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Brad Tilden: Keeping an Airline Flying

84_BTildenBradley (Brad) D. Tilden has been the chief executive officer of Alaska Air Group since May 15, 2012. He also serves as the president of Alaska Airlines, a position he has held since December 2008. He served as the chief financial officer of Alaska Air Group from February 2000 to December 2008 and also served as Alaska Air Group’s executive vice president of finance and planning from January 2002 to December 2008.

Alaska Air Group consists of Alaska Airlines and Horizon Air. Together they have about 13,000 employees. Alaska Airlines is the seventh-largest U.S. airline based on passenger traffic and is the dominant U.S. West Coast air carrier. Headquartered in Seattle, Alaska carries more passengers between the state of Alaska and the Lower 48 than any other airline.

Tilden joined Alaska Airlines from Price Waterhouse in 1991 and served as controller of Alaska Airlines Inc. and Alaska Air Group Inc., since 1994. He has been an independent director of Flow International Corp. since May 2010. He has been a Director of Alaska Air Group Inc. and Alaska Airlines Inc. since December, 2010. He serves as a director of Pacific Lutheran University and the Chief Seattle Council of the Boy Scouts of America. He is also a private pilot. He is married and has three adult children.

Tilden earned a bachelor’s degree in business administration from Pacific Lutheran University and an executive master’s degree in business administration from the University of Washington.

This Conversation took place in Brad Tilden’s office at Alaska Air Group’s corporate headquarters in Seattle, Washington, on February 27, 2013, and was updated in May 2013.

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Ethix: On the last four Alaska flights that I’ve been on, I said to the flight attendant, “I’m going to be talking with Brad. What question would you like me to ask?” And universally it’s this question: “What’s happening in our industry, and are we going to make it through this?”

Brad Tilden: The fact that our employees are so interested in the industry backdrop makes me happy. We have great people here. Even in the worst of times, the pride in this place is sky high. People are very, very proud of Alaska Air Group. They want us to succeed, and they want to be a part of that success. They also want us to be a strong, independent, Seattle-based company. And that’s the objective we have as a leadership team as well. To achieve that, we have to perform, and we have to be a compelling investment option for our owners. That’s what we focus on when we come to work every day. So, I’m glad our people are asking you about the industry and how well we’re competing.

The airline industry has gone through an amazing collection of mergers, and consolidations. This changes the competitive landscape for Alaska Airlines. How does this affect you?

Airline consolidation is a real part of the competitive landscape, and we believe it’s going to be good for Alaska Air Group. Northwest and Delta came together, then United and Continental, and now American and US Airways. Southwest and Air Tran also merged. These four airlines represent 83 percent of the air travel capacity in the U.S. They have big, powerful networks and frequent-flier plans, which give them an advantage in attracting corporate travel. They are all threats to a company like Alaska. On the other side of the spectrum, we compete against smaller airlines with very low cost structures.
“One good thing about industry consolidation is the capacity discipline it has brought to our industry.”

One good thing about industry consolidation is the capacity discipline it has brought to our industry. Having the right number of seats flying relative to demand is important for the health of the industry. Our challenge is to capitalize on the advantages of our smaller size – which we believe outweigh the disadvantages.

An argument can be made that there is a dis-economy of scale, where size works against you.

The notion of diseconomies of scale is valid. I think Alaska is a nice size for our industry. We have revenues a little under $5 billion, so we’re big enough to go to a company like Boeing and buy airplanes at excellent prices. We are also big enough to negotiate with our partners, and to have the resources to build a solid airline and do things right. But we’re small enough so our team can come together and provide a better level of service. We can operate more effectively and change more quickly than our larger competitors.

Understanding the Airline Industry

Alaska Airlines is a part of an industry that, according to some reports, has not been profitable over its history. Is that the case?

The industry has certainly had periods of profitability, but on a cumulative basis since its beginning, retained earnings have been negative, which means the industry’s net result is a loss. So, yes, that is true.

What’s special about the airline industry that would cause it to be this way?

That’s a good question, and there are several contributing factors. We’re capital intensive, we’re labor intensive, and we have long cycles. Further, while we don’t buy this at Alaska, the service we offer is viewed by some as a commodity. That means we don’t have a lot of pricing power. These are some of the structural factors that influence profitability.

But perhaps a bigger factor is that until 35 years ago, we were a regulated industry. That sounds like a long time ago, but given our long business cycles, we’ve only gone through a few since then. Industry downturns have come every 10 years or so, and with each one we’ve learned a little bit more.
“Today the management teams of all of the airlines are more focused on achieving the long-term success of the businesses.”
Today the management teams of all of the airlines are more focused on achieving the long-term success of the businesses, rather than having big networks and big market shares. As an industry, our focus is sharper, and that leads to better results. A lot of folks who have followed the industry think that airline managements may be slowly learning from our mistakes of the past and are headed to a state where our businesses are more stable and sustainable over the long run.

When I was at Boeing, we did a study to understand the impact of the Internet on air travel. We concluded the Internet could replace travel for a time, but it ultimately increases air travel. Connections and relationships electronically would lead to more people wanting to get together physically. But the problem is that during bursts of time, like right after 9/11 for six months, people can get by without travelling at all. That leaves capital equipment sitting idle, and that affects profitability.

I will say that I basically agree with your study’s results. The Internet has helped us get closer to people who might live as far away as Australia or Europe. Social media has added to the building of relationships, and these stronger relationships do drive more air travel. But you are right ― you can Skype your friend and you don’t need to get on an airplane at this very moment. This volatility (of demand) means an airline must have a strong balance sheet to insulate and protect itself during those soft periods you’re talking about.

9/11 was a big shock to the industry. We had a material reduction in passenger numbers immediately following that tragedy. The recession of 2008–09 was also a challenge but not as severe. And we had a better balance sheet at that point. After two or three months we had to cut the schedule and fly less. So two key lessons we’ve learned for dealing with volatility are one, keep a good balance sheet, and two, be ready to adjust capacity (our schedule) quickly.

Many businesses today have become very short-term focused. Are you a bit less pressured by the short term because of the nature of these longer cycles we have talked about?

That’s another good question. From an investment standpoint, the airline industry trades at lower multiples than most other industries. In part, this is because the industry has not proven itself a consistent money maker for investors, so perhaps investors have historically had lower expectations. This would say that there is less short-term pressure on companies in our industry than those in other industries. Having said that, I feel this is changing for Alaska Air Group. Our stock has moved a lot, and we all feel a lot of pressure to perform. We’ve told investors to expect us to be not only a good airline, but also a good business, and I think they do.

It would seem there are tensions at the intersection of being a good business for the market, and being a good airline from a customer point of view. How do you deal with those tensions?

PHX Reservations_smIt requires a long-term viewpoint. Certainly you can do something that’s employee or customer friendly in the short run that would be bad business and not investor friendly. But I think most of our constituents (customers, communities, employees, owners) are more interested in Alaska being a fundamentally sound, strong company for the long run.

For an airline, that starts with safety. We then need to operate reliably and provide great customer service. Those are our top priorities and we need to continue meeting them. We need to have low fares, and to have low fares we need to have low costs. We need to bring all of this together and produce returns for our investors that are in excess of our cost of capital. To achieve these balanced results, we need to come to work every day and focus, not on tomorrow or this quarter or the next quarter, but on the question, “Are we doing everything we can so this company is as strong and as good as it could be three years from now?”

“Are we doing everything we can so this company is as strong and as good as it could be three years from now?”

The industry has been through a great deal of shakeout in the past 10 years. How do you see the next 10?

I agree it has been wild. Just to help make your point, there was a time not many years ago when 70 percent of the seats flown were flown by bankrupt airlines.

I have an optimistic side that thinks the industry might be heading to a time of better performance ― a little more prosperity than we’ve seen in the past. But we can only control those things under our control. Our treasurer says, “Our job isn’t to predict the weather, our job is to build a strong house. If the storms come, we can close it up and batten the hatches and ride out the storm. And if we have good weather, we can open the windows and roll out the carpets and let the weather into the house.” This makes a lot of sense to me. As a leadership team, our job is to build a company that can do well in whatever environment we find ourselves in.

Passenger Experience

Let’s talk about the passenger experience. Airlines, including Alaska, have been unbundling costs, and this means baggage fees. Do you think people like baggage fees?

