Published in May 2016 issue
Seattle´s residents are some of the most loyal people you´ll ever meet. Whether it´s a super bowl championship team, an online retail giant, or a mega coffee chain, the people of the Emerald City love to rally behind their own.
By Albert Rodriguez
This is one reason why Seattlebased companies such as Amazon.com, Starbucks, Holland America, and Tommy Bahama, to name a few, have grown from small businesses into global brands. Nordstrom, Zillow, REI, Jones Soda, and Getty Images, all headquartered in ‘Seatown’, also expanded domestically or throughout North America as a result of strong customer support back home.
You can add Alaska Airlines (AS) to this list. From a 1940s charter service to a 1950s regional airline, to a leading US carrier today, flying to 114 destinations throughout North and Central America, AS has steadily increased its operations at Seattle-Tacoma International Airport (SEA) (Airways, February 2015) while also offering more flights from its hubs in Portland (PDX), Los Angeles (LAX), and Anchorage (ANC).
But isn’t it ironic that an airline named Alaska is not based in that State?
The true story is that, for many in the Puget Sound, Alaska Airlines is not only their preferred carrier, it’s a company they take pride in, feel connected to, and feel represents them. Alaska is their airline.
This 83-year-old carrier is now stronger than ever, growing steadily with new aircraft and a refreshed look that, according to its CEO Brad Tilden, “makes us stand out in a compelling and consistent way as we expand into new markets, build loyalty and attract new customers.”
ALASKA’S EARLY DAYS
As the name suggests, Alaska Airlines was born in the Last Frontier State. Even though Wien Air Alaska (WC) was the first airline in America’s northernmost State, AS has become the most prominent. Launched as McGee Airways and Star Air Services in 1932, later becoming Star Air Lines and, eventually, Alaska Airlines, it recorded its earliest flights only within the mountainous state.
Instrumental in the aftermath of World War II in transporting goods during the Berlin Airlift, and in relocating Jewish refugees to Israel, it wasn’t until 1951 that the airline was temporarily permitted to fly commercially between the Pacific Northwest and Alaska; in 1957, was granted permanent access to continue these services.
In the early 1960s, the carrier, now led by Charlie Willis, entered into the jet age with a Convair CV-880M, which introduced ‘Golden Nugget Service’ on August 30, 1961. Customers loved the ways it took their minds back to the old days of gold prospecting, from the vivid red wallpaper at the ticket counters to the decorative tassels and plush seats of red and gold in the aircraft cabins.
In 1965, AS became the first comercial carrier to fly the Lockheed L-100 (the civilian version of the C-130 Hercules), transporting large drilling equipment to Alaska’s oil-rich North Slope and, later, to the jungles of Ecuador. A year later, AS sold its sole CV-880M to Cathay Pacific (CX) and took delivery of its first Boeing 727. By 1968, the carrier expanded service by acquiring Cordova Airlines plus several smaller other carriers serving Southeast Alaska, including Alaska Coastal-Ellis Airlines.
At the beginning of the 1970s, AS began charter services to Siberia in the Soviet Union. This was the result of three years of secret negotiations between the airline and the Soviet authorities. The US Department of State reluctantly chose not to block the plan for fear of a negative response from the Soviets. The airline gained permission to fly more than two dozen flights between 1970 and 1972.
But the airline’s finances teetered. Revenues fell when work on the Trans- Alaska Pipeline System. Meantime, fuel and operational costs were rising. Then, flight AS1866 crashed in Juneau on September 4, 1971—the worst accident in the airline’s history to date.
By 1972, AS was on the verge of bankruptcy. Board member Ron Cosgrave convinced other directors to oust Willis. Cosgrave became chairman and brought in his business partner Bruce Kennedy, who would become CEO in 1978. The airline slashed the workforce by more than one third and dropped its money-losing routes and cargo business, earning back creditor trust. The team also oversaw crucial improvements to customer service and on-time performance. It was soon on the path to profitability.
