Innovation in Flight
A Critical Case Analysis
By Tyler Hull
MBA 617
Abstract
Operations for Alaska Airlines began in 1932 with Mac McGee flying from Anchorage to the
Bristol Bay and back. While operations began small, they quickly expanded through mergers to enter
new markets and expand their fleet. Alaska is now the 7th largest airline in the country and has been
growing rapidly in most recent years while other airlines struggle to stay afloat. Alaska has set the record
for most consecutive years of profitability (19), expanded into international travel, and pioneered
technology to enhance safety and pilot expertise. The challenge lying ahead of Alaska Airlines is the
question of what comes next. Do they expand national routes? Do they expand international routes? Do
they focus on strengthening current status? (Alaska Airlines, 2015a)
History
Alaska Airlines struggled to get its wheels off the ground but determination to succeed held the
small staff afloat in the 1930s until their strategy of merging began. Their merging strategy focused not
only on making a larger fleet but also was their method for entering new markets. Merging first with Star
Air Service not only created the largest Alaskan fleet but also gave the company opportunity to enter
other markets such as Fairbanks. Due to regulation however, Alaska was denied access to the Seattle area
until the early 1950s putting its expansion dreams on hold.
Over the next two decades, Alaska struggled to turn a profit with limited opportunities and
success. In the mid 1970s, new leadership was established and Alaska began to see new life with a
greater focus on customer service. At this time, Alaska saw its biggest growth obstacle as heavy
regulation. Alaska was one of only three airlines that pushed for deregulation and immediately saw
progress upon their success. In the early 1980s, Alaska quickly expanded to servicing areas such as
Southern California, San Jose, Spokane, Boise, Phoenix, as well as expanding some routes in Alaska. It
was at the end of this time period that Alaska rebooted its strategy of merging for growth through the
establishment of Alaska Air Group which would be the holding company of Alaska Airlines and the
newly acquired Horizon Air and Jet American Airlines. With such growth and opportunity at its finger
tips, Alaska also began service to Mexico in 1988. (Alaska Airlines, 2015b)
With a strong network of flights, Alaska refocused on its cost structure while maintaining high
customer service standards. From 1990 to present, Alaska created more efficient processes, expanded its
routes to the east coast, pioneered technology such as the HGS (Head-up Guidance System) for pilots and
digiplayers for passengers, set standards in on time performance, and received the J.D. Power award
“Highest Customer Satisfaction Among Traditional Carriers in North America” seven years in a row.
Alaska has created an environment that both employees and customers view as professional, friendly,
efficient, and effective. (Alaska Airlines, 2015c)
Culture
Companies across the nation focus on what is provided to the stakeholders of the company. This
focus stands as their culture. Alaska Airlines states well its culture in its mission statement:
At Alaska Airlines, our employees share an uncommon blend of integrity,
professionalism, caring, resourcefulness, and spirit. Every day we strive to bring these
values to life through behaviors and deeds that go above and beyond the ordinary - what
we call "North of Expected" and Alaska spirit in action. (Alaska Airlines, 2015d)
This statement differs from most mission statements in that it tells the customer how employees behave at
Alaska Airlines rather than telling the customer only what they will receive in their purchase. Success
stories from customers do not always discuss the sleek online layout, airplane design, or prices but focus
more on the high level of service they receive from employees.
This culture carries true also for the employees as Alaska is determined to ensure that each
employee feels valued and strengthened by the organization. The commitment of excellence for the
company drives a strong professional atmosphere while at the same time leaders believe in having fun
with what they do. Back in the 60s, Alaska started using rhymes as part of the flight attendants’
presentations. That attitude of having fun carries on today with pilots reporting to passengers the progress
of sporting events, flight attendants enjoying fun conversations with passengers, and even creating the
official company position CFO (Chief Football Player) for Seattle Seahawks quarterback Russell Wilson.
Alaska Airlines has pioneered in-flight service with more than smiles and handshakes; they have
been a leader in technology for the past several decades. They were the first to utilize satellite technology
rather than ground radar for tracking, paperless flight manuals, and the HGS to enhance even further
safety and efficiency of flights. Other first for the company include online self bag-tagging, online checkin, and utilizing check-in kiosks as part of their “Airport of the Future” initiative. (Alaska Airlines, 2015e)
These two focuses, customer service and technology, have been the ground work for Alaska
Airlines long standing record of success for all stakeholders.
Critical Evaluation
Since its inception, Alaska Airlines has experienced ups and downs but most recently seen the
fruits of its labors with a CAGR (compounded annual growth rate) of 7.2% since 2003, at a time when
most airlines are struggling to break even. Over the past four years, Alaska has added 63 markets causing
the strong financial performance of the recent past. (CAPA, 2014) The question at this point is what
comes next? The problem Alaska Airlines faces is not in its stability, community/customer relations, or
efficiency but what can it do to carry this growth momentum forward into the future. How does this
relate to the organizational structure? Depending on the action of Alaska Airlines, the structure would
need to be arranged differently. (See appendix A for current structure) Each recommendation will
discuss what is to be done and how it would impact the organizations structure.
