In slightly over one month from today, Larry Kellner will step down as CEO and Chairman of the Board of Continental.

When the announcement was made in July it was something of a shocker, as no one expected Kellner to leave. Certainly, there were none of the behind-the-scenes machinations of the kind that forced Bethune to step down as CEO.

When Kellner took over from Bethune in 2004 he inherited what can only be called the darling of the airline industry, a phoenix risen from the ashes of the Frank Lorenzo nightmare.

Continental was consistently scoring best of category in numerous consumer surveys and the choice of Larry Kellner seemed an outstanding one as he was a principal architect of Continental's revival under Bethune.

Five years later, though, what is Kellner's legacy and which airline does he leave behind to his successor Jeff Smisek?

THE GOOD

First, over Kellner's entire tenure, Continental continued to exceed average industry performance. But that, of course, isn't saying much.

To his credit, he successfully oversaw the antitrust immunity which allowed a close marketing alliance with UAL and the shift toward Star Alliance.

He also listened to his most valuable customers and agreed to modernize the BusinessFirst cabins with a lie-flat seat, although it could be argued he was largely playing a game of catch up here.

THE BAD

While the past five years have clearly not been good ones for the airline industry, as it lurched from crisis to crisis, first debilitating fuel costs, then the deepest recession since the thirties, Larry Kellner did not adhere to the Bethunian principles of Continental's "exceptionalism."

As the carrier needed to find ways to earn a profit, his playbook proved painfully thin, and instead of adding revenue through adding value, as Bethune had done, Kellner simply resorted to garden-variety cheap shot tricks to cut costs and enhance revenue, such as charging for checked bags, IFE, reducing the quality of catering, and so forth.

How ironic is it to view Continental's TV advertising now (http://www.youtube.com/watch?v=QjaFR...om=PL&index=16) in which the carrier adopted a superior, almost snarky, tone in declaring its exceptionalism to the falling standards of airline travel?

Now, as Kellner departs the company, Continental has been stripped of virtually all of its exceptionalism. Not only has it ironically done away with pillows and, for the most part, blankets, but the airline now charges most of its customers to check bags, to standby on most flights, and to watch its in-flight entertainment on domestic flights, while magazines have been removed.

Yes, it still serves meals at no additional charge in its economy section on some domestic flights, but this, last feature of Continental's exceptionalism is hinted to be on the chopping block as well.

On another, although slightly more oblique level, Continental also slowly but relentlessly diminished the benefits accruing to its frequent flyer elites, the details of which you are all well versed in.

So what is left? When Bethune retired, he could proudly proclaim that "that a good airline is defined by customer satisfaction, not just cost per available seat mile," which, of course, echoed the philosophy of Continental's principal founder, Bob Six.

As Kellner departs, he can make no such claim. Can anyone out there honestly say they are as satisifed with Continental today as when Kellner took over as CEO?

And, interestingly, as Kellner slowly transformed Continental into virtually just another legacy airline its financial performance began to mirror the mediocre performance of other legacy carriers as well.

In 2008 CAL lost $585 million and so far in 2009 its losses are just about on par with the losses at UAL, adjusted for the larger size of UAL. This despite record load factors (85%), and a continuous reduction in capacity and service.

Of course, much of this can be attributed to the general malaise of the airline industry. You know that when WN is losing money, things are not going well. And Continental was at a disadvantage since most of its rivals entered into bankruptcy in recent years, while CO's two bankruptcies occurred in the nineties and thus its cost savings are no longer as evident.

Nevertheless, there was a lot to be said for Continental's exceptionalism, an approach to the business that had monetizable value, not just a word to make some CO plats feel good about receiving an upgrade.

IN CONCLUSION

Kellner eviscerated the exceptionalism through his lack of vision and guts. After all, the previous management faced the same criticism and scorn when they adopted policies that appeared counter-intuitive and certain to ruin the airline (You're going to have an international first class section but only charge business class fares? Are you crazy?).

Continental has the best people in the airline industry and some terrific positives (many of which are thanks to Larry Kellner). Now Jeff Smisek needs to reconnect with Continental's long tradition of exceptionalism (which goes back to the Bob Six days) and add revenue by adding value, not by reducing it.

OK. That's my $.02 (or more like $.20 given the length of the post, sorry).

I'm curious to read other takes on Kellner's legacy.