James F. Parker, Dallas-based Southwest Airlines’ CEO, unexpectedly resigned yesterday after just three years. The publicly stated reason for the resignation was the ubiquitous “personal reasons,” such as the “draining” nature of the job. Airline CEO’s are becoming as disposable as football coaches. Mr. Parker becomes the sixth major airline CEO to step down since the 9/11 attacks.
However, the resignation coincidentally came just hours after Southwest reported that its second-quarter earnings had fallen 54%, although that dip was attributable mainly to labor-related charges in the current quarter and a onetime gain a year earlier. Nevertheless, as with the entire airline industry, Southwest has been troubled by labor troubles, higher operating costs and terrorism concerns since the 9/11 attacks. Moreover, although it pioneered the no-frills, low-cost approach, Southwest faces increased competition from new low-cost upstarts who have chased its business and kept fares under pressure.
Mr. Parker’s undoing probably was due to the acrimonious labor contract talks with the flight attendants union that the CEO complained became “personal” and “off track.” They were were settled only with the involvement of an outside mediator and the company’s hard-charging co-founder and chairman, Herbert D. Kelleher, whom Mr. Parker had to bring in as lead negotiator in the labor negotiations.
Mr. Parker had been seen as a transitional CEO, who definitely had a tough act to follow in Mr. Kelleher. The charismatic Mr. Kelleher had worked hard to build personal rapport with employees and won popularity on Wall Street with his pioneering low-cost approach. The two men were longtime associates who began working together 30 years ago at a San Antonio law firm and Mr. Parker was for years known as Southwest’s coordinator of big projects such as leading Southwest’s successful opposition to a high-speed rail project in Texas. But Mr. Parker had also been largely in the background while Mr. Kelleher became the company’s public face.
Chief Financial Officer Gary Kelly, who is 49, was named to replace Mr. Parker as CEO. Mr. Kelly was responsible for negotiating protective price hedges against higher fuel prices that saved Southwest hundreds of millions of dollars as other carriers suffered higher fuel costs.
The scuttlebutt within the industry is that the Southwest board and Mr. Kelleher had become frustrated by the tenor of labor relations at the airline over the past few years. If true, it’s understandable that Mr. Kelleher would have a hard time comprehending why it took two years of negotiations to settle an agreement that he and the union were able to settle in two months once Mr. Kellerher got involved.

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