Recommendation 1: International markets
Currently, Alaska Airlines has routes servicing the United States, Canada, and Mexico. The
presence in Canada and Mexico however is somewhat small in comparison to United States operations,
49, 33, and 752 respectively. By expanding this market, Alaska can grow revenue opportunities and get
more involved in international travel. (Alaska Airlines, 2014)
With that in mind, how does the organization need to change? These international markets are
close in proximity making travel easier than if it were European or Asian markets. This means that
leaders can stay somewhat centralized and still be able to reach out to each group, national and
international. This will play to their advantage in continuing a push in customer service and technology
expertise. If new terminals are accessed internationally, local employees will be more focused on
customer service than on production or research and development. Marketing and legal teams will still be
necessary to understand local regulation and customer outlook.
In this scenario, it is recommended to maintain executive leadership but under each department
separate into national and international divisions. For example, marketing will have two divisions, one
that oversees data collection, strategy creation, and promotion in the United States while the other
oversees the expanded international market. Should aggressive expansion be pursued in multiple
countries, i.e. Canada and Mexico, then an additional division should be created for each country.
Understanding the local environment is crucial to Alaska’s initiative of customer service and
culture for employees. By having local teams for specific divisions, it also limits the expense that comes
with going international in business.
Recommendation Two: Expanding East Coast Markets
While Alaska has a dominant presence in the northwest, it has limited routes to the east coast.
The east coast consists of the next biggest market that Alaska can enter in the United States. By merging
with an established company on the east coast, Alaska can use its already proven method to ‘instantly’
increase its fleet and staff to accommodate a jump into the east coast. This merger could take on two
forms, one being a conversion of the already established airline into Alaska Airlines or maintain its title
like Alaska has done with Horizon. The latter will be the explored option as this can maintain strong
brand loyalty from east coast customer.
In such a merging situation, the existing organization can maintain its structure with the CEO’s
title changing to president of the acquired company. By maintaining the same structure, the employees
will experience minimal morale impact from the acquisition. Existing staff will receive subsequent
training on the culture and expectations of Alaska. As time progresses, employees will adjust to the
company culture and carry forward the established success into a new market. Culture and attitude must
remain firm through any merger in order to create a successful and compatible environment.
Recommendation Three: Maintain Course
While continuing on the path that Alaska has placed itself is a viable option, there is a change that
can help strengthen the culture and mission of the company. This change would be to place a
communication tool for better collaboration between divisions. This could appear as a quarterly
brainstorming event with a representative from each division at the base level. By bringing in base level
employees it allows for those who interact most regularly with customers or systems to provide feedback
on corporate level ideas. It also supports the idea of employee support and encouragement by executive
leaders.
Alaska Airlines is currently in the elaboration stage and has a need for regular revitalization in
order to maintain course. Heavy involvement and feedback from employees will keep those in power
positions to remain fresh on current demands, possibly spark ideas of innovation, and maintain a positive
corporate culture. While this recommendation does not change the structure of the company it does
require a change in mindset by both staff and managers. Executive leaders must be open to the ideas of
staff and vice-versa in order to maintain a fresh perspective on company goals and strategy.
Conclusion
Alaska Airlines is in a stable position economically and socially. The company is seeing year
over year strong financial performance while customer service surveys over the past decade have rated
Alaska above the rest. Each recommendation is a viable option for Alaska Airlines to pursue, but each
has the requirement of focusing on its competencies, primarily customer service and innovation.
Surrendering either of these two would eliminate the strengths that make Alaska a pioneer in the field of
aviation.
References
Alaska Airlines (2015a). Historical Overview. Retrieved March 10, 2015 from
http://www.alaskaair.com/content/about-us/history/overview.aspx
Alaska Airlines (2015b). History by Decade. Retrieved March 10, 2015 from
http://www.alaskaair.com/content/about-us/history/history-by-decade.aspx
Alaska Airlines (2015c). Alaska Airlines Awards and Recognition. Retrieved March 10, 2015 from
http://www.alaskaair.com/content/about-us/newsroom/alaska-awards.aspx
Alaska Airlines (2015d). Our Mission. Retrieved March 10, 2015 from
http://www.alaskaair.com/content/about-us/sustainability/our-mission.aspx
Alaska Airlines (2015e). Innovation and Technology Leadership. Retrieved March 10, 2015 from
http://www.alaskaair.com/content/about-us/newsroom/technology.aspx
Alaska Airlines (2014). Cities Served. Retrieved March 10, 2015 from
http://www.alaskaair.com/content/about-us/newsroom/as-cities.aspx
CAPA (2014). Alaska Airlines Touts Successful Network Evolution as 2015 Growth Estimates in high
single digits. Retrieved March 10, 2015 from CAGR http://centreforaviation.com/analysis/alaska-airlines-touts-successful-network-evolution-as-2015growth-estimates-in-high-single-digits-200799
The Official Board (2015). Alaska Air. Retrieved March 10, 2015 from
http://www.theofficialboard.com/org-chart/alaska-air
Appendix A – Organizational Chart of Alaska Airlines
(The Original Board, 2015)