25-Feb-2010 8:18 AM

Continental Airlines interview - the challenges for Continental and the industry

Continental Airlines CEO and President Jeff Smisek, gave (22-Feb-2010) an interview about the challenges Continental faces in the short and long term. Highlights include:

  • Outlook: Smisek stated Continental's goal for 2010 is to "start making money and keep making", however noted that better year-on-year improvements must be "kept in perspective", due to unusually weak results in 2009, but nonetheless hopes "2010 will be a far better year than 2009". He stated