Executive Q & A: Sally Jewell, President and CEO of REI

| FROM THE PRINT EDITION |
 
 

EXERCISE: I always start the day with a workout. When things get busy, I have to get outside. On [a recent] Saturday, with my husband and dog, I climbed Grand Prospect [on Rattlesnake Mountain]. It feels so nice to get a little mud on your feet, a little mist in your face.

YOUTH: My father was a doctor who came over from England in 1959 when I was 3 to take a teaching fellowship at the UW Medical School. My father asked what people did here. They said, “You join REI, you buy a tent and you go camping.” So that’s what we did. Our first trip was to Mount Rainier National Park.

EDUCATION: It was a different era for women when I graduated from high school in 1973. My college [aptitude] test showed high scores in mechanical reasoning and spatial ability, but my recommended professions were nursing and teaching—the same as all my female friends. At UW, I was going to be a dental hygienist, but my roommate said, “You’re smart enough to be a dentist,” so I did pre-dental. When I started dating Warren, now my husband, his engineering homework looked a lot more fun than mine, so I transferred to engineering. Turns out I’m a natural engineer in terms of how my brain is wired.

CAREER: In engineering school, I worked for General Electric for a total of 18 months over a period of three years. It was a good time for engineers. I had 15 offers for jobs coming out of school and ended up working for Mobil. I came back in 1981 to work for Rainier Bank as an oil and gas expert because I loved Seattle. Oil and gas isn’t found in the most pleasant places in the world and, being a woman, there were things I had to put up with that would be considered illegal now, and it just became tiresome. I also wanted to raise my children around grandparents.

REI: When I began as COO, our growth was stagnating. We invested in the internet, but we underinvested in our retail stores, the core of the business. We were good at colder climates but not so good at southern climates. We developed great, innovative products, but I felt we had an enormous opportunity to analyze our member data better to understand what our customers wanted. We’ve since relocated a lot of our stores to more convenient places where people could find us. Now we’re learning how to reach younger customers. We’re also seeking racial and geographic diversity.

NEW CUSTOMERS: We love it when an outdoor product becomes a hot thing for people who otherwise wouldn’t be coming in our door. We’ve been quite successful in selling jogging strollers after mommy blogs said, “This is the best jogging stroller and REI is the best place to get it.” That probably brought families in that wouldn’t otherwise have been there. Once you walk into an REI, it’s hard not to get a touch of inspiration about going out and playing in the great outdoors.

GETTING PEOPLE OUTDOORS: Studies show children are spending more time in front of a screen. Children have an affinity for playing outdoors, but it’s up to us as adults to help facilitate that. What are the critical points of entry to introduce someone to outdoor activity? College is one point. School groups, YMCAs, and Boys and Girls Clubs are others. We had a store catch on fire a year ago in Eugene, Oregon. A lot of the merchandize was smoke damaged but serviceable. Our insurance carrier agreed to allow us to donate it all to YMCAs in the L.A. area to help get kids there into the outdoors.

CHALLENGES: You don’t want people to use your stores just as showrooms [and then buy online]. How do you compete with that? You have to think about the value you add when someone shops at REI. There are benefits to being a member. Our stores are staffed by incredible colleagues who know the products. And we have to look at how we are doing in terms of price, service, breadth of assortment and convenience relative to our competitors if we want to be in business for the long term.

TAXES: One thing that’s frustrating is to be providing employment in a state and then be penalized with a 5 to 10 percent sales tax that the online retailer is not collecting but that the consumer still owes. The state of Washington estimates there’s about $438 million a year in uncollected sales taxes from out-of-state direct purchases.

DESIGN: In a world where product is ubiquitous, REI apparel is unique. We have invested in our own designs continuously over the time I have been here. We have a top tent designer. We have taken more design in house to make sure we have a compelling value proposition. If you take the top brands in the industry, we want REI products to represent equivalent quality for a lower price or a better product for the same price.

CIVIC ENGAGEMENT: Community service has been very important to me for decades. Whether it’s board work or volunteer work, you learn to lead through influence and not through power. I try to help share that ethos with my colleagues here. In a job like mine, you have a title that commands a certain amount of power, but when you are on a nonprofit board or you are volunteering, your title doesn’t really mean anything other than perhaps your ability to have influence.

