Editor's Note: A Reason for Optimism

Donald Trump notwithstanding, 2017 in Seattle may be brighter than anticipated.
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It’s easy to be pessimistic about the outlook for 2017. After 90 months of growth, the economic expansion is aging and may not have much life left. Interest rates, which have fallen pretty steadily over the past 35 years, seem headed up again. If they reach anywhere near their 100-year average of 5 percent, that could choke off growth. And global trade, which has been on a growth path for 70 years, benefiting our technology, manufacturing and agriculture exports, could hit a wall if President-elect Donald Trump follows through on threats to slap tariffs on partners, triggering a trade war. 
 
But 2017 could well be far more prosperous than we have any right to expect. While Trump may be bad news on issues of immigration and inequality, it’s hard to argue that his plans to slash taxes on business, encourage local manufacturing and raise infrastructure spending won’t be good for business in this region. Michael Butler, CEO of Cascadia Capital, who has done a booming business representing entrepreneurs who want to sell their companies, says some clients are now putting off plans to sell their firms, believing the economic outlook is now much brighter.
 
Even if Trump’s pro-business policies don’t come to pass, there is a strong argument to be made that the Seattle region will continue to prosper. When it comes to new infrastructure spending, for example, our region has enough projects in the pipeline to keep workers busy for years, including tens of billions of dollars in new Sound Transit spending, the remodeling of Sea-Tac Airport, the convention center addition and the Manhattanization of downtown Seattle.
 
And the number of new jobs posted continues to rise, driven by strong growth among the region’s ever-expanding tech sector. “We don’t fully appreciate the number of jobs, people and households that will be added over this next cycle,” says Peter Orser, director of the UW’s Runstad Center for Real Estate Studies. Despite an unprecedented building boom during the past five years, Orser says the region has failed to keep up with housing demand, adding just a fourth the number of residential units needed to house the new residents moving into the area.
 
Just five years ago, few institutional and international investors paid much attention to Seattle. “Today, we are their darling,” says Orser. The inflow of new money and young talent is “fueling investment in development, the UW, buildings and new ideas at a scale that is exponentially greater than five years ago.”
 
While there will be cyclical corrections as we overbuild, Orser says it would take “a major event” to knock the regional economy off its trajectory of rapid growth. “I don’t see job creation slowing,” he says. “I see a shortage of labor, land, investment dollars and housing. The breadth and depth of the economy is radically different [from five years ago].” 
 
Matt McIlwain, managing director at Madrona Venture Group, agrees, pointing to Seattle’s strength in rapidly growing technology sectors like cloud computing, virtual reality and “intelligent applications” that incorporate the power of big data, the cloud and artificial intelligence.  
 
More needs to be done to retrain local residents for the jobs being created, build affordable housing and improve transportation infrastructure. But if Orser and McIlwain are right, our economy will continue to be strong enough to expand financing for such activities. 
 
LESLIE HELM is executive editor of Seattle Business magazine. Reach him at leslie.helm@tigeroak.com
 

Final Analysis: The Improbable Marriage

Final Analysis: The Improbable Marriage

Alaska’s union with Virgin America seems odd, but the outcome will ultimately be unsurprising.
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Despite its origins in the rugged north country, Alaska Airlines is a button-down shirt and wingtips. As recently as five years ago, it distributed Bible verses with its in-flight meals.  Virgin America, meanwhile, with a provenance linked to the flamboyant entrepreneur Richard Branson, is more T-shirt and flip-flops. Its aircraft have leather seats and 12 shades of “mood lighting.”  And yet, the two are one. Or at least they’re sitting on the beach under the same umbrella, trying to get along. 
 
The $2.6 billion union of Alaska Airlines and Virgin America under the Alaska Air Group banner had many scratching their heads when it was announced last year. Then it was consummated in mid-December, making Alaska Air Group the fifth-largest airline company in the United States, and many were still wondering.
 
Alaska has gone to some lengths to acknowledge the improbability of this marriage. It created the web domain DifferentWorks.com and populated it with all manner of information to drive home the point that Alaska and Virgin America are “an odd couple that works well together.”
 
This is all a bit of marketing nonsense, of course, since no one really knows if Alaska and Virgin America will work well together. Heck, they’ve been “together” for all of 12 weeks, so this whole “Different Works” campaign is more wishful thinking than honest assessment.
 
If you’ve ever been on the wrong end of a corporate takeover, you know the experience isn’t as seamless — or as painless — as Alaska wants us to believe it’s going to be. Right now, there are hundreds of Virgin America employees who are concerned, confused and cross. Some will buy into the new gospel being preached by Alaska. Some will hesitate. Some will rebel. Happens all the time.
 
Branson himself opposed selling off Virgin America, but as a foreign national he could own no more than 20 percent of a United States airline, so he didn’t have majority control.
 
Rights to the Virgin America name revert to Branson if Alaska doesn’t continue the brand, so Alaska has some incentive to maintain Virgin America as a separate entity.
 
Alaska isn’t tipping its hand. “We appreciate that there is great interest in the future of the Virgin America brand among customers and employees alike,” Alaska CEO Brad Tilden said in December. “This is a big decision and one that deserves months of thoughtful and thorough analysis. We plan to make a decision about the Virgin America brand early next year.”
 
Keep in mind that this is not a merger of equals. Alaska, with nearly a thousand daily flights and a fleet of 223 aircraft, dwarfs Virgin America, which had 197 daily flights and 63 airplanes at the time the deal closed. Seattle-based Alaska had 15,600 employees; Burlingame, California-based Virgin America had 3,200. Alaska’s annual revenue is $5.8 billion; Virgin America’s $1.6 billion.
 
Given that Alaska has successfully initiated the subtle disappearance of its Horizon Air brand these past few years, it seems reasonable to assume Virgin America is due a similar ride into the sunset. In a world where branding is everything, it makes sense for Alaska to keep the Virgin America brand alive awhile as it gets the lay of the land and takes the temperature of Virgin America’s loyal customers. 
 
It took years, after all, for Macy’s to subsume all the regional department store brands it had swallowed up. Alaska Air group will likely follow the same course. It will be gradual. It will be subtle. And, in the end, it will be Alaska. 
 
John Levesque is the managing editor of Seattle Business magazine. Reach him at john.levesque@tigeroak.com.