Alaska Airlines’ Change Management

Executive Summary

In a case study ALASKA AIRLINES: NAVIGATING CHANGE faces three major problems. The first problem Alaska Airlines faced was the organizational and industry shock from 2000 to 2001. On January 31, 2000, there had occurred a severe crash on an Alaska Airlines MD-80 aircraft that is carrying 88 passengers. Among the passengers on Flight 261, 12 were working and off-duty employees and 32 Alaska employees’ family and friends. This incident has forever changed Alaska's collective self-concept and led to the problem of employee morale being shaken. The 9/11, which occurred in 2001, caused changes in security and boarding procedures, leading to disruptions in airline operations across the industry and a sharp drop in tourist demand for travel. Under the impact of the problems caused by these two incidents, to restore most of the employees' beliefs in the company, Alaska's leaders deliberately chose not to lay off employees because the leadership seems to be betting that its employees will lead the airline to a higher level. The second problem is that the soaring costs of Alaska Airlines have caused worrying losses. Oil prices have been rising since 1999, and crude oil prices directly affect the aviation industry through rising fuel costs, resulting in a loss of Alaska costs. At the same time, Alaska's union employees, pilots, flight attendants, and ramp workers are paid the highest fee of operating expenses, accounting for 39% of the cost. Alaska is the most upper income in the industry relative to the industry average. It shows that Alaska's wages represent a considerable labor cost disadvantage. To solve the cost problem, Alaska did not apply for bankruptcy reorganization. Instead, choose a viable alternative. Executives believe that if the pilot union and the company are unable to reach a collective bargaining agreement, the contract reached through binding arbitration will be better than bankruptcy. Improving and developing the management of the company is the top priority to keep the company can operate better. The third problem is that Alaska had significant difficulties to afford every employee in the tough time. Thus, in the fall of 2004, there are several actions taken to reduce its free expenses and labor expenses by focusing on saving non-customer-facing workgroups. Finally, nearly 900 of the approximately 10,000 employees were cut. To minimize the loss of the company and to keep their reputation, the company needs to make corresponding strategic measures under different problems.

Assignment Questions:

1. What tools could Alaska Airlines leaders have used to increase their awareness of internal and external issues?

The leader of Alaska Airlines has used a few tools to increase their awareness of internal and external issues. First, a scorecard is a helpful tool which is used to measure the extent to which Alaska follows its expected process. Over time, a standard workflow is defined, and the daily scorecard provides performance visibility for each step in the airplane's turn. In Alaska Airlines, the scorecard is a new enterprise performance evaluation system for multidimensional balanced evaluation, which measures the non-financial performance of Alaska airlines. Second, In the early days, Mandatory meetings are used as tools to raise awareness of internal and external issues. Minicucci formed a matrix of directors and managers, each of whom had a personal interest in different aspects of day-to-day operations. This cross-functional team meets at least 90 minutes a day to analyze performance and identify the root causes of delays and mishandling of luggage. This meeting improves the efficient and motivation of each department. Third, balancing priorities is also one of the tools used by Alaska Airlines leaders. While Alaska is increasing its focus on the operational efficiency of the Seattle hub, it also retains a strategic focus on safety, customer satisfaction, and shareholder value. Through the planning meeting, the following key initiatives (KI 4) and its customer service-related support initiatives were drafted to increase on-time departures and arrivals, minimize lost or delayed baggage, and address other operational issues affecting the customer experience, thereby enhancing customers’ satisfaction and loyalty. Minicucci implemented report cards to address the fundamental problem of Alaska's lack of standard workflows and mechanisms to measure interim performance goals. Report cards record and track operational metrics daily or even hourly, playing a pivotal role in daily meetings. Glenn Johnson introduces a lean approach to efficiency by categorizing, organizing, system cleaning, standardizing and maintaining to maintain areas and projects and maintain organizational workspace for new orders.

