Listen in as Alaska Airlines CEO Ben Minicucci sits down with Aviation Week's Karen Walker and discusses 2022 goals, customer service, sustainability and innovation.
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Rush transcript
Karen Walker:
Hello everyone, and welcome onboard for Window Seat at Aviation Week air transport podcast. I'm Air Transport World group editor, Karen Walker, and I'm delighted to be joining you today from the Seattle headquarters of Alaska Airlines. And with me is their CEO, Ben Minicucci. Ben, welcome. It's so great to be with you. Thank you for your time today. I know you're extremely busy.
Ben Minicucci:
That's no problem.
Karen Walker:
First thing I'm delighted to be able to say, is congratulations. Alaska Airlines as been selected by global editors, as the 2022 Airline of the Year, and it's very well deserved. So let me start by asking you what it actually means to be Airline of the Year, beating out not just the US carriers, but all airlines in the world. This is not an overnight achievement, this is a steady delivery of performance. How do you do that?
Ben Minicucci:
Well, let me start by saying we are just amazingly honored and humbled. Credit goes to the amazing people of Alaska, and everything they've done, not only through the pandemic, but like you said, over many, many years. I mean, to answer your question, ever since I've been in the airline, and I've been here 18 years, we've always had a way of looking at a business, and it was always a balanced way of managing our business. It's looking after our people, looking after our guests, and being good to the communities we serve, and also being good financial stewards of the company.
Ben Minicucci:
So ever since I've been here, we're honed this business model of just looking after the people who really depend on Alaska. And over the years we've kept honing it and honing it. And I think what's just been a tremendous asset for us, has been our culture, and these values that are just behind it. I put them on my wall, because they mean so much to me, and these values of being kind, caring, I think have taken us, over the years, to create a company that, once people know us, they really love us, and we've gained amazing loyalty. But it's really helped us grow the airline, and to gain the reputation we have today.
Karen Walker:
So let's look at that care from two different aspects here, because to be honest, or sadly, it's not necessarily something that people always associate with airlines.
Karen Walker:
And obviously, there's been enormous stresses and pressures, both for, obviously people in the industry through this pandemic, but also for those people who have elected to fly again through this. They're under great stress. In the seat-back pocket, where I've noticed that you have the menus and things like that, is something like, "Care shouldn't be rare." What does care mean in your eyes for the customer?
Ben Minicucci:
What's amazing about our culture, is that over the decades, we've just hired amazing people who are kind people. We've just hired kind people. So this culture of kindness and caring really emanates from our people. But when people experience it and feel it... And it's subtle. We were talking about an experience you had coming over here. What we try and just communicate that everyone in the company is that, people are empowered. People are empowered within a framework. We call it our care framework. There's actually something that we put people through... we call it our service of care framework... that people are empowered to make decisions to do what's right. Again, another one of our values is to do the right thing.
Ben Minicucci:
And it could be something like making an announcement to tell people, "Look, we have turbulence coming in, you might want to use the restrooms before. The service might be delayed." It could be something onboard, where our flight attendants are serving an elite guest and they brought a friend, and they will treat that friend like an elite guest. And there's nothing in our manuals, in our policy, that says to do that, but we create this empowerment framework that says that you're allowed to make exceptions for policy, based on the situation that's right in front of you. Because we can't write every policy in a book, and we don't want a big policy book, because we don't want to be this airline that's just bureaucratic. So, we really hone the message of empowerment, and people are empowered to do the right thing.
Karen Walker:
Doing the right thing. A Big, big topic, of course, is sustainability in aviation. Alaska was an airline that was speaking about this... look at [RMP 00:04:49] and the work you did there, for example... frankly a long way ahead. But what are you seeing as the big changes now, and then big comparatives for Alaska and the industry?
Ben Minicucci:
A couple of big things. One of course is our drive to be net-zero carbon by 2040. It's an ambitious goal. And we really have a strategy, it's a five-point plan, to get to net-zero by 2040. but we're doing some innovative things, like partnering with a Silicon Valley based company, that's using artificial intelligence, machine learning, to help us plan our flights. If you're going from Seattle to DC, or from DC to Seattle, they use this tool to help our dispatchers plan this flight, where it will use the least amount of fuel, and be the most efficient flight path, to get you from point A to point B.
