Airliners.net

About 100 employees at the parent company of AS and QX to be cut, no frontline employees, more details in 3 weeks.

https://www.adn.com/business-economy/2018/10/12/management-shake-up-at-alaska-air-will-bring-layoffs

B6 did exactly the same thing. The two are kind of in a battle to see who can clean up their balance sheet enough to buy the other. B6 let go of some pretty senior people like the VP of Network Planning. Although I will say the changes made in his wake that were recently announced did not seem to me to be very significant in terms of overall earnings. IAD was the only "hard" decision that was made. They have a lot more dead wood left to trim. So, I don't really see that being more than a few degrees of change in heading. It will be interesting to see if we see the same thing with AS. Will they also flush the network group? Will they reverse on SFO shrinking or gut it? It would seem a network re-eval is more needed than the 100 layoffs. Their California strategy is a mess IMHO. They can't be big in SAN, LAX, SFO, and SJC and make that work. I talked about this a long time ago, loyalty is not a State-wide concept like they seemed to think it was. It's a local concept. Being big in SAN does not help LAX, etc. WN is big in all of them. AS doesn't have the resources to challenge WN and others in all of these at once. They need to figure out which are the most winnable and focus their resources there. It's the classic failing war strategy "stretched too thin". It's sort of the opposite of B6 which I'd argue has too few focus points and thus nowhere to put airplanes.

Is it that big of a deal for there to be some layoffs after a merger? Seems like par for the course. I wouldn’t read much into it.

I think JetBlue also laid off a chunk of its HDQ workforce... Alaska seems to be aiming at its leadership.

Getting ready for a nice B6 takeover.

Odd that this is described as a management shake-up. It looks like simple headcount reduction not a commitment to new people in senior roles.

I'm sure this has less to with B6 (though I know that A.net has the two carriers intertwined) and more to do with earnings. The pressure is on and they obviously aren't performing at the level they need to. If they are top-heavy, cutting seems appropriate.

RE: California strategy. That's something they have to work through. Do you throw all your eggs at SFO and then when that falls flat just sink? Do you slash what you gained in the acquisition? Do you try to be more of a broader "California" airline? It's a tough hill to climb when you have WN so entrenched and UA dominant in SFO. They have shown in the past that they are not afraid to try, and they have shown in the past that they are not afraid to cut. This isn't any different.

MIflyer12 wrote:

Odd that this is described as a management shake-up. It looks like simple headcount reduction not a commitment to new people in senior roles.

That's what it is. Very apparent they have way too many chiefs. So, they are taking care of that. But, they are also scapegoating their financial performance by throwing the seperations into that pot along with decreased health care etc. Token nod to Wall Street that is transparent as it can get.

MIflyer12 wrote:

Odd that this is described as a management shake-up. It looks like simple headcount reduction not a commitment to new people in senior roles.

Ya, I think it was the spin put on the article by the writer, probably based on the take of the manager quoted in the article. I was expecting Tilden to be out or something when I read it.

Didn’t AA recently make a similar move or am I mistaken?

enilria wrote:

B6 did exactly the same thing. The two are kind of in a battle to see who can clean up their balance sheet enough to buy the other. B6 let go of some pretty senior people like the VP of Network Planning. Although I will say the changes made in his wake that were recently announced did not seem to me to be very significant in terms of overall earnings. IAD was the only "hard" decision that was made. They have a lot more dead wood left to trim. So, I don't really see that being more than a few degrees of change in heading. It will be interesting to see if we see the same thing with AS. Will they also flush the network group? Will they reverse on SFO shrinking or gut it? It would seem a network re-eval is more needed than the 100 layoffs. Their California strategy is a mess IMHO. They can't be big in SAN, LAX, SFO, and SJC and make that work. I talked about this a long time ago, loyalty is not a State-wide concept like they seemed to think it was. It's a local concept. Being big in SAN does not help LAX, etc. WN is big in all of them. AS doesn't have the resources to challenge WN and others in all of these at once. They need to figure out which are the most winnable and focus their resources there. It's the classic failing war strategy "stretched too thin". It's sort of the opposite of B6 which I'd argue has too few focus points and thus nowhere to put airplanes.

