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Concern among Seattle business people that Delta turning from Alaska partner to predator

There's a growing concern among Seattle-area business leaders that they are seeing a once mutually beneficial partner relationship between Alaska Airlines and Delta Air Lines changing to one in which Delta seems to be moving from partner to predator.  

There is an obvious agreement within the business leadership that losing Alaska would be a significant blow to the economies of Seattle and the state. And that is leading many toward a conviction that the business community can't merely stand on the sidelines to watch to see what the outcome is of a battle between the world's second largest airline and hometown Alaska.  

Thus if those expressing such concerns are accurate, then Seattle will need to shed its "Seattle Nice" image for a time to forcefully take a position in support of Alaska.

"The business community must take sides in this and do so forcefully and visibly and an important part of its message is that Delta is actually not good for Seattle," suggests Joseph Schocken, president of Broadmark Capital, a successful Seattle boutique merchant bank that focuses on emerging companies.  

"Delta is anti-Boeing, and thus anti-Seattle, with both its dollars and its political clout," Schocken said. "With its dollars, it buys Airbus planes rather than Boeing's and with its political clout it opposes the Ex-Im bank that is important to Boeing's success," he added.

As I talked with various people in the business community, there was an expression of the need to have a pro-Alaska effort, even a forceful one, but not an Anti-Delta one, lest that generate sympathy for the Atlanta-based airline since it is a very successful airline that employs a large number of people and successfully serves parts of the region's air-carrier needs.

Yet as each got into the competitive aspects of the issue, comments frequently turned from support of Alaska to negative on Delta.

As business people discuss this Alaska-Delta struggle, there is a logical defense of free-markets competition but a dark view of competitors who turn predators. And I detected growing sense that predator is what Delta's competition with Alaska has devolved into.

One who best summed up the competition issue was John Fluke, whose family's business leadership, investment focus and philanthropic involvements are widely known and respected, who said: "The notion of free markets and competition are absolutely necessary to the success of our economic system and the effort to gain advantage over competitors, ethically pursued, benefits customers."

But Fluke suggested that the current competitive activities amount to Delta "abusing" the definition of competition, saying "its tactics with everything from current pricing to their philanthropic outreach with nonprofits here are likely to last only as long as it takes to drive Alaska into submission."

"If that happens, then airline tickets will eventually cost more, route structures will become less accommodating and Delta's support of important philanthropic causes will be lower and that would be abusing the real meaning of competition," he added.

Woody Howse, whose Cable & Howse Ventures basically launched the venture-capital industry in this region, exemplified the enthusiasm of Alaska supporters when he said "Alaska Airlines is one of the most community minded, customer serving and socially contributing corporations in our region."

But his comments also quickly turned against Alaska's challenger, noting his view that "Today Alaska Air is being attacked vigorously by the Carpet Bagger Delta Airlines, coming to town with Airbus (not Boeing) airplanes and viciously attacking the Alaska Air routes with competing schedules.  Our Northwest Community must band together and support the company that has so supported us through the good as well as difficult times."

    

"With Delta's current actions and apparent ulterior motive in Alaska's hometown hub, engaging in a process intended to squeeze Alaska Airlines with the objective of acquiring, we customers need to be very alert to the probable outcome if Delta is successful," Howse added.

Mike Kunath, principal and founder of Kunath, Karren, Rinne & Atkin LLC, a successful Seattle investment advisory firm, summed it up succinctly as: "Alaska has been a true supporter of the region. Delta never will be."

Herb Bridge, longtime Seattle civic leader and philanthropist as well as chairman and CEO of Ben Bridge Jeweler for several decades before guiding the company into acquisition by Warren Buffet, notes that corporate acquisitions themselves are not evil.

"It is possible for an important local company to be acquired in a way that allows it to retain local control and oversight, as happened with our acquisition by warren Buffet," Bridge said. "But when the acquisition is pursued in a predatory rather than a friendly manner, not only the shareholders of the pursued company but the community it serves are losers. There is nothing beneficial about Delta's pursuit of Alaska."

Alaska CEO Brad Tilden, retired CEO Bill Ayer and board members are reluctant to get into any Delta-bashing conversation, preferring to focus on Alaska positives.

Ayer, who as Alaska chairman and CEO for a decade before retiring in early 2012 guided the carrier through some of the industry's most tumultuous times, told me "The question of whether Alaska could remain independent has been raised for decades."   

"Our response was that a locally based, independent airline was better for customers, the community, employees, and investors. While there were no guarantees of remaining independent, all we could control was our own performance, and our chances were much better if we did a great job for each of those stakeholders," he said.

