Gordon Bethune And Ual?

herkav8r

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Apr 10, 2003
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Wednesday, October 13, 2004
Continental chief sees big changes coming in airlines
He says higher fares coming soon, then mergers, failures to pull industry out of mud


THE WALL STREET JOURNAL

>> a d v e r t i s e m e n t <<


In the future, airline passengers will pay more to fly, suffer longer delays and have fewer carriers from which to choose. It is a certainty, said Gordon Bethune, the chairman and chief executive of Continental Airlines.

Bethune will retire Dec. 31 from Continental. Although he might end up running another airline, in the meantime, after 10 years as a chief executive in what he calls "the most dysfunctional industry I've ever seen," Bethune has strong views about what is ahead for travelers.

What he sees: More turmoil in the short term. Rising oil prices will drive ticket prices higher. Fancy seat-back entertainment systems could quickly become a battleground - and airplane food eventually will be back. His prescription for fixing the ailing industry includes a mix of mergers and failures of weak airlines. Someday, he said, he would even like to see UAL Corp.'s United Airlines merge with Continental - a long shot, he knows.

But the first thing, he said, that travelers can expect to encounter is higher prices. Noting that even discount carriers now are warning of financial losses because of high oil prices, Bethune said that fares are going to have to go up. For several years now, travelers have, in effect, been subsidized by airline debt-holders - their losses at bankrupt airlines have kept airlines going and allowed fares to stay low, he said.

Continental tried several times to raise prices this year, but ended up rolling back the increases when a competitor or two didn't go along. Now, "$50 oil gets us all," he said. "Wouldn't you think that will change behavior in pricing?"

It already has. Two $5 fare increases on most tickets initiated by AMR Corp.'s American Airlines stuck in many markets in the past week.

The industry is likely to consolidate in the next 24 months, either by merger or attrition, he said. "Since we've all been in intensive care, it's hard to talk about dancing," he said. "But it should happen."

Once labor contracts and pension issues are resolved, it will be easier for carriers to merge because many will end up with similar contracts. More than $23 billion in U.S. airline losses during the past four years undoubtedly have weakened opposition to mergers among federal regulators and Congress.

For a couple of years Bethune has thought that combining Continental with United Airlines would create a powerhouse carrier that could bring more stability to the industry - something that might appeal to new investors at United or to creditors, two groups capable of financing a merger.

United is strong to Asia; Continental to Latin America. United has rights to land at London's Heathrow Airport; Continental has extensive service to other parts of Europe. United is strong in the western United States; Continental in the east. Combined, the two could be very successful, he believes. "It would be, game over. Checkmate," he said.

He has mentioned the idea to Glenn Tilton, UAL's chairman and chief executive, and his predecessor, Jack Creighton, but neither was interested. No talks were held.

Bethune is leaving Continental because of a bitter feud with financier David Bonderman.

Bonderman reorganized Continental out of its second bankruptcy and brought in Bethune from Boeing Co.

The two clashed over small details and major strategies, and once Bonderman and his investment group had sold all their shares in Continental and were negotiating for other airlines to turn around, Bethune thought Bonderman should leave Continental's board.

Bonderman, in turn, saw his role as "lead director" as an appropriate check to balance Bethune's bravado.

Neither would leave voluntarily alone, so, like Old West gunslingers, they shot each other.

Bonderman and his associates left Continental's board in the spring after Bethune agreed to step down at the end of the year.

"I'm leaving here because it's time to go. Maybe it's the wrong reason, but it's the right time," he said.

Bethune said he will entertain offers from other companies, even airlines.
 

jimntx

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Well, he speaks the truth, and we all know it. I am a little surprised at his CO-UAL merger idea. I would have thought that NWA-CO would have been a better fit and easier to do--they already codeshare and it wouldn't create a mega-giga-airline like CO-UAL or UAL-US would have done.
 

firstamendment

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herkav8r said:
Wednesday, October 13, 2004


For a couple of years Bethune has thought that combining Continental with United Airlines would create a powerhouse carrier that could bring more stability to the industry - something that might appeal to new investors at United or to creditors, two groups capable of financing a merger.

United is strong to Asia; Continental to Latin America. United has rights to land at London's Heathrow Airport; Continental has extensive service to other parts of Europe. United is strong in the western United States; Continental in the east. Combined, the two could be very successful, he believes. "It would be, game over. Checkmate," he said.

Short of South America, wasn't the US Airways merger suppose to do the same? With only DC overlapping, I can't wait to hear all the excuses as to why that didn't work and CAL should.

Advice...Stay away from UAL. Even if it were a good idea, they would sabotage that merger too.
 

Fly

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You are mistaken. The employees didn't sabotage the merger, the government turned it down. The merger WOULD have happened, regardless of the employees.
 

whlinder

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The government did turn it down, but by that point UA management didn't want to pay $60 a share for US. I can't even imagine where the combined company would be today if that had gone through, with that cash out the door to US stockholders, plus all the integration money that would have been spent...