People don’t like bag fees, we know that. But here is the situation we found ourselves in. We were competing against Virgin America who was flying San Francisco to Seattle with a very low $69 fare. They had a $25 bag fee and we didn’t. But, even though the total cost of the trip was the same on either carrier — $94 on Virgin and $94 on Alaska — our published fare was higher than theirs, which didn’t include their bag fee, and customers simply look at the cost of the ticket when they compare prices. There was blood on the table by the time that decision was made, but at the end of the day, we had to institute a bag fee in order to compete.

“… at the end of the day, we had to institute a bag fee in order to compete.”

We did it a bit differently from others, though. Our fee is $20, and most of the others are $25. Our second and third bag fees are $20, while others are often $35 or higher. On top of that, we implemented a 20-minute bag delivery guarantee. We concluded that baggage was a separate service, and we “unbundled it” as you say.

So, we recognize that customers don’t really like bag fees. And in a perfect world we wouldn’t have them. Having said that, I think in many areas of our lives, the world is moving toward more unbundled offerings where you pay for what you use.

Where will this go? Will it be charges on the restroom door? (Laughter)

Perhaps you remember that we ran a commercial on television 25 years ago featuring a passenger on a flight that charged for use of the bathroom. He was going up and down the aisle looking for someone who had the right change, getting more and more desperate. But no, that won’t happen.

Some airlines in Europe charge for a soft drink, or for seat reservations. Do you see yourselves doing that?

You are right. Even in the United States there are airlines that charge for things like this. I don’t see us going to the extremes.

I put unbundling into two categories. There are areas where the service traditionally has been built into the ticket price and is being unbundled now (baggage fees and meals are two examples), and then there are new services we can offer our customers to earn an ancillary fee (hotels and cars are examples of these). Good quality hotels and rental cars offered at excellent prices are two new services we’re offering. We hope customers see us as a trusted name, and that we’re able to help them efficiently get something they need.

Another issue from the view of passenger experience, is crowded airplanes. I came home Monday night from Burbank on Alaska Airlines on a completely full flight.

Thank you for flying Alaska!

Fuller flights are one way the industry has changed. And while that’s unfortunate for customers, they’ve made it clear they want low fares. And if the airplane is 87 percent or 88 percent full, you can cover your costs at a much, much lower fare than if the airplane is 60 percent full, which was the case 20 years ago. Nobody likes the middle seat, but the story for consumers is what it costs to travel from Seattle to Burbank. It is much more affordable for more people than it was 20, 30, 40 years ago.

What about the seats themselves in terms of comfort and spacing?

We have a new seat on the 737-900ER, a Recaro seat. It’s a German-made seat; they also supply seats to BMW. Its slimmer profile allows a little more personal space for each row of the airplane. This seat is on the eight 900ERs we have in our fleet today, and we’re putting them on our 737-800s and -900s.

How does overall customer satisfaction compare with where you were 10 years ago?

We’re gratified, but there’s more we need to do. For operational performance, the first thing we need to do is get the customers and their bags to their destination on time. We’re doing that. We survey customers every month, and our numbers are among the highest they’ve ever been. Another important study we look at it is the J.D. Power survey, which is really important recognition for all airlines. And Alaska is very fortunate to have received the highest in customer satisfaction award for a traditional network airline for the last six years in a row.

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How do the traditional networked airlines compare with the other airlines?

Customers rate the low-cost airlines higher than the traditional network airlines. So while we lead the traditional airlines, we still have some distance to go to lead both groups. We are making good inroads against the low-cost carriers, though, and our objective is to make further progress.

What will it take to do that?

That’s a great question. We need to keep delivering safe, on-time flights. We need to keep working on customer service. We need to make sure that we have low fares and that our customers know we have low fares. I will say that on the fare side, there is a perception issue that we need to work on. If you look at our fares against the low-cost carriers out of Seattle or Portland, for instance, our fares are identical, but our customers (and more importantly, people who aren’t our customers yet) don’t know that.

I know it, because I compare all of the time when I travel where Alaska goes! And we keep flying Alaska to Burbank.

Glad to hear that.

One more question from a passenger experience. For a long time Alaska Airlines had a little prayer card on the serving tray, and that is now gone. What was the thinking behind eliminating it?

That was a tough one ― an extraordinarily difficult decision. The prayer cards were a great source of comfort and reassurance to some. But they were offensive to others. Our travelers are becoming more diverse, both because we travel to more places now and because our society is becoming more diverse. We wrestled with that at the highest levels of the company and finally concluded the negatives outweighed the positives, and so the decision was made to take them off the airplane.