Increased Hawaii competition in 2018 - historically a huge profit driver for AS - also hasn't helped. And then there's the WN entry at some point soon into many of AS's Hawaii markets (OAK, SAN, SJC, SMF).

MIflyer12 wrote:

Odd that this is described as a management shake-up. It looks like simple headcount reduction not a commitment to new people in senior roles.

The key point was "no frontline employees" were cut, so we could call this a non-senior-management cutback.

That is good! I have not enjoyed their service out of the Bay Area at all. VX was much more premium in all classes and a better value. I have switched all flying to UA or DL out of the Bay and would try Alaska in the future if they improve the airline. It is too bad a merger was allowed to go through. Hopefully some new employees can turn this airline around in terms of quality!

What sorts of decisions happen at ALK vs. AS?

PlanesNTrains wrote:

Do you try to be more of a broader "California" airline? It's a tough hill to climb when you have WN so entrenched and UA dominant in SFO.

Yeh, but those were known, long-established factors before AS wrote the check for $2.6 Billion.

Bayer is laying off around 2,000 people for the same reason.

I guess that means JetBlue is going to buy them, too.

MIflyer12 wrote:

PlanesNTrains wrote:

Do you try to be more of a broader "California" airline? It's a tough hill to climb when you have WN so entrenched and UA dominant in SFO.

Yeh, but those were known, long-established factors before AS wrote the check for $2.6 Billion.

Are we disagreeing? I never said otherwise.

Pi7472000 wrote:

That is good! I have not enjoyed their service out of the Bay Area at all. VX was much more premium in all classes and a better value. I have switched all flying to UA or DL out of the Bay and would try Alaska in the future if they improve the airline. It is too bad a merger was allowed to go through. Hopefully some new employees can turn this airline around in terms of quality!

lol. They’re reducing management.

And I’m pretty suspicious of these Alaska haters from LAX and SFO - until very recently almost all pre-merger VX flights have remained Airbus flights that still have ex-VX crews. The seat back entertainment and ordering still works. So the experience should be virtually the same save the airline name. So I’m just not buying it.

AA just did the same as well. Its mostly a cut of middle management at corporate that have too few direct reports to be meaningful at that salary bracket. There are a lot of positions that get created when needed are really just a 12-18 month position but they end up lasting for far longer than required. You then have wasted overhead.

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Pi7472000 wrote:

That is good! I have not enjoyed their service out of the Bay Area at all. VX was much more premium in all classes and a better value. I have switched all flying to UA or DL out of the Bay and would try Alaska in the future if they improve the airline. It is too bad a merger was allowed to go through. Hopefully some new employees can turn this airline around in terms of quality!

Alaska was just ranked #1 by Kayak and Conde Nest. Have you been on Airbus flights or Boeing flights?

This has everything to do with the deterioraton of profits and nothing to do with spicing themselves up for sale to B6 (AS is larger than B6, BTW). For 2018, no US airline will have as large a decline in operating margin percent than AS (down 8% from 17% to 9%). Some is just timing (new pilot deal in late 2017); some is self-inflicted (where were they going to put 8% ASM growth every single year?); some is competitive (DL relentless in SEA; Hawaii RASMs worst in the country)- as a result they are only one of 2 airlines forecast to have down PRASM in 2018 vs 2017 (LUV is the other and might eke out a gain in the end). AS needs to retrench esp if oil prices keep going up.

Runway28L wrote:

Didn’t AA recently make a similar move or am I mistaken?

