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Alaska Airlines: Navigating Change Case Study


Introduction

Alaska Airlines is a Seattle-based air company dating back to the 1930s. The company survived the World War, the Great Depression, and several crises. The most recent one occurred at the beginning of the new millennium when the company’s performance almost hit the rock bottom.

The present paper is aimed at reviewing the case study “Alaska Airlines: Navigating Change” in terms of change management. The background of the company will be given, the case and the issues faced by Alaska Airlines will be summarized, and an analysis will be conducted.

Case Study

Background: History of Alaska Airlines

The company now known as Alaska Airlines was started as a small private enterprise by Linious McGee in 1932. Two years after his first flight as “McGee Airways,” he went into the joint with Star Air Service to become the biggest Alaskan airline, with 22 jets in function. It was the era of bush flights with no fixed schedules and practically no service to speak of. The years 1937 and 1938 changed the situation: the company bought another airline and was then successfully sold to become Star Air Lines, and the Civil Aeronautics Authority was created for regulatory purposes (“Alaska Airlines History by Decade” par. 1).

The 1940s saw further expansion of the company, despite the lack of human resources during the World War. The issues faced by Star Air Lines (which was renamed to Alaska Airlines in 1944) were of financial and regulatory character, but the company, undauntedly, was making its way towards becoming the world’s leading charter operator. In the 1950s, the company received permission from Civil Aeronautics Board (CAB) to carry passengers to Seattle and Portland. CAB also implemented a management change to strengthen the company’s fiscal ground, appointing a new CEO, a pilot by training, and a marketer by talent. By the 1960s, the new management improved the company’s image by adopting a creative approach to shaping the customers’ experience (Serling 15).

In the 1970-1980s, the company was once again saved from collapse. A new CAB-appointed CEO ensured stability for some time. Along with the deregulation of U.S. skies, the expansion over a number of states including California and Arizona, the company saw unprecedented growth in revenue. The steep profitability rise of 1973 lasted for just under two decades until the company found itself facing significant performance and accountability issues (Avolio, Patterson, and Baker 1).

Case Summary

The case focuses on the story of Alaska Airlines since the 1990s when an array of problems occurred on several levels.

The authors start with the culture problems, which may or may not mean that they consider it the major cause of performance and accountability issues met by the company. They note that the corporate culture adopted a laissez-faire approach to the basics of service (namely, the timeliness). The leadership, it seems, was the one to blame because it openly opposed the Departure on Time (DOT) reporting. Still, despite the inefficiency, the company was a self-proclaimed best customer service deliverer because the clients were served in a “nice” manner. Somewhat surprisingly, the company was indeed receiving quite an amount of good reviews (Avolio, Paterson, and Baker 4).

In spite of the client-employee goodwill, the authors state, the labor-management relationships were shattered by labor negotiations which sometimes resulted in industrial disturbances and pay-actions. At varying times in the company’s history, there were repeated strikes ventured by flight attendants and machinists; negotiations with the latter and the client service agents were lengthy as well.

The morale of Alaska Airlines workers was shaken again when two terrible accidents occurred in 2000 and 2001. The first one involved an MD-80 jet, Flight 261 from Puerto Vallarta to San-Francisco. The jet was carrying 88 people, of whom 44 were somehow involved with the company. The deaths resulted in a drastic change in the ways the company saw itself. The 9/11 that followed was happening that further exacerbated the self-conceptions of the whole industry. Amid the nationwide shock and distress, Alaska Airlines was still getting over the Flight 261 tragedy, which was “more personal.” The employees’ faith in the company was partially restored because the leadership did not plunge into a furlough as the majority of other companies did (Avolio, Paterson, and Baker 5).

From 2001, a series of misfortunes followed. This mainly concerned metrics such as handling of the luggage and timing of flights. The crisis point was 40% of delayed flights and 0.7% of all luggage items either lost or damaged or otherwise mishandled. The Seattle hub was operationally inefficient and needed to be fixed. All that required a dramatic and timely change in management, which came in place. A more detailed analysis will reveal the underlying causes of the issues faced by the company, what and why was overlooked, how the problems were resolved, and whether there still are points for improvement.

