Updated: 11/11/08

CEO advice for Obama: Larry Kellner of Continental Airlines

Taken from the Houston Chronicle

In today's column, I interviewed eight local chief executives, asking them what priorities they believe President-elect Barack Obama needs to set. Because of limited space in my column, I'm reproducing the interview here in more detail. This is the fourth in a series.

Larry Kellner, the chief executive of Continental Airlines, sent the following email in response to my request for his list of presidential priorities.

Thanks for asking my views.  The President-elect’s task is daunting, but I have high hopes that he can bring positive change not just for business, but for the country and the world.  

1. The economic crisis would be at the top of my list, as it’s vital that the Administration create a platform for economic growth and help ensure businesses of all kinds have reliable access to credit.  While government assistance will remain necessary, I hope the Administration will recognize that such assistance must be provided within a framework that doesn’t pick winners and losers, but rather sets and enforces clear rules in an even-handed manner that provide certainty and stability.

2. I am sure you won’t be surprised to know that I think transportation policy must be a top priority. There is a great opportunity for the President to work with the Department of Transportation to focus on modernizing our transportation infrastructure, including our antiquated air traffic control system.  The technology exists today to measurably and safely increase the volume of flights that can be flown in the U.S., particularly in congested areas like we have around our NY/NJ hub.  Reducing flight delays will increase service reliability and reduce fuel consumption benefiting our customers, the airlines and the environment.

3.  That brings me to my third point.  The environment would also be on my list, with a goal toward developing sound, consistent policies that create incentives for business to invest in new technologies and find alternative energy sources – without curbing economic growth through a rigid cap and trade scheme. The U.S. must move toward energy independence not just for the sake of the environment, but also for our national security and the economy.

ExpressJet improves on bottom line as it loses branded, DL flying

ExpressJet Holdings finished what President and CEO Jim Ream called a third quarter "of transition" with a $4.8 million loss, narrowed from a $22.3 million deficit in the year-ago period.

The company ended its branded flying experiment in early September, when it also ceased flying 10 EMB-145XRs for Delta Air Lines (ATWOnline, July 10). By the end of the quarter it operated 214 aircraft under a capacity purchase agreement with Continental Airlines, including some formerly used for branded flying. Eighteen aircraft were reallocated to its charter/corporate aviation division, lifting that fleet to 30 units.

Third-quarter revenue fell 40.6% year-over-year to $262.3 million while expenses dropped 39.1% to $291.3 million. The company reduced its operating loss to $29 million from $36.7 million in the third quarter of 2007. It lost $10 million excluding special charges and other nonoperating items compared to $23 million last year.

It flew 2.44 billion system RPMs during the quarter and 3.16 billion ASMs with a load factor of 77.1%. It did not provide year-ago comparisons. Nine-month net loss deepened to $67.8 million from $38.6 million in the year-ago period. Operating loss fell to $107.7 million from $65 million.

Continental wants full-year service to Rio de Janeiro

Continental last week asked the U.S. Department of Transportation for permission to add year-round service between Houston Bush Continental and Rio de Janeiro starting in June 2009. Continental had previously announced plans to add seasonal service on the route, which is set to fly three times a week from Dec. 17 through Feb. 28. For the year-round service, Continental says in a press release that it "proposes to operate the daily service utilizing a Boeing 767-200 on the route, with 25 seats in BusinessFirst and 149 seats in economy. The proposed nonstop flight will be timed to offer convenient flight connections at Continental's Houston hub to more than 104 cities throughout the U.S., Canada, Europe, Asia and Latin America."

"We continue to see strong demand by our corporate customers for daily nonstop service between these two important oil markets," John Slater, Continental's staff vice president Latin America and Caribbean sales, says in the release. "The new flight will complement our existing service between the U.S. and Brazil and provide additional access for tourists traveling between the two cities." Continental also flies between Newark Liberty and Sao Paulo and between Houston and Sao Paolo with continuing service to Rio de Janeiro.

Continental reduces size of bags allowed onboard

DALLAS (AP) — If you've squeezed a large carry-on bag aboard a Continental flight, you might want to measure that bag before your next trip to make sure it's still legal.

Continental Airlines on Nov. 1 reduced the maximum size allowed for carry-ons to 45 linear inches — the sum of the bag's length, width and height — down from 51 inches.

Continental spokeswoman Julie King said the change is being made to align policies of the Houston-based airline with those of its alliance partner airlines, including Delta, Northwest and Air France-KLM.

Passengers sometimes book a single ticket that involves travel on Continental and one of its partner airlines, which means currently customers could carry the bag on one leg of a trip but be forced to check it on the next.

King said there was no link between the change in carry-on policy and Continental's recent decision to charge customers $15 for checking a first bag.

Besides Continental's partners, many other so-called legacy airlines have a 45-inch limit on carry-ons, including American Airlines.

But AirTran lets 55-inch bags aboard, US Airways and Alaska Airlines allow 51-inch bags, Southwest sets the limit at 50 inches, and Frontier Airlines allows 49 inches.

Continental reports quarterly loss, but beats expectations

Continental Airlines this morning reported a third-quarter loss of $236 million ($2.14 per share). Reuters writes "excluding some one-time items, it reported a loss of $1.32 per share. That was narrower than the $1.55 per share loss Wall Street was expecting, according to Reuters Estimates." Continental reported a profit of $241 million ($2.15 per share) during the same quarter a year ago.

Discussing this year's results, The Associated Press notes Hurricane Ike cost the carrier about $50 million in operating profit after forcing Continental to shut down its Houston hub for more than two days in September. "And the carrier had to contend with a 68% spike in fuel costs to $1.5 billion during the quarter, as crude prices flirted with $150 a barrel mark in July," AP adds.

AP says "Continental's strategy of hedging against high oil prices backfired when oil prices tumbled later in the period. The company said it recognized $63 million in fuel-hedging losses, but is still $78 million ahead for its hedging this year."

Elsewhere, Continental says it will delay the delivery of 18 jets from Boeing. Two Boeing 777s will now be delivered in 2010, instead of next year. The Wall Street Journal adds Boeing and Continental also "reached an agreement in principle … to reschedule 16 deliveries set for the next two years. The deliveries will now take place no sooner than 2011."