Wednesday, January 19, 2011

Republic AirlinesRepublic Airlines opens new chapter

By Matt Detrich, The Indianapolis Star
Republic CEO: Bryan Bedford managed the company's assimilation of Frontier and Midwest. The carrier flies as Frontier, and its planes' tails are painted with mascots such as Woody the Wood Duck.

By Roger Yu, USA TODAY

For a recent episode of CBS' Undercover Boss, Bryan Bedford donned a wig, put on a pair of glasses and went to work on some of the least pleasant jobs his employees undertake daily.

The CEO of Republic Airways Holdings, which owns Frontier Airlines and four regional feeder carriers, cleaned planes, emptied human waste from aircraft holding tanks and sweated profusely unloading bags.

Typical of the show's narrative arc — in which a CEO goes undercover as an employee and gains newfound respect and appreciation for his troops — Bedford also found himself stumped by mundane operational challenges and witness to testimonies from employees who are struggling to get by on meager salaries. At the end of the episode, he announces a resolve to improve where he can, urges his direct reports to do the same and wraps it up with emotional huddles seemingly requisite of such reality shows.

The show's implicit promise of a new beginning wasn't entirely coincidental, given Republic Airways' recent emergence from a company overhaul led by Bedford. In mid-2009, Indianapolis-based Republic Airways spent $140 million to buy two struggling commercial airlines — Denver-based Frontier Airlines and Milwaukee-based Midwest Airlines— within days of each other and immediately transformed Republic from an obscure but stable operation flying solely under other carriers' banners to a company handling its own brand, flight network and reservation systems.
The struggles of integrating the acquisitions, particularly amid a bad economy, were evident in company results. In the first quarter of 2010, Republic reported its first quarterly loss in a decade. But after months of merging the disparate operations and settling on a brand name — Frontier — for its main airline, Republic is eager to tell the story of its new chapter.

"It was like drinking from a fire hose," Bedford, 49, recalls. "Unfortunately, timing was such that we had to do both at the same time. We were very cautious in 2010 with marketing spending and message. We were really a work in progress. You want to be careful about over-promising."

Getting the word out

One of the first major public relations moves Bedford made after the acquisitions was to appear on Undercover Boss.

The show partly served as a platform to broadcast its new identity and, not insignificantly, Bedford was introduced only as CEO of Frontier Airlines.

While excited to participate, Bedford says he was concerned about timing. The show was taped during peak summer months last year, when it was "doing the worst parts of merger integration," he says. "It was like inviting your boss to your house the day after your move."

For a relatively small company such as Republic, it was a big step. Frontier and Midwest were operating different reservation systems, all the way down to kiosks. Frontier was a low-cost carrier, flying discount seekers in all-economy cabins under its whimsical brand of flying animals. Midwest, albeit smaller than Frontier, was a full-service business carrier with a host of amenities, such as warm cookies and the business class cabin, that engendered a loyal following.

After settling on the Frontier brand, the company consolidated operations at 20 airports where it had duplicative ones, merged three back offices into one, retired Midwest's Boeing 717s it no longer wanted and laid off most Midwest flight attendants. About 425 flight attendants lost their jobs, according to the Association of Flight Attendants. Republic disputes the figure, saying about 150 were laid off due to the merger.
The integration, completed October 2010, "took longer than expected," Bedford says. But it won some praise.

Aviation consultant Michael Boyd, based in Denver, is one who offers it. "Frontier had a very strong service orientation. The Broncos (NFL team) don't have the loyalty in Denver that Frontier has," Boyd says. "The transition has gone well. I don't hear any complaints here."

In forming the new Frontier, the company chose what it believed to be the best from the two airlines, Bedford says.

Frontier's all-economy cabin configuration and in-flight entertainment were kept. Midwest's business-class cabin was taken out. But the new Frontier introduced "stretch seating" — seats in the first four rows that have 36 inches of legroom, 4 inches more than other economy seats. It also retained Midwest's famous cookies and food on board.

Republic continues to shed its 50-seat regional jets in anticipation of greater demand. It's ordering bigger, more fuel-efficient planes, such as 100-seat Embraer 190s. Meanwhile, it plans to expand in cities where it's "outperforming," including its hubs in Denver, Milwaukee and Kansas City, Bedford says.

The results — along with rising demand for air travel amid a recovering economy — are starting to show in financial statements. The July-September period in 2010 was its most profitable quarter ever, prompting several analysts, including Michael Linenberg of Deutsche Bank, to upgrade the company's outlook.