In the mid-1970s, benefiting from the development of the Trans-Alaska Pipeline, AS and Braniff International offered an interchange service between Fairbanks (FAI) and Houston (IAH) via ANC, SEA and Dallas (DFW). When the 1978 Airline Deregulation Act was enforced, AS flourished. Beginning the next year, it enjoyed one of its strongest growth spurts by expanding to PDX and San Francisco (SFO). Until then, it had served only 10 destinations in Alaska and one in the continental US: Seattle. It continued branching out, adding flights to Spokane (GEG), Phoenix (PHX), Tucson (TUS), Boise (BOI), Oakland (OAK), and San Jose (SJC).
In the 1980s, AS merged with Horizon Air (QX) and Jet America Airlines (SI). Horizon would be vital in introducing regional service in the Northwest and West Coast. Jet America ended operations in 1987, while Horizon Air retired its brand in 2011, the same year that SkyWest (OO) entered into an agreement with AS to operate some of its flights as an affiliate. As of 2015, SkyWest flies to 18 of Alaska’s destinations. In 1988, AS made one of its most significant advances: adding flights to Mexico, a top destination for North American vacationers and snowbirds.
In the early 1990s, amid the post-Gulf War downturn and stiff competition from Southwest Airlines (WN) in the West Coast markets, the airline posted a loss of $121 million, the first in 19 years. Kennedy stepped down as CEO, and it fell to his successor, Raymond Vecci, to take drastic measures, including layoffs and cutbacks on the prized in-flight product.
By the middle of that decade, growth and profits had resumed and AS continued to expand. Part of the profits came from performing unique Combi and ‘milk run’ operations to remote and oildriven towns within Alaska for a number of years, making AS a key player in the secluded state’s economy by supplying mail, food, and vital cargo. These operations, originally carried by Boeing 737-200Cs (and, currently, -400Cs), are still in effect and have been highly profitable.
Despite the positive financial results, Vecci was dismissed in early 1995 and replaced by John Kelly, former CEO of Horizon Air. Almost immediately, the carrier ventured into an expansion of its West Coast routes, taking advantage of the open skies agreement set between the US and Canada in February of that year. Also in 1995, AS became the first US carrier to sell tickets over the Internet.
Since then, AS has scored a series of industry firsts: introducing Global Positioning System (GPS) navigation technology in 1996, and being the first to fly with head-up guidance systems (HUD). By 1999, AS installed combined GPS and Enhanced Ground Proximity Warning System (EGPWS) technology in all its Boeing 737-400s, adding a real-time, three-dimensional terrain display—particularly useful for challenging Alaskan approaches such as Juneau. It also pioneered the use of Required Navigation Performance (RNP), not only in Alaska but also in the lower 48.
During the dot-com boom of the early 2000s, and with an opportunity to connect the Northwest region to other parts of the country, AS added nonstop flights to Orlando (MCO), Miami (MIA), Washington (IAD), Boston (BOS), DFW, Chicago (ORD), Denver (DEN), and Newark (EWR). Not only were these destinations important for both leisure and business, they were also major connecting points for trips to Europe, South America, and the Caribbean.
In July 2001, the airline scored a major victory when it secured a pair of slots at Ronald Reagan Washington National Airport (DCA). The FAA granted exemptions to operate beyond the existing 1,250-mile (2,010km) federal restriction perimeter imposed on the airport. Currently, AS holds eight slots to operate from DCA to SEA, LAX, and PHX.
Innovative in its cabins as well as its cockpits, in 2003, the airline introduced the digEplayer, a novel portable self-contained inflight entertainment (IFE) device developed by Bill Boyer Jr., then a baggage handler for the airline. The device created a whole new IFE product category which still is evolving in the industry today.
A year later, AS devised the concept of the ‘Airport of the Future’ in ANC, eliminating the traditional counters with automated kiosks and self-check-in stations. It was the world’s first airline to allow web-based passenger check-in, and to introduce wireless check-in technology.
In October 2007, the airline expanded to Hawaii with flights from SEA to Honolulu (HNL) and Lihue (LIH), and later to Maui (OGG) and the Big Island, at Kona Airport (KOA). Hawaii became one of Alaska’s most profitable destinations.
