Continental Financial

Frank Lorenzo
• Acquired by Texas Air for $154 in 1982
• The Lorenzo network
• Crutch for Lorenzo’s other projects
• Bankruptcy- 1983
– Ch 11 invalidates previous Union contracts
• Acquires Eastern Airlines- 1986
• Bankruptcy- 1990
– Eastern Airlines struggling, creditors pushed for merger
• Restructuring- 1993.
– Withstood 2 bankruptcies, 5th largest US airline, serving
193 Airports
 Lorenzo’s Legacy
• Lorenzo departs-
• aging equipment
• bad reputation
– Department of Transporation quality indicators
– Employees
• Debt
– $400 million in asset transfers
– $680 million in unfunded pension liabilities
 Gordon Bethune
• From Boeing
• improved on time performance, lost baggage claims and customer
complaints.
• Department of Transportation -3rd and above
-increased high-fare business travelers from 32.2-42.8 percent
• Incentives for employees
– On time bonuses- not just for pilots
– Information sharing
• Changing target
– No longer competing with Southwest
– Reinstated frequent flyer program
• Relationships with Travel Agents, business partners, customers
-burned employee procedure mmanual, redid planes
• Better product through better service
 Gordon’s Legacy
• 2006- Conde Nast Traveler
• 2006- J.D. Power & Associates
• More international destinations than any
other US airline
• Business travelers
• Putting employees first
 Leadership Analyzed
• Corporate culture
• Open door policy
• Low price vs. serving business clients
• instead of old focus on cost savings, putt out
better product trhtough better service.
 SWOT
Strengths Weaknesses
-strong fleet operations -High debt prior to acquisition
-adjust to meet market demands -CCC rating limited financing options
-efficient, expansive hub organization -Decline in sales
-uses technology to lower booking costs -Transition Stage
and provide travel related services to -
customers
-low operating costs
Opportunities Threat
-With completion of merger, forms most -Global Recession
comprehensive global route network -Climbing fuel costs
-5,800 flights a day to 371 airports -Highly competitive industry
-Increase in Air Freight industry with more -pressure to lower ticket prices
global trading - increased market share captured by
-Recovery of Airline industry discount airlines
-FAA forecast steady growth over next -Increasing industry taxes and regulation
20 years in industry -Southwest, low cost airlines, intense
competition
 Merger: United Continental
• 5,800 flights a day to 371 airports
• “Merger of Equals”- market share and
offerings
• United’s and Continental’s more than 80,000
employees reside in every U.S. state and in
many countries around the world.
• http://online.wsj.com/article/SB10001424052
748703933404576170393021650666.html
Future Under Merger