Yes, but to be fair AA has had waaaaaaaay too many people in management since the US merger. They needed to get costs and management staffing in line with UA/DL.

crescent wrote:

This has everything to do with the deterioraton of profits and nothing to do with spicing themselves up for sale to B6 (AS is larger than B6, BTW). For 2018, no US airline will have as large a decline in operating margin percent than AS (down 8% from 17% to 9%). Some is just timing (new pilot deal in late 2017); some is self-inflicted (where were they going to put 8% ASM growth every single year?); some is competitive (DL relentless in SEA; Hawaii RASMs worst in the country)- as a result they are only one of 2 airlines forecast to have down PRASM in 2018 vs 2017 (LUV is the other and might eke out a gain in the end). AS needs to retrench esp if oil prices keep going up.

Agreed, but reverse takeovers exist for a reason... i've been part of one myself (not airline industry). it could happen, so lets not assume that because AS is bigger than B6 in capital terms, that B6 could not buy them out in some form or another. Hell Berkshire Hathaway have been reported to be wanting to invest in an airline for a long time now. they sure as hell have the money to do it.

Why in the world do so many people think B6 and AS are primed for a merger? I don’t get it.

It's the way to turn the Big 4 into the Big 5 with another national airline and eliminate a competitor. People think well why can't AS & B6 exist as a nonambitious strong regional but look at what DL has done to AS in SEA- now DL has a hub with foreign routes & connections that AS doesn't. DL is trying to do the same to B6 in BOS. The big 3 benefit from foreign alliances that AS & B6 do not.

This seems long overdue, and I would hope that AA is next given how bloated their organization has become. Below is a very quick and dirty Wikipedia analysis that I know can be easily skewed by contractors, but it's a decent bellwether view nonetheless in my mind:

ikolkyo wrote:

Why in the world do so many people think B6 and AS are primed for a merger? I don’t get it.

1. They aren't megacarriers and are thus deemed more likely to get government approval
2. Virtually zero network overlap so no likely divestitures needed and maximum of efficiency would be added
3. Historically similar strategies on opposite coasts
4. Similar size (pre-VX at least)
5. Both are seen as being eventual losers in competition with the Big 4 in status quo

HPRamper wrote:

ikolkyo wrote:

Why in the world do so many people think B6 and AS are primed for a merger? I don’t get it.

1. They aren't megacarriers and are thus deemed more likely to get government approval
2. Virtually zero network overlap so no likely divestitures needed and maximum of efficiency would be added
3. Historically similar strategies on opposite coasts
4. Similar size (pre-VX at least)
5. Both are seen as being eventual losers in competition with the Big 4 in status quo

What stands to be gained in terms of synergies with a B6/AS merger? The two networks are pretty independent of each other. Would there be any passengers that would fly on a combined B6/AS that dont currently fly them today?

Again layoffs after mergers are common, it takes a while for new management to sort out redundancies. And 100 people is not a lot to cut.

Its important to note that AS considers any employee that is non-union to be a "management" employee. So these cuts affect anyone in a back office role and not limited to supervisory or leadership roles.

winginit wrote:

This seems long overdue, and I would hope that AA is next given how bloated their organization has become. Below is a very quick and dirty Wikipedia analysis that I know can be easily skewed by contractors, but it's a decent bellwether view nonetheless in my mind:

Yes. Another way to look at labor productivity is ASMs (or RPMs) per employee.

winginit wrote:

This seems long overdue, and I would hope that AA is next given how bloated their organization has become. Below is a very quick and dirty Wikipedia analysis that I know can be easily skewed by contractors, but it's a decent bellwether view nonetheless in my mind:

I'm 90% sure those 126k employees for AA includes the Envoy, PSA & Piedmont employees.

tphuang wrote:

Again layoffs after mergers are common, it takes a while for new management to sort out redundancies. And 100 people is not a lot to cut.

It’s actually less than 100, as a good chunk of the 100 FTEs will be in the form of not backfilling certain open positions. That said, it’s a crazy time for those of us in leadership who could be impacted.

EA CO AS wrote:

It’s actually less than 100, as a good chunk of the 100 FTEs will be in the form of not backfilling certain open positions. That said, it’s a crazy time for those of us in leadership who could be impacted.

