Lofty ideals

John Kelly '67: In triumph and tragedy, steady leadership at Alaska Air Group

By Mary Boone

As a teenager John Kelly ’67 loved to hang out with his 8mm camera at Seattle-Tacoma International Airport, filming the planes as they took off and landed.

“I was totally mesmerized,” he says. “I still am, to this day.”

What others on the Sea-Tac observation deck might not have imagined back then was that the kid with the camera would someday become the man at the helm of Alaska Air Group.

“It makes sense now that this is how I spent my career,” says Kelly. “It wasn’t always easy, and it wasn’t always fun, but we not only survived deregulation, we thrived, and I feel lucky to have been right in the middle of it all.”

Beginning at ground level
Kelly started his studies at the University of Washington but says the school’s size overwhelmed him.

“I had 500 students in my oceanography class and hated how impersonal it all was,” he says. “When I got to UPS, I pretty much got down on my knees and kissed the ground. It’s a wonderful campus with faculty members who are articulate and knowledgeable, and I really felt like I could grow and learn and be challenged there.”

A 1967 business administration graduate, Kelly’s first post-college job was as a Continental Airlines customer service agent at Sea-Tac.

“I remember telling them that I didn’t go to college to become a ticket agent, but the folks at Continental did a good job of convincing me there was potential for advancement if I was willing to work hard,” he says.

He learned from his co-workers and rose through the ranks, moving to Houston and then Los Angeles to become the airline’s national manager of convention and group sales.

Kelly got a job offer from Alaska Airlines in 1976 and welcomed the opportunity to return to his native Northwest.

“You really learn to appreciate this place after you’ve been gone for a while,” he says. “Everything seemed greener than before. We were so happy to be back.”

Kelly started as Alaska’s assistant vice president of sales and within a few years was promoted to vice president of marketing, a position that allowed him to exercise his creativity. In the early 1980s he co-produced the humorous “beleaguered traveler” TV ad campaign and featured his mother in a series of commercials touting the airline as a low-cost, high-service carrier. In 2002 the Seattle chapter of the American Institute of Graphics and the Seattle Advertising Federation gave Kelly its lifetime achievement award; he was the first honoree who didn’t work for an advertising agency.

When Kelly first signed on with Alaska, the carrier had just nine jets. Over three decades, he saw the company grow into a major carrier with service all along the West Coast, across the country and to Mexico, Canada, and the Soviet Union.

“Deregulation was good for us,” says the Tacoma native and Clover Park High School graduate. “While other carriers were merging and folding, we just kept going and growing, bringing better service to more and more customers. Those were fun, fun years because we were plowing new territory and growing and opening in new cities.”

In the mid-1980s Alaska bought Horizon Air, a transaction Kelly calls “the best deal we ever did.” He served as Horizon’s CEO from 1987 to 1994, updating the airline’s business plan while maintaining its culture and reputation for top-notch customer service.

Kelly returned to Alaska in late 1994 and—in a scenario that reads like the script for a spy movie—he became chairman and CEO of Alaska Airlines and Alaska Air Group in February 1995.

A day before the company’s regularly scheduled board meeting, a board member asked him to meet at what’s now the Red Lion Inn near Sea-Tac airport. Once there, the board member drove him to the Marriott, where other board members were waiting.

“It was a pretty clandestine thing, but they told me they had asked [then chairman] Ray Vecci to resign and they wanted me to take over as CEO,” he recalls. “I was concerned for Ray, but I knew he was leaving whether I took the job or not, so I just told them my only question was ‘What took you so long to ask?’”

He served as Alaska Air Group CEO until his retirement in May 2003.

Standing up to challenges

Ray Vecci and his team, including Kelly, had made drastic budget cuts in order to compete with low-fare carriers like Southwest and Morris Air.

“We cut $100 million from the budget,” Kelly says. “Then, because our fares were lower, we started selling more tickets and filling more planes and flying more routes more often. But we didn’t want the increase in volume to degrade service.”

So in the early days much of Kelly’s time was devoted to making the transformation from a high-cost, full-service carrier to a much lower-cost but still high-service airline.

It was a successful makeover. Under his guidance, Alaska won Conde Nast Traveler’s best domestic carrier award seven times and Travel & Leisure magazine’s top domestic airline honor six times. Both Horizon and Alaska have consistently ranked among airlines with the fewest complaints to the federal Department of Transportation.

