The New Face of

Airline Leadership

Michael Bell
Global Aviation Practice
Spencer Stuart
Our domain is aviation leadership…
What I Would Like to Cover
Today…

• Where do we see the global

airline industry going?

• What are the implications for

airline leadership?
What Are The Major Forces Shaping
Airline Leadership in the Future?
• Low-Cost Carrier Phenomenon
• Rise of Emerging Markets
• Globalization of the Industry and of the
Executive Job Market
• Chronic Financial Underperformance
• “A Changing of the Guard”
Snap Back to 1995 –
The Leaders Then
Fast Forward to 2005 –
The Leaders Now
 Five New Airline Models
Emerging…
• Region-specific no-frills carrier (EasyJet, Gol,
JetBlue, Ryanair, Southwest, Virgin Blue)
• Independent, “larger-than-home” carriers
occupying the premium space (Copa, Emirates,
Etihad, LAN, Qatar)
• Global alliance player (Star, oneworld, SkyTeam)
• Consolidator (Air France-KLM, America West-US
Airways, Air New Zealand-Ansett, Grupo TACA,
LAN)
• Focused, niche player serving a specialized
market (ACMI, cargo, charter, regional flying)
Who has successfully transitioned to a
new model?

> Aer Lingus

> Air Canada
> Copa
> Emirates
> LAN
> Qantas
> Ryanair
> Grupo TACA
 What are the “New Guard”
Doing?
• Setting Product Standards (at both the high-end
and the low-end)
• Defining the necessary cost of production
• Setting pricing (much to the chagrin of legacy
carriers)
• Defining the most efficient distribution channels
• Securing the most valuable assets (Chicago
Midway, Dubai, Stansted)
• Grabbing the attention and profile of consumers
(much as did PanAm in the 1960s/1970s)
• Defining new aircraft requirements (A380 down
through A320/737NG)
 New model carrier hold
“all the trump cards”…
• Cost superiority (low-cost carriers)
• Product superiority (independent
premium carriers)
• Network superiority (alliances)
• Loyalty preference (alliances)
• “Staying power” (all)
What are the Implications for Airline
Leadership?
• Quality versus quantity of experience matters
more…a youth movement underway
• Those with “LCC DNA” seen as the fittest
• High quality leaders, frustrated and under-
compensated, are leaving and staying away
• Leaders may have to go abroad to get the “right
kind of experience”…and they will have the
opportunity to do so
• A new breed of airline executives “moving in” –
from both inside and outside the industry
 A Youth Movement at the Top
Alaska Airlines Bill Ayer 51
American Airlines Gerard Arpey 47
British Airways Willie Walsh 44
Continental Airlines Larry Kellner 47
Delta Air Lines Jim Whitehurst 38
US Airways Doug Parker 44

Average Current Age 45

 What was the picture in 1996?
Alaska Airlines John Kelly 51
American Airlines Bob Crandall 60
British Airways Colin Marshall 62
Continental Airlines Gordon Bethune 54
Delta Air Lines Ron Allen 54
US Airways Stephen Wolf 55

Average Age in 1996 56

Drop in Average Age in 10 Years 11
Average Age in 2015 34?
 Even More Pronounced at LCCs

Tony Davis Tiger Airways 39

Tony Fernandez Air Asia 42
Carlos Munoz Vueling Airlines 36
David Neeleman JetBlue Airways 46
Constantino de Oliveira Gol 37
Jozsef Varadi Wizz Air 40

Average Age 40
 A Youth Movement in
LATAM/Caribbean
Enrique Cueto LAN 47
Pedro Heilbron Copa Airlines 48
Constantino de Oliveira Gol 37
Juan Emilio Posada Avianca/ACES 47
Emilio Romano Mexicana 40

Average Age 44
 LCC DNA – What is it?
• Direct experience in conceiving, launching, or
operating a LCC
• Intimate knowledge of the LCC business model
• An ability to work within the “new generation”
airline organization
– Limited resources
– Real work
• An obsessive focus on cost
• Creative and innovative, “out of the box” thinking
LCC DNA – Nature or Nurture?
> Nature
>You either have it or you don’t
>Legacy-experienced executives are tainted
>Better off with industry outsiders or highly
malleable younger professionals
> Nurture
>Good executives are adaptable
>LCC is a mindset that can be acquired
>LCC disciplines are not rocket science; they can
be learned
 Not as LCC as one would think…
CEO – David Neeleman Morris Air/
Southwest
President – Dave Barger Continental
Flight Operations – Dave Bushy Continental
In-Flight Service – Vicky Stennes Delta
Technical Operations – Tom Anderson Boeing
Sales & Marketing – Tim Claydon Virgin
Finance – John Owen Southwest
Human Resources – Vincent Stabile Ziff-Davis
 Virgin America
Assembled with little LCC DNA
CEO – Fred Reid Delta
Flight Operations – Bob Weatherly Atlas/Canadian
In-Flight Service – Vicky Stennes Delta
Technical Operations – Guy Borowski AirTran/Canadian
Network Management – Brian Clark US Airways
Consumer Marketing – Spence Kramer ESPN
Finance – Bob Dana I-Banking
Human Resources – Frances Fiorillo Canadian
 Industry Outsiders at the Top
President – Constantino de Oliveira Grupo Aurea
CFO – Richard Lark Americanas
Several executives formerly with VASP!
LCC DNA Obsession – Bordering on
the Dangerous
> Some airlines recruiting highly inexperienced
executives with LCC experience into positions above
their heads
> Highly qualified and adaptable executives from legacy
or near-legacy environments wrongly overlooked
> Over-weighting of LCC exposure relative to other
important attributes – maturity, lessons learned from
experience, resilience
Notable Voluntary Departures
from the Industry
• Richard Anderson (NW) Ingenix/United Health Care
• Ed Bastion (DL) Acuity Brands (and then back to DL)
• James Beer (AA) Symantec
• Greg Brenneman (CO) Turnworks, PwC, Burger King
• Michelle Burns (DL) Mirant, Marsh & McLennan
• Jeff Campbell (AA) McKesson
• John Edwardson (UA) CDW Computers
• Steve Gorman (NW) Krispy Kreme Donuts, Greyhound
• Tom Horton (AA) AT&T (and then back to AA)
• Dirk McMahon (NW) United Health Care
 AA CFO Role –
Last Stop Before Exit
• 2000 Tom Horton CFO, AT&T
• 2002 Jeff Campbell CFO, McKesson
• 2006 James Beer CFO, Symantec

