CAL CEO views on UAL


Jan 20, 2003
Others ready to fill gaps if major carriers fail, Continental CEO says
By Michael Kinsman
March 15, 2003
The chairman and chief executive of Continental Airlines said yesterday that the friendly skies might be a little friendlier with fewer competitors.
Right now, our industry has an overcapacity of seats, Gordon Bethune told a meeting of business leaders sponsored by the University of San Diego''s School of Business Administration. I don''t think the consumer would be inconvenienced by the failure of an airline today.
Bethune said his own airline and others stand ready to fill in the gaps should United Airlines fail to climb out of bankruptcy or American Airlines or others have trouble surviving.
Earlier this week, the Air Transport Association, a trade group for major airlines, predicted that an economic slowdown, rising fuel prices and potential fallout from a war in Iraq might cause domestic airlines to lose as much as $10.7 billion this year. The group also predicted that 10 percent of daily flights would be cut and up to 70,000 airline jobs eliminated.
UAL Corp., parent company of the nation''s second-largest airline United, sought Chapter 11 bankruptcy in December, and No. 1 American Airlines has suggested it may soon have to seek bankruptcy protection as well.
If United disappears, I''m sure Continental, Delta, Northwest or others will be ready, Bethune said. Don''t forget we''ve got laid-off workers just waiting for this to happen and planes sitting idle in the desert.
Michael Boyd, an airline analyst in Evergreen, Colo., said he agreed with Bethune''s assessment.
His logic is impeccable, Boyd said. Since 9/11, air travel is down about 15 percent nationally, which is about the market share that United has. And, certainly, other airlines will be quick to pick up that slack if United goes out of business.
But Boyd is concerned that smaller markets such as Redding, Calif., and Bend, Ore., that depend only on United will be the real victims.
That''s where people will be hurt, Boyd said. We''ll have to depend on other airlines moving into those cities.
Reint Reinders, president and chief executive of the San Diego Convention & Visitors Bureau, said the airline industry is simply adjusting to a period of fast growth.
In ''98, ''99 and 2000, the airlines were ramping up, he said. It was going crazy. I fly a lot, and when I flew then all of the planes were full. The airlines were all trying to get a share of that.
Yet, he said when the business downturn of 2001 met up with the fallout from the Sept. 11 terrorist attacks, the industry began crumbling.
Bethune said the airline industry now has 15 to 18 percent more capacity than it needs, which means that almost all carriers are losing money. Continental lost $451 million in 2002.
If an airline were to fail today, he said, others are ready to fill the void with a minimum of route adjustments.
I don''t think we would miss an airline today any more than Eastern, Braniff, Pan Am or TWA, he said. Nobody was inconvenienced when those went away.