So after the big DO,you might not know how to react if WN throws themselves at you? All that talk about LK garnering loyalty with that party go pffft?If I had any feelings,they would have been hurt.


Jumping in on the WN hedge advantage debate:

Am I naive to think that if WN didn't hedge at @ $58.00 bbl and instead hedged at @ $68.00 or $78.00 they would have priced their product differently? Just asking.

Jumping out now.

Of course they would have.

But they hedged at $58. That's really all there is to it.

Also, anybody with enough cash could hedge along with WN.

Of course, you have to have the liquidity...

But WN didn't just luck out on their hedge, it's something they've been doing very well for a very long time.

Instead of whining, the other carriers should try to learn something about fuel costs from LUV...

CO has been there for a long time on charging a change fee when the fare decreased....UA was pretty much closing a big loophole that most US legacies had closed a long time ago.

Thank you, TWA Fan 1, for your valuable perspective; it mirrors mine.

Larry Kellner is a very capable manager. He is decidedly not a leader. Leaders lead. They innovate, imagine, and inspire. Larry Kellner does none of these things. The results speak for themselves. Employee morale is stultified. On an almost daily basis, there appear less and less value-added characteristics to our company to positively differentiate us from our competitors.

These things concern me, because where I once enjoyed working for one of the premier carriers in the world, I now find myself relegated to working for a company that seems bent on marginalizing its collective talent, impoverishing its former focus and vision, and crippling its hard-earned prestige.

I don't like the idea of working for an also-ran. I want to work for the best. My management team is obstructing this desire, despite my best efforts.

I have been a constant and persistent critic of Kellner, but it's certainly not personal.

I actually think he was a terrific CFO. But he stinks as a CEO.

It's not his fault, really, he's just a square peg in a round hole.

As Bethune's bean counter, he was a great foil to Gordon's wilder side. But if Gordon could be a little wild, he certainly understood people. And people are the basis of any success, whether they are employees or customers.

Kellner is your classic accountant. He understands numbers, the bottom line. He needs to be in control, when in fact, the way to lead is to trust your instinct, ergo to not be completely in control.

Where Gordon could regale the troops with his salty stories about working as a Navy mechanic, what can Larry do? Tell them about how excited he is about the latest Revenue Management software the geniuses at Smith Street are using?

Gordon also understood that making money isn't just about the bottom line, that nickel-and-diming customers can ultimately result in diminished revenue. Making money is mostly about understanding psychology, what motivates people to spend or not to spend.

And nothing terrifies an accountant more than the vastly intangible black hole of human psychology.

I know this sounds a little extreme, but I believe that when all is said and done, Kellner will go down in history as a worse CEO than even Frank Lorenzo. Frank Lorenzo? I'm sure you think I'm out of my mind.

At least Lorenzo was so extreme he was a comic-book villain, and it that made it easier to get rid of him.

Kellner is much more insidious. He knows how to smile and to make the most out of some good p.r. In the end, though, he is slowly sapping all the vitality, the morale, the specialness, and the gusto out of CAL, both for employees and customers.

Under Gordon Bethune, BF became an industry leader, and upgrades were designed to attract and keep happy customers. What will be Larry Kellner's legacy, the fact that he imposed a $15 fee to check a first bag? Or that he had jetBlue install DirectTV on the domestic fleet so that customers could spend $7 to watch commercial TV, when the same service is free on B6?

The irony here is that if all you trust is money, you will end up making less of it. And that hurts everyone involved with CAL.

Yup, they lose money for their owners so they can pay pensions. Nice work LK! By the way, are they still paying the pensions for the employees they laid off last year?

It's interesting you mention that.. if you look up-thread a little bit you'll see folks mentioning that the legacy airlines rely heavily on booking engines and that the lost-cost is often the winner.

Interesting in that WN doesn't appear on those searches.

Thus the other airlines struggle in the price war and WN continues to keep their customers happy. I think a key to their process is that even a high WN fare doesn't look absurd. Meanwhile, I've pulled up plenty of fares from the various legacy lines and spit out my coca-cola at the sheer audacity of what they were charging.

I think WN's prices are often more palatable (lack of a better term) to the public and the legacy airlines need some adjustments to become more in line with them. They aren't losing money on the lower fares, so obviously the legacy airlines are doing something wrong in how they choose to price their "extras." If people wont buy them, they're not valuable.

