04
Flying a premium brand straight into the ground
Filed Under (Continental Airlines) by Douglas on 04-07-2011
Some ten years ago, I was always pleased to introduce someone to Continental Airlines. My apartment is decorated with so much vintage Continental Airlines swag that people always assume I work for the “Proud Bird”. Now, even I have begun to speak of Continental derisively.
What has changed?
“Frank Lorenzo in a better suit”, aka Jeff Smisek.
Even after 9/11 and the calamitous environment for the airline industry, Continental alone maintained its standards for passenger experience. The ads showing pillows and blankets being thrown off of the airplane, free food in coach at mealtimes, an engaged employee population, all of these things provided support for Continental charging a fare premium to most other carriers, as frequent fliers chose Continental in droves.
There is no way to know just how many WorldPerks and SkyMiles rewards were redeemed on Continental metal. People who had flown Northwest for decades jumped at the chance to fly on a carrier that had clean, tidy airplanes, enough cabin staff to keep everyone happy, left on time, and made a person feel like a valuable customer.
At the end of 2004, Gordon Bethune left the airline. He was pushed out by an investment group who wanted more profits from the revenue stream. Gordon, who had been the champion of both customers and employees, crafted the programs that made Continental the sole premium brand airline in North America. Larry Kellner, who had been the CFO, was elevated to Chairman.
Larry seemed a good enough guy, although the employees didn’t care for him. He did what all accountants do; he counted beans. However, he had been close enough to Gordon’s success that he was able to see the bigger picture. Service didn’t decline too much, and profit enhancements were generated through adding winglets to the entire 757 and 737NG fleet. Aircraft utilization continued to climb – when an American jet or a United airplane was basking in the moonlight, CO’s fleet were leaving contrails on their way to someplace far away, loaded to the gills with passengers.
The route structure continued to expand, even though new aircraft deliveries belied the possibility. Continental was fast approaching replacing Pan American World Airways as the one airline that could take you anywhere.
Larry lasted until the end of 2009. Were we really supposed to believe that Larry wanted to go back to being a private equities broker? That’s the airline industry equivalent of “wanting to spend more time with my family”.
The open question was, which position was it that had prevailed in the Board Room at 1600 Smith St.? Merger or not-merger?
Larry kept his own counsel on the matter. Gordon, too, kept silent, although he continued to champion more industry combinations.
Jeff Smisek, a Harvard lawyer, took over as chairman. It didn’t take very long before it was revealed that the pro-merger forces had prevailed. It also was revealed that profit at any cost was the new marching order of the day.
Free food, blankets and pillows, OnePass rules, free checked bags where chucked out of the cabin door along with employee morale and the attitude of customer accommodation.
Employees are no longer partners in providing the best customer experience; they’re now like Eastern Airline’s overworked, beaten down staff. The airplanes are no longer as clean. Cabin crew are now tasked with up-selling everything, moving about the cabin with WiFi credit card readers. Everything about the passenger operation now screams “have your credit card ready”.
As Hyundai, Audi, or GM – it takes decades to build a powerful customer reputation, and only a few months to destroy it.
Recently, friends who have flown Continental have been universally displeased and derisive. One has said she is sure that the newly merged United staff is behind the problem.
They’re not.
United’s employee population has already been beaten into submission. Their sole hope of salvation was that Continental’s storied passenger and employee relationship culture would lift them from the damp, dark galleys in which they labored.
It was not to be. Recently, “United” decided to take their pilot negotiation demands to the public, in an effort to persuade the public that labor was being unreasonable.
Instead of lifting United up, Smisek has piloted Continental down to a level consistent with the dank expectations of United’s long-suffering customer base, likely in order to simplify merging a former high flyer with a clunky, hapless, hopeless stalwart.