Regarding Bethune's UA/CO merger thoughts, I have thought for a while that from a route network standpoint, CO would be equal to if not better than US for UA. Comparing the assets, PIT and CLE are essentially equal. IAH would be of more value to UA/CO than CLT would have been to UA/US. EWR is more valuable than PHL+LGA. BOS brings some value to US, but not enough to make up for EWR and IAH being superior to US' hubs. The only section of the country that UA/CO would be weak would be in the Southeast, and they wouldn't be that weak with so many prominent hubs. Perhaps UA would have been able to keep MIA open with the additional traffic.

Being the carrier with the largest hub in the NYC area, the DC area, the Chicago area, the LA area and the SF area, plus Houston and Denver? Being one of the top 2 carriers for Europe, Asia and Latin America? Plus CO Micronesia? That is an awesome network. And no hub is too close to another one.

Of course airplanes and unions and all that fun stuff would make a merger much more difficult, but it is fun to speculate on what could have been.
 

firstamendment

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Fly said:
You are mistaken. The employees didn't sabotage the merger, the government turned it down. The merger WOULD have happened, regardless of the employees.
[post="190466"][/post]​


I'll give you half that, Fly, but you AND your cohorts were sooo against that merger and that only helped the cause for UAL management to reconsider and the govt to take a pass.

How soon many forget the stickers that had US Airways with a slash through it...but oh no, that isn't a method of sabotage.

I do agree, no mergers. All airline employees have had enough insanity without the addition of policies, senorities, left seat-right seat. There are too many airplanes and too many without jobs...not to mention left behind would be all the senior folk and that will only have the airline management teams fighting for paycuts as we have all topped out as opposed to a very junior Jetblue.

Continental has come a long way and should be thankful for what Bethune has done, but stop for a moment and remember the Lorenzo debacle. While a long time ago, there is a strange mixture of pilots and f/a's with many of them old scabs from the past. Something tells me THAT would prove very interesting, if not contentious.

Anyway, I hope things are going well with you guys and that you don't get to where we are now. I also agree that with what we know now, the US-UAL would had been disasterous for all involved.

Good luck all.
 

Fly

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True! But lets also not forget all the rides on the Phl employee bus where US f/a's asked about our Asian trips (and how we weren't going to be flying them anymore once they got onboard). Laughing to themselves about how they were so senior to us at UAL that we would never fly international again. It went both ways. Glad it didn't happen too.
 

firstamendment

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Fly said:
True! But lets also not forget all the rides on the Phl employee bus where US f/a's asked about our Asian trips (and how we weren't going to be flying them anymore once they got onboard). Laughing to themselves about how they were so senior to us at UAL that we would never fly international again. It went both ways. Glad it didn't happen too.
[post="190548"][/post]​

Always a few bad apples...and, please Fly, we ARE talking about PHL...'nough said!! :D :p :blink:
 

DCD

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firstamendment said:
Always a few bad apples...and, please Fly, we ARE talking about PHL...'nough said!! :D :p :blink:
[post="190557"][/post]​
Do you really think any of those senior mammas were really from Philly? No I guess the philly jab was easier than thinking.
 

Light Years

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Fly said:
True! But lets also not forget all the rides on the Phl employee bus where US f/a's asked about our Asian trips (and how we weren't going to be flying them anymore once they got onboard). Laughing to themselves about how they were so senior to us at UAL that we would never fly international again. It went both ways. Glad it didn't happen too.
[post="190548"][/post]​

I'd be shocked to see any of those Allegheny mamas want to do Asia- some of them complain about transcons and Europe!

The worst of that whole drama was when the UA F/A spit at a US crew waiting for a van in SAN. I was ashamed to be a flight attendant for awhile there... at the time I spent alot of off-time in a UA hub city and as a US F/A I was treated pretty badly by some UA folks both at the airport and socially. The stickers and such were very mean-spirited, the flag symbol means something to some people and it was just really poor taste to descrate our corporate symbol because they disagreed with thier own management. I guess the UA folks aren't as used to mergers as the US folks are, and the particular group I encountered were younger, shallow people with nothing better to do than act like middle schoolers. Most airline employees are not like that at all, but at the time it was kind of a relief when it didn't happen.

There will be mergers between whatever legacy carriers are still around, let's hope there's not the animosity there always seems to be.

The folks who were happy about the idea of a UA merger were the former LAX, SFO, and LAX folks who would love to not have to commute across the continent to work. There was a lot of disapointment for them.

As for the PHL base... there are very few US F/As that are actually from PHL (which might be a good thing!) especially senior mamas, as PHL really only became what is now in the last decade or so. All the senior folks seem to commute... PHL is the most commuted to base for US.
 

Fly

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Light Years said:
The worst of that whole drama was when the UA F/A spit at a US crew waiting for a van in SAN.
[post="190725"][/post]​

OMG! I'm ashamed right now. Wow, that's about as low as someone could go. :shock: