paused and smiled. "But it's also kind of fun too."

Most people don't see the business that way, but Parker has a playful appreciation for the absurdity of the economics of his industry, one with deregulated prices and huge fixed costs. While airlines are generally doing well this year, historically they have lost more than they have made. Parker thinks the only way the airlines can grow up and act like rational businesses is to reduce capacity.

To show what that means, Parker cites the case of Asheville, N.C. (pop. 72,231). US Airways operates eight flights a day from there to its hub in Charlotte. Delta flies four to Atlanta. But the passengers typically aren't going to either city, they are just connecting to Los Angeles or Dallas or Boise. Parker's idea: Cut the Asheville schedule by three flights and you can fly the same passengers for a much lower cost.