Meeting the business threat of the discount carriers was a stunning accomplishment, but Alaska would face its share of other turbulent times during Kelly’s tenure, with many of the crises playing themselves out in the national news:

  • In 1999 Kelly and his team negotiated four union contracts in a single year—an unprecedented achievement for a major airline.
  • In January 2000 the nation watched in horror as crews fruitlessly searched for survivors after Flight 261 plunged into the Pacific Ocean off the coast of California. All 88 people on board were killed and the airline’s safety procedures came under fire. Twelve of those lost were employees of Alaska/Horizon and 32 others were their friends and family members.
  • On Sept. 11, 2001, terrorist attacks triggered a crisis that reverberated throughout the airline industry, as some carriers grounded large portions of their fleets. Among the nation’s major airlines, only Alaska and Southwest kept all their employees working.

Through it all, Kelly gained a reputation for being honest and caring. During the days and weeks following the Flight 261 tragedy, he found himself handling dozens of media inquiries. It was a difficult task another CEO might have delegated to a vice president or company spokesperson—but not Kelly.

“In my opinion, a CEO who would hand off that sort of responsibility is just stupid,” he says. “When you lead a company, you do it 100 percent of the time, not 99 percent. You get paid to deal with the good, the bad, and the ugly. My involvement didn’t bring those people back, but by being open and upfront, I believe we conveyed how sorry we were and won back the public’s trust.

“Those were the darkest days of my career, but I can’t imagine not handling the questions or the meetings with the families myself.”

Kelly is proud of many Alaska Air Group advancements. Under his direction, Alaska pioneered the use of technologies such as global positioning navigation systems, online ticket sales, Internet check-in, and electronic airport check-in kiosks. He instituted “Compass,” a companywide process used to identify the values that make Alaska unique, and played a major role in developing the carrier’s mileage program. He considers himself someone who is driven by challenges, rather than goals, and counts building a strong leadership team as his greatest accomplishment.

“When I think about the team at Alaska, I couldn’t be happier,” he says. “There will always be challenges in this industry, but I left the company confident that the people there will carry on and find a way to excel.”

Those people are quick to praise his management style, innovation, and business savvy.

Jeff Pinneo, current Horizon president, said Kelly’s leadership was especially evident in the aftermath of the Flight 261 tragedy. “I don’t think events like that shape character; they bring out the character that is already there,” he told the Tacoma News Tribune. “What we saw with John was character that was broad and deep.”

Bill Ayer, who succeeded Kelly as Alaska chairman, said: “The guy has incredible instincts, both on the employee and the customer sides.”

Jacquie Witherrite, an Alaska customer service agent based in Seattle, wrote a tribute to the retiring chairman in last spring’s company newsletter: “John is all about encouragement, hope, and unwavering optimism. For me, one of the most telling insights into the man was a phrase he often used: ‘We’re not perfect, but we never stop trying.’”

Moving on

Kelly says he actually intended to retire in 2000, but, with the turmoil following the crash of Flight 261 and then 9/11, it made sense to stick around longer.

“The fact is, I was a CEO either at Alaska or Horizon for 15 years,” he says. “That’s a long time, and I truly believe that it’s important for the health of the organization to have periodic changes in leadership. It encourages new thinking and different perspectives.”

As tempting as it might have been to stay on the air group’s board of directors, Kelly thought it best to step aside altogether.

“The trend in corporate America today is that the outgoing chairman make a clean break so the new person isn’t burdened with the sense that someone’s looking over his or her shoulder. It’s odd to be on the outside looking in, but I think it’s a good practice.”

Kelly met his first wife, Cheryl, through friends at Puget Sound; she died of cancer in 1990. He wasn’t exactly looking for love when he met Maggi, his current wife, at work later that year.

“I was CEO at Horizon and she was director of in-flight [services] at Alaska,” he remembers. “A friend told her she should meet me, so she made a point of loitering in the office to say hello. I remember shaking hands with her that first time and thinking she was attractive and smartly dressed, but, to me, work was work. It wasn’t until she called me up and invited me to go out for a beverage that I began to think: ‘How stupid am I?’”

The two married in 1993 and now live in Phoenix, where Kelly consults with a couple of marketing and human resources firms. He also is a board member with Avista Corporation, headquartered in Spokane, Wash. Kelly effusively details his mission of helping businesses work their way through the process of identifying shared values, enhancing communication, and improving morale.

“I’m not the kind of guy who can play golf all day, so the work is welcome,” he says. “On the other hand, I’ve always believed that you should work to live, not live to work. I’m happy to be able to do things I didn’t have time to do when I was working full time, and I’m thrilled to finally be able to obsess over the little things—like my garden.”