In the following years, AS continued piling on more nonstop routes from Seattle. It also began connecting its destinations to each other—such as PDX to Minneapolis (MSP); San Diego to Kona; Boise (BOI) to Reno (RNO)—while increasing its runs to Hawaii from the West Coast and debuting flights from LAX to Liberia (LIR) and to San José (SJO) in Costa Rica.
According to December 2015 data, the Los Angeles-area operations have been slimmed down to an average of 58 daily departures, while PDX has become a focus city with 112 flights—the second largest market for the carrier in terms of average daily departures.
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THE ALASKA EXPERIENCE
Alaska scores high in surveys measuring customer and employee satisfaction.
This year, the airline plans to roll out its new Premium Economy Class, featuring a seat pitch of about 35 inches (compared with about 31 and 32 inches in Economy), priority boarding, and potential additional perks on its all-Boeing 737s. The fleet will be retrofitted with the new seating section through 2017.
Customers will be able to upgrade to Premium Economy when booking flights with AS and SkyWest—but not on Horizon Air routes.
Alaska boasts some of the best-trained pilots in the industry. In 2013, the airline invested $40 million to adopt a satellite technology that enables it to operate in difficult weather conditions—the norm in Alaska—year round. According to AS, the technology saves more than $20 million every year by reducing flight cancellations and delays.
Although AS isn’t a member of any major airline alliance, its Mileage Plan program extends to partnerships or agreements with multiple airlines.
INVOLVING THE COMMUNITY
Something else separates AS from other airlines: its involvement with local communities, either through in-kind contributions, sponsorships of special events and programs, or its own philanthropic project, the Alaska Airlines Foundation. Whether it’s supporting the Anchorage Symphony, partnering with Make- A-Wish and Special Olympics, participating in the Seattle Pride Parade, or assisting the Shriner’s Hospitals in providing over 1,000 complimentary passenger seats to patients requiring medical assistance in other cities, the airline has proactively integrated itself into communities from Seattle to Alaska, to Hawaii.
An annual event that warms the heart is the holiday-themed Fantasy Flight, which carries underprivileged children from shelters and hostels to the ‘North Pole’ (GEG to SEA), complete with Christmas carols, festive costumes, and plenty of comfort and joy. In December 2015, AS announced that it would be donating an additional one million miles to the Hero Miles program, which provides airline tickets to wounded, injured, and ailing service members and their families.
However, where AS is at its most visible is in college and professional sports. The indoor and outdoor facilities at the University of Washington in Seattle have been renamed Alaska Airlines Arena and Alaska Airlines Field. The University of Alaska Anchorage has its Alaska Airlines Center. Appearing boldly on select Horizon Airlines aircraft are the school colors and logos of 11 Northwest and West Coast colleges. And Russell Wilson, the star Seattle Seahawks quarterback, appears in commercials as a public spokesman.
SEA-TAC: ALASKA AIRLINES COUNTRY
Alaska Airlines is the biggest tenant at SEA. With dozens of daily flights scheduled out of the airport, the airline currently uses 31 gates at Concourses C and D and the North Satellite in the main terminal. Anyone landing at Sea-Tac for the first time knows right away they are in AS territory.
Besides its operating space at the airport, the company has its main offices less than 10 minutes away. Nearby is the AS Flight Operations Training Center, a two-story facility used to train its nearly 3,000 flight attendants and 1,500 pilots. To provide initial and ongoing training to Alaska’s Fight Crew staff, the building houses multiple classrooms, flight simulators, mock 737s, and a Systems Operations Control (SOC) center.
THE DELTA/ALASKA BATTLE IN SEATTLE
Success has its disadvantages. If a pie looks good, everyone will want a slice. For years, Alaska and Horizon operated unchallenged in the Northwest and West Coast, offering flights to such humble destinations as Pasco (PSC), Medford (MFR), and one of its oldest routes, Bozeman (BZN), which had begun in 1980.
