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The big merger: Az's business climate needs change

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Rogue Columnist: American Airlines/US Airways

The big merger: Az's business climate needs change

Dogma of 'low taxes and light regulation' means Phoenix will be that much poorer

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Here's Arizona's "positive business climate" at work: The combined American Airlines/US Airways will move its headquarters to Dallas-Fort Worth. That pretty much says it all.

Much is wrong with this deal. It continues the extreme consolidation of the airline industry into four giant carriers, limiting customer choice, reducing competition and damaging local economies. Where do you think the $1 billion in promised "savings" will come from? Largely from cutting jobs and eliminating operations. Anyone who thinks the combined carrier will maintain its existing hub at Sky Harbor, so close to DFW, has spent too much time in the sun. When Northwest merged with Delta, the modern and efficient Delta hub at Cincinnati was closed, resulting in thousands of lost jobs. American's takeover of TWA did the same in St. Louis. In these and numerous other cases, the airlines had leaned on local governments to build airport capacity, only to be thrown away to make the latest numbers work for another merger. These mergers almost never deliver as promised, even long-term for shareholders. For cities and workers, they are a cancer. Good full-time jobs have been killed and not replaced. Airline industry employment today is lower than in 1995 even though passenger revenue miles have soared.

The US Airways that Doug Parker has spent years trying to sell traces its roots to Ed Beauvais' post-deregulation startup America West Airlines. It was very much Phoenix's airline, closely tied to growth at Sky Harbor. And through upturns, downturns and bankruptcy reorganizations, America West persevered even as Parker took over as CEO and used it as a vehicle to buy long-suffering US Airways. Even then, the headquarters remained here.

But Parker was never a Phoenix business leader in the mold of Walter Bimson, Gene Pulliam, Dick Snell or even Del Webb. Flawed as they were, they were deeply committed to the city and its progress. Parker is one of the stateless imperial chief executives; Paradise Valley is just one of the places where he hung his hat. The desperate condition of metro Phoenix arts organizations is one testimony to the lack of real corporate stewards here. Parker was never one, never wanted to be one. The 750 employees at the headquarters building in downtown Tempe was always a temporary gig.

Real corporate headquarters are an essential part of a healthy metropolitan economy. "Real" as opposed to the "suitcase headquarters" in north Scottsdale, with few employees, outfits that are the toys of rich men awaiting a buyer. Real headquarters draw talent and capital, provide high-wage jobs, are centers of decision-making, support scores of vendors, professional services and other small businesses, and spin off experienced executives who start new companies on their own. At their best, they are the bulwark of giving to the arts and charities. Because the chief executive and top management lives in the city, they see the city's health as important to their company, not least because a vibrant, livable city helps in recruiting top talent. Even when former corporate centers such as Pittsburgh and Cleveland lose many of their crown jewels, the legacy of stewardship lives on, empowering reinvention.

The best of Phoenix is the legacy of such corporations: Valley National Bank, First National Bank, the Arizona Bank, Greyhound/Dial Corp., etc. These were gradually lost and never replaced. Arizona's five Fortune 500 headquarters — Avnet, Freeport McMoRan, USAirways, Republic Services and Insight Enterprises — do not fill these roles. Only one is located in the central core. They are far fewer than should be expected in a metro area of this size. By comparison, 17 are located in Dallas-Fort Worth; 24 in Houston; eight in Seattle. The few large private companies in Phoenix are even more invisible, especially Apollo, the parent of the University of Phoenix.

Anyway, it's sunny and February is always a lovely month. The brightsiders will so their best to put the happy face on this horrible loss and life will go on. But this is a devastating loss for Phoenix and its competitiveness. It will affect Sky Harbor much more seriously and negatively than anyone wants to imagine. Doug Parker, the investment bankers and merger lawyers will be even richer. Phoenix will be that much poorer. One thing is clear: Arizona's dogma of "low taxes and light regulation" does not produce an attractive business climate.

This commentary was originally posted on Rogue Columnist.

Jon Talton is a fourth-generation Arizonan who runs the blog Rogue Columnist. He is a former op-ed and business columnist of the Arizona Republic, and retired as the economics columnist of the Seattle Times in 2019. Talton is also the author of 12 novels, including the David Mapstone Mysteries, which are set in Arizona.

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