Any comment on which sort of positions aren't going to be filled?

alasizon wrote:

EA CO AS wrote:

It’s actually less than 100, as a good chunk of the 100 FTEs will be in the form of not backfilling certain open positions. That said, it’s a crazy time for those of us in leadership who could be impacted.

Any comment on which sort of positions aren't going to be filled?

No one who is frontline or covered by a CBA will be impacted. Beyond that, there’s no further info available yet.

Good luck to you! If you contribute as well to AS as you do to us here, you’re good!

As an anet love seat CEO, in my opinion, the biggest mistake was when AS turned their back on DL.
Rushing into AA's arms didn't work out and then paying 2.6 billion for Virgin.
Bad moves.

global1 wrote:

As an anet love seat CEO, in my opinion, the biggest mistake was when AS turned their back on DL.
Rushing into AA's arms didn't work out and then paying 2.6 billion for Virgin.
Bad moves.

Letting B6 win and acquire VX would have been an even worse move for AS.

alasizon wrote:

winginit wrote:

This seems long overdue, and I would hope that AA is next given how bloated their organization has become. Below is a very quick and dirty Wikipedia analysis that I know can be easily skewed by contractors, but it's a decent bellwether view nonetheless in my mind:

I'm 90% sure those 126k employees for AA includes the Envoy, PSA & Piedmont employees.

It does.

United doesn't have any owned subsidiaries, however the employment of their contractors (Skywest, Air Wisconsin, TSA, Republic, Xjet, etc.. is massive.

MIflyer12 wrote:

winginit wrote:

This seems long overdue, and I would hope that AA is next given how bloated their organization has become. Below is a very quick and dirty Wikipedia analysis that I know can be easily skewed by contractors, but it's a decent bellwether view nonetheless in my mind:

Yes. Another way to look at labor productivity is ASMs (or RPMs) per employee.

http://web.mit.edu/airlinedata/www/Empl ... ivity.html

This link has parsed Form 41 data showing ASMs per Employee and ASMs per $ of employee compensation.

flyby519 wrote:

HPRamper wrote:

ikolkyo wrote:

Why in the world do so many people think B6 and AS are primed for a merger? I don’t get it.

1. They aren't megacarriers and are thus deemed more likely to get government approval
2. Virtually zero network overlap so no likely divestitures needed and maximum of efficiency would be added
3. Historically similar strategies on opposite coasts
4. Similar size (pre-VX at least)
5. Both are seen as being eventual losers in competition with the Big 4 in status quo

What stands to be gained in terms of synergies with a B6/AS merger? The two networks are pretty independent of each other. Would there be any passengers that would fly on a combined B6/AS that dont currently fly them today?

The biggest gain in my opinion would be gaining critical mass in both hub and non-hub markets to gain frequent fliers. To use MSY as an example, JFK/BOS/FLL or SEA/SFO alone wouldn't be enough to attract loyalty, but combine those routes and maybe add PDX/MCO/LAX/SAN and suddenly you've got a nice network that competes with the legacies. There are also a large number of markets that can't be reached with one or the other's network. A SEA flier that needs to reach JAX often is going to choose DL as would a BOS flier who flies to MCI. But a combined carrier would be able to get you there, albeit with a roundabout connection.

Think of how the DAL operation might have turned out with a merged AS/B6 or at least a codeshare.

Think of what could've been with an AS/DL alliance or merger. That was a fork in the road.

What has all the expense and disruption brought to AS? All Because they wanted to codeshare with everyone and anyone rather than commit to an alliance with DL? (I'm being simplistic.Obviously there's more to the story than this).

AS could be making money hand over fist instead of floundering for a way forward or contemplating a takeover, or being taken over by B6. That scenario would be an extremely expensive and very messy exercise to try and cobble a system out of two polarized route structures and fleets and could ultimately result in the demise of the AS brand.

They're all very late to the merger game. The only remaining players that make sense might be further consolidation of the ulcc carriers. Otherwise that ship has pretty much sailed.

if AS and B6 merged, where would that place them amongst DL, UA, AA and SW? If they did merge, I would hope they would stick with Alaska Airlines as the new name of the combined carriers.