Analysis

Issues faced by Alaska Airlines

The problems that called for the change occurred in two main areas of Alaska Airlines’ performance, namely: internal communication and operations.

The first aspect in need of improvement was mainly consistent with employees not being engaged in interaction. The communication on the internal level was complexified on the aftermath of the 2000 tragedy when the survivors’ guilt overwhelmed the employees and the morale was disrupted. Another cause of morale disruption was the fact that the ramp vendor was outsourced. Furthermore, the management was not entirely accustomed to the ramp operations, which meant that their understanding of how to organize the ramp processes was generally low.

This resulted in overall havoc in terms of on-time departures; more importantly, the communication among the staff was encumbered. The workers were multitasking and not always aware of their duties, and the performance evaluation was next to impossible due to low accountability.

On this background, the operational performance of Alaska Airlines was hitting the bottom line. The percentage of flights departed on time fell to less than 50. Due to the management’s inability to control the ramp properly, 20 out of 100 items of the customers’ luggage was mishandled (Avolio, Paterson, and Baker 1). At times, passengers had to wait up to two hours at the carousel. The employees’ laissez-faire approach has, in fact, led to conflicts when the police had to take action.

It appears that such an attitude had financial issues as its prime cause. The industry was affected by the rise in fuel costs from the late 90s and further. The fuel expenses of Alaska Airlines were running high by 2008 and substantially pulled back the company’s revenues. The 2010 plan and the outsourcing of ramp employees, as well as the fact that Alaska Airlines’ pilots were earning tens of millions more than other airlines’ pilots during even the harshest periods on the 9/11 aftermath, all led to pay cuts. Salary negotiations were tense and often resulted in the employees’ distress because the company stood its ground and persevered the pay cuts when there was a need. Thus, the employees’ demotivation was understandable, although it did not help the company’s shattered culture in any way.

Mad Dog Task Force

The difficulties appeared the most evident at the company’s largest hub – the one in Seattle. In reaction to these issues, MD Group or Mad Dog Group was established. Started as a task force and retrained into a forum for data exchange, it was aimed at fixing the operational problems in Seattle. In two years, from 2005 to 2007, the MD Group still had no visible results in spite of all their efforts. Al the changes, large and small, that the group implemented only slightly improved Seattle performance on the flight timeliness and luggage handling (Avolio, Paterson, and Baker 10).

It is possible to blame poor and unprepared leadership for the Mad Dog Group’s failure. There is, however, more than one important factor that the setback can be attributed to. The Group held operational issues in its focus, which was justifiable but overlooked other problems such as employee motivation, rapport building, engagement, and morale. Besides, their area of potential improvement did not involve upstream metrics that would enhance customer service.

The result of the Group’s actions was, therefore, far from ideal. True, the timeliness of departures and luggage delivery was returned to almost normal. However, the operational flow was permanently on the brink of collapse because of poor organization. The ramp was not functioning properly. The pilots and other crew faced change-resistance when they proposed improvements but lacked the authority to implement them, and due to the low morale, even such propositions were sparse. Still, and to Mad Dog Group’s credit, it realized its powerlessness to make a real change and went for it. They acknowledged that a new leader had to be able to improve the culture, which was practically imploding on itself back in 2007.

Culture

An unarguable strong side of Alaska Airlines’ culture is that it has gained the respect of the customers. Still, more importantly, the company managed to preserve considerably high ratings even at the hardest of times. The positive reviews were made possible because of active advertising and in-flight service that relied heavily on marketing: in the past, the company’s crews were known to wear Gay 90’s and Cossack uniforms and present their cockpit briefings in an entertaining manner. Alaska Airlines still prided itself on putting the priority on the customers in the 2000s, which can explain their loyalty.

On the weaker side, the company’s employees came to be the witnesses of two tragedies. One of them made them doubt that the company actually valued them. The other one implicitly leads to the company outsourcing workers, which the existing ones could not establish collaboration with. Indeed, outsourcing the vendor meant some employees were riffed.

Those who stayed would find their family members were out of the job. Because the task to outsource was the management’s, the employees came to develop a defensive attitude towards them and the system in general. The pilots whose wages were arbitrated were known to frequently take sick leaves and repeatedly allow for irregularity. What is more, they could not support the ramp vendor employees, and the conflict became absurd at times.

