I can't speak for others, but this video sums up my emotions over LK's departure:

http://www.youtube.com/watch?v=KbM8Iu-547k

you really are too much

Well here's my thoughts on this....after trying to right the good ship NWA for 3 years Richard decided he didn't have the stomach/ability to do what needed to be done to save the company and left (ie he couldn't get ugly when things needed to get ugly), Doug said he could/would do whatever it took to fix things and basically said "BRING IT!!!!!!!!!!!!".....remember though this wasn't all Doug's fault - Richard had tried to get unions to open their contract for 3 years so there's enough blame for all sides in this story....from a paying PAX's point of view though I think Doug did ok - he continued and infact improved Richard's focus on the PAX...just think back...when did things get really really good for us Elites? The airline was near the top of every ranking out there for performance and our beloved WP kept getting improved....unfortunately DL has always ranked near the bottom of these very same rankings and they've become brainwashed into thinking cuts are "best in class"....now with all of this rambling what did LK do doing these same times? He held a steady hand on the ships wheel and held course during one of the worse storms in our nations history, were there minor course corrections sure but there weren't the major heading changes that US/UA/DL have all seen over the past 5-10 years...he kept CO the CO I knew 10 years ago, if someone asks me about my recent experiences and how they compared to when I left I'd say there's more soft focus today on the pax....to me that's what earns my loyalty

Soc

PS nah - wont start this same type of discussion over in the DL forums....theirs too many Koolaid drinkers out there that believe the world is all right as long as there's widgets painted everywhere (afterall didn't know you widgets will solve world peace?)

Thank god you, channa, or TWA don't run an airline. You have clearly no idea what you're talking about.

It would be one thing if this arm chair CEO was even entertaining. It's just redundant complaining with a complete lack of macro understanding of the industry and it's challenges.

So exactly what do you believe to be incorrect in this quote ?

"LK's biggest failing is that he hasn't done anything, one way or the other, to better position CO for the long-haul"

As I demonstrated the business has stumbled along at breakeven over a 5 year period, without significant change, while a major competitor (WN) has grown slightly faster while making a reasonable return. The result is CAL has pretty close to zero nett worth in the balance sheet today, so it's vulnerable to pretty much any unforseen event - terrorism, rising fuel prices, a prolonged grounding for technical reasons, a significant strike, a failure of a credit card processor - pretty much any of these (and others) could drive the business back into bankruptcy. You can ride out these problems if you have a profitable business and a buffer in the balance sheet. CAL has neither.

It's funny, though, isn't it that the only airlines that are doing better are the ones who've resisted falling into lockstep with the rest of the legacy carriers and into the resulting inevitable swamp of mediocre product and mediocre results.

It's a perfect demonstration that if you follow the herd you can only ever achieve mediocrity. If you aspire to excellence, by definition you have to try something a little different.

LLC is not an option. The only future for Continental is merger/acquisition. Kellner and the Board know this and are clearly making that happen. If Larry was kicked out, it was not because of the "vision thing," to quote the man for whom IAH is named.

That was my original point in starting this thread. CO used to stand out, was exceptional.

Although it still maintains some of its exceptional features (especially its great people), Kellner's influence was to water this down so that CO looks more like all the other legacies than it did when he took over as CEO.

And, as he has morphed the airline into just another mediocre legacy carrier, its financial perfomance has worsened and now mirrors that of the other legacy carriers.

One more note: There is soooo much more that could be done with the airline product, in terms of target marketing the product, monetizing product based on added value (not reduced value), but it's simply stunning how profoundly visionless all these airline managers are.

I can only think of my own business, broadcasting. I came into the industry in the 80's, at the tail end of its so-called glory days. It's horrifying to see how far network TV has fallen in that time and how deeply uninnovative and narrow most network management has been in all that time.

While some have engaged in a certain-to-fail race to the bottom with reality TV and talk shows in primetime, one man, the great Leslie Moonves, has stood out. Not only has he retained audiences with great programming, he's made a mint doing it.

As long as you're giving people garbage, garbage it what you'll get back in return.

