One year later, Alaska Airlines on way to recovery

Posted: Friday, January 26, 2001

SEATTLE (AP) -- Flight 261's fatal plunge into the Pacific was the low point of a bad year for Alaska Airlines.

But the way the company has handled its mishaps has impressed passengers and industry analysts alike. It's hiring more workers, losing less luggage and, some say, even answering the phones more quickly.

''Everybody seems to be very comfortable with what they're doing right now,'' says Helane Becker, an analyst with Buckingham Research Group in New York.

The crash last Jan. 31 killed all 88 people aboard. In the following year, some passengers and flight attendants refused to fly because of safety concerns, Alaska's own employees accused it of shoddy maintenance practices and federal auditors, who are watching Alaska closely, proposed nearly $1 million in fines.

An investigation into the crash continues.

In response to its troubles, Alaska hired 180 new workers, mostly in maintenance and engineering, and a few more are on the way. It created a new position, vice president for maintenance, and a new safety department, Chief Executive John Kelly reported earlier this month.

Furthermore, Alaska is rewriting its general maintenance manual to make standards and procedures more consistent.

''It's hired a lot more people, has a lot more spares and has built more time into its schedule,'' said Glenn Engel, of Goldman, Sachs & Co. ''To protect passengers, Alaska is enduring extra costs.''

That's the kind of thing passengers like to hear.

''A plane isn't something you can let slide without maintenance,'' said Jeremy Lopez, of Yakima, who flew Alaska Airlines to California this month. ''If it breaks down, you can't exactly pull over and get a jump.''

Financially, Alaska was hurt more last year by rising fuel prices than bad publicity, said Peter Jacobs, an analyst with Ragen MacKenzie.

Alaska's earnings were expected to fall from $4.98 per share in 1999 to about zero in 2000, Jacobs says. Increased fuel prices would account for up to $3.50 of the decline, while higher maintenance costs and other crash fallout would explain the rest, he said.

If fuel prices drop, Alaska's earnings could improve by later this year, Jacobs said.

While Alaska has improved in several ways -- for one, its misplaced-luggage rates jumped from one of the worst in the nation in 1999 to one of the best in 2000 -- in other ways it isn't yet as reliable as it was before the crash.

More than a year ago, Alaska was canceling 2 percent of its flights, Engel said. That number jumped to 5 percent shortly after Flight 261; now, it's down to about 3 percent.

Alaska isn't as efficient, either, he said. For now, it is more focused on running a good airline than a good business.

Engel added that Alaska, unlike some competitors, has all of its labor disputes settled, which could prove helpful soon.

That, combined with Alaska's other improvements, could make it a possible candidate for a merger with another airline, such as Delta. So far, though, Alaska has seemed more interested in forming alliances -- such as with Continental and Northwest -- than in merging with anyone.

Marti Anderson, president of Anderson Travel, believes one reason she has heard few concerns from Alaska passengers is that the company is local, based in Seattle.

''It's hard to talk to anybody who doesn't know someone who works for Alaska,'' Anderson said. ''Most people feel a personal relationship with the company.''

Industry experts also credit Alaska Airlines with a loyal customer base. They say it was developed from decades of serving remote parts of Alaska and the Northwest.

Michael Berry sometimes flies Alaska for his job as chief executive of a Boise, Idaho-based medical savings account company. He said he hopes other airlines heed Alaska's troubles.

''The plane that went down for Alaska could have been any airline,'' Berry said as he picked up his bags at Sea-Tac.

''Anytime you hear an airline is putting more resources on the line, you have to love it.''

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