INITIATIVE FOR GLOBAL DEVELOPMENT: The initiative was launched after 9/11. As we looked at the attacks on the United States, we thought, “Why does the world hate us?” We saw an opportunity to bring a business voice to the issues of global poverty, the idea that you are never going to solve global poverty if you don’t create economic opportunity in those communities. I was the first chair of the board. We’ve become a pretty effective national organization with people like George Mitchell, Madeleine Albright and Colin Powell involved. I’ve met with CEOs of African companies with sales of more than $100 million. One company produced retroviral drugs in Uganda while another had a seed and vegetable oil business in Zimbabwe. One of our group, the CEO of Cummins Engines, is investing $75 million in Africa. He wouldn’t have done that without those relationships. We would like to go beyond Africa to Latin America and South Asia.

EDUCATION: As a regent at the University of Washington, I’ve seen the university do some amazing things in a difficult environment. It has prioritized cuts in administration first and has worked hard to make sure that access is high regardless of socioeconomic background. Twenty-five percent of our students pay no tuition. The state wants us to create more graduates in high-demand fields like engineering and computer science, but that’s hard when the budget keeps getting cut. One possibility is to charge higher tuition in fields like engineering where you have high potential for earnings and it costs more to educate you.

ENVIRONMENT: Last year, we made $4.2 million in direct donations to nonprofits. We’ve facilitated over 3 million hours of volunteer work on public lands. And that’s not just picking up garbage. That’s swinging a Pulaski and an ax and building trails.

Paine Field Ready for Takeoff

Paine Field Ready for Takeoff

Opposition continues, but Paine Field inches closer to commercial operations.
 
 

When Paine Field was built in 1936, nearly a decade before Seattle-Tacoma International Airport was completed, the 604-acre, fog-free unpopulated site 23 miles north of Seattle was envisioned as being one of 10 commercial “super airports” around the country. Originally called Snohomish County Airport — its name was changed to Paine Field in 1941 — the airport was a Works Progress Administration project designed as part of the New Deal to create jobs, drive economic growth in the Pacific Northwest and support a nascent aviation sector.

Shortly after opening, the airport was diverted for military operations during World War II, and again later for the Korean War. Snohomish County took over full management of the site and opened it for new commercial development in the mid-1960s, leading Boeing to establish a production facility for the 747 jetliner in 1966. By then, Sea-Tac had emerged as the region’s primary airport.

Now, 80 years after construction began, Paine Field is about to fulfill its original purpose as a commercial airport. Last year, Snohomish County approved plans for a commercial air terminal to be operated by Propeller Airports, a 5-year-old subsidiary of Propeller Investments, a private equity firm that invests exclusively in the aerospace and transportation sectors. When completed, the two-gate passenger terminal will be the first privately operated commercial air terminal in the country.

“This is a win for residents and businesses in Everett and Snohomish County,” says Everett Mayor Ray Stephanson. “Bringing a terminal of this quality to our community as a public-private partnership saves precious taxpayer dollars and offers considerable economic benefits.” He says the county looks forward to “helping travelers avoid hours of traffic and headaches.”

Initial operations will be limited to two dozen flights a day. Any expansion beyond that, which will require Federal Aviation Administration approval, will likely be vigorously fought in court by community groups in nearby areas like Mukilteo and Edmonds concerned about traffic, noise and property values.

Mukilteo’s mayor, Jennifer Gregerson, is pushing for a county charter amendment to create an airport commission to oversee Paine Field. While Mukilteo, whose eastern border abuts the airport, has no legal authority to stop passenger service, Gregerson wrote recently in a blog post, “We will use every tool at our disposal to ensure that the full impacts to our community are heard and addressed. We will not stop in that mission, and the fight is not over.”

In that regard, the Port of Seattle’s effort to build a third runway at Sea-Tac is a cautionary tale. First proposed in 1992, it faced opposition from cities and communities neighboring the airport and encountered long delays and rising costs. The third runway finally opened in November 2008 and cost $1 billion, more than four times the original estimate.

But the forces arrayed in support of Paine Field are building. The FAA concluded in 2012 that commercial airplanes could use Paine Field without significantly affecting the neighborhood. Jet engines are much quieter today than they were two generations ago, and Paine Field officials say the noise level meets federal guidelines within the footprint of the airport itself. In fact, the noisier aircraft tend to be private planes that use the only runway that takes them over Mukilteo. An opposition group, Save Our Communities, and two individuals filed suit to block commercial service on environmental grounds, but a Ninth Circuit Court of Appeals ruling in March rejected the argument.