The ramp workers themselves were unprepared for the passenger flow that Alaska Airlines had. Although the first few months of the new outsourced ramp work went smoothly, the employees could not preserve the quality of service. Their isolation from the remaining employees added up to the demoralization.

In relation to the customer service, the demoralization of the employees resulted in a negligent attitude. They deemed it acceptable that the flights were not departing on time once they were “nice” to the customers.

What could be foreseen and possibly solved

9/11 did not have as much effect on Alaska Airlines’ performance because the ripple it caused was spread over the industry as a whole. Flight 261, on the other hand, was a personal catastrophe that disengaged the employees from the company (Avolio, Paterson, and Baker 5). Although the accident in itself could not possibly be predicted, its effects could have been forecasted in advance.

Another disruptive effect that could have been predicted was that of the DOT requirements non-acceptance. Rather than acknowledging the fact that Alaska Airlines had issues resulting in departure untimeliness, the leadership argued that it was the system that could not apply to Alaska, advocating for its unique operational environment. The “blame the system” approach resulted from that.

Finally, and most disturbingly, the succession of events could not have resulted in such a disaster in Seattle and other hubs if the labor relations’ effect were foreseen. The long-standing negotiations were never reaching a consensus because of the employee turnover, with their contracts lasting 3 to 5 years. The pilots’ and other employees’ wage arbitrations kept the company in constant labor turmoil. September 11th brought along a steep decline in demand for airline services and massive employee layoffs all across the industry. Despite the fact that Alaska Airlines did not reduce the staff that actively, it had to decrease the payroll, which brought the negotiations to an end and directly and deterioratingly affected the pilots’ performance.

It would be true to say that, in the wake of 2000 and 2001 tragedies and fuel costs rise, the company had to survive the best it could, which is why the labor decisions were justifiable. However, by overlooking the cultural aspect of the company and focusing on operational issues led to the failure that Mad Dog Task Force was. At that, the decision to proactively deal with operational issues and outsource the ramp service could be predicted to badly affect the morale.

The reason the management decided to outsource was the potential operational blockage that the ramp workers’ union would cause in case they went on strike. Thus, if the moral decline and subsequent performance slowdown was predicted, outsourcing would not be considered an option from the very beginning. Rather, attempts would be made to reach a consensus with the existing union to alleviate their distrust.

The Seattle hub would not present such a problem if the ramp was run by existing contractors. Besides, the MD Group could use another leader, a more emotionally intelligent one, to devote most of their time to Seattle, establish a connection between assorted departments, and communicate a unified strategy in meetings. However, neither the problems were foreseen, nor the solutions were thought up, which caused the slowdown. The ultimate solution came in the form of a new leader, the one that MD Group and the company in general needed.

SWOT analysis

Strengths Weaknesses
  • Geographic dominance. The company has been expanding its fleet and geographic coverage since 1950.
  • Customer service. The company uses marketing principles for in-flight service and trains customer-oriented employees.
  • Customer loyalty. The abovementioned practices help build good relationships with the customers.
  • Little to no internal communication. Each unit is run by its own supervisor that has to break through their own silos.
  • Employee disengagement and dissatisfaction. Flight 261 tragedy, the outsourced ramp employees, and staff layoffs make employees distrustful.
  • Pilot salaries are too high. The overall pays and benefits exceed those of other airlines by $70-90 million.
  • Labor negotiations. Issues with worker unions and pilot wages cutbacks demoralize employees and result in an operational slowdown.
Opportunities Threats
  • Further fleet and destination expansion.
  • Technological advancements.
  • Join the airline alliance.
  • Increasing fuel costs.
  • Potential incidents are likely to reduce the demand for airline services.
  • Competition.

New leadership

Ben Minicucci was appointed the VP of Seattle operations after having worked for 3 years in Alaska Airlines. He had extensive knowledge of the aerospace industry and used his controls system engineering training to put the situation right. Overall, he was the leader the company needed because he was passionate and laser-focused: he metaphorically pulled the right controls to tackle the operational and cultural issues. Accountability and data management being the major problems, Minicucci became the driving force of change.

