Can Continental Airlines Continue To Work Hard, Fly Right And Fund The Future

History of Continental Airlines

Continental Airlines began service in 1934 as Varney Speed Lines, named after one of its initial owners, Walter T. Varney operating out of El Paso, Texas and extending through Las Vegas, Albuquerque and Santa Fe, New Mexico to Pueblo, Colorado. The airline started with Lockheed Vegas, a single engine plane that carried four passengers. The airline later flew other Lockheed planes, including the Lodestar. It was renamed Continental on 1 July 1937 after a new owner Robert Six had taken a forty percent ownership with Varney's co-founder Louis Mueller. Six relocated the airline's headquarters to Stapleton Airport in Denver in October, 1937. Robert F. Six was one of the legendary patriarchs of U.S. aviation had a reputation as a scrappy, pugnacious and risk-taking executive who presided over the airline he largely forged in his image for more than 40 years. During World War II Continental's Denver maintenance facilities became a conversion center where the airline converted B-29s and P-51s for the United States Army Air Force. Profits from military transportation and aircraft conversion enabled Continental to contemplate expansion and acquisition of new aircraft types which became available following the war.[3] Among those types were the DC-3, and Convair 240. Some of the DC-3's were acquired as surplus planes after WW-II. The Convair was the first airplane operated by Continental that was pressurized. The airline's early route network was limited to the southwestern United States for many years. In 1953, Continental merged with Pioneer Airlines, gaining access to 16 additional cities in Texas and New Mexico which integrated well with the carrier's initial El Paso-Albuquerque-Denver route.

The environment

Many countries have national airlines that the government owns and operates. Fully private airlines are subject to a great deal of government regulation for economic, political, and safety concerns. For instance, the government often intervenes to halt airline labor actions in order to protect the free flow of people, communications, and goods between different regions without compromising safety. The United States, Australia, and to a lesser extent Brazil, Mexico, the United Kingdom and Japan have "deregulated" their airlines. In the past, these governments dictated airfares, route networks, and other operational requirements for each airline. Since deregulation, airlines have been largely free to negotiate their own operating arrangements with different airports, enter and exit routes easily, and to levy airfares and supply flights according to market demand. The entry barriers for new airlines are lower in a deregulated market, and so the U.S. has seen hundreds of airlines start up (sometimes for only a brief operating period). This has produced far greater competition than before deregulation in most markets, and average fares tend to drop 20% or more. The added competition, together with pricing freedom, means that new entrants often take market share with highly reduced rates that, to a limited degree, full service airlines must match. This is a major constraint on profitability for established carriers, which tend to have a higher cost base. As a result, profitability in a deregulated market is uneven for most airlines. These forces have caused some major airlines to go out of business, in addition to most of the poorly established new entrants.

Flying in Turbulence the board room

Groups such as the International Civil Aviation Organization establish worldwide standards for safety and other vital concerns. Most international air traffic is regulated by bilateral agreements between countries, which designate specific carriers to operate on specific routes. The model of such an agreement was the Bermuda Agreement between the US and UK following World War II, which designated airports to be used for transatlantic flights and gave each government the authority to nominate carriers to operate routes. Bilateral agreements are based on the "freedoms of the air," a group of generalized traffic rights ranging from the freedom to overfly a country to the freedom to provide domestic flights within a country (a very rarely granted right known as cabotage). Most agreements permit airlines to fly from their home country to designated airports in the other country: some also extend the freedom to provide continuing service to a third country, or to another destination in the other country while carrying passengers from overseas. In the 1990s, "open skies" agreements became more common. These agreements take many of these regulatory powers from state governments and open up international routes to further competition. Open skies agreements have met some criticism, particularly within the European Union, whose airlines would be at a comparative disadvantage with the United States' because of cabotage restrictions.

Internal Organization

He challenged all stakeholders in the air transport value chain to keep pace with an aggressive agenda for industry change. After at least two years of lost growth, traffic is back to pre-September levels in most parts of the world. First quarter 2004 passenger traffic was 6.5% above the same period for 2001 while cargo volumes were 15.5% above 2001 levels. Firms in the commercial airline industry were studied to ascertain their use of strategic market planning. The results indicate strategic market planning and related techniques (Experience curve/cost analysis, portfolio analysis, investment opportunity analysis, and PIMS) are not employed by all firms. In fact, many corporate planners were unfamiliar with the state-of-the-art methods. These results were found in firms of all sizes. Overall, individuals familiar with the strategic market planning tools were critical of their inflexibility and felt they had limited application to the airline industry. Some firms have developed their own proprietary planning methods. A large proportion of smaller firms had no formal planning process, relying instead on executive judgement. Planners identified the need for greater support from top management and better definition of planning requirements. The results are suggestive of the opportunity for greater dissemination of the state-of-the art and research to improve planning technique.

Ownership Structure

Airline financing is quite complex, since airlines are highly leveraged operations. Not only must they purchase (or lease) new airliner bodies and engines regularly, they must make major long-term fleet decisions with the goal of meeting the demands of their markets while producing a fleet that is relatively economical to operate and maintain.