Excellent post, and thank you for your candor.

A couple of observations about CO:

1. When Frank Lorenzo walked away from CO, the airline he left had virtually nothing remaining from the CO he acquired from the Bob Six days, except the name and a small handful of the routes. The carrier he left was really primarily Texas International (Lorenzo's airline) merged with PeoplExpress.

The reason this is important, is because people tend to forget that the airline Lorenzo's successors inherited had much more in common with an LCC than the legacy carrier CO had been.

Let's not forget that Lorenzo took CO in bankruptcy and immediately invalidated all the collective bargaining agreements. He offered to rehire the employees of CO, but often at a 50% pay cut. Many simply had no choice but to accept. This eventually led to a Federal law making such invalidations illegal.

2. When Gordon Bethune took over as CEO in 1994, CO was a burned-out shell on most levels. Bethune was "one of the people" a former enlisted Navy seaman who had worked as an aircraft technician.

He knew how to get along with everyone, and he felt at ease with the front-line staff. He was charismatic and profane, funny and larger than life.

He knew that organizations thrive on respect and teamwork, and he instilled an esprit de corps that surpassed any other in the airline industry.

But he was also a cocky SOB, and much of the CO "syndrome" the swagger, the iron-clad conviction of its superiority can be traced, at least in part, back to Bethune.

I bring this up because, while Bethune was no doubt a stellar manager who accomplished much, his personality and style sowed the seeds for some of the current problems.

3. Bethune also got lucky. Just as CO was ascendant, most of his competitors started hitting the skids. UA, of course, went through its infamous "Summer From Hell," and American started to hiccup.

Another way Bethune got lucky is that one of the hubs was in NYC area. With all the freebies and the general "glow" of a phoenix risen from the ashes, flying CO was vastly appealing to NYC-based business travelers, who availed themselves of the all the free upgrades, the generally excellent food, etc.

Since many of these flyers were influential opinion-makers in the fields of finance and the media, CO had built up a huge reservoir of goodwill that it continues to exploit to this day, even if that goodwill is now running on the tail-end of the fumes.

A quick word about upgrades: In the early days of the Bethune era, as you wrote, upgrades were essentially automatic for any CO elite (even a silver). This is because no business traveler worth his or her salt would be caught dead flying Frank Lorenzo's monster.

So Bethune et al were desperate. The best they could do was to give it away. And so they did.

I remember flying transcon in the early 2000's on CO, on a 767, always in FC, even though I was only a silver.

But Bethune only instituted upgrades grudgingly and felt they were a real problem, severely depressing the airline's revenue potential.

4. Once Bethune left, as you write, things went downhill, in my opinion, in a hurry. Larry Kellner, Bethune's successor and Smisek's predecessor, was a very troubling transitional figure.

He knew that Bethune had gotten the ax because a number of the airline's major shareholders and investors were unhappy with the airline's P&L statement. But he was also highly conscious of the huge and cult-like following the airline had generated, based on its mythic comeback narrative and fueled in part by its snarky, irreverent marketing.

So Kellner played a lot of pretty transparent lip service to the quality of CO, all the while, and surreptitiously, dismantling its exceptionalism, little by little.

He even made a show of coming to a FlyerTalk DO in Houston, where the hypocrisy was in full view. A "vote" was taken asking the attendees if they would prefer DirecTV or WiFi. The vote was overwhelmingly in favor of WiFI but Kellner then selected DirecTV anyway, based on one criterion: DirecTV would fund the installetion and thus there would be no cost to CO of adding the infrastructure.

Of course, on the back end, DirecTV would keep the lion's share of the revenue, so, if anything, it was not even really a good deal for CO's bottom line, but it was a clear example of CO's focus on cutting up-front costs even if it meant hurting revenues in the long run.

That's basically what Smisek is doing with the Orwellianly-named "Project Quality," and the way it was explained to me is that CO knew it could control cost but it didn't have direct control over revenue, so it felt it was better to cut costs than to hope for a bump in revenue based on product enhancements.

Finally, much has changed in the airline industry since Bethune left Continental a decade ago. But, as you wrote, Smisek, although he hasn't retained the lesson of the importance of respect, continues to hold onto to his mentor's view of the airline product as a pure commodity.

You have to understand that, unlike, say, Richard Anderson at Delta, who sees his airline as an arm of the hospitality industry, CO always saw the airline business as first and foremost an operational enterprise.

The joke around here is that passengers are treated as self-loading cargo, but too often that is sadly the case. When you're in the operational field, and not in the hospitality business, the passengers' needs are a necessary nuisance in order to get access to their money.

The most important is to get the most out of the infrastructure, fly the planes as much as possible, fly the fewest different types of planes (at the end, CO flew only the 737, 757, 767, and 777), on as many routes as possible (overseas and domestic).

The goal was to minimize IrrOps, but when they occurred their bulldog customer service department would do everything in their power to hold onto the money as hard as possible.

They developed the widely criticized and even ridiculed SHARES. But SHARES accomplishes exactly what they want it to. They want it to be hard to use, user-unfriendly, they want to limit the capacity of the line employees to have any control over it, again to keep as much money in their coffers as possible.

Of course, none of this is very clever, if you're in fact severely under performing the industry. In my opinion, the fact that Smisek et al still hold onto the cynical view that an airline seat is a pure commodity, that there is no revenue upside to the "experience," is an outdated view that might have been somewhat accurate twenty years ago, but today is widely discredited in the airline industry.

The irony, of course, is that Smisek is one of the direct disciples of Bethune, and while Smisek continues to manage based on the premise that an airline seat is little more than a transportation commodity, CO's heyday came at a time when the CO experience was far superior to its competitors.

The most important change, though, is for senior management to retain Bethune's most important lesson: Respect.

Until that happens, the organization will be very troubled.