The Flight Stuff

By SALLY B. DONNELLY

Doug Parker, 42, became CEO of Arizona-based America West Airlines, the nation's eighth largest carrier, on Sept. 1, 2001, and has turned around what critics used to call "America Worst." He spoke to TIME's SALLY B. DONNELLY on the state of the airline industry:

TIME: It seems as if the industry is imploding. What's going on with the major airlines?

DOUG PARKER: Deregulation [begun in 1978] is finally sorting things out. There are far too many carriers flying far too many seats, based in part on labor contracts that are out of line with what customers are willing to pay. And the combination of aggressive low-fare airlines and some of the highest fuel prices in history is crippling.

TIME: Has the government helped keep inefficient airlines around too long?

PARKER: Maybe. The government loan guarantees were necessary immediately after 9/11, when the capital markets were closed to airlines. But the government kept that process open too long and didn't look critically enough at some airlines' business plans.

TIME: Why has it taken so long for the system to shake out?

PARKER: In most industries, when your rival runs out of money and declares bankruptcy, the game is over and you win. But in the airline business, financial backers are willing to let failing carriers hang on. The government loan guarantees played a role too, in part by distracting some airlines from fixing their own problems first.

TIME: Who is responsible for the big-airline woes--management or unions?

PARKER: It's not so simple. It's true that tensions between labor and management have been a problem for decades. There was--and still is at some airlines--a great deal of mistrust. At America West, for example, we have spent an extraordinary amount of time over the past several years just talking to our employees.

TIME: What should big airlines do?

PARKER: They have to be open to change. And they have to cut their costs-- in some cases pretty dramatically. Some of the Big Six carriers have costs up to 30% more than low-fare airlines. We completely revamped our fares system-wide. None of the Big Six have done that, and people are voting with their feet.

TIME: What will the industry look like in five years?

PARKER: Hub-and-spoke networks are not going away. But after some painful consolidation, we will probably have three very big airlines. The country likely can't sustain six low-cost carriers either. If 75% of passengers now travel on the Big Six airlines, I think that will be about 50% within a few years, and the low-fare airline share will rise to take the other half.