Alaska Airlines' David Oppenheim talks:
- Progress with corporate & travel management company deals
- Why Alaska shuns soft-dollar funds for corporates
- When network growth might accelerate
Alaska Airlines in recent years has made bigger moves to win corporate market share. Part of that strategy was hiring David Oppenheim for the new position of VP of sales. After more than a year in the role, he spoke with BTN transportation editor Michael B. Baker about corporate sales strategy, the integration of Virgin America and network growth plans.
BTN: What are some of your major goals and accomplishments since joining Alaska?
Oppenheim: I worked at United for some time but also was a consultant, so I've had exposure to a lot of different airlines over the years and this is a really special place with a really special management team. We did not have the senior exposure internally for corporate sales. While we had relationships with some TMCs, we hadn't gone as deep as we should have. Historically, we were very Pacific Northwest based, and before Delta entered the Seattle market five or six years ago, we didn’t need to do those things; we were successful without it. [To be successful, I need to make us] more competitive where we need to be against legacy carriers and raise awareness of the value [the corporate sales team brings] among our senior executives. We've focused in on corporate and TMC sales. Strong corporate revenue growth and TMC revenue growth [are] exceeding our stretch targets for 2019, [owing to] the actions that the team has taken and that the business demand environment is strong. My peers at other airlines will also have good news on the corporate sales front; it's a rising tide for sure. We're really excited about our market share and our market share relative to our fair market share.
BTN: Have any particular segments been strong for corporate sales?
Oppenheim: The strongest growth on a percentage basis has been the California markets. We acquired Virgin America and they had a strong sales program, but being small makes it hard. We've tried to leverage that together. A lot of companies, particularly the tech companies, are not just in the Bay Area or Seattle; they are distributed across the West Coast and the country. So we've become much more relevant to them and grown our relationships. The fare environment, particularly in the first quarter of this year, makes the overall dollar results and profit results more challenging, but the fact that we're winning share in the corporate space, which is the highest-yield segment we have, bodes very well for the future.
BTN :Has Southwest challenged that on California routes?
Oppenheim: There's been some challenges on the shorter [flights] that Southwest is really competitive on, but what we've talked about is the challenges on the core transcon[tinental]s: LA and San Francisco to New York, Boston and D.C. Those fares, particularly in the first quarter, which is always a slow demand period, were down more than usual this year. Things are picking up now, and we're putting in place a lot of actions to make sure we go through next winter in a better position.
BTN: What is your strategy in winning corporate market share?
Oppenheim: When I go into a corporate and tell them about what we can offer, it's about the best experience for their travelers. Other airlines have very big soft-dollar funds to waive fees, handle issues and all of these sorts of things. We have a lower fee structure than the legacy carriers, so we're starting off from a better point. When I first got here and we had our first corporate advisory board, I asked, "We don't give you soft dollars. Shouldn't we be giving them to you?" Unanimously, over 20 people, said, "Absolutely not. You solve my problems. Your normal processes solve my problems. Don't give me some dollar figure I have to keep track of."
BTN: How are things progressing with the Virgin America integration?
Oppenheim: We're 80 to 90 percent done. From a sales perspective, we're 100 percent done; [that was] purely contractual, so it was largely done before I arrived. The real heavy lifting is integrating work groups and processes. On a lot of that, we're done: Our pilots can fly next to each other, and we're starting to see pilots cross-training. The flight attendants are done because their training doesn't take as long. The one place we're a little behind is on the maintenance side. We don't have a joint agreement yet and are working actively to do that; a former Virgin tech cannot touch a former Alaska plane and vice versa.
BTN: What's happening on the product side?
Oppenheim: We are redoing the interiors of all the former Virgin America Airbus planes. There are a lot of small elements we did bring in [that] Virgin was successful at, [but] it doesn't have the Plexiglas and dark purple; it will feel a little more Alaska than Virgin. The premium cabin is really excellent first class seats. We [will] have one configuration of first class seats as we retrofit the fleet. We know it is not the premier product for transcon flying—particularly from California to New York, we're the only one offering seats in first class instead of beds—but we have other things going for us. We have the quality of service we provide onboard. We have a food offering that is on par with anybody else. We have the occasional corporate traveler who tells us they prefer [seats to beds] because they can talk to their seatmate. Certainly on a red-eye flight we don't have the premier product, but we have great pricing.
The things we've done in coach are bigger. Our premium class, which is our extra legroom economy section, has the same seat attributes as our economy cabin but complimentary drinks, snacks and things like that. We have power and USB ports at every seat, not for every two seats, and they're right there in front of you; you don't have to have a flashlight to find them under your seat. We've added phone and tablet holders. It's configured so no matter what device someone is using five years from now, you can have it in front of your face and plug it in. We've invested in the most movies and TV shows in the sky, all available free. We're putting satellite Wi-Fi on board; the Gogo air-to-ground system, while it's been pretty reliable, is not fast, particularly on heavy business routes. With satellite, everyone can be online. The speed is so fast that you can stream your own stuff. We will have a lot of the fleet done before the end of 2019.
BTN: What are your network growth plans?
Oppenheim: Like very airline, we have a list of what might be next [and put the present] focus on a couple of things, one being what we call new-market maturity. It takes time to get where you want to be when you launch a route. We've launched a number of routes over the past year like Pittsburgh, routes between both Seattle and El Paso and San Diego and El Paso that have been successful. About three years ago, we launched a whole lot of new routes, and not every one's a winner. We've made a couple of market exits and changes, and you redeploy. The vast majority of the new routes are working out and are maturing nicely, a number of them well ahead of schedule. We have relatively modest growth both last year and this year. We need to get our margins to a place where we have the right to grow. If we're not making a reasonable amount of money, we're not going to invest in growth, and that' s our business philosophy. Our margins have been improving, and we expect things to continue to improve, which will enable higher growth in 2020 and beyond. We historically have grown much faster than the industry, and we think we will return to that pretty soon.
BTN: What is your alliance strategy?
Oppenheim: We're really excited about the global partner base that we have. It covers the world and provides great utility to our members. You can't get on the Alaska plane and go to Sydney or Hong Kong, but you can fly on the Alaska plane for your work every week; earn those miles and use our credit card; and go anywhere in the world. When you look at our global partners relative to the size of the alliances, it's very competitive.