Employee Culture

Let’s talk about employees now. What kind of values do you have as a company? And how do you make sure that people that are a part of this team represent those values?

I’ve been here 22 years, and for the entire time Alaska has had a strong focus on doing the right thing. In fact, it’s a core value that manifests itself in many areas. If we provide substandard service to a customer, it guides how we make things right with that customer. If we made a mistake with a frontline employee, we try to make that right.

Over the last 10 or 15 years, we’ve been trying to work more closely with our employees and trust and empower them more: It’s not only doing the right thing ― but really listening to our employees and understanding them and their concerns. We have also intentionally given employees the tools they need to make things right for our customers on the spot. To do this, we need to trust them, but we also need to share the company’s values and the company direction with them. We need everyone to help us move the company forward. So we have to give them what they need so they can do the things that advance the company.

“Over the last 10 or 15 years, we’ve been trying to work more closely with our employees and trust and empower them more.”

I noticed you share more than ideas and direction. This morning in the paper you took out an advertisement announcing that you’re sharing financial resources with the employees.

Yes, I am really proud of that. For the last four years, our people have earned about one month of extra pay because of our incentive plans.

What kind of ethics training do you do for your people?

We have a code of conduct/code of ethics that is roughly 30 pages long. Our folks have done a good job with it. It’s written in an easy-to-read format to help people understand our values and to provide clarity.

But it’s more than that. I personally think examples are very powerful. You can have a great training program or motivating sign on the wall, but if you’re not modeling it, you’ve got a problem. When you don’t live out your ethics, the training and plaques on the wall don’t matter. There are moments of truth that happen not infrequently, where people get to see how you live out your values on various issues. And it’s important that you stand for the right things when you’re given those opportunities.

“When you don’t live out your ethics, the training and plaques on the wall don’t matter.”

To what extent do you hire for character, versus skill?

I think character. Of course there are certain skills you must have to do the job. But you can train for skill; it’s much harder to fix character.

Labor relations weren’t always as great as they are right now. You had a time when there were some challenge with your pilots and baggage handlers. What have you done in these areas?

Labor relations are vitally important for any large U.S. airline. You’re going to have labor unions, and you’re going to have issues that you need to deal with. If you look at the history of the company, there have been a couple of periods in the last 20, 30 years where relationships got pretty ragged, but we got through them. If you go back to 2005, Alaska had very high costs and we knew they needed to come down. We were trying to compete against JetBlue and Virgin and Frontier on many of our routes. Every one of our legacy airline competitors went through bankruptcy. Their costs came down, they shed pensions, they restructured and outsourced, and retired old airplanes that they didn’t want to fly. We didn’t go through bankruptcy, but to compete, our costs needed to come down.

We had a binding-arbitration provision in our pilot contract, and we ultimately went to arbitration. Both sides presented their cases and we got new, significantly lower wage rates with our pilots. Pensions weren’t changed at all. There were a couple of other changes to the contract, and our costs came down.

In retrospect, I don’t think we did a good job helping people understand what was happening in our industry, and what had to happen at Alaska for us to be able to compete successfully. These shortcomings made getting through some of our labor issues more difficult than it needed to be.

In addition, we outsourced our maintenance operation in Oakland and our ramp operation in Seattle. New employees in all groups (other than pilots at the time) were moved to defined-contribution pension plans. So there were changes happening everywhere, changes that had to happen for the company to survive. But as you said, the pilot one was particularly difficult, and it took us a while to get that relationship back on a solid footing. To tell the full story, there were several hundred management people who were laid off at that time and the executives took pay cuts.

Was the message clear that executives were also dealing with cuts and changes?

I’m pretty sure we didn’t do as good a job communicating as we could have.

In addition to the pilot challenges, you had a challenge in the baggage area. How did you change that problem into a 20-minute baggage guarantee?

You’re in academia now, and you know that every action has an equal and opposite reaction. (Laughter) The reality in 2003 was that the company needed to get $300 million out of our cost structure. Candidly, that was a low estimate. We knew how difficult it was going to be, so we didn’t say $400 million or $500 million. We came up with a set of strategies to get there.