The solutions he offered were as follows. In terms of operation, a strict timeline was established to track the time between the air jet arrival and departure and ensure the flights were on time. A system of report cards was implemented to track these and other metrics. These were to be filled out at fixed intervals in time. The system was designed to improve accountability and remove unnecessary steps of the operation. Finally, Alaska Airlines’ progress had to be evaluated. For that sake, scorecards came into usage to track the company’s adherence to the set goals and define new ones.

Minicucci realized a communication issue was present. The problem was that the company was siloed, that is, each operation unit was run by a separate manager whose communication was sporadic and not efficient. Besides, the managers of units such as ticket counters and flight operations were repeatedly harassed by Carlyle Group executives who threatened to lay them off unless Seattle was fixed. Under Minicucci’s leadership, cooperation was ensured across divisions, as well as the alignment for each manager to function within their responsibilities. The mornings started with meetings with selected managers to discuss strategic goals and track the progress.

The communication path was structured anew: the Seattle-Tacoma Airport had a dotted-line communication system wherein the employees were expected to report to both their supervisors and to Minicucci himself.

The approach that Minicucci developed since he was appointed leader was practical. He was determined to fix Seattle and step on to other problems. The message behind his actions was that of quality control, and for that sake, he held the entire organization accountable.

New high-performance culture

The new approach subsumed a new culture of high performance. As an emotionally intelligent leader, Minicucci realized the need to engage the employees instead of merely concentrating on operations. The message he repeatedly communicated in his meetings with the management and directors was consistent with the following values.

  1. Quality control to achieve excellence. As Minicucci put it, quality control had to be in everyone’s DNA from then onwards. The company’s consistency with the interim goals had to be measured on every parameter (boarding, catering, etc.).
  2. Improving relationships with customers. This merged from the quality control: as soon as the company was able to provide exceptional service (not simply being nice), the relationships were bound to improve.
  3. Responsibility and accountability. Report cards were to become an indispensable part of performance measurements, track the failures, and what leads to them.
  4. Collaboration and teamwork. Breaking through the silos and pursuing the goal by consolidated effort was imperative to fix the problem a hand within short timeframes.

Results

As Minicucci correctly estimated, the problems with the ramp came because of the non-involvement of the management who were unaware of how to run the ramp and because of the penalties imposed on the vendor. With Minicucci, the management of the ramp became data-driven. With the Seattle hub’s operational issues, the compulsory morning meetings with the directors and managers of different departments resulted in several improvements.

The management and directors were able to communicate and voice their concerns in a transparent atmosphere to be on the constant update. The “food fights” of the early days opened people up and allowed them to switch to more meaningful dialogs later on. The employees were required to do their homework and figure out the underlying homework of the performance issues, which helped them realize that they were in charge.

The report cards, the values of which were included in the subject matter of the meetings, allowed for the establishment of a unified set of goals shared by the whole company. When each department had its own metrics and goals, breaking through the silos was harder. Data sharing not only was a major step to facilitating operational functionality but also improved the company’s culture.

The silent acceptance of mediocre operations and “blame the system” approach were put an end to, just as the culture of being content with performing just above normal. Hall meetings with employees repeatedly stressed the importance of fixing the hub. So did the internal communication and the interactions between different departments. These had re-engagement of employees as their prime goal, helping them develop trust and accept their responsibility instead of merely pushing the blame around. The communication and progress tracking also kept employees in the know. The fact that Minicucci’s program achieved visible results within the first half-year of implementation served as a factor of motivation for those who were otherwise skeptical.

The results of Minicucci’s leadership can be, thus, summarized as follows. His systematic vision of the company as a mechanism helped engage and organize employees. The dotted-line communication system demonstrated that the company valued every voice and at the same time held the employees accountable. Fixing the ramp operations through enhanced communication and transparency triggered the pilots’ acknowledgment of the need for more organized performance.

As a consequence, the timeliness of departures revved up to 90% by 2010. The number of bags lost or mishandled decreased to 2 out of 1000, as opposed to 20 out of 1000 in 2005. This resulted in a greater rate of positive customer reviews and brought growth in revenues because the costs of operation did not include expenditures in wasteful steps and air-jet down-time.

