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Friday, July 16, 2004 - Page updated at 12:00 A.M.
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Southwest Airlines CEO quits

By Trebor Banstetter
Knight Ridder Newspapers

Jim Parker's sudden resignation surprised many.
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FORT WORTH, Texas — When Jim Parker told the Southwest Airlines board of directors yesterday he was resigning, the reaction was pure Southwest.

He received a standing ovation. Board members hugged him. A few tears were shed.

"I am sad," Herb Kelleher, Southwest's co-founder and chairman, said a few hours later. "Jim is an admirable and indeed lovable human being."

Parker's abrupt exit was notably different from other recently high-profile CEO resignations, which are often terse, awkward affairs in which company failures are piled on the shoulders of the departing chief.

Parker, 57, was lauded for his 18 years at the company. He was praised for his role in keeping Southwest on course and profitable amid the industry downtown after the Sept. 11 attacks.

"It has been an honor to be of service to the people of Southwest Airlines," Parker said, calling the airline's employees "the best in the world."

The outgoing chief shocked board members, employees and Wall Street with the news of his resignation from the nation's largest discount airline, renowned for its genial corporate culture.

He leaves immediately, although he will be available as an adviser to new CEO Gary Kelly and Kelleher. Parker said he was leaving the Dallas-based carrier for personal reasons following the expiration of his three-year contract. He took the top job shortly before the attacks.

Kelly, 49, the airline's chief financial officer, had been groomed for the top job, although, Kelleher said, "We didn't anticipate that Jim would decide to retire when he did."

Kelly said he had no immediate plans for strategic changes.

"I'm anxious to work with our officers and our board and see what opportunities we could explore," he said. "But it would be premature to suggest any changes are planned."
 
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While not specifying the reason for retiring, Parker hinted that recent sparring with the flight attendants union took its toll on his credibility with some employees.

After more than a year of fruitless negotiations, Parker withdrew from talks earlier this year.

Union leaders had singled him out for criticism, slamming him for taking an 8 percent pay raise at the same time he was offering attendants a deal that would have boosted their wages by less than 3 percent annually.

Parker was replaced at the negotiating table by Kelleher, Southwest's legendary chain-smoking, liquor-quaffing spiritual leader. Kelleher, assisted by airline President Colleen Barrett, reached an agreement within weeks.

Airline analyst Ray Neidl said Parker's failure to ink a deal with attendants had damaged him at a company renowned for its benign labor relations.

"Airline unions are very powerful, and there was a lot of animosity there," Neidl said. "I think having the talks drag on so long, costing time and money, had everyone thinking that maybe it was time for him to go."

Leaders of the attendants union declined to speculate about the reasons for Parker's resignation. But Thom McDaniel, president of the local chapter of the Transport Workers Union, said he wished Parker well.

"While we had our differences and difficult times with Mr. Parker, we knew he shared our commitment to making Southwest the best airline in the industry," he said.

There were no outward signs that Parker was preparing to leave.

Parker said he had begun talking to Kelleher about stepping down about a week ago. Kelly was told Monday he was going to become the airline's next chief executive. The board wasn't informed until yesterday.

Parker leaves Kelly in charge of a company that has posted 53 straight profitable quarters, and whose low-cost structure has inspired a new generation of imitators, such as JetBlue Airways and AirTran Airways.

The surprise announcement came as Southwest reported a 54 percent drop in second-quarter profit, missing Wall Street targets amid higher expenses for fuel and labor.

Southwest shares fell 31 cents to close at $14.75 yesterday.

For the three months ended June 30, Southwest earned $113 million, or 14 cents a share, compared with $246 million, or 30 cents a share, a year earlier.

Information from The Associated Press is included in this report.

Copyright © 2004 The Seattle Times Company

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