Part of it was reducing costs in baggage handling, so we negotiated with that union. We were unable to get to a deal that would work. So ultimately in 2005, we outsourced the baggage handling in Seattle to a third party. The cost savings did come more or less immediately. But the reliability of getting bags off the airplane to the carousel on time was not achieved. It wasn’t 20 minutes. It was more like 40 or 50 or 60 minutes. And it was a mess for a couple of years.

Where is it now?

It’s excellent. More than 90 percent of our flights have the bags off within 20 minutes. We have this 20-minute bag guarantee, and we don’t pay out much. I check my own bag virtually every flight. I talk to more and more business travelers who say, “Look, it’s easier, I don’t have to it carry through security and deal with that.” It’s not uncommon for the bag to be at the carousel before you’re at the carousel. We have to credit Ben Minicucci for a lot of the improvements. The outsourcing decision caused a lot of the problems, and it exposed some underlying processes that were weak. Ben is our chief operating officer now, and he’s put scorecards on almost every aspect of our aircraft turn process. Things got better quickly once we were really clear with expectations and started measuring results.

Don’t people sometimes know how to make a process better but don’t speak up out of fear? That can hide a problem for a long time.

True. I don’t think we have a good answer to that question, but here is one thing we have done. Now that the company is performing, we have the luxury of bringing folks into a room in relatively small groups, listening and speaking to them. We try to understand their concerns and share ours about the industry and about the environment, talking specifically about our plan. We talk about what’s going to be required to be a strong, successful, independent Seattle company 20 or 30 or 40 years from now.

_DSC2292Out of this we started a program called “Flight Path,” where we divided our employees into groups of 150 and held 80 separate full-day sessions with them. It was really interesting and I think the needle did move, showing improvement. Some sessions were “love fests” but many were not! Folks would come in and share exactly what was on their minds. And we listened to them ― we listened to every question. And we looked them in the eye and we gave them honest answers. They challenged us on issues we had thought through and on some we had not. So we got their input, and we began to develop strategies. It is my hope and belief that our employees felt respected through that process. They know that we want the company to be strong and successful. I think that five or 10 years from now we will look back on this time and say, “That was a really important program for Alaska Air Group.” But we’ll see.

But that’s only part of the answer to your question. You asked about fear from employees?

As I was doing some research, I found an incident that seemed to reflect fear. It was around 2005 when someone drove a baggage truck into an airplane, and didn’t report it. The plane took off with no one knowing about this, and the cabin depressurized, requiring an emergency landing. That’s extreme, but demonstrates the importance of eliminating fear.

That’s a good example and there are others. It’s crucial that we talk about incidents like this pertaining to safety. We must have a culture where people know not only that they can report a safety issue without any sort of fear of reprisal, but also that they must. Our customers trust us with a big responsibility (getting them safely to their destination), and it’s a responsibility that we all share.

“We must have a culture where people know not only that they can report a safety issue without any sort of fear of reprisal, but also that they must.”

In a related challenge in your industry, pilots have a difficult job. With automation today, it would seem much of the job is routine, but there are moments requiring every skill the pilot has. How do you deal with this environment?

There is more automation today to help our pilots get across the country than there was in the old days. But they still shoulder enormous responsibility. In bad weather and low visibility, you are counting on the skill of that pilot to get the airplane safely on the ground. The airplanes are phenomenal ― Boeing helped with that ― and the training is phenomenal. But the pilots do shoulder an enormous responsibility for keeping everyone safe. I think that’s not always fully appreciated.

One of the things we want our pilots to know is that we recognize and appreciate their skill. This philosophy really came into play with the 2009 contract. Pilots not only fly the ship, but they are also the operational leader for the flight. They back up our flight attendants during the trip, they set the tone for the mechanics, they lead everything. This makes the trip go a lot better.
“One of the things we want our pilots to know is that we recognize and appreciate their skill.”

When a pilot is about to upgrade to captain, we bring them through a training program. We remind them, “You’re not only a leader from a safety perspective, but you also have a big responsibility culturally and from a leadership perspective.” Most of them relish this challenge. They want to be empowered and they naturally want to lead.

Process Improvements

You’ve also made improvements in on-time performance. What did you do?

You can tweak a lot of things to bring about improvement. But a key factor was getting some of the side effects of our business transformation behind us. I think our employees got tired of being in the middle or the pack or worse. We said, “Look, we can do better, we’re a great airline. Let’s do it.” I also don’t think you can overstate the impact that Ben Minicucci had on our operations.