By 2010

As an outcome of Minicucci’s focused policy, the Seattle hub was stable and running like clockwork by the year 2010. Alaska Airlines has adopted a new attitude, which was one of open dialog, trust, and cooperativity. Accountability was the main priority and was reached through report cards, the major source of reference when a failure occurred. Because Minicucci’s approach was known to give results, the acceptance of his policies occurred on every tier, and the open communication no longer was a burden, be it the morning operational meetings or supervisor meetings scheduled with employees on a biweekly basis.

Metrics such as on-time performance (88%) and net profits ($251.10) are the highest since the beginning of the company, while wage expenses and other losses are kept stable. The company has high rates of customer satisfaction because it provides excellent service and operates efficiently on all levels.

Recommendations

When one looks at the results of the change it becomes clear that an emotionally intelligent, passionate leader was what the company needed to overcome the crisis, return back to normal, and exceed it. The program developed by Minicucci was more effective than that of the Mad Dog Group because it involved the cultural element the MD Group plan lacked. However, there are still some points that can be improved in terms of both internal communications and operations.

Given that the employees’ attitude to meetings is generally positive, more training workshops could be organized. The training would benchmark the status quo of the employees’ development so far. Besides, should any new system be implemented, the training would serve as a testing platform. Additionally, the employees themselves would acknowledge the company gives them opportunities for personal and professional development and values them. Training would also facilitate transparency between the managers and employees, help single out the weaknesses and devise ways to improve them (Noe 5-10). Another point would be to add more incentives in the form of appraisals and benefits for good performance (Vaiman and Vance 163).

In terms of operations, it appears that outsourcing was the movement that shattered the employees’ faith and goodwill. As the company expands, therefore, outsourcing should be removed as an option. The need to outsource was mainly justified by the existing employees’ distrust and union issues. Consequently, the pay scale should be balanced, and all negotiations should be focused on reaching a happy medium so that all future decisions are consensus-driven.

Furthermore, Alaska Airlines could join an alliance to receive the benefits of a large route network. Such a move would sufficiently increase traffic and revenue per seat mile through code sharing and coordinated schedule. Frequent flyers would be using not only the home airline but the ones all over the alliance to earn their miles. Finally, it would reduce the costs maintenance, marketing, and on-ground operations, and help promote the airline through a well-known brand.

The latter benefit would enhance Alaska Airlines’ market image and make the changes visible to a broader range of customers (Iatrou and Oretti n.pag.). The customers are likely to associate the brand with high-quality service and acknowledge Alaska Airlines’ change more willingly if the company promotes it through the brand. Also, the brand is generally associated with higher perceived safety, which is still relevant to the aftermath of 9/11 and (specifically for Alaska Airlines) Flight 261.

Conclusion

To reiterate, the operational and cultural problems the company faced were caused by a multitude of factors: the labor issues and prolonged negotiations, the salary cutbacks and employee layoffs, the air-related tragedies, the service outsourcing, and lack of communication. MD Group did not account for the cultural element of the Seattle hub, which can explain its failure to fix it. The new leadership possessed emotional intelligence and focus necessary to improve the situation and further benefit the company. The points for improvement would be employee training, rejecting the outsourcing strategy, and joining an alliance to achieve even better results.

Works Cited

“Alaska Airlines History by Decade.” Alaska. Alaska Airlines, Inc., 2016. Web.

Avolio, Bruce J., Chelley Patterson, and Bradford Baker. “Alaska Airlines: Navigating Change.” Harvard Business Review 93.3 (2015): 1-22. Print.

Iatrou, Kostas, and Mauro Moretti. Airline Choices for the Future: From Alliances to Mergers. Abingdon-on-Thames, UK: Rutledge, 2016. Print.

Noe, Raymond. Employee Training & Development. 6th ed. New York, NY: McGraw-Hill Higher Education, 2012. Print.

Serling, Robert J. Character & Characters: The Spirit of Alaska Airlines. Seattle, WA: Documentary Media LLC, 2008. Print.

Vaiman, Vlad, and Charles Vance. Smart Talent Management: Building Knowledge Assets for Competitive Advantage. Northampton, MA: Edward Elgar Publishing, 2010. Print.

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