Charting a Route to Success in Technology Mergers

Many of us travel routinely for work or leisure. We think little of the tasks required — booking tickets, checking bags, earning or redeeming frequent-flyer miles — but modern air travel is a tremendous achievement that few take the time to consider or appreciate.

In 2016, Alaska Airlines acquired Virgin America, creating a strong competitor to the four largest U.S. carriers. Merging the two airlines into a single company required a radical shift — one that empowered employees to take initiative and make decisions. This shift transformed Alaska Airlines’ culture, eliminating bottlenecks and accelerating the merger.

This experience benefited the company during the height of the pandemic, when it joined Oneworld Alliance, a program that services international frequent flyers for its 14 member airlines. To become a Oneworld member, Alaska Airlines needed to rework its fare classes, mileage tiers, and loyalty program — all without any of its customers noticing.

I spoke with Alaska Airlines’ Charu Jain, senior vice president of merchandising and innovation, and Vikram Baskaran, vice president of information technology services, about the merger and how their organization seized opportunities to reduce friction for employees and customers.

MIT Sloan Management Review: Any integration, like Alaska Airlines’ merger with Virgin America, is a big technology lift. And when you take into consideration all of the customers who needed to enjoy a seamless experience while this was happening — that’s pretty daunting. How did you approach it?

Vikram Baskaran: We looked at Virgin from a distance, and we saw that the company had a spotless guest experience and it was, of course, a startup initially. Alaska Airlines is a 75-year-old company. So these two companies were completely different as far as technology stacks go. It was interesting to compare the two ecosystems — Virgin, which was more commercially focused, and Alaska, which was more operations focused — and think about how to scale these systems forward. Both Charu and I also worked for United Airlines when United merged with Continental Airlines, so there were also certainly lessons learned from previous experience.

Charu Jain: Right. I believe Alaska was actually my third airline merger, and I joined the company right around when the merger was announced, so I knew what I was getting into. I think there are two things in every merger that are make-or-break: One is technology, and one is culture — the people part of it. We’re technology people, so we know that there are ways you can make the technology part harder for yourself, but you can also figure out the simple way to do it. There are guiding principles you can use to make decisions about how to move forward — whether picking one system to move forward with from either side, or moving to a third answer. In some cases, both companies might have been looking at a new system or answer for a certain area. On the technology side, what’s most important is focusing on what’s the fastest way to bring the systems together.

How did you approach this from a technology leadership perspective?

Jain: I’ve always equated this to a racetrack: A merger is announced, and all of the horses start running without understanding who has to go first, second, third. From a leadership standpoint, we sort of have to be a traffic cop and say, “This is the sequence of how things need to be and why.” The technology team has to play a role in educating, by bringing people along and getting them excited about what changes they will get and when.

We had to set up a framework of quick decision-making. Within our technology group, we had stand-up meetings twice a week, which allowed us to surface issues quickly. If anyone on the team encountered a roadblock, they could bring it to the meeting, and within 24 hours, whoever was responsible for the block had to fix it. That way, nobody was waiting for the escalation chain.

How do you get people to trust each other within that environment — to bring things up without fear that they were going to get blamed for something or get a colleague into trouble? How did you think about reinforcing and continuing to build that trust over time inside the context of this relatively high-pressure operation?

Jain: Previously, people worried about bringing things up, but in this situation, it became the opposite: If you didn’t bring it up, you were creating an issue. It’s your responsibility to escalate these things. Eventually, people began to view this process as a way to enable leadership to get stuff done and help the company move forward. It changed how we worked, moving away from a very hierarchical atmosphere to a better-functioning organization.

Baskaran: Traditionally, situations at Alaska had to be funneled up to the top. Ben Minicucci, who is now the CEO, truly trusts leaders who work with him and provides them with the right level of support. The integration team felt very empowered to work as one group and not worry about a decision being overridden. The deed closed in 2016, we launched work in January of 2017, and by mid-2018 we were done with the commercial phase. Essentially 90% of the merger was done by some point in 2018.

Could you have done this in a hybrid work environment? Or would you have needed to bring people together for certain aspects?

Jain: We joined the Oneworld Alliance during the height of COVID. It was a very big effort across technology teams to join the alliance and do all the work around loyalty and redemptions. At that point, most of our teams were not even coming into the office. Hybrid was new for our company, but we were able to make a case for remote work based on that: “If we can get Oneworld done remotely, we will know that we’re able to be productive and get these things accomplished in that environment.” A lot of our very intense work was done before anybody was coming into the office, so that’s an example of a really large initiative, almost mergerlike, that was pulled off remotely.

Most of us don’t pay that much attention to airline alliances. Obviously, there’s a logo and brand associated with being part of a global alliance, but it also seems like a complex technology change. Can you talk a bit about that?

Jain: There’s the visual and branding part of it, which you see. Every logo now has the Oneworld orb on it. But you have to sell the same classes and fares as the other airlines, which requires alignment. There are 26 of these classes — and ours were not in alignment. Every fare class was redone. If a passenger had a ticket already booked, the ticket had to be rebooked into a different class. The loyalty mileage plan tiers also had to align. Everybody had to be given a Oneworld status in accordance with all of the policies regarding earning and redeeming miles. The whole loyalty set had to be defined, and the redemption and accrual side of mileage had to be tackled, plus revenue alignment and recognition of loyalty across each carrier. We had to do that while ensuring that customers didn’t notice any difference. That was a tremendous amount of work.

Systems are evolving to enable the behavior that consumers have just come to expect, and those goalposts are moving. You guys are at the front of that.

Jain: Your last best experience is what you expect from everybody, right? When that doesn’t happen, you get frustrated. If you booked a flight from Spokane to Seattle to Hong Kong on Delta, you would get a very seamless experience. You wouldn’t have to check in twice, for instance. So how do we create that experience between multiple carriers? That’s the gold standard, because you, as a customer, don’t care whether you’re on Delta or Alaska; you want the same experience. There’s a lot of work to deliver that — to patch holes between different airlines’ processes so they no longer exist. It’s hard to stay ahead of it, but you can see certain trends, like payments being contactless and touchless, and customers wanting to do everything themselves while having choice and control over the experience.

Baskaran: We do our best to keep our finger on the pulse. We’re not doing things like crypto, but we are interested in things like biometrics, and we’re trying to see if we can elevate the experience. Apple announced recently that you can use your iPhone to accept payment through Tap to Pay, which has been one of the things we have been pushing Apple directly on. We want to make boarding an aircraft a lot easier, like in San Jose, where we’re using biometrics to board so you don’t need your boarding pass. They match your face, and you can just walk onto the plane. We want to eliminate the friction as much as possible.