 

And as Tilden puts it, "The transformation over the last decade has been all about cost. We're trying to balance low fares and lots of service to the destinations (passengers) want, with a strong and successful company that can grow and buy new airplanes and has the capital to add new services."

 

The financial results are impressive as the parent company for Alaska Airlines and its regional sister carrier Horizon Air made a record $508 million profit in 2013, and the stock continued a steep ascent to five times its value from just five years ago.

 

What needs to happen is for Delta CEO Richard Anderson to be convinced by those who know him well, and that includes some in Seattle, that he is risking a serious downside in creating the potential for an in-your-face attitude among Seattle business people on behalf of Alaska.

For as Schocken summed it up: "There needs to be a real corporate campaign to encourage flying Alaska, discouraging flying Delta and make it unpleasant, hurting Delta's bottomline so Anderson decides that not only isn't it going to be as he thought, but shareholders and board members are getting unhappy.'"

     

Evidence that neither Fluke, Howse nor any of those who echo similar sentiments about Delta targeting Alaska are out of line is Delta's own home page where it headlines "Exclusively for Seattle, 2x miles all year long."  

But Delta's sharpest critics could suggest with a smile that what happens when you click on that link on Delta's home page might prophetically point to where Delta would be for Seattle if they were to push Alaska into a merger. The click leads to a page that says "the requested page could not be found."

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Eliassen, epitome of "entrepreneurial encore," and 'last of a breed," leaves Red Lion Hotels

Jon E. Eliassen, who has epitomized the phrase "entrepreneurial encore" since his first "retirement" a decade ago, may actually be moving closer to real retirement, at the age of 66, as he steps down from the role of president and CEO of Red Lion Hotels Corp.

  

In one respect, his retirement from the helm of the Spokane-based hotel company ends a dual role that made him the last of a vanishing CEO breed, those who chair the board of one publicly traded company while serving as CEO of another.

Jon Eliassen
Jon Eliassen

 

Thus while Eliassen is leaving the top-executive post at Red Lion, which he has held since January, 2010, he will remain as chair of the board of Itron Inc., the $2.2 billion global energy-management and technology company based in Liberty Lake, east of Spokane.

  

Eliassen's retirement, announced last week, took effect Monday and he will leave the Red Lion board at the end of September.

 

His focus on a strategy of converting Red Lion from a hotel company that owned buildings into one that relied on franchising properties has been largely successful as half of the company's 52 hotels in 10 western states and British Columbia are now franchises and lesser owned hotels have been sold.

 

But the past year has been a difficult one for Eliassen and his board as efforts to find a suitor for the company proved unsuccessful and criticisms from two investor groups, who together own about 33 percent of the company created and long controlled by the Barbieri family, mounted. Donald Barbieri, CEO of Red Lion during its growth and expansion years before he turned over the reins in 2006 while remaining as board chair, retired from the board last December.

 

Four new board members were added last year, including James P. Evans, former head of Best Western International, who will serve as interim president and CEO while the board searches for a permanent new leader.

 

But if the role at Red Lion brought its likely frustrations, the board-chair post at Itron, which he helped birth as a start-up subsidiary of the old Washington Water Power Co., now Avista Corp., in the later half of the 1980s, has brought offsetting satisfactions.

 

In a column I did on Eliassen when he assumed his role at Red Lion, he made clear that he didn't want to be credited with being responsible for Itron's successful growth from its early days as a remote meter-reading business. Others, however, would say he clearly played a dramatic role in Itron's growth as the CFO at WWP-Avista for 16 years.

 

But he conceded he's had fun watching what he referred to as "a great run" for Itron into its role as a world leader in providing electricity, heat, water and gas metering devices.

 

Eliassen's first "retirement" came in 2003 when he departed his role as CFO and senior vice president at Avista, capping a 33-year career with the investor-owned utility. But he quickly­ was coaxed into taking over the Spokane Area Economic Development Council as its CEO.

 

He remained as CEO of the Spokane EDC until 2007 when he helped put together a merger of the EDC with the Spokane Chamber of Commerce to create Greater Spokane Inc.

 

That retirement lasted for a couple of years until 2010 when the Red Lion board, on which he had served since his retirement from Avista, picked him to be president and CEO at a time of transition and challenge for the hotel company.

 

When I asked him this week what lies ahead, he said "I'm not planning to do anything beyond being involved as a director or in an advisory role."

 

But the board work extends beyond Itron, since he is a board member of ITLifeline, a privately held business continuity anddisaster-recovery company down the road from Itron in Libetry Lake. And he is the principal of Terrapin Capital Group, LLC.

