April 14, 1997

 

John F. Kelly
Chairman, President and Chief Executive Officer
Alaska Airlines
Box 68900
Seattle, WA 98168 - 0900

Dear Mr. Kelly:

As a service provider, you owe it to your customers and shareholders to be profitable and stay in business. Your customers are entitled to safe service at a reasonable price. We wish prosperity for Alaska Airlines and value satisfaction for all the customers in your service areas.

Our job as legislators is to represent the people of Alaska - your customers. Our job is to be an advocate for the people of this great state, many of whom are your employees. Sometimes we must be a "devil's advocate" in situations where monopoly control exists over essential services. In such cases the people have no other place to seek relief.

In our original letter, we pointed out that fares to rural and southeast Alaska are too high and that published discounts are too few and difficult to qualify for. We attributed this condition to the lack of competition in this market. We also said that we wanted the airline that bears the state's name to conduct itself like the State mattered to its existence.

Rather than reply to the dozen signatories of the letter, you chose to reply to the Speaker of the House because your, "reading between the lines was that it 'appeared' that we were trying to pressure Alaska Airlines." Let me clarify so that there is no question: we certainly are trying to pressure Alaska Airlines. We are trying to pressure you into providing better and more affordable service between rural and southeast Alaska, and the rest of Alaska and Seattle. Your letter indicates a stiff resolve to argue with us, your customers, rather than to offer more thoughtful action.

It is incomprehensible that your Anchorage-Juneau schedule requires two overnight stays in Juneau in order to get the discounted, three-day advance purchase fare of $220. This schedule adds $200 to the expense of the trip, assuming people could afford the time, in addition to the money.

We are trying to encourage people to visit the state capitol; to participate in the legislative process. Your schedule and pricing are a huge dis-incentive.

Your "survey" of similar markets is misleading and largely irrelevant to rural and southeast Alaska. The city-pairs you selected are not comparable in fundamental ways. Nearly all of them have alternate airports, and alternate air service, within an hour's drive. Their inclusion ignores the unique conditions in rural and southeast Alaska.

Furthermore, Alaskans, by virtue of our isolation, fly more often than people from other states. Airline Transport Weekly is quoted as saying Alaskans fly 17 times more than the national average. Juneau, by virtue of being both isolated and the center of government, has a disproportionately high volume of air traffic for its population. Hence, your comparisons are way off the mark. However, they do reveal how far removed from Alaskan circumstances, Alaska Airlines management has become.

You are on record as stating that your system-wide operating cost is "about $7.7 cents per seat mile." If we throw in 50% for profit, please tell us, exactly which routes in Alaska can we buy tickets for at $.12 cents per mile.

We are also apprised that cargo on passenger flights is essentially all profit because the fixed costs of passenger flights are allocated to passenger ticket prices.

Your advertised discount fares are not rational except for the reason of profit maximization. The reduced fare for a 21 day advance purchase would be acceptable if we could all plan our trips 21 days in advance. But sometimes our need to travel is on short notice. Inasmuch as your operating costs are is the same whether we purchase a ticket 21 days in advance or on the day of travel, we wonder why you penalize travelers who must travel on short notice. Emergencies are always short notice. They are the times we can least afford high fares.

One of your customers tells the story of flying to Juneau and overheading because of bad weather. He had to reschedule for a week later. He was charged $35 to change his reservation even though it wasn't his fault or his choice to reschedule.

Everywhere we look, injustice abounds in your fares with respect to Alaskans because most of your Alaskan routes have no competition.

Ketchikan to Seattle, 678 miles , no competition, is $344. Seattle to San Francisco, 672 miles ,with competition, is $61. Wrangell to Petersburg, 32 miles , no competition is $73. Seattle to Spokane, 280 miles, with competition, is $73. Ketchikan to Juneau, 200 miles, no competition, is $150.

Your Anchorage to Seattle and Seattle-L.A. markets are competitive and your pricing reflects it. Seattle-L.A. is the same distance as Bethel to Juneau and the fare is $176 round-trip with a seven day advance purchase. Bethel to Juneau is $420 with a 21 day advance purchase. Bethel to Anchorage with a one night layover and continuation from Anchorage to Juneau, is over $700. One family with seven children from the Bethel area incurred costs of more than $6000 to fly to Juneau. There are no family discounts, even on weekends or red-eye flights. We must ask ourselves if rural and southeast Alaskan markets are subsidizing your competitive markets in the lower 48.

Most of the discount fares in Alaska are "flight specific", i.e., only good on one flight per day. However, in the lower 48 competitive markets, the discounts are good on most or all flights, not just one per day.

You said that you, "approach every market as if you had a competitor." When you actually had a competitor in southeast, your prices were consistently much lower. If your statement is true, then obviously your current prices should be closer to what they were when you had competition.

The inequities in your fares also carry through to your frequent flyer program. It seems unjustifiable that Alaskans pay twice as much per seat mile but get only the same amount of frequent flyer miles as the people who pay cheaper fares. For example, a Seattle-L.A. passenger pays 19 cents per seat mile. Bethel-Juneau is about the same distance but pays 43 cents per mile. Yet, they both accrue the same amount of frequent flyer miles. Does this seem fair to you?

Congratulations on your ten million dollar investment in a Global Positioning System. It is a necessary acquisition of technology that will eventually be required. No place needs it more than Juneau and FAA has made the Juneau airport a priority. However, it would be misleading for you to contend that this investment is singly applicable to Juneau. We understand most of the equipment is aboard your aircraft and you will use it at other airports as well, particularly San Francisco. We are happy to read that your investment will pay for itself in two years. It seems like a good business decision. Surely you've made sizable investments in communities outside of Alaska, too. And, we're sure they have letters describing your commitments to them also. All the cities you serve are fortunate in that we believe Alaska Airlines has the best pilots in the world.

You moved your headquarters out of Alaska, then your aircraft maintenance center, then your reservation system and operators. You've withdrawn from the statewide, cooperative marketing program, and, the Southeast Alaska cooperative marketing program. Most recently you're depriving travel agents the opportunity to participate in the ticketless reservation system. Now, we are forced to use your 1-800 service in Phoenix instead of our travel agents who provide us with excellent service.

In days past we've always known Alaska Airlines' executives by sight. We saw them and talked to them on a regular basis. Now, most of us wouldn't know you if we saw you. All we get is inadequate, overpriced service, a lobbyist and an argumentative letter that presumes we have no frame of reference for our views.

Your public relations/lobbying machine is showing great skill in organizing a letter-writing campaign from some of your supporters who are disturbed at our earlier letter. Those who we can identify have airline pass privileges or fly at their company's expense. I'm sure there must be a few bona fide ticket payers in the crowd somewhere We just haven't found them yet. On the other hand, we are meeting people on the streets every day, people are coming to our offices and people phone us to thank us for trying to improve their situation. Your detractors have even started a web site on the internet. We are not dissuaded by your letter writing campaign and hope you will reassess your position.

Mr. Kelly, we can argue forever but it serves no purpose. We want Alaska Airlines to prosper and grow. We don't want the citizens of Alaska to go broke trying to fly around the state. We continually try to find ways to disperse tourists to rural Alaska but they can't afford it either. As legislators we are creatures of compromise. We would prefer to spend our time working on other issues. However, we can't turn our back on Alaskan citizens who are captive in their remote communities. Let's quit arguing and do something positive to improve air access and affordability so Alaskans can get around Alaska.

Yours truly,

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John J. Cowdery
Representative