2. What issues were foreseeable, and which were completely unpredictable?

The foreseeable risk is the risk that can be foreseen based on experience, but the consequences cannot be predicted. The intermittent strike of flight attendants in 1993 was foreseeable. It can be seen from the establishment and development of IAM. In 1945, the pilot was the first employee union in Alaska to form a union, followed by mechanics and flight attendants in 1959 and 1961, respectively. In 1985, the International Association of Machinists (IAM) strike lasted for three months, during which time alternative workers were hired. At the same time, labor negotiations are a regular and expensive aspect of Alaska Airlines' business. Even if a settlement is reached through negotiation or binding arbitration, resentment can last for years, affecting morale and productivity. Therefore, the intermittent strike of the flight attendant is foreseeable. The problem of operational confusion in Alaska in 2005 was foreseeable. Addressing the failure of Alaska's operations requires large-scale systemic changes. The dysfunctional aspects of Alaska culture need to be fundamentally changed to address persistent problems and threats. Alaska's culture has long been accepted as mediocrity and has been in the middle of performance packages for many years, supporting the airline's lack of responsibility for monitoring and improving its performance. Thus, the problem of operational confusion in Alaska was foreseeable. Operational challenges of outsourced slope suppliers are predictable. As the demand for Alaska reservations increased, the ramp supplier was not prepared to handle the volume of transactions associated with the Alaska contract. At the same time, the slope supplier team is understaffed, and their inexperienced employees operate a complex and demanding operating system. Slope suppliers operate inside a philosophical culture and do not encourage dissent. In addition, management has been monitoring unionized ramp operations for many years, so it is not possible to manage ramp suppliers because they do not know how to perform ramp operations under "wings." In the past, management was not even able to pass ramps; therefore, they knew little about ramping operations or how to avoid operational failures in everyday events. Based on this, problems in operation are predictable. (Aviation space and environmental medicine, 1975) Unpredictable risks are likely to occur, but the likelihood of their occurrence is even unforeseen by the most experienced people. The unpredictable risk is sometimes called unknown risk or unrecognized risk. The tragedy of Flight 261 as natural disasters is unpredictable. Because the aircraft is not a malfunction of human operation, it is unforeseeable. The event 9/11 is also unforeseen since it was a terrorist attack. The rise in fuel costs in the aviation industry is too unpredictable, in part because of the OPEC supply management policy, oil prices have been rising since 1999, and the internal affairs of oil-producing countries are unpredictable.

3. What aspects of Alaska Airlines’ organizational culture reinforced what occurred in this state, and how might a focus on transforming its culture have averted some of the problems?

A culture of “Just good enough” is reinforced. In the early days, Minicucci formed a matrix of directors and managers, each of whom had a personal interest in different aspects of day-to-day operations. He also received support from the project management office to project manager and lean process improvement and IT department resources. This cross-functional team meets at least 90 minutes a day - sometimes up to 3 hours to analyze performance and identify root causes of delays and mishandling of luggage. Attendance is mandatory. This level of attention and commitment to results is a change in the rules of the game. These long-term meetings first involved the line maintenance director, Cargo's manager, primary chief pilot, customer service airport supervisor and new project manager. Some of them were members of the Mad Dog Working Group. The difference between these meetings is that they are daily and mandatory; when these staff members are unable to attend, they are asked to send higher-level people (such as their vice presidents) because the meeting focuses on the previous daily operational performance.  Minicucci set out to make these meetings a safe and transparent space for people to truly explore and honestly explore and discuss the fiasco that is happening（Avolio, Patterson, and Baker, 2015). What is important is that the purpose of these meetings is to make people have a difficult but necessary "violent dialogue" between each other. These conversations are affectionately called "food disputes" because of the fierce accusatory climate in the early days. Participants learned open and honest debates and continued to discuss the issue rather than making it an individual. Focusing on operational issues from the previous day forced employees to "do their homework" on the reasons behind delays or other issues. The goal is to determine everyone's responsibility for the problem - not just for the pilot, but for the staff, only the cleaning staff. Another critical element of the meeting was that anyone could share or suggest anything, but in the end, Minicucci had the right to decide everything. Therefore, these meetings characterized by a high degree of participation and strong authority leadership, as well as the high risks associated with each style. The strategies of these conferences run counter to Alaska's culture and business style.

