Bill Ayer is stepping down as chief executive. Although Brad Tilden officially takes over in May, he's effectively in charge right away. Though Ayer will remain chairman for now, that's only for a short-term transition period.
After a dark decade of airline consolidation, bankruptcies and cost-cutting, Alaska Airlines remains a boutique airline that has preserved its independence, its profitability and its reputation for superior service.
On Thursday, Alaska Air Group CEO Bill Ayer announced his retirement and handed the controls to the person groomed to take his place, Alaska Airlines President Brad Tilden.
Ayer, 57, had to cut jobs, outsource baggage handling and add bag fees since taking charge in 2002. The airline is now a much lower-cost operation.
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But he’s credited with achieving that without going through bankruptcy, and without making cuts as heavy as those now looming at American Airlines.
During his tenure, Alaska Air has grown: expanding routes, buying new planes and making a profit — $244.5 million last year.
Michael E. Levine, a former senior airline executive and now a law professor at New York University, said that despite painful layoffs Alaska Airlines has preserved relatively good labor relations, making its cabin and ground staff “more welcoming to customers” than is the case at many airlines.
“Alaska’s personality has stuck with it in that respect,” Levine said.
The airline came in No. 1 in on-time performance among major North American carriers in 2011. And for the fourth year in a row, a J.D. Power and Associates study last year ranked Alaska highest in “customer satisfaction” among traditional network carriers in North America.
In an internal company memo Thursday, Ayer gave credit to employees for helping him successfully navigate the financial pressures of the past 10 years.
“A small-company feel makes it easier,” he said. “I’m certainly proud of how we’re positioned today.”
Industry observers foresee a smooth transition and a steady course ahead.
Tilden, 51, will take over in May, though he’s effectively in charge right away. Ayer will remain chairman but that’s only for a short-term transition period.
“Brad will officially assume the title of CEO of Alaska Air Group, Alaska Airlines and Horizon Air at our annual shareholder meeting on May 15,” Ayer said in the memo. “He’s in the left seat now, though, and in command.
“My tenure as chairman will be up to the board, but it won’t be long term,” Ayer added. “My belief is the new CEO shouldn’t have the old one looking over his shoulder.
“The time is right for me to pass the torch,” he said.
Stock split, buyback
Signaling confidence in the company’s financial prospects and its stock price, Alaska also announced a 2-for-1 stock split and the board authorized a $50 million share buyback. Alaska Air Group shares closed Thursday up $2.32, or 3 percent, at $77.10.
Ayer has spent 30 years at Alaska — first at Horizon Air, the regional jet subsidiary, and then Alaska Air, becoming chief executive in 2002.
In the decade since, airlines have been under enormous pressure to slash costs.
Oil was priced at an inflation-adjusted average of $29 a barrel when Ayer became CEO. Today it tops $100 a barrel. In the last three months of 2011, the airline’s fuel bill was $83 million more than in the same period a year earlier.
Yet as fuel prices have soared, airfares haven’t kept pace as passengers routinely choose the lowest price available on the Internet.
Alaska Air, however, remains solid. Alaska and Horizon together have 9,500 employees, with 6,200 of those in the Seattle area. Combined, they fly 119 aircraft.
Alaska Airlines has steadily modernized its fleet and now flies only Boeing 737s. Last month, it took delivery of a new 737-800, with two more pending this year. Next year, it will take nine of the larger 737-900ERs.
It has opened carefully selected transcontinental routes to the East Coast and to holiday destinations in Mexico. And when Aloha Airlines collapsed in the Hawaiian market, Alaska stepped in and this winter operates 21 daily round trips to Hawaii.
NYU’s Levine said Ayer’s management has been “opportunistic and nimble.”
“They are a relatively small airline,” said Levine. “If they see an opportunity, they jump on it.”
In Thursday’s internal memo, Ayer warned that continued “low fares and low costs are required for long-term profitability and growth.”
He said he expects no letup in the push for cost savings and in the challenges facing the industry, and that the airline’s management needs to be unafraid “to implement important changes even when they’re really hard or unpopular.”
“We’ll continue to face competitive pressures, a weak economy and high oil prices, so change will be a constant,” Ayer said. “The only thing we can’t change is facing up to realities and executing a business plan with a long-term perspective.”
Ray Neidl, an airline analyst with Maxim Group investment banking, reiterated his buy recommendation on the stock in a note to investors, predicting Tilden will “continue the Alaska Air culture of solid growth and profitability.”
Despite the pressures forcing other airlines to consolidate, Neidl believes Alaska is unlikely to be swallowed by a bigger carrier.
The airline has for years resisted exclusive partnerships and assiduously maintained its independence, leveraging its niche network from Alaska to Acapulco and its small-airline nimbleness into consistent profits.
“They have a unique culture and a unique model that makes lots of money,” said Neidl. “If you merged them with anybody else, you’d destroy that.”
As he leaves his position, Ayer has joined the NextGen Advisory Committee, a panel of aviation leaders working with the Federal Aviation Administration to modernize the nation’s air traffic control system.
He also is joining the University of Washington Board of Regents.
And he remains chairman of the Puget Sound Energy board and is a director of the Museum of Flight in Seattle.
Ayer holds a private pilot license, which he uses to fly patients to receive medical treatment through an organization called Angel Flight West.
Tilden joined Alaska Airlines from Price Waterhouse in 1991 and became Alaska Air Group’s chief financial officer in 2000, then president in 2008.
Ayer described him as “my right-hand person as we made the series of important but often difficult decisions.”
Also a private pilot, Tilden grew up near Sea-Tac and learned to fly at Renton Airport during the summers of his college years.
In the internal memo, Tilden told employees he’ll continue the course set by Ayer.
“As to what may change with regard to my leadership style as I move into the CEO role, I would say ‘not much,’ ” Tilden said. “We’ll do a lot of what we’ve been doing.”
His vision of Alaska Air, he said, shows “a future where we are a strong, independent, Seattle-based company.”
Dominic Gates: 206-464-2963 or firstname.lastname@example.org