As Sea-Tac struggles to handle rapid growth (see story, page 41) and as vehicle traffic through Seattle faces gridlock much of the day, pressure to develop a second major airport in Washington state will continue to grow. Boeing Field — officially King County International Airport — is not a candidate as a relief airport because of conflict with the flight pattern into Sea-Tac. McChord Field, a military airport near Tacoma, is also mentioned as a possible option — Colorado Springs Airport south of Denver, for example, has combined military and commercial operations. But McChord is a key component of Joint Base Lewis-McChord and there are no plans or initiatives afoot to use McChord for commercial flights.

Besides, since Sea-Tac is already situated between Seattle and Tacoma, Paine Field is far better positioned to serve the growing number of residents who live in Seattle and to the north. The state Office of Financial Management estimates that, by 2025, the population of Snohomish County alone will grow to 1 million, up from 870,000 today.  About 4,700 travelers a day from Snohomish County depart from Sea-Tac, according to Port of Seattle passenger data from 2014 and 2015. Most presumably have to travel by highway through the center of Seattle to get there. 

 

A Long Runway
1. A WPA project, Paine Field was one of 10 “super airports” intended to spur economic growth during the Great Depression.

2. The site required tree clearing and leveling to ready it for runways in 1936.

3. Shortly after it opened, the airport was used by the military during World War II.

4. Alaska Airlines had a maintenance hangar at Paine Field in the late 1940s

It’s also difficult for communities in north Puget Sound to argue persuasively that Paine Field’s growth should be limited when the airport was there before most of the communities were established, and when the region’s economy has benefitted greatly from aerospace development around Paine Field.

It is now one of the largest manufacturing and service centers in the state, encompassing about 50,000 jobs. Boeing builds its largest planes at a Paine Field facility that is the largest building in the world. Other companies like Aviation Technical Services, which employs 1,500 workers doing commercial aircraft maintenance, also call Paine Field home and use its runways for their operations.

Although commercial flights will initially be limited to about 24 a day, Paine Field is already a busy airport. It handles roughly 300 flights daily, including large jetliners from the Boeing factory and small planes flown by private aircraft owners. The modern, FAA-operated control tower was built in 2003, more than doubling the size of the old tower, and it has the most advanced aviation technology in the industry. 

Propeller Airports is moving ahead — it has submitted its application to comply with Washington’s State Environmental Policy Act — and hopes to break ground on the new terminal by the end of this year. Flights could begin in late 2017.  

With commercial operations an apparent certainty, the issue now is growth. Asked to discuss the future, Propeller CEO Brett Smith is careful in his response. He says the company is “building its business model around a two-gate terminal, and beyond that, who knows?”

Opponents doubt Propeller’s ability to operate a terminal, given its lack of a track record, but Smith insists Propeller will create a “world-class facility worthy of this airport.” 

Propeller expects to make a profit from parking, concession, service and airline facility fees. 

Tom Hoban, CEO of the Coast Group of Companies, an Everett-based commercial real-estate and investment firm, is often described as the “father” of the effort to bring commercial service to Paine. He sees the two-gate operation as adequate for now. But, he adds, “If you think of the things the community could do to drive economic diversity and provide jobs for our kids, there is no better option than leveraging a public asset like Paine Field.”

If Seattle-based Alaska Airlines is one of the airlines that operates from Paine, Hoban says the community could not have a better partner.

He also disagrees with residents of communities opposing commercialization, predicting commercial operations at Paine Field will likely increase property values. He says commercial flights will provide businesses the ability to function in Snohomish County, attracting more demand. “The model is there,” he notes. “San Jose to SFO [San Francisco], John Wayne to LAX [Los Angeles]. It’s the low-hanging fruit.”

Propeller’s Smith agrees. “Is it going to be Sea-Tac north?” he asks. “No.”

But he believes the operation will provide a new and welcome experience for passengers tired of the Sea-Tac hassle. Propeller’s terminal will have a fireplace and comfortable seating areas. The nearby parking lot will offer valet service; arriving passengers will be able to send text messages to the lot and have their cars waiting in front of the terminal building.

Smith says Propeller will leverage what he calls “the incredible aviation infrastructure at Paine Field” to encourage further economic development and provide local travelers an airport option.