He wasn’t just engaged in the baggage processes?

No, he has responsibility for all operations at Alaska Airlines. The first thing he focused on was consistent, standardized processes. Ben got really clear with our people. He made sure that Ketchikan, Juneau, Seattle, Portland, and LA all had the same processes. When we do things repeatedly and consistently, we have a lasting process. There might be a little variation in Anchorage, for example, given the weather there, but the basic process needs to be the same at every station. That was the first thing Ben did.

The second thing he did was to articulate these processes for all of our leaders and employees. He set the process out step by step by step, so everyone understood that our expectation is that they follow this process. There was a little bit of pushback by people who said, “I’m used to being empowered and want to do it my own way.” We said, “No, think of this like a football game. The coaches put in a game plan and send a play into the game. The quarterback still gets to change the play every once in a while if the situation warrants. But we’re basically giving the team a plan to help them win.”

Ben’s leadership has been really important. It’s understanding the process, detailing expectations, and then measuring. We measure something like 200,000 data points a month to see if we’re complying with our process. Ben’s personality is part of the success. When he started the scorecards, everyone got Fs. If students at SPU all got Fs they would go try a different school, and you would think that would happen here. But just the way he approached it ― by fixing problems instead of blaming people ― they all seemed to smile and say, “Yeah, I got an F from Ben.” And then they got to work on improving. It’s actually quite a story.

“We measure something like 200,000 data points a month to see if we’re complying with our process.”

Was there anything about the on-time performance that related to your heritage as an airline in Alaska? I think I have heard that schedules were a bit less formal in the early days.

I hadn’t actually thought about that, but I think that’s probably right. With the weather in Alaska, the important thing historically was that we flew when it was safe ― and that we ultimately got people to their destination. Our customer base up there was forgiving. But we don’t want to be relaxed about process and procedure.

How does technology both on and off the airplane affect your airline?

It is important at many levels. We have talked about its importance in the airplane. And it is vital to help us manage our processes and keep our costs in check. But it is also important because we are a West Coast company. We are headquartered in Seattle, where Amazon and Microsoft are headquartered. And we fly in California, which has Google, eBay, Yahoo, and Apple. Our customer base, perhaps more than anywhere else in the world, expects us to be a leader with technology. This ranges from the purchase of tickets to the airport experience to the on-board experience. So it is strategically important for us to keep up with technology.

What was behind the decision to have all Boeing aircraft in your fleet?

We thought there was far too much complexity in the industry and in our business. Our basic belief is that our customers want low fares, and we have to configure the company to give them low fares. We had MD-80s and 737-400s with a similar number of seats. You could argue that there was a different role for the two airplanes, but not very effectively. We wanted to get to a common parts inventory, a common set of airplanes, common operating procedures, common pilots, common pilot training, and a common set of reserve pilots ― all of those economies that come from a single fleet. And we’ve done it now at both Alaska and Horizon.

We made a joke when Boeing bought McDonnell Douglas in the late 1990s that we were finally all Boeing. But that wasn’t what we really had in mind. It was in 2005 when we did a big deal with Boeing and said, “OK, now we have the airplanes to take out the MD-80s.” We retired them between 2005 and 2008 and then truly became “proudly all Boeing.” We’re Seattle people and we’re loyal to this community. But more than that, these 737s are fantastic airplanes. They have allowed Alaska to achieve so much. We went from the 737-400 to the 737-700, -800 and -900. These longer-distance planes made it possible to fly to New York and Boston and Washington, D.C., and Florida on a nonstop basis. And then when these airplanes were certified for ETOPS [ExTended OPerationS], Hawaii was in our sights. The capability of the airplane has grown as Alaska Airlines has grown. It’s been an amazing partnership.

Personal Motivation

Tell me about yourself. What was your path to this position?

tilden_pilotI went to Highline High School, just a couple of miles from our headquarters here. There used to be a spot near the high school where the third runway is now, where you could go to watch jets take off and land. I really can’t explain it, but I have been fascinated by airplanes since I was a little kid. During college at Pacific Lutheran University, I had a job with Amtrak. I was able to pay for my school and had a little money left over. For some unexplainable reason I went down to the Renton (Washington) Airport and learned to fly. It was great, and I loved it. I remember so well to this day what it felt like to take off and fly around the pattern three times on my first solo flight. But for whatever reason, I never saw myself getting hired by an airline like Alaska. I thought being a commercial pilot would be like winning the lottery, and that it would never happen to me. So I studied accounting and became an accountant at Price Waterhouse for eight years. A friend of mine at Alaska was going to leave and have a baby, and she was looking for someone to take her place. I jumped at it ― a dream come true.

“I have been fascinated by airplanes since I was a little kid.”

Where did you start with the Alaska Air Group?

The job was director of general accounting. We set up the depreciation on the airplanes, did fuel accounting, accounts payable, payroll, that kind of thing. I worked with some fantastic people there who really helped me understand what this place is all about.

You’ve been CEO here now for how long?

Just about a year. It’s been good. The company is performing, so I’m gratified by that. Our people are doing well and are feeling good for the most part. We have an incredible leadership team that’s a blast to work with. They give me a lot of energy. It’s fun to come to work.

But we have big challenges ahead. If anybody thinks that Alaska is out of the woods, they’re nuts. Because one thing we know about this industry is there will always be another challenge.

How do you face a challenge?

The first thing I think about is something pilots call “situational awareness.” We try to honestly ask, “What has happened to us? Where are we? What direction are we headed and how fast are we moving?” Then, once we understand and agree on our situation, we try to articulate some guiding principles. The situation may be an airline partner relationship, it might be a labor agreement, it might be a strategy to enter a new market, or how we’re going to advertise or work on a profitability initiative. Developing guiding principles is a good way for the senior leadership of the company to come together. But it is messy. After we gain some clarity on guiding principles, we establish objectives. Once we have objectives, we want plans with names and dates. And then we start hammering. I’ve seen this movie several times now. We start in the fog with a murky issue, looking at it from a distance. We don’t have a plan and it’s uncomfortable. But we just push ourselves until we have a plan, and once we have a plan, we start to work on execution.

We had Jim Collins, who wrote the book Good to Great, come to talk with us. One of his big themes was to confront the brutal facts. He basically said, “Whatever you think you’re dealing with, it’s probably worse than you think.” And we’ve taken that to heart. If we have to make a guess, are we better off assuming a situation is better than it looks or worse than it looks? Then build a plan around the problem. As we do this, the company is building a culture and its leadership team. We want a culture where people don’t come in every day and say “Things are great.” We want a culture where folks come in and say, “What can we do better? What’s wrong? What can I work on? What’s broken? How can I make this company stronger today?” Of course you have to balance this mentality with recognition of the positive things people are doing, and candidly, this is something that I’m not as good at as I should be.

“If we have to make a guess, are we better off assuming a situation is better than it looks or worse than it looks?”

What inspires you to get up in the morning?

I love what we do. I think what Alaska does is important. We connect communities, we connect people. If you run a business, we help you by getting you to San Francisco for a meeting. If you have grandkids in Burbank, we help you get down there to see them. So what the company does fundamentally is important, and it’s important that we do it well. Ifwe do it well, we can continue to have 25 million or 30 million people a year flying with us. And that provides 13,000 livelihoods for our employees as well. Investors can also get a good return. It’s a pretty cool system, this American free enterprise system. We play a role in it. I think running a business well is an honorable thing to spend your time on.
“running a business well is an honorable thing to spend your time on.”

So are you having fun?

Yes, absolutely.

What are you reading at this point?

A book called Multipliers: How the Best Leaders Make Everybody Smarter by Liz Wiseman. Basically it discusses how your leadership style affects people around you. Are you the person in the room that gets the best out of everybody? Are you the person in the room that has to have the answer to every question, which stifles people and creativity? I also read a lot of pilot magazines and the AOPA magazine, the equivalent of the trash novel, you know. (Laughter)

Advice for Younger People

What advice do you have for younger people just starting out?

Learn everything you can. One of my reflections from school was that understanding and then mastering the basics is a lot more important than I thought it was at the time. You need to actually understand subjects like economics and English and so forth, and understand them well. You need to be able to think critically about problems and articulate a path forward. So I tell them to get everything they can out of school.

“… get everything they can out of school.”

The other bit of advice I typically give young people is to “go for it.” They should take some risk with their careers. Sometimes I see people play it safe. They get a job they know they can get. They don’t even apply for the job they really want. I think they should take a little risk, have fun, figure out what it is they really want, and go for it.

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