Alaska Airlines

Founded:
CEO:
President & COO:
Acquisation:
Acquisation:
Employees:
Key feature:
Competitor
Culture:

New Values:
New Values:

Virgin America:
Conceived:
Officially started:
Key Feature:

Culture:

IPO
President:
Alaska Airlines: Empowering Frontline Workers to Make It Right

Summary:

1932
Bradley Tilden
Ben Minicucci
2016
$4 Billion - Virgin America Airline, ($57 per share - i.e 46% premium = $2.6Million) ($4.2 billion - including debt & aircraft lease
3,000 (Virgin America ), 15,000 (Alaska)
Superior Customer service
Delta Airlines
"whatever it takes" - to please customers - failed
"Service Framework" - for customer statisfaction - framework 4 points - "safety, courtesy, show & efficency"
Revised Framework (after acquisation) - Own Safety, do the right thing, be kindhearted, deliver performance & be
remarkable.
After Acquisation: included Virgin's ideas & created - "Creating an airline people love"

2004
2007
First in US to offer WiFi, purple & pink mood light/ advanced in-flight entertainment system
Family Culture.
"Create WOW" - put customers first- ensure good experience.
"Elevate People" - for managers & peers - create opportunity for employees - team building - respectful
environment.
"Be Virgin" - reinforce fresh, cheeky experience.
2014
Hunt - promoted from CFO - after acquisation

History:Alaska
1990 - competition rise - encouraged employees to do "whatever it takes" to please customers - this failed - due to lack of trai
2000 - plane crash - reputation down - started to focus more on safety.
2001 - 9/11 terror attack - planes demand fell - price of raw materials rise - verge of bankrupcy - $43.4 Mil Loss.
2004 - cut 2100 jobs - by 2005 started making profit $55 Million -still struggled with operational issues.
2008 - created "departure & arrival" playbook - detailed rules for all - more disciplined.

Had open communications with upper management - frontline workers showing frustration - no proper training on custmer se
2014 - 8person task force created - to better customer service - called Beyond Service - 1pg document - to find "Secret Sauce"
Hire Disney Institute - for this work
create "Service Framework"
Service Framework - create by and for workers
1. Create personal connection.
Great Customer service - "safety, courtesy, show & efficency"
- considerable degree of freedom to employees - to bend rules - make exceptions - but should follow the 4 points of Framewo
- Superior/ manager encouraged to followup - but not reprimand - treat them with empathy

After Acquisation - Alaska - got access to San Francisco, Los Angeles & new york, california
Virgin employees - didn't like Alaska - saw their culture dominating - only white employees

Exhibit 6 Comparison of Alaska Airlines’ and Virgin America’s Operations, 2015

Annual passengers
Aircraft

Daily departures
Destinations

Exhibit 4 Alaska Airlines’ Financials, 2008–2017 (in millions of U.S. dollars)

Year:
Total Revenue
Growth Over Prior Year
Gross Profit
Margin
EBITDA
Margin
EBIT
Margin
Earnings from Cont. Operations
Margin
Net Income
Margin (3.7%)
Diluted EPS (0.94)
Growth Over Prior Year NM

Exhibit 9 Virgin America’s Financials, 2009–2016 (in millions of U.S. dollars)

Year:
Total Revenue
Growth Over Prior Year
Gross Profit
Margin
EBITDA
Margin
EBIT
Margin
Earnings from Cont. Operations
Margin
Net Income
Margin
Diluted EPS
Growth Over Prior Year
g debt & aircraft lease)

ed - due to lack of training .

training on custmer service

to find "Secret Sauce" behind exceptional frontline workers - created team of 25 best frontline workers

Exhibit -1
e 4 points of Framework.
Alaska  Virgin 
 Airlines America       

32 million 7 million
152 Boeing 63 Airbus
52 Q400
15 regional jets

1,000 200
112 24

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
3,663 3,400 3,832 4,318 4,657 4,964 5,368 5,598 5,931 7,495
4.5% (7.2%) 12.7% 12.7% 7.9% 6.6% 8.1% 4.3% 5.9% 33.7%
486.5 788.1 1,074 1,232 1,308 1,424 1,464 1,929 2,117 2,454
13.3% 23.2% 28.0% 28.5% 28.1% 28.7% 27.3% 34.5% 35.7% 32.7%
116.5 442.4 719.0 765.0 834.0 908.0 1203.0 1650.0 1816.0 1868.0
3.2% 13.0% 18.8% 17.7% 17.9% 18.3% 22.4% 29.5% 30.6% 24.9%
(88.1) 223.2 489.0 518.0 570.0 638.0 909.0 1330.0 1453.0 1511.0
(2.4%) 6.6% 12.8% 12.0% 12.2% 12.9% 16.9% 23.8% 24.5% 20.2%
(135.9) 121.6 251.0 245.0 316.0 508.0 605.0 848.0 814.0 775.0
(3.7%) 3.6% 6.6% 5.7% 6.8% 10.2% 11.3% 15.1% 13.7% 10.3%
(135.9) 121.6 251.0 245.0 316.0 508.0 605.0 848.0 814.0 775.0
3.6% 6.6% 5.7% 6.8% 10.2% 11.3% 15.1% 13.7% 10.3%
0.84 1.71 1.67 2.2 3.58 4.42 6.56 6.54 6.22
NM 103% (2.3%) 32.1% 62.7% 23.5% 48.4% (0.3%) (12.8%)

2008 2009 2010 2011 2012 2013 2014 2015 2016

547.6 724.0 1,037 1,333 1,425 1,490 1,530 1,626
NA 32.2% 43.2% 28.5% 6.9% 4.6% 2.7% 7.7%
75.4 105.1 171.4 213.2 334.6 355.9 471.4 560.3
13.8% 14.5% 16.5% 16.0% 23.5% 23.9% 30.8% 34.4%
(22.8) (1.9) (19.6) (22.9) 86.8 106.6 190.3 248.5
-4.20% (0.3%) (1.9%) (1.7%) 6.1% 7.2% 12.4% 15.3%
(39.0) (12.4) (27.4) (31.7) 75.9 96.4 177.2 220.4
(7.1%) (1.7%) (2.6%) (2.4%) 5.3% 6.5% 11.6% 13.6%
(80.8) (68.7) (100.4) (145.4) 10.1 60.1 340.5 298.3
(14.8%) (9.5%) (9.7%) (10.9%) 0.7% 4.0% 22.3% 18.3%
(80.8) (68.7) (100.4) (145.4) 10.1 60.1 340.5 298.3
(14.8%) (9.5%) (9.7%) (10.9%) 0.7% 4.0% 22.3% 18.3%
NA NA NA (207.2) 3.68 7.13 7.66 6.67
NA NA NA NA NM 93.8% 7.4% 57.5%