Snohomish County Executive Dave Somers says having a private company operate the airport not only provides substantial income for the county — the lease agreement calls for annual payments of about $450,000 — but also eliminates the risk of a publicly operated terminal. Under the 30-year lease, Propeller is responsible for building and maintaining a state-of-the-art, two-gate terminal, which would revert to county ownership at the end of the lease. 

Although neighbors have expressed concern about airplane noise, Paine Field Airport Director Arif Ghouse says it should not be a concern. “We have shown that the noise level is contained within the airport itself,” he says, meaning that noise levels above 65 decibels are not heard in neighboring communities. He notes that Paine Field already has many large commercial airplanes taking off each day as new planes come from the Boeing plant. The only difference between them and commercial flights, Ghouse says, is that “they’re just empty.” 

Future Destination
Propeller Airports, a private developer, is buldigna two-gate commercial terminal to serve Paien Field. It could open late next year. 

There is room for expansion at Paine. The airport already has about 80 acres north of the main runway targeted for development. The aim is to market the land to “aerospace” uses, Ghouse says. Expanded airline operations would certainly qualify as an aerospace use. 

Road access to the airport may be a more serious concern. There are two general access routes to Paine Field on crowded surface streets. Motorists trying to exit to Interstate 5 run into long lines when Boeing shifts end. Paine Field is scheduled to be on the Sound Transit 3 light rail expansion. An updated version announced in May indicates light rail would serve the airport (and Everett) by 2036.  

No airline has publicly announced flights from Paine Field, but two have shown strong interest. Bobbie Egan, an Alaska Airlines spokeswoman, says there is a need for another commercial airport in the region. Asked about Propeller’s lease and plans, Egan says, “If there is an airport built there, we would take a strong look at service there.” In a 2013 proposal to the FAA, Alaska suggested operating 98 flights a week from Paine Field to Portland, Honolulu, Los Angeles, Las Vegas and other West Coast destinations. 

Las Vegas-based Allegiant Air, which operates flights from Bellingham to Oakland, Los Angeles, Palm Springs, Las Vegas and Phoenix, has also expressed interest with the FAA but says it has no immediate plan to fly from Paine Field. 

Paine field has three runways, the longest more than 9,000 feet and used mostly by Boeing for its large, wide-body jets. The runway length means it can handle almost any size aircraft; the longest runway at Sea-Tac is about 12,000 feet. A second runway at Paine is much shorter, about 3,000 feet, and is used mostly by small private aircraft — about 650 private planes are based there. The third runway, 4,500 feet long, is used as a taxiway and for Boeing to park unsold aircraft.

Paine Field also is a major tourist destination. The Future of Flight Aviation Center and the associated Boeing factory tour attract 350,000 people a year. The Museum of Flight Restoration Center and Reserve Collection also call the airport home, along with Paul Allen’s Flying Heritage Collection. Two community colleges operate facilities there, training students for jobs in aviation.

The question that’s still hard to answer is how Paine Field can grow fast enough to help shoulder part of Sea-Tac’s increasing load. “As part of our master planning, we have always recognized the region is going to eventually need a reliever airport,” says Sea-Tac spokesman Perry Cooper. But 24 flights a day at Paine won’t do much to relieve congestion at Sea-Tac, which currently averages more than 1,000 flights a day.

One pressing issue is the real challenge faced by the Port of Seattle at Sea-Tac. If it stumbles even slightly in its plan to enlarge the airport, the resulting bottleneck would affect the region’s economic growth and send business elsewhere. 

Another major regional airport would provide the answer. In 1936, Paine Field was envisioned as a “super airport” serving the region. It now seems as if fulfilling that vision is the only practical alternative to serving the area’s growing transportation needs.

Who Was 'Top' Paine?
Paine Field is named for Topliff O. “Top” Paine, who was born in Ohio in 1893 and moved with his family to Everett in 1903. A graduate of Everett High School and the University of Washington, Paine was a ranger with the U.S. Forest Service when he joined the Army in 1917 upon the United States’ entry into World War I. He was commissioned a second lieutenant in 1918 after completing flight school. He was discharged in 1919 and became a commercial pilot in California and Mexico. In 1920, he joined the Post Office Department’s new Air Mail Service, becoming one of the top pilots in its Western Division. He died in 1922 when his revolver accidentally discharged. The Earl Faulkner Post of the American Legion suggested Snohomish County Airport be named in Paine’s honor in April 1941.