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Shareholders grill Alaska Airlines

Crash, poor financial report causes concern

Posted: Wednesday, May 17, 2000

SEATTLE - Alaska Air Group executives have gotten an earful from disgruntled pilots and shareholders concerned about the company's image and performance following the deadly crash of Flight 261 in January.

``Your company has weathered some difficult, difficult challenges,'' Alaska CEO John Kelly acknowledged to shareholders Tuesday at the airline's annual meeting at the Museum of Flight here.

``Since the time of the Flight 261 crash, we've been under the microscope from about every government agency I can think of,'' he said. Eighty-eight people were killed in the accident.

Maintenance records for the MD-83 that plunged into the Pacific Ocean near Oxnard, Calif., on Jan. 31, are being examined by the National Transportation Safety Board.

Records also have been subpoenaed for a federal grand jury investigation in San Francisco.

The grand jury has been scrutinizing the Seattle-based carrier's primary maintenance operation in Oakland, Calif., since 1998, but the investigation has expanded and apparently intensified since the crash.

``Our employees, our customers, everyone'' is watching the airline more closely now, Alaska Airlines President and Chief Operating Officer Bill Ayer said at a news conference before the annual meeting.

``What used to be little things have now become relatively significant,'' he said, citing such problems as a broken lavatory on a flight.

Kelly said the company has selected a new vice president in charge of safety - a move it promised following the crash. David Prewitt, 50, will join Alaska from TWA, where he has been vice president of corporate safety and security.

Kelly also said a company-funded, independent audit of Alaska's maintenance practices will be complete in about two weeks. He said auditors have found that no unsafe planes had been released for flight, but they recommended more standardized training for pilots and other administrative changes.

The company is adding 50 mechanics, Ayer said. In addition, it is cycling dozens of planes through its Oakland facility for work to ensure that non-flight equipment - everything from lavatories to coffee makers - is in good working order. That work is expected to be completed by the end of this month.

An additional 60 reservation agents also are being hired. Alaska saw widespread flight cancellations as emergency inspections were ordered after the crash, and agents couldn't handle the details of both informing customers about the cancellations and taking new orders, Ayer said. At one point, typical hold times for callers exceeded 10 minutes, and 40 percent of those who called eventually just hung up.

``There's nothing more important, given what's happened, than to return to on-time, scheduled service,'' Ayer said.

Dozens of Horizon Air pilots and supporters picketed outside the meeting site, calling attention to ongoing, contentious negotiations with the Alaska subsidiary.

Gerald Smith, chairman for the Horizon Air Pilots association, was applauded loudly at the meeting when he challenged Kelly to allow Horizon CEO George Bagley to ``be turned loose for a contract that's beneficial to both sides.''

Pilots have complained of overwork and are seeking improved pay and benefits.

``Nobody wants a contract more than I do ... Nobody's more frustrated than I am,'' Bagley said, also to applause.

``The current attitude of Alaska Air Group seems to be one of disdain toward its employees,'' said John Sluys, head of the Alaska Airlines pilots group.

``We're at the limits of our patience, because these problems have existed and grown more onerous over the past five years.''

Ayer acknowledged there had been widespread scheduling problems following the crash, ``where we published schedules and weren't able to fly them ... That's a mistake we're never going to make again.''

Kelly blamed poor first-quarter financial performance wholly on an increase in fuel prices from 48 cents per gallon a year ago to 99 cents earlier this year.

``Thankfully, fuel has now come back down and is in the realm of being at least semi-acceptable, in the 80s,'' he said.

He said Alaska's image and performance would improve now that it has returned to normal operations, including a resumption of advertising.

``If we just execute, if we go out and provide the service we have been providing, have customers and employees who are happy campers, we'll do just fine.''

Alaska operates a fleet of 89 jets on the West Coast from Alaska to Mexico. Horizon operates a mixed fleet of 62 jets and turboprop planes on shorter routes.



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