It's a lot harder to take risks, break the mold, spend money to make money than to just follow the fold, lemming-like, and declare you're a genius because you're charging customers to check bags.

OK, if you've got all the answers please enlighten us to what you would have done differently.

Plus I love how you ignore that they fly some of their initiatives over the years; new airplanes, upgraded BusinessFirst, joined Star Alliance, added Live TV, launched more international flights to India and China (and still the only ones to offer daily nonstops when everyone else reduced or pulled out), launched the PDA site for frequent fliers, continued to provide meals and mealtimes, and gained access to LHR etc.

If you somehow think merging with another carrier is somehow innovative, especially when it stresses labor relations, customer experiences, IT integration issues, and product consistency, and has yet to demonstrate any significant cost savings for either US Airways or Delta. Have a gander over on the DL and US boards and see how they like all their "innovation"

And of course you whipped out the old, "well Southwest is better" rebuttal. Southwest only succeeds by keeping expectations low, providing basic service, not interlining, no first class, meals, common fleet, no long haul flying etc. Not saying that's a bad thing, it just doesn't work everywhere.

Plus you ignore that WN is having labor issues, and they're losing money. Wow so innovative.

So tell me when you're handicapped with historical legacy labor contracts (and you already pay lousy salaries), with high fixed costs (pension, health care, salaries), high variable costs (oil, aircraft), high government imposed ticket taxes, shrinking customer and yield base, and an uneven market playing field (foreign competition), what other magic rabbit you think you can pull out of your hat?

Oh I know, arm chair 101, rip seats out of economy class to give me more leg room. Dump the RJ's and Q400's and fly 737 on all short hops. And fly wide bodies interhub and to the West Coast from EWR with three cabin service. And have SWU and easier access to premium seating and upgrades for all elite levels. Oh and you're expected to find a way to maintain your "profit margins" at the same time despite the fact that every initiative has been tried before and failed, multiple times.

Or you could stop the whining and chose to fly another carrier. But silly me, what would be the point in life if I couldn't complain endlessly on Flyertalk? I might actually have to speak to my wife occasionally.

Which are those?

B6 is vaguely profitable right now and they charge for checked bags (2nd or more), pillows/blankets, headphones, more legroom, etc. Are they truly different? They don't seem too much so to me. Maybe in their willingness to drop service to smaller destinations.

Allegient is the only carrier that remains consistently profitable and they don't meet my needs at all.

So which are the special carriers that have broken free from mediocrity and are raking in the dough?

CO has certainly taken a measured approach to all their changes in recent years. With the exception of throwing dozens of 752s across the Atlantic they haven't really been first at anything. I'm not sure that makes them mediocre or not, but they have survived. And while they may not be ideally situated for the next 3 years they do seem to still be above the mean-line when compared to other US-based carriers. Is that really failing?

And what makes you the expert? Do you run an airline? Have a degree in aviation management?

Setting the international and flag carrier market aside, as it plays by different rules, the US domestic market has a challenge - extract more yield from each seat mile.

If they invest in the product, the only way to reclaim those costs is by extracting more yield on the revenue side, which means higher fares.

Unfortunately, *most* (not all) customers are unwilling to pay more to get more - they go to online sites and look for the bare bottom lowest fare and flip airlines by their personal equation of money vs. time (do I spent $25 more for a nonstop?).

Loyalty programs are a good way for airlines to combat flipping - if you don't fly the airline whose program you belong, you "lose" something - miles, points, promotions, benefits or some other item whose perceived value is designed to outweigh the actual difference in fare a customer might be asked to pay.

The problem is, product differentiation in itself is not sufficient to stop flipping or attract new customers - it might encourage *some* to pay more, or some to buy their ticket on a particular airline, but not enough to make the investment in product worthwhile.

Whereas some airlines looked at this situation and say 'screw the customer' (i.e. USAir), other airlines made attempts at differentiation and failed (AA MRTC) because they didn't touch the right customer nerve. Larry looked at this problem in another way (and I believe we helped shape this vision) - spend $1 extra on product if it brings in $1.10 in revenue. Other ways he thought out of the box - the LiveTV arrangement which cost CO nothing.