In RPMs, still less than half the size of AA, DL or UA. (See the 2017 Annual Reports.) Still no meaningful South American network, and nothing TATL nor TPAC. No Mid-Con hub. Ask US Air how well the 'barbell' network worked after it bought PSA.

global1 wrote:

Think of what could've been with an AS/DL alliance or merger. That was a fork in the road.

Except that kowtowing to one airline is great for that carrier but not necessarily great for you. In the end, the outcome will likely be the same - AS will become part of a larger airline. I seriously doubt that the DL we know today would have been happy long term letting AS control the PNW, and I’m not even sure how much they could have done long term given DL’s size.

Regardless, they had to decide: Do we let DL control our destiny or do we want to control it? Again, I’m not sure the ultimate outcome would be much different.

We need to remember that AS has had a higher profit margin than DL has during these intervening years. I would hardly characterize AS as floundering.

Prost wrote:

We need to remember that AS has had a higher profit margin than DL has during these intervening years. I would hardly characterize AS as floundering.

different environment today than 10 years ago and two totally different mergers with 4 totally different airlines. Totally different landscape. Plus, we also need to take a look back to the OP, I dont think anyone suggested that AS is floundering. Maybe they will be if they don't make these cuts,

Now, if B6 and AS were to merge, which is not out of the realm of possibility, what would the new airline be called?

I'm not saying AS is floundering as an enterprise. I'm saying that they're floundering to find a long term strategy if they aspire to be a national player.

At this point their options are somewhat limited and it may be a case of eat or be eaten. Aligning or merging with DL was
a possibility when the two had little overlap.
Buying or merging with B6 or HA will still not provide the scope and heft to compete effectively for many large national corporate contracts. If they're bought by B6, there goes the AS brand.

DL will continue to focus on Sea. The opening of the new FIS facility will only intensify the pressure.

Good luck going against UA in SFO.

Time will tell if their decision was a wise one.

global1 wrote:

I'm not saying AS is floundering as an enterprise. I'm saying that they're floundering to find a long term strategy if they aspire to be a national player.

At this point their options are somewhat limited and it may be a case of eat or be eaten. Aligning or merging with DL was
a possibility when the two had little overlap.
Buying or merging with B6 or HA will still not provide the scope and heft to compete effectively for many large national corporate contracts. If they're bought by B6, there goes the AS brand.

DL will continue to focus on Sea. The opening of the new FIS facility will only intensify the pressure.

Good luck going against UA in SFO.

Time will tell if their decision was a wise one.

Sure, but again, what are you thinking would have been better for them if they’d aligned with DL? Would they have earned even greater profits? Would they have grown even faster? Would they even exist still today? Saying that they’re gonna die eventually anyhow so they might as well have given in to DL (my words, not yours) seems more about making DL happy than anything to do with AS.

If you look at where delta is at today nationally and as a strategy, does anybody think for a minute that they would’ve allowed Alaska to have been in control of their own destiny? Does anybody think that they would’ve just continued to be hands off in Seattle? We can see what’s going on in Boston, we can see what’s going on in Austin, we can see what’s going on in Raleigh Durham, we can see what’s going on in JFK, we can see what’s going on in Los Angeles, we can see what’s going on with their international joint venture partners-frankly, there was no future for Alaska as an independent airline had they went solo with Delta. It was a short term, stopgap measure by Delta to avoid having to do what they’ve now done in Seattle.

AS may ultimately fail, but if they do, they at least did it on their terms and not Deltas.

As much as it pains me to say this, these cuts are a by-product of an acquisition. However, I am upset that the chosen employees were not already quietly notified and offered a severance package or optional retirement. Leaving the knife hovering above an entire work group for 3 weeks with nobody knowing who it’s coming for isn’t good for anyone. It feels unnecessary. My thoughts and best wishes to everyone in AS management who are going through this right now.