But along came Delta. Much like the big kid in the cafeteria who wants your lunch money, and several years after it had merged with Northwest Airlines (NW), which had SEA as one of its hubs, the Atlanta-based airline re-positioned that airport as an official hub. Depending on whom you talk to, AS may have initiated this turf war in October 2008, when it launched flights to Minneapolis-St. Paul (MSP). That was a key destination for DL, and NW’s former main hub. Or, possibly, it started a year earlier, in October 2007, when AS launched flights to Hawaii from SEA. But the battle was certainly joined when DL confirmed the Emerald City as an official hub in 2013, and began stacking flights onto its daily schedule, gradually offering nonstop routes between SEA and PDX, LAX, SFO, and Las Vegas (LAS), to name a few—some of Alaska’s longest-running and most profitable routes.
In a 2013 interview, Glen Hauenstein, DL’s chief revenue officer, asserted that SEA was big enough for both carriers. “I don’t think anybody gets to claim anything in the business world as theirs,” he said. “Clearly, we’ll serve some of the same cities, but we serve a different spectrum of the market. They’re a giant superregional. We’re a global carrier.”
Delta may be beating Alaska in advertising. In recent years, DL has been aggressively promoting itself on Seattle’s light rail trains, bus tunnel billboards, airport banners, and all over the Internet, from social media to travel blogs and websites. DL even took the bold step of christening one of its Boeing 737s ‘Spirit of Seattle’, poking Alaska’s chest with higher intensity.
And as an aggressive countermeasure, AS added four direct flights to DL’s largest western hub in Salt Lake City (SLC). To celebrate the new service, AS offered Mileage Plan members double miles on all flights to this destination.
So who’s going to win?
In the short run, the answer may very well be: the airport. Traffic growth at SEA sizzled in 2015, with an estimated increase of over 15% in comparison to 2014. “As of the end of September 2015, SEA experienced 13.4% more passengers than during the same period last year,” an airport spokesman told Airways. That placed SEA at the top of the list of fastest-growing airports in the country.
And, even though there’s a serious deficit of available gates at SEA, and Delta has repeatedly requested more availability, Alaska Airlines controls 49.9% of total seat capacity versus Delta’s 20.2%. For international flights, DL holds the edge at 38.6% versus 19.2% for AS.
The last major market to see this type of sustained competition between two major network airlines was Denver (DEN), where United (UA) and Southwest eventually settled into an uneasy co-existence after Frontier (F9) exited the market. In SEA, DL is the aggressor, but that experience is probably instructive.
Under present economic conditions and at the current price of fuel, this situation is probably sustainable. But when the next recession hits, all bets are off. In the meantime, Seattle residents can expect an everexpanding windfall of additional service and sharply lower airfares.
“When I see that face, I feel proud. I feel like I’m home,” says Sallee Baltierra, a concierge in Anchorage’s Board Room. “I love to see that Eskimo on the tail in other cities that we fly to, from Liberia, Costa Rica to Nashville, Tennessee. It makes me feel like there’s a little piece of home waiting for me.”
Alaska Airlines is soaring these days. The company posted a net income of $274 million for its third 2015 quarter, up 38.4% year-over-year, and breaking the record it had set a few months earlier, when it announced a $234 million net income for last year’s second quarter.
A record-breaking fourth quarter in 2015 resulted in AS employees being rewarded with bonuses of more than 9% of their annual wages, or an estimated five weeks of additional pay. The combined monthly and annual bonuses paid to employees for last year totaled $120 million.
THE EMERALD CITY IS HOME
Alaska is no longer an Alaskan airline, nor a Northwest airline, nor a West Coast airline. That hooded Eskimo-faced tail can be spotted flying into nearly every large or mid-size city in the continental US, passing every sandy shore in Hawaii, Mexico, and Costa Rica, and around every snow-capped mountain in Alaska and Western Canada.
The question is whether this brand will survive the next round of consolidation. Major legacy airlines have joined the bandwagon of absorbing smaller carriers over the last decade, so Alaska may very well be in the sights of American or Delta, industry observers say. But where Alaska Airlines is seen the most, talked about the most, and beloved the most is Seattle.
As that pig-tailed girl in the movie once said, “There’s no place like home.”