This would not be such an issue had AA not

invested hugely in the careers of these industry
stars and would-be successors to the CEO
position!
Primary Reasons for Departure
• Poor prognosis for wealth accumulation
– Little/no annual bonuses
– Salary cuts to demonstrate unity with labor
– Equity wiped out or non-performing

• Lifestyle improvement; not 24-7

• Frustration with labor intransigence

– Everything comes down to labor
– Executive compensation under the microscope

• Insufficiently fast promotional opportunities

– No growth
– Blockage at the top
Recruiting Them Back is Nearly
Mission Impossible
• They can’t afford to make the move back, even
if they wanted to
• Their prognosis on the industry is generally not
robust
• Once out, they are better able to separate their
passion for the industry from the logic about
their professional and economic well being
• Their “currency” wanes the longer they stay
away, particularly with the changing of the guard
underway
 Emerging Airline Markets
Drawing Talent
• Latin America – Copa, gol, LAN, TACA
• India – Kingfisher, Indigo, Sahara
• Middle East/Gulf – Emirates, Etihad, Gulf Air,
Qatar Airways
• Southeast Asia – Air Asia, Tiger Airways,
Jetstar/ValuAir
• China - ???
 Emerging Airline – The Appeal
• “Frontier” airline development
• Clean sheet situations
• Rapid growth organizations
• Professional adventure
• “Escape” from unhealthy, frustrating
legacy environments
• Potentially huge economic upside
Emerging Airline – The Challenge
• “Frontier” airline development –
little/no infrastructure
• Remote environments in sometimes
less-than-desirable location
• Foreign culture adaptation risk
• Trailing spouse/family issues
• Professional career risk; out of the
mainstream
• No certainty on economic upside
They are going primarily for the
experience…
• Most of the offshore movement is to
LCCs, not legacy carriers
• Offshore LCCs who offer little or no
“expat” support
• Base salary and bonus compensation is
adequate but not enough for wealth
accumulation
• Equity participation is usually present but
is by no means guaranteed
 A War for Talent Brewing
• Substantial need for airline leadership in
developing markets (whole teams, not just
individuals)
• Pervasive desire for “LCC DNA” with very little of
it to be found
• Diminishing desire on the part of proven airline
executives to stay in the industry
• Traditional market carriers are going to have fight
much harder to attract and retain the best in the
face of stiff competition from LCCs and offshore
airlines
A New Breed of Airline Leaders
is Emerging
• More entrepreneur than corporate executive
• More substantial owners than mercenaries
• More commercial/financial than operational
• More non-airline than airline
– Consumer goods
– Bus transportation
– Entertainment
– Consulting
 More Commercial than Operational

• Alaska Bill Ayer Marketing

• American Gerard Arpey Finance/Operations
• Continental Larry Kellner Finance
• Delta Jim Whitehurst Planning/Consulting
• Northwest Doug Steenland Legal
• Southwest Gary Kelly Finance
• United Glenn Tilton Marketing
• US Airways Doug Parker Finance/Planning
 More Owners/Founders than
Mercenaries
• Air Asia Tony Fernandes
• Gol Constantino de Oliveira Jr.
• JetBlue Airways David Neeleman
• Ryanair Michael O’Leary
• Southwest Herb Kelleher/Gary Kelly
• Vueling Airlines Carlos Munoz
• WestJet Clive Beddoe
What Does This Mean for You as
an Airline?
• Recruiting executives and senior
professionals is going to get tougher, not
easier
• Retaining prized talent should become a
top priority if it is not already today
• Looking far-and-wide, geographically and
industry-wise, will become the norm
What Does This Mean for You as
an Executive?
• Seek out the “right kind” of experience,
even if may mean a step sideways or
backwards
• Don’t be averse to professional adventures
abroad, with an eye to a staying connected
• Think and act as an owner, not as an
employee