Ben Minicucci:
A great thing about this program that we call [Flyaway 00:05:42], is that we partner with the Silicon Valley company, is that it's provided huge benefits, again reducing our impact on the climate, it's reduced fuel, and it's just one sliver of what we have to do to get to net-zero carbon in 2040. But it's all about innovation. So innovation's a big part of our strategy. Actually, on the board we have an innovation committee, a subcommittee on the board, that's totally focused on the board along the line of innovation. Whether it's innovation for employee tools, innovation for customers, innovation for the environment, our board, our entire company's focused on making sure that we're doing everything we can to get to our long-term goals.
Karen Walker:
So that raises an interesting question in terms of investment and resources. You were really well ahead of so many of your peers in terms of getting the financial stability that you needed, first of all, at the worst point of the pandemic, and then getting back to profit, but it's still a hard tough road.
Ben Minicucci:
It is.
Karen Walker:
The travel recovery is still ongoing. As we know, there are all these other new challenges coming in. But clearly, you still have a priority on keeping an eye on that innovation and sustainability, am I correct?
Ben Minicucci:
Absolutely. When the pandemic started... I break it up into three phases. One, it was a crisis. When the pandemic really hit in March 2020, and passenger travel dropped by 95%, we were running through $400 million of cash a month. And so the first order of business was, "Stop bleeding clash." And once we stopped bleeding cash, we went to positive cash flow, and once we [inaudible 00:07:23] positive cash flow, we said, "Let's start making money. Get the profit-building." And that are the three phases we took through the pandemic, which is a place we're in right now. It was that mindset that allowed us to do things like putting an order for Boeing MAX airplanes, in the midst of a pandemic where nobody was looking at it. Because we had stabilized the company, and we knew we were going to [inaudible 00:07:45].
Ben Minicucci:
We came into the pandemic strong, and we knew that "Now we've stabilized the company, we're not burning cash, let us focus on the future." Because we knew that this pandemic was going [inaudible 00:07:57] guessed was two years or two and a half years... we're still not through it... but we knew that we were going to get passed it so, "How do we set up a framework for the future?" And a big Boeing deal was exactly what we wanted to do to get back to a single fleet. But that's just an example of us making sure that we're always looking forward, and we're setting up the company for the most success. We're just always thinking [inaudible 00:08:18].
Karen Walker:
You mentioned the MAXes there, and of course, as you say, you were actually doing deals when many airlines couldn't even think to do that, and you've added the MAX 8 and the MAX 10, but you're also, of course, simplifying the fleet, and you've accelerated that [inaudible 00:08:38] down to the Boeing [inaudible 00:08:40] and the [inaudible 00:08:46]. Tell us a little bit about what that's going to mean to you, the airline, and the customer.
Ben Minicucci:
Well, when we thought back prior to 2016, prior to our integration of Virgin America, where the airline was a single fleet, and we saw just the synergies and the efficiency and the effectiveness of being a single fleet. So when the pandemic happened, we never thought that "Hey, one day we'll be back to a single fleet." We had these Airbus airplanes [inaudible 00:09:14]. But then we saw an opportunity during the pandemic with this Boeing deal, to say, "How do we get back to a single fleet?" Because that is where the airline really fires on all cylinders, gets its cost structure lower, and is able to withstand external shocks.
Ben Minicucci:
And there are so many efficiencies with crews and maintenance on a single fleet, so that was just a decision that we just accelerated for and said, "Do you know what? Now's the time to do it. Let's get there. We have the order book and we know the benefits of a single fleet are enormous." And then we looked at our regional fleet and said, "Look, we have two regional fleets with Horizon," and we said, "The same benefits exist on our regional side." And the [inaudible 00:09:56] is terrific airplane, like the 737, so we just saw a huge opportunity to get our cost structure and our business model really honed in, and get it ready for post-pandemic, 2023 and beyond, and really have the business model honed going forward.
Karen Walker:
And that's interesting because relatively speaking you're a small airline, but you're not acting like you're a small airline, in terms of your ambitions and your goals. The competitive landscape in North America is changing a lot, [inaudible 00:10:30] low-cost carrier [inaudible 00:10:32]. But this is really what's going to continue your forward progress, correct?