Gordon was excellent at the operational aspects of running an airline, and certainly was colorful, but he fell short on the financial side -- Continental was saddled with sizeable debt servicing obligations and depleted cash reserves that Kellner and his team have had to address through the most difficult period in the history of civil aviation.

I actually disagree, and disagree pretty strongly. I think the issue is that you are ultimately selling transportation. The vast majority of people are buying a ticket to get from one place to another. People simply aren't looking for anything else, so what, exactly are you going to sell them on?

Meals at mealtime is a classic example. CO simply can't offer a meal at a cost that can reasonably be recovered by increased fares. I mean, they can't possibly be more efficient at food service than your average airport eatery but it is hard to imagine they can charge any more than your average airport eatery up front. I mean, why pay $10-$15 extra for the ticket if you know that you can eat somewhere else for $5? Why buy a first class ticket for a 3 hour flight? A hot towel and a couple of cocktails isn't worth but maybe $15.

And when the airlines do offer something that people might be inclined to pay for, they get the pricing all wrong. I am much more worried about long-term yields than LK seems to be. I see no way that J fares recover, simply because the J seat does not offer sufficient utility to cover the price differential. Even corporations are starting to recognize this, and I can't imagine that we will see $5k TATL fares anytime soon - it simply isn't worth that. What will the airlines do when the BF sale fares become the norm?

I hate to get all TWA Fan on you, but I think he is probably right in that PE might be the legacies best hope of attracting a revenue premium. Certainly, I think that a domestic F cabin is nothing more than a waste of capacity and an increase in fixed costs, and should be replaced with a more flexible, European-style J product to better match the product with the pricing in most markets.

It is ironic, though, that through most of his tenure, Bethune's financial guy was none other than Larry Kellner, who was the architect of the capital program that resulted in the debt you describe (by the way, the debt was, on balance, a good thing since it allowed CAL to modernize its fleet, one its great assets).

Also, no one is disputing that times are hard for the airline industry now. The issue is the kind of unimaginative response Kellner has had to meet the challenge.

I agree that CO has been playing it somewhat conservatively over the past few years, but that isn't a bad thing to the extent it's still in somewhat better shape than most of its peers, and ironically now retains more flexibility than its peers to adapt its business model during the downturn as a result.

Delta is up to its eyeballs in debt and now will be spending the exorbitant sums necessary to physically merge NW into its ops, a process that invariably leads to inattention to product quality and operational performance, to say nothing of imposing constraints on how the airline can tweak its network because of the promises made during and after the merger process. AA and US lack the capital to do much more than keep shrinking. United has some room for improvement, and is doing just that, and should get somewhat better for the near term as some of CO's practices rub off on it, but is still saddled with all sorts of looming problems to its cost and revenue infrastructures.

Agreed. I'd rather have conservative growth. Expand too fast or in too rushed a fashion and the result might be not having a company to grow. The only thing I really think that has gone outright wrong in the CO model in the last few years was the number of widebody purchases. There's no reason that EK/SQ/QR should have had an opening to come into IAH and set up shop on the oil routes that they did.

I am all for conservative and prudent.

Where I don't agree, is with unimaginative.

Conservative, prudent and imaginative. That's the best way to run any business.

Also, while I think it would be wrong to say that United is somehow a model for how the industry ought to be run, there are actually many practices which, in my experience, are far superior at UA than at CO.

One of the big mistakes CO needs to avoid is believing it has nothing to learn from the other kids in the class.

CO is already on top of that by virtue of its new partnership with United, in which the companies will actively cooperate to a level seldom seen in the U.S. industry and invariably "mirror" various business practices from each other. Short of ruining itself with a costly, divisive, merger it cannot afford in the near term, or debasing its product to a point where attempts to market it become laughable to road warriors and leisure travelers alike, what more -- beyond the new UA partnership -- do you want CO to take away from its legacy peers?

Who said anything about its legacy peers? Might as well look at the best from all carriers.

And, in all fairness, CO has already done some of that. But the approach is timid and not in tune with the needs of the customers. Additionally, when you look at how much revenue is left by the wayside because of rigid edicts, it's really quite stunning.