4. What typical factors contributed to the challenges that affected Alaska Airlines? What factors unique to the airline industry contributed to Alaska Airlines’ problems? Please conduct a thorough analysis of all factors impacting Alaska Airlines’ change process.

The intermittent strike of flight attendants in 1993, the tragedy of Flight 261, the event 9/11, fuel costs have risen since mid-1999, the mediocrity culture of Alaska Airport, the dot-com bubble burst in early 2001, outsourcing of ramps and collapse of ramp operations in Seattle. The intermittent strike of flight attendants in 1993, the tragedy of Flight 261, outsourcing of ramps and collapse of ramp operations in Seattle, unique to the aviation industry, had caused challenges for Alaska Airlines. Fuel costs have risen since mid-1999, with flight 261 crashing on January 2000, the dot-com bubble burst in early 2001 and the subsequent 9/11 incident. The internal cost savings and restructuring under the 2010 plan and the labor costs saved by the new 2005 pilot wage agreement helped airlines avoid bankruptcy as Majeske and Lauer (2005) have argued that “The US aviation industry was greatly affected by the September 11 terrorist attacks. Although the panic and fear have dissipated after September 11, passengers have a lot of views on flight risks and believe that security checks should strengthen. These views have spurred passengers' needs and experience in air travel, especially in the United States.” However, the outsourcing of ramps and the collapse of Seattle ramp operations have led to losses and bumps in profits. Providing some cushioning in this bumpy journey is a strong reserve of profitability over the years. Despite this, the downstream impact of these events has had an unexpected effect on employee morale, operational efficiency and customer experience (Mallikarjun, 2015).

5. If you were part of the Alaska Airlines’ Change Management Team, what would you have done differently? What change management approach would you choose to handle this case?

If I was part of the Alaska Airlines’ Change Management Team, I might repeatedly study the possibility of slope strike risk and the difficulty of solving this problem. I would not replace the 470 Seattle baggage handlers with contractors through bold assumptions, and would not outsource all work to the ramp supply. Business. Decision making and execution cannot be done in a short 24 hours, which seemed like too sloppy and less consideration. I would choose the sept 2: Form a Powerful Coalition and step 8: Anchor the Changes in Corporate Culture. Because I want to lead the transformation of Alaska Airlines, I need to bring together an influential group of people or teams whose power comes from a variety of sources, including job title, status, expertise, and political importance. Once formed, my "Transformation Alliance" needs teamwork and continues to build urgency and motivation around the needs of Alaska's transformation. Since the culture of Alaska Airlines is imperfect, some changes required. Regardless of the difference, corporate culture should be part of the core of the organization. Corporate culture often determines the work to be done, so the value behind the vision must reflect in everyday practice. Only work hard to ensure that change is visible in all aspects of the organization. This will help to make this change a place in the culture of the organization.

References

• Avolio, B. J., Patterson, C., & Baker, B. (2017). ALASKA AIRLINES: NAVIGATION CHANGE (Vol. 9B14C059). LONDON, ON: IVEY publishing.
• John, K. (2012). Leading change. Harvard Business Press.
• Aviation space and environmental medicine. (1975). Louisville, KY: Aerospace Medical Association.
• Mallikarjun, S. (2015) Efficiency of US airlines: A strategic operating model, Journal of Air Transport Management, 43, (46).
• Majeske, K.D. and Lauer T.W. (2012). Optimizing airline passenger prescreening systems with Bayesian decision models, Computers & Operations Research, 39, 8, (1827).
• Duncan, D., Kumar, P.A., Maddern, H. and Maull, R.S. (2008). Alternative perspectives on service quality and customer satisfaction: the role of BPM, International Journal of Service Industry Management, 19, 2, (176).
• Ito, H. and Lee, D. (2005) Assessing the impact of the September 11 terrorist attacks on U.S. airline demand, Journal of Economics and Business, 51 (1), 90-95.