And while he says he remains "engaged with trends and the continued evolution of energy and water."

And because of what Spokane venture capitalist Tom Simpson has described as "an unselfish desire to fuel economic growth in Spokane," none would surprised if Eliassen were to find a future

summons too interesting to pass up.

 

As to the dual role in which he was the last of what I described as "a vanishing CEO breed," until a year ago he had shared that unique role with Bill Ayer, president and CEO of Alaska Air Group as well as being board chairman at Puget Sound Energy. But Ayer retired from Alaska in early 2012.

 

The reason he's likely the last of a breed is because of the growing aversion of boards to having their CEOs involved in a significant way with the business of another company, with those schooled in board activity noting that directors are increasingly saying, basically, "we want our CEO to be focused on our company."

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Early lessons helped shape Ayer's style in guiding Alaska's through turbulent times

If a company deserve to be judged by the leader it keeps and leaders by the companies they build, then Alaska Air Group and its chairman and CEO Bill Ayer should be judged well.

 

Ayer, 57, who steered the company for the past decade through an increasingly successful flight while for the rest of the "legacy" airlines the 10 years proved an image-scaring and scary ride, has announced that he is officially turning over the CEO reins to Alaska president Brad Tilden.

 
 

Ayer, who has spent more than 30 years in the industry since launching his own little start-up airline in his mid-20s, offered some reflections this week on his career from entrepreneur through leadership of the nation's seventh largest airline. And those reflections by its leader, shared in an e-mail exchange of questions and answers, indicate why Alaska has remained a favorite of investors, its customers and its communities.

 

Two of Ayer's convictions are that you learn from, rather than make fun of, your competitors and that a small-company feel makes it easier for employees to work together and be open to change, no matter how big the company.

 

The former is perhaps best exemplified by an email exchange we had several years ago after Ryanair CEO Michael O'Leary suggested his lowest-cost Irish airline (frequently also referred to as the cheapest airline) might consider charging for use of airborne restrooms.

 

I suggested to Ayer that it might be time to revive the amusing television ads from years ago that showed the travails of a passenger who needs a 25-cent fee for entry to his plane's restroom and proceeds to try to obtain the quarter for an increasingly high price from passengers on the plane.

 

"You never want to make fun of competitors' actions because you never know what steps you might be required to take yourself," he e-mailed back.

 

I asked him this week about that exchange and his reluctance to criticize competitors.

 

"Sometimes what seems like a lousy idea from a competitor turns out to be pretty

Smart," he replied. "If we have a 'we're better than you' attitude, we won't take the time to evaluate it.

 

"Our focus has been on controlling what we can control and not simply hoping that something bad happens to a competitor to improve our situation," Ayer added. "We were surprised at how controllable our business was once we started to really focus on what we could do differently."

 

The fact that Ayer was an entrepreneur, then executive of a fast-growing start-up airline before joining Alaska in 1995 as vice president of marketing and planning has undoubtedly guided his belief in the need to retain a small-company feel.

 

He was in his mid-20s, a regional manager for Piper Aircraft Co., when he launched Air Olympia, a small commuter serving several Washington cities that operated for two years.

 

He jokes that "we didn't go broke, but probably would have if we had stuck with it."

 

Instead, he was lured to close up his little carrier and join the late Milt Kuolt and his team at the fledgling Horizon in 1982, the relationship that eventually led to Ayer's role atop the parent company of both airlines. Alaska acquired Horizon in 1987, along with Ayer.

 

Bruce McCaw, a Kuolt confidante and one of his key advisors, recalls that "Milt was quite impressed with Ayer, even though he was very young at the time. He knew Bill was smart and had a lot of good ideas."

 

"I liked Bill from the moment we met and we worked well together," McCaw recalled.

 

Ayer remembers Air Olympia as "a great place to start, although it felt like a leap into the

deep end of the pool. That experience convinced me that I had a passion for

this business which I should pursue."

 

He recalls the days with Horizon as "difficult. We were always worried about having enough cash to make payroll. But (it) shaped our conservative approach."

 

The shaping of that financially conservative approach undoubtedly helped guide Ayer's decisions as he steered Alaska basically unscathed through a decade of airline-industry turbulence that saw all of its legacy competitors go through bankruptcy.

 

So now Ayer turns the reins over to Tilden, expressing the conviction that "a CEO can overstay his or her welcome" and "there should be different leaders for different times."

 

He and the Alaska board, which Ayer says he's had involved over the past couple of years in the planning of the transition to Tilden, view him as "exactly the right leader to take us to the next level." The skills that Ayer and others see in Tilden may indicate that a company is also judged by the leadership-successor it picks.

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