Mergers are catnip to Wall Street. Even though they have produced, at best, mixed results, they do yield big fees initially for investment bankers, lawyers and short-term institutional investors.
When I interviewed Bill Ayer last year, he was as adamant as the chief executive of a public company can be: Alaska Air Group would remain independent.
Now that Ayer is retiring, the question is sure to come back, even though he is being replaced by President Brad Tilden, a 21-year Alaska veteran.
Ayer guided Alaska through perhaps the most challenging time the airline industry ever faced. Alaska was one of the few so-called legacy carriers to right itself without resorting to bankruptcy reorganization. This required major job cuts and a top-to-bottom rethinking of the strategy of Alaska Airlines and Horizon Air. Alaska moved to an all-Boeing fleet and is experimenting with biofuels.
Employees came through this still loving the hometown airline. Passengers, too: Metrics such as on-time arrival and customer satisfaction are consistently at or near the top.
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Although quick to share credit, Ayer exemplified the best in a chief executive.
His logic to stand alone — or be the top dog if a merger makes sense — remains. The board supports independence, a critical backstop. Alaska is relatively small and operates a quirky network in its namesake state, hardly a magnet for another major carrier. It’s already lean and competitive, thanks to its trials after 9/11.
In addition, Alaska has pursued an organic growth strategy with an emphasis on excellent customer service quite at odds with the deal focus of, say, USAirways. It’s yielded far better results for shareholders than seeking deals. Its passenger-load factor has improved, fuel costs have been well managed. Profits have consistently grown and the company boasts a healthy balance sheet without the heavy debt that has dragged down so many airlines. No wonder Alaska shares have risen above $76 from a 52-week low of $51.10.
Still, mergers are catnip to Wall Street. Even though they have produced, at best, mixed results, they do yield big fees initially for the investment bankers, lawyers and short-term institutional investors. Is Thursday’s stock bump a vote of confidence in Alaska’s continuity, or a hope that it will now be put in play?
The industry’s increasing consolidation has been bad for competition and customers, and worse for communities. Cities such as St. Louis, Minneapolis and Cincinnati lost tens of thousands of good jobs because mergers eliminated headquarters or hubs.
For all that, most of the survivors are the walking dead, distracted by melding different cultures, systems and employee groups. And their larger problems — especially Southwest Airlines — haven’t been solved. United Continental Holdings is trading around $23. Delta Air Lines is less than $11 — better, I suppose than last summer’s $6.41.
No matter. With American Airlines in bankruptcy reorganization, the merger vultures are circling, especially USAirways, based in suburban Phoenix and a creature of a half-dozen painful, destructive combinations.
The loss of Washington Mutual and the amazing expansion of Amazon.com show the importance of major headquarters to Seattle. We’ve been blessed to keep a hometown airline that employs about 6,200 workers here while providing competitive, convenient service for business travelers and tourists.
So a humble piece of advice to Mr. Tilden: When the investment bankers ring, just say no. Better yet, don’t take their calls.
You may reach Jon Talton at firstname.lastname@example.org. On Twitter @jontalton.