For those who hadn’t heard, Alaska Air Group’s wholly-owned regional subsidiary Horizon Air will be losing its brand some 25 years after Alaska first bought the airline. Instead, Horizon flights will all be marketed under the Alaska name. I spoke with Horizon’s president and Alaska Air Group veteran Glenn Johnson about this big change. Tomorrow, I’ll have the second part of our discussion where he talks about growth opportunities and outsourcing.
Cranky: A lot of changes at Horizon this week, several of which have been in the works for quite some time. To start, why retire the brand now?
Glenn: Sure, you know Horizon’s just about to celebrate its 30th anniversary, so the name and the brand has been built over all those years but we made the decision to go to 100 percent capacity purchase agreement (CPA) flying [Ed note: that's where Alaska buys capacity from Horizon and handles pricing and marketing] effective January 1. While that doesn’t necessarily mean you have to change the external branding, we thought that was a good opportunity to look at it. Certainly the Alaska brand … I don’t know if you know my background; I’ve been at [Alaska] Air Group for 28 years back and forth between Alaska and Horizon so I think I recognize the value of both brands … but certainly Alaska is a much better-known brand.
I think what we came up is kind of unique in the industry. We didn’t go with Alaska Express or Alaska Connection but the Alaska name and the Eskimo on the airplane with the Horizon name still there. I think that captures the value of both of the brands. And as we think about taking Horizon up to the State of Alaska, certainly there’s no better brand to have on the side of the airplane than the name of the state. It all seemed to come together.
Cranky: What were you doing with the brand before this? Obviously it was on the side of the airplane but was there a lot of brand promotion over the last couple years?
Glenn: I would say that we’ve been ratcheting it down over the last few years. When we first acquired Horizon at [Alaska] Air Group back in 1986, we kept the two brands completely separate and over the years we’ve found more and more opportunities to co-brand things. In 2010 about 50 percent of our flying was done on behalf of Alaska as CPA flying and the other half was done on what we’d call brand flying where we did our own advertising and promotion in some of the small communities. So there was some level of effort and cost put into the Horizon-specific brand but I think there’s a more cost effective solution here to go with the Alaska brand and get the benefit of all the advertising that goes into the Alaska brand for both companies.
Cranky: Externally, the only thing that seems to be changing is the paint job, right?
Glenn: Right. There will be some airport signage so where we have a Horizon backwall we’ll change those out to Alaska backwalls. The airports will transition to be just Alaska. We have to still say the flights are operated by Horizon Air like any other CPA carrier.
Cranky: Is anything changing internally? I know there’s already been a huge behind-the-scenes effort to consolidate.
Glenn: It really doesn’t and that’s one of the things we’re talking about with employees this week. They’re anxious about this. Losing their identity, so to speak. But we remain a separate company with a separate operating certificate. We still have all the same employees. Still have our folks in Horizon uniforms in terms of pilots and flight attendants. We’re maintaining the service elements that we think are important to our customers. The free beer and wine onboard, the a la carte service … so all of those elements stay the same. It’s really just getting that visual brand recognition and the brand halo from the customer perspective.
Glenn: I would say where we have a fair amount of name recognition is in Idaho, Montana, Eastern Washington, and Oregon. Those are traditional Horizon locations, the small cities, where Alaska hasn’t had a presence. That was what we were trying to capture by keeping Horizon on the side of the airplane. Places like Missoula, Montana see Horizon as their hometown carrier and we still want them to have that same sense of pride and ownership in the airline even though we’ve got a new name on the side of the airplane. By contrast, when we are down in California flying from LA to Loreto or La Paz on behalf of Alaska or go up to the State of Alaska, it makes no sense to me to try to propagate it and promote two brands.
Cranky: So the assumption on your part is that there’s enough brand benefit by consolidating with Alaska to pay for the cost of painting the planes?
Glenn: Yep, and to that extent we’ve said it’ll take 12 months or longer to get everything painted. We have 8 new airplanes coming over the next 6 months so those will all be painted in the new colors, of course, and then we’ll take a period of time to paint the existing airplanes. We’ve held off on painting so there’s a bit of a backlog because we knew this decision was pending. And we have 8 airplanes with special liveries – the university airplanes and the green airplane – that will just be a simple change by painting Alaska with the script instead of Horizon. There’s not a huge amount of incremental cost because it’ll be done largely in the course of business.
Come back tomorrow for more on the recent deal Alaska made to outsource some flying to SkyWest as well as future growth opportunities for Horizon.