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Brad Tilden, President and CEO of Alaska Air Group, was the guest speaker for the Albers Executive Speaker Series on October 24th. He opened his talk by describing the difficulties faced by the airline industry, noting that since the industry was born it has not been profitable on a cumulative basis. Billions of dollars of capital has been destroyed and bankruptcy has been a frequent occurrence. Of late, the industry has consolidated into four major players who control 90% of the US market. That has left Alaska with 3.5% of the market, yet despite that small market share it has been one of the few profitable domestic airlines.
What are some of the reasons for this? One that Tilden mentioned was that performance at the margin can really make a difference. Where you decide to spend your last $100k can make a big difference, they have found. Also, he credits Alaska's practice of bringing in business leaders from other organizations to learn from them has also been very helpful. Two examples he cited were Jim Sinegal from Costco Wholesale and Orin Smith when he was at Starbucks.
How does one survive in an industry of big players? In this capital intensive industry aren't their overwhelming economies of scale that a small player misses out on? That may be true, said Tilden, but there are also diseconomies of scale. Being smaller gives one less to worry about and brings fewer coordination problems. Tilden also gave credit to Alaska's use of "Lean." These process improvements have been especially helpful in aircraft maintenance, and the Lean method keeps you from thinking you have everything figured out. You are much more open to continuous improvement. Simplicity is also key - it is not a good idea to be flying 14 different airplane types, for example!
When asked what he wanted his legacy at Alaska to be, he replied he wanted the company to remain an independent, be known as a good employer to work for, and leave a strong leadership team in place.
Jim Sinegal talks about Sol Price as his mentor. Who was Brad's mentor? He mentioned his predecessor, Bill Ayer, and his father. Both were good role models for him.
When asked what advice he would give to college students, he noted two things - (1) When it comes to your career, make sure you do something you really enjoy, and (2), Don't play it safe with your career. Take risks. Apply for that promotion if you want it.
Finally, he discussed the importance of the people in the organization and creating a culture where employees feel empowered and going the extra mile is recognized. He also stressed the importance of safety - both for customers and employees.
Brad Tilden drew nearly 300 people to Pigott Auditorium, and they left very impressed with the leader of Alaska Airlines. It was both what he said but also how he said it. His sincere and approachable demeanor impressed his listeners.
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