So yes - running an airline and designing an airline product are difficult challenges when your planes are full (of lower yielding customers) and people are unwilling to spend more. I believe the concept of 'fees' began as a way to 'ambush' customers - it's really a form of bait and switch. Sell your customers a cheap ticket for transportation, but surprise them (many are still surprised) after-sale when they discover their bags will cost an extra $100 and they have no choice but to pay. This trend of 'unbundling' is designed to allow airlines to advertise one cost, and charge another - the 'transportation' cost covers you in the seat, and can be lower than it needs to be because if you want to take bags, eat, drink, watch TV or pee (Ryanair), it will cost you extra - and some experts have calculated that an airline can collect $300 in revenue from a passenger while still selling them a $200 plane ticket. If they advertised that $300 plane ticket, they wouldn't sell any seats because their competitor is advertising a $200 ticket (plus fees). Unbundling is a like a drug to a revenue-hungry company operating in a hypercompetitive market because it masks the true cost of the ticket.

So the bottom line is you can either join the herd (as most majors do), or figure out a way to stand out from it. WN found a way - instead of harping on fare differences, it attracted customers frustrated by ambush fees with their 'bags fly free' marketing campaign. It turned bag fees into an issue and capitalized on it. B6 developed a 'mystique' around its low fares - think jetBlue and you think 'low fares'. The truth is, B6's fares on many routes aren't as low as many think.

Continental needs its own issue to break out from the herd and capitalize - and that is the only way it can get fares up and yields up without losing ticket sales or constantly shrinking capacity.

AA found that extra legroom doesn't resonate enough. VX is now undercutting everyone with a tech and feature-savvy product while its able to maintain low Y fares as a low cost carrier.

I don't have an easy answer - but what CO needs is a visionary leader who can find that missing connection with frustrated or uncomfortable customers and tap into it. Riding the 'hub-hostage' horse won't work forever. They need to figure out what items they can spend a $1 on that will bring in $1.10 or more.

Extra legroom as an option, free TV, free first bag. CO has none of that. Compared to industry average, B6 seem to be above average for the Y flyer.


CO has indeed been conservative, but aside from the "meal," I'm not sure what puts them above the mean-line at this point. The Y seats are hard, legroom is poor, and the TV you have to pay for. I suppose the "meal" and power are the pros, while the seat quality and pitch are the cons.

You get a more comfortable seat on DL, UA, AA, or even US. You get free TV and "snacks" on DL. For the non-Elite flyer, I'd say among the legacies that DL probably is a hair above the rest, while the others all more or less equally suck.

Well, you can pay more for extra legroom on CO, too, though it is a lot more. I agree that B6 is above average and I actually like their in-flight product. I'm wondering which other carriers are also above average.

I was speaking specifically about their ability to survive in the industry.
A personal preference thing that others will disagree with. I like the CO seats. You don't. I rather dislike the UA seats. You don't. So it goes.

Which of the MD-8x or DC-9 planes are you getting that free TV on? It is really on a small bit of their fleet. The percentage of CO's fleet with zero IFE options is lower than that of DL, I believe. CO charges for TV and DL charges for meals. I call that a wash speaking broadly.

bocastephen: Excellent post, well reasoned, filled with common sense. All agreed.

I would just add one comment about the "spend $1 to make $1.10" slogan Kellner employed so often.

I know this made for a good sound bite but I hope he didn't really believe it, or more precisely, that he didn't create a linear correlation between a dollar spent and $1.10 earned.

First of all, what could that possibly mean in an enterprise as complex and inscrutable as a major airline? Where do you identify the dollar spent? In a dozen different departments? How do you correlate that to the revenue earned?

What if you need to spend $1.50 in the short term to earn $1.00 but this invesemtent results in a $2.00 long-term ROI?

And so on.

But if Kellner really believed this was the right approach then we gain a window on the lack of risk-taking, the lack of boldness. And when you will not take risk or be bold, then clearly the only way to increase return is to nickel and dime.

Which is what he did.

One would hope that Mr Smisek will take a broader, bolder approach that will appreciate how much value is not being monetized in the most lucrative tranche of the demand right now, the sub-premium business traveler.