SEATAC, Wash. -- Four months after seeing signs that it could potentially be among the next in the industry to be a target of an unsolicited merger, Alaska Airlines/Horizon Air Employees Federal Credit Union didn't sit idly by fretting.

Back in March, the $50 million credit union learned that an employee at the $1.6 billion Wings Financial Federal Credit Union had registered a Web site domain with the name "AlaskaHorizonWings.com," similar to the site the Apple Valley, Minn.-based credit union created during its merger campaign towards Continental Federal Credit Union, "continentalwings.com." The site, which was still live at press time, was launched on March 9, the same day Wings Financial sent its merger proposal to Continental's board. The plan was eventually turned down and what ensued was a month long, unprecedented and "unwanted" merger chase that came to an end when NCUA stepped in and said the $200 payments being offered by Wings Financial to Continental's members were impermissible under the Federal Credit Union Act.

Shortly after the merger proposal hit the surface, AAHAEFCU President/CEO Dulce Frial confirmed with Credit Union Times that it had been approached in May 2006 and again in December 2006 by Wings Financial about a possible merger. AAHAEFCU's board turned down the proposal both times. Today, Frial said the credit union is staying the course, but also looking at better ways to reach more potential members and to serve existing ones.

"Like everyone, we have our challenges," Frial said. "I think we can service the members we have and we can bring in more. I'm encouraged by that. Our thing is to keep listening to the members."

Based on member feedback, the credit union is working on bringing better loan promotions to those who don't have "A paper" credit, Frial said. The intent here is to continue helping those who may have fallen on hard times, but are really trying to get back on track.

"We recognize not everyone has an A-plus credit rating but we want to help them through good and bad times," Frial said. "It's that classic 'cradle to grave.' We want to show that you don't have to be this huge credit union to help members throughout their lives."

AAHAEFCU's free online banking has proven to be very popular with members so adding more brick and mortar branches to its two locations in Anchorage and Seattle is not in the foreseeable future, Frial said. Members are accessing accounts through the credit union's electronic services and audio response. Still, on a recent flight to Los Angeles, Frial struck up a conversation with a flight attendant who said she loves the credit union and wishes there was a branch in L.A.

"Contrary to people thinking that [more prefer branches] our members are finding it easier to pick up the phone to check balances," Frial said. "We don't

want to be ABC stores--'all block covered' stores

like Starbucks."

Frial is aware of the larger credit unions in the area served by AAHAEFCU, but there are no fears of members walking out en masse.

"What makes us special is we have a good relationship with our sponsors. We're old school and I

encourage that."

Going forward, the credit union is working on picking up its efforts to target groups that have not really been targeted--Generation Y and new employees to the airline industry and their families. The goal is to become their primary financial institution especially helping the Gen Yers with their first car and home purchases. For instance, AAHAEFCU has just rolled out an auto loan promotion that finances 100% of a person's purchase price including tax and license, other fees and GAP insurance.

Meanwhile, when Wings Financial recently announced that it had partnered with JetBlueAirways to serve the carrier's 11,000 employees, Frial admits it piqued her interest.

"That's fine," she remembers thinking. "If it's a merger between two parties that's amenable, then that's fabulous. We wish them well."

Like AAHAEFCU, the $300 million FAA First Federal Credit Union also looked like it was on Wings Financial's radar. Eileen Rivera, president/CEO of FAA First, also told Credit Union Times back in March that the credit union was approached by Wings Financial in 2006 about a "partnership proposal." Rivera said Wings Financial President/CEO Paul Parish had assured her that FAA First was off the merger radar. Rivera knew that a domain Web site name had been registered with the moniker "FAAFirstWings.com." Wings Financial confirmed one of its employees had registered the name in December 2006.

The unsettling merger moves sparked a public image campaign at FAA First, Rivera acknowledged.

"We wanted to hear from members on why they like us and why they do business with us," Rivera said. "It made us think about [the outcome] if we were ever considered a target."

To that end, FAA First has collected "great testimonials" from members elaborating on why they love their credit union, Rivera said. The "feel good promotion" is currently being used to recruit new members. Long before the Wings/Continental shakeout, FAA First has conducted weekly pricing reviews from nearby competitors including other credit unions and local players.

"We've always had pretty aggressive pricing, even it if it meant taking a hit on ROA," Rivera said. "We don't want to find ourselves being a target."

Employee morale is stronger than ever, Rivera pointed out. In fact, many have stepped forward to say they are "prepared to support and defend" the

credit union.

"If anything, this has brought us together in a sense of pride and ownership," Rivera said.

She would still like to see the regulator take more steps through added protections. NCUA has not wavered in its stance that it will not even consider a merger application unless the proposal is approved by all credit union boards. Rivera said the gaps are

still a concern.

"It's pretty clear that the board will make the final decision and [a credit union] can't merge without board approval," Rivera said. "To me, it's missing the resources to protect. A credit union should not have to keep defending its decision."

--msamaad@cutimes.com

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