Enter Gordon Bethune: Continental Airlines
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Enter Gordon Bethune: Continental Airlines
When Gordon Bethune took over as CEO at Continental Airlines the company had been in a period of constant upheaval since long time CEO Bob Six retired about thirteen years prior. Bethune took a look at the financials and thought it may be too late to save the airline seeing as they were headed towards their third bankruptcy in the past decade. They had just posted a $38.5 million dollar loss for the final quarter of 1993 and 1994 was looking even bleaker. Given the state of the company Bethune and fellow Continental officer Greg Brenneman predicted a $600 million loss on approximately $6 billion in sales. They quickly realized that profitability would never be possible given Continentals current business culture. Bethune noted the financial woes of the company but thought the root of the problem was the people, and their loss of sight of how to effectively collaborate to run an airline. The perception of Continentals overall product was poor to say the least. Employees didnt enjoy working there, one employee in particular was quoted as saying, “If someone asks where I work I say I work for an airline because I dont want them knowing I work for Continental”. Customers thought just as bad if not worse of the company as Continental ranked last among ten major airlines in on-time percentage, mishandled baggage reports and complaints about poor service. Gordon Bethune sensed a serious lack of team spirit as a fundamental and most basic root to their problems and decided to do something about it.
Turning Continental Airlines around: The Go-Forward Plan
Bethune and Brenneman met for dinner meetings for a week before Bethunes first presentation to the Board of Directors. These meetings were called “the last suppers” and often included the transition of sipping wine to sipping scotch to try and cope with the problems Continental was having. But amidst the bleak outlook and glasses of wine the two officers came up with an all-encompassing initiative called the “Go Forward Plan”. This plan was announced as the means to return Continental to profitability during 1995. The plan had four central tenets which included: Fly to Win, Funding the Future, Making Reliability a Reality and Working Together. Each of these had its own focus and objectives but successful application was dependent on the effective implementation of all four in unison.
Fly to Win
Fly to Win was designated to pronounce and allow Continental to maximize its strengths. They wanted to re-establish a winning tradition at Continental, doing so by eliminating things that didnt make them money. It was a simple and seemingly obvious correction. Continentals management believed that the most obvious problems that required attention were the reduction in the quality of services offered as part of the airlines OnePass Elite benefits (Continentals frequent flyer program), the alienation of travel agents, and the attempt to expand Continental Lite too rapidly. Each of these problems was addressed during 1995 with considerable strides being made to rectify the various weaknesses. They also strived to expand their customer base from “backpacks and flip-flops to suits and briefcases”. Continental solicited feedback from customers by asking “What would you be willing to pay for?” instead of “What do you want?”.
Fund the Future
When Greg Brenneman realized that Continental didnt have enough cash reserves to pay its employees salaries they decided to take action. Bethune and Brenneman determined that planes comprised the most expensive fixed assets and came up with a three pronged cost reduction plan based on restructuring Continentals fleet. First they reduced the number of fleet types from 13 to 4. Then they would match airplane sizes with the size of the customer market. Lastly, they would eliminate above market leases on planes. They still almost went bankrupt seeing as they wouldnt be able to pay their employees but Bethune stepped in and made a call to