Ben Minicucci:
Absolutely. We're a West Coast airline. We're based here in Seattle, but we have a phenomenal West Coast network. But people that don't know Alaska, really think Alaska only just fly in the State of Alaska, and also we're not really... We're West Coast based, and we fly to the State of Alaska, we fly to Canada, we fly to Western Hawaii. We have a big network to Hawaii. We fly to Mexico, we fly to Costa Rica, we fly to Belize, we fly East to [inaudible 00:11:08] and East Coast cities. We have a vast network. [inaudible 00:11:12] over the next four or five years is continuing to just enhance that West Coast network.
Karen Walker:
And then of course, the other big thing here on the network side, which you also accomplished while all of this was going on, was the joining of the oneworld Global Alliance. So, you now reach the world. Tell us about that change.
Ben Minicucci:
I was so exited about being part of oneworld. It really was the missing link for us. We had partnerships before, but what oneworld did, was create a seamless experience for our customers. So if you're an elite customer who's got reciprocal benefits, whether it's boarding, or baggage, lounge access, redemption accrual, miles. So that oneworld agreement, really allowed us to connect everything about Alaska to the world, so our West Coast network to the entire world. And it's 14 phenomenal airlines that are a part of oneworld. We saw benefits even during the pandemic. Qatar Airways began to fly from Doha to Seattle, an amazing thing. And so I'm extremely optimistic now that the world is starting to open up, and international's starting to open up, the benefits of oneworld that are going to be brought here to our West Coast network, and us taking our guests to the world.
Karen Walker:
You just said now that you see things picking up. Can I just ask you, how are you seeing things looking in terms of traffic demand for the summer, for the rest of this year, but also, are you seeing a pick up on the interest of international and corporate travel?
Ben Minicucci:
It's definitely picking up. What I will say is, when Omicron happened, January and February were weak. From Presidents' Day, which is mid-February, we started seeing amazing pick up in traffic then. I will say it's extremely robust now. We were profitable in March, and on investor day we said we were going to be profitable in the second quarter, third quarter, fourth quarter, put guidance out that we were going to have positive pre-tax margins in the six to 9% for the rest of the year, because of the traffic we're seeing, because of that strong, robust, hint of demand that was there. We're starting to see business come back. We're already 70% of 2019 models, which is really, really exciting. We're starting to see international pick up with our partners, which is fantastic. So, we're really optimistic for '22, not withstanding there's the high cost of fuel that's out there, there's inflation. So far we've been able to absorb those external shocks.
Karen Walker:
Plenty of challenges there-
Ben Minicucci:
Plenty of challenges.
Karen Walker:
... as we see, for the Airline every Year. You've got this strong foundation across all aspects. I have one other question for you. Put you on a spot a little bit here. Clearly this is a team effort, and clearly Alaska is a team player, but as CEO, you are the leader, you are the figurehead, what makes you most proud to be Alaska Airline's CEO right now?
Ben Minicucci:
I love this airline. I love... everybody in this airline's about. I love the people. I love our values. I connect with our values, and I think what this company represents, again, is balance, is looking after our people, looking after our guests, looking after the communities we serve, and looking after our owners. And what I love about this company, is always our balanced approach. It's never off balance, and we've done that over the last two decades, and I'm just excited to continue that momentum.
Karen Walker:
Excellent. Ben, thank you so much for your time. I know you are a very busy person, so that you for your time.
Ben Minicucci:
[crosstalk 00:14:48].
Karen Walker:
It's fantastic to see you here in the headquarters of Alaska Airlines.
Ben Minicucci:
I'm so happy to have you here. Thank you.
Karen Walker:
Again, my sincere congratulations. What I'm really looking forward to doing, is seeing you next in June in Doha. Obviously it's the IATA AGM. You'll be at that. And Ben, we'll be presenting you with a trophy of Airline of the Year, so looking forward to that.
Ben Minicucci:
[inaudible 00:15:07] thank you. I'm just honored.
Karen Walker:
And thank you to our listeners. I hope you'll join us again next week, for our next episode. Make sure you don't miss it by subscribing to The Window Seat podcast on Apple Podcast, or wherever you listen to podcasts. Until then, I hope you're looking forward to your next flight. This is Karen Walker, disembarking from Window Seat.
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