"The Republic story has been one of transition over the past year," Linenberg wrote in November. "Republic has now combined two complementary businesses into one successful operating model."

To drive more sales, Frontier will increase its advertising spending this year and launch a new website in March that will allow customers to book with "fewer clicks," Bedford says.

The company will also modify its frequent-flier program later this year to better award customers who buy more expensive fares. "All fares aren't created equal," he says, adding that rival Southwest's similar upgrade of its program recently is "a step in the right direction."

Right leader in right place

The adroit handling of the acquisitions, and jettisoning small Midwest jets, affirmed Bedford's reputation in the industry as a "visionary" operator, Boyd says. "The biggest threat to Republic is if he leaves," Boyd says. "If I were looking for a new airline CEO, I'd be looking at (him)."

Bedford was recruited to join Republic as CEO in 1999, after he ran another regional airline company, Mesaba Regional Holdings. At the time, Republic was a sleepy operator of fewer than 35 turboprop planes with a single contract to fly regionally for US Airways, recalls Douglas Lambert, a Republic board member and a managing director at consulting firm Alvarez & Marsal.

In looking for a CEO who could expand the company, its board wanted a good communicator who could handle the inherently conflict-ridden business of flying planes for other airlines. Bedford impressed the board by "being a straight shooter," Lambert says. "The industry runs on relationships, to a great extent, and obviously, it's a tough industry to form relationships."
Bedford's communication skills were on full display during the Undercover Boss episode.
Seemingly undaunted by the prospect of being on national TV while working with less-than-happy employees, Bedford took orders from a lively "aircraft appearance" coordinator who surprised him with the word that they had only seven minutes to clean a plane. In one scene, he chatted breezily with passengers during a flight as he handed out drinks. He listened attentively as a flight attendant complained of a companywide 10% pay cut implemented last year.

He also spoke frequently of God, praying with and hugging employees who shared their financial and family difficulties with him. "A lot of CEOs are put on ivory towers and are unapproachable. That's not Bryan," Lambert says.

While acknowledging his employees' diversity, Bedford says he's not shy about his Roman Catholic faith or broadcasting its messages publicly in company communications. "We believe that every employee, regardless of personal beliefs or world view, has been created in the image and likeness of God," reads the first line of Republic Airways' vision statement.

In the TV show, he's seen kissing the cross on his necklace and reading the Bible before going to bed. With Bedford a fierce opponent of abortion, the company has intervened to help several employees arrange adoptions.

"Things get controversial when bosses express their faith at the workplace," Bedford says. "We try to live by the commandments. When we talk about faith in the workplace, we're talking about treating people fairly. I think people find it an interesting aspect of who I am. Most CEOs wouldn't be that intimate. It's part of who I am. I don't hide it. I don't beat people over the head with it."

Veda Shook, president of the Association of Flight Attendants, says she finds it difficult to reconcile his Christian faith with some of his cost-cutting moves, including layoffs.

"It all seems very disingenuous, especially when they can't pay their mortgages," she says. "He's got a business model of low labor costs, and he wants to keep it that way."

Bedford says his moves have led to securing jobs for as many workers as possible. "Someone might say, 'You think $12-an-hour is fair compensation?' And I might respond by saying that our No. 1 concern is secure jobs for 11,000 workers. These issues have a faith component — what's fair."

He says he passed up his bonus last year for the sake of fairness. "I don't think we performed at outstanding levels."

Meanwhile, Bedford has come through on some changes he considered during the CBS show.

After spending a day as a "cross-utilization" agent at Oklahoma City — loading bags on the plane at the ramp, hurrying up to the ticket counter to process check-ins and facing customers while still sweating — Bedford put an end to the practice. "Cross-utilized agents are scheduled so they do not have to switch from above-wing duties (e.g. ticket counter) to below-wing (ramp) duties during the same shift," the company says.

Tui Faamausili, the flight attendant who spoke of the pay cut and the need for management to listen more to workers in the episode, has been selected to chair a new committee aiming to "establish a common, unified culture at Republic Airways" and "make suggestions to senior leaders of specific changes," the company says.
Republic hasn't lengthened the time available to clean planes, but is emphasizing "opportunities for passengers to turn in unwanted items to our flight attendants prior to landing," it says.

The 10% pay cut is still in effect.
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