Seattle-based Alaska Air Group comprises Alaska Airlines and regional carrier Horizon Air. In December 2016, the company acquired California-based Virgin America. Brad Tilden is a 27-year veteran at Alaska and under his leadership, Alaska has consistently been recognized for its high levels of customer service and satisfaction.
– Interview by KAREN WALKER
Talk about the Alaska experience through these past few months and the COVID crisis. I don’t think our perspective is all that unique, but it hit us really hard. It was late February when the gravity of the thing really hit us and in the first month, as loads came down and down and down. We had 55 days when we had more cancellations than new bookings and then we had almost 30 days with net refunds, so negative cash. It was a really hard adjustment. But then you adjust and say, this is our new reality and you anchor yourself in the new reality and say, what’s our plan?
Describe the plan. We built eight workstreams that had to do with customer safety and our fleet and our network and our employees, and we started working those plans. And then you busy yourself with that work. It’s the right stuff and I believe in it and it gives you a path to work through. In terms of numbers, we are an airline that on average carries about 130,000 people a day and in early April we were down to 4,000, so it’s been devastating. But we are building back. We had 45,000 people on July 1, and we’ll see if we carry some of this July 4 [Independence Day holiday] strength forward or not. At some point we’ll get to where we were in 2019, but I don’t think that will be this fall or even next summer. So that’s the work we are doing now, to figure out what size we need to be.
When do you expect to get to cash break-even? We have a lot of work to do and we were burning $15 million a day at the outbreak of the virus. But we are improving. It was $5 million in May and $4 million in June. There are a lot of difficult things to do before we get to cash break-even by end of year and then profitable next year, but we need to get there.
What are your restart plan priorities? The big one is safety. There are two aspects to that. I think in this industry, people take the safety of flight and the safety of aircraft for granted. I do think all airlines work best when they operate in a repeatable way. So bringing the system down or bringing it back up again, those are huge changes, and as you bring it back up, you have people who have been off for two or three months and aircraft that have been in storage, so we are spending a lot of time with our people. We have something called ‘ready, safe, go,’ and only when those parameters are met, do we go. If we are not ready, if we are not safe, we don’t go. But the other priority here is the safety of our employees and customers. I think this pandemic will permanently change how people think about sanitation and cleanliness and the spread of germs. We are spending all sorts of energy on that. Our marketing team put together our Next Level Care campaign. There’s the health declaration form, the mask wearing, the contactless system and the aircraft cleaning, which are all super important. We want people to get on our plane and say it’s spotless and to feel safe and good.
Where are you with your schedule this summer? I think it’s first worth remembering that while we do have a cost problem, what we really have is a revenue problem. Each person is going to make their own decision about when they want to fly again, but we want them to know that when they are ready, we will be there. Our flight schedule before this was about 1,300 flights a day and we are bringing it back up fairly rapidly. We were at 600 flights at the beginning of July—almost all US domestic.
And where are you prioritizing your network restoration destinations? Leisure will come back before business and people are starting to feel a little cramped up and cabin fever, so certain sunspots will come back earlier. Looking at our network, transcon flights, which are heavily business, are probably weaker. Hawaii has a unique situation with a very serious quarantine that has all but choked up demand, but it is getting relaxed now if you get a COVID test, so from Aug. 1 we will start returning service to Hawaii.
How do you maintain customer loyalty? We are doing a lot of communication things. We’ve done some virtual events. We’ve extended the status of our high-status frequent flyers and lounge access through end of 2021. We just try to be generous. Our bigger mindset is that we really value the loyalty our customers have.
Alaska has established a US west coast partnership with American Airlines and is going to join the oneworld global alliance. Does the crisis change your oneworld plans? It’s probably accelerated it a little bit. We are really excited to be joining oneworld. We have a lot of relationships with several airlines in oneworld and the time is right. We were thrilled to be nominated by American and I think it’s going to be awesome. Despite what’s happening with COVID, the world is more global and our customers are getting more international. And we feel really good about the partnership with American, which really sets the whole thing up. The way we look at it is our job will be to build up loyalty in some of our core markets and that’s what we bring to the alliance, and then the alliance brings this fantastic global network that can help us fill those airplanes.
Your mainline fleet was all Boeing 737s until you acquired Virgin America, which was an all-Airbus A320 family carrier. What are your long-term fleet plans? We have roughly 225 mainline aircraft and we are thinking we will probably come out of the crisis with a fleet that is modestly more Boeing than Airbus. Then we need to sort out our long-term fleet structure and we hope to do that over the next six to 12 months. The A320 and 737 compete very closely with each other. The A321 is a very good airplane. There are benefits to a single fleet and dis-economies to a dual fleet. And we are a Seattle-based airline, so that is a consideration.
You have 32 Boeing 737 MAXs on order and that aircraft has now started flight tests. Do you remain confident in that aircraft? I think even Boeing would say there were some mistakes that were made and Boeing is correcting those. But as a guy from Seattle and a pilot, this mode of transportation is amazingly safe and Boeing has led the charge on making it that safe. The commitment to safety in this industry is deep and I have no reservations at all about Boeing’s commitment to MAX safety. I heard the flight tests have gone well and our team is very satisfied with the safety of the MAX.
–This interview is edited from a one-hour webinar conversation.
The full recordingcan be viewed at: bit.ly/2Om7vB7
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