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Management shakeup at Alaska Air will bring layoffs

Alaska Airlines planes sit on the tarmac at Sea-Tac International Airport. (AP file photo/Elaine Thompson)

SEATTLE -- A management shake-up is underway at Alaska Air Group, the parent company of Alaska Airlines and regional carrier Horizon Air.

One manager, who asked not to be identified, said employees learned in an internal company webcast on Tuesday that the re-organization will result in about 100 job cuts, including layoffs.

This was confirmed in an email sent to employees Thursday by Alaska Air vice president Andy Schneider, who heads human resources.

"We need to make some difficult, but necessary, management reductions to more efficiently support our frontline employees and better align our costs with our current revenue realities," Schneider wrote. "We expect that we will reduce our staffing by approximately 100 management positions through a combination of position eliminations, restructuring and not filling open roles."

Employees were told that it will take some three weeks to work out the details and individuals won't know if they are affected until then.

"This leaves you in limbo, not knowing what is going to happen," the manager said. "This three-week limbo is totally wrong."

The manager added that employees are also upset that the company isn't considering other options such as across-the-board pay cuts, or the offering of voluntary separation packages.

"Cost cutting is important but are the company's top officers taking a cut?" the manager asked.

Alaska Air spokeswoman Bobbie Egan said via email that "These will not be easy steps to take, but they are necessary to reset how management supports our frontline employees in a competitive environment."

Egan added that the company will prioritize "the respectful and compassionate treatment of affected people."

No frontline employees will be laid off, Egan said. That includes pilots, cabin crew, gate agents, aircraft mechanics and engineers, operations center staff and employees working at call centers or airport lounges.

Facing tough competition from Delta and Southwest, Alaska has also been challenged by the integration of Virgin America airplanes and employees following the acquisition of the California-based airline almost two years ago.

Last year, a cost-cutting campaign drew employee and passenger complaints. This year, Alaska slowed the planned growth of its fleet and shifted some planes from unprofitable routes.

In July, while Alaska reported progress in the integration of Virgin America, profits were sharply down from a year earlier. Since the summer, the price of oil has risen to $80 a barrel from just over $70, increasing jet fuel prices and financial pressure on airlines.

Schneider's email to employees offers some detail on the financial squeeze.

"While our network has gotten bigger, our costs have been increasing for the last two years, but revenues have not kept pace," she wrote. "Our average cost to carry one customer on a journey has increased by $25 compared to two years ago. During the same time, our average ticket price has declined by about $2."

"A low fare environment and fuel prices are largely out of our control. We can, however, focus on keeping our costs flat," Schneider added. "We are planning to have a 2019 wage and non-wage budget that will be effectively flat year-over-year."

She said that because of the harsh competitive environment, "our business realities require hard choices."

In the company's second quarter earnings call that month, Alaska Air Chief Operating Officer Ben Minicucci said that to cut costs "we're going to attack overhead," and he identified three areas for cost reductions: "healthcare, crew hotel costs and management headcounts."

A former manager who retired this summer said he isn't surprised at the layoffs.

"They were so heavy at the top, even before they got together with Virgin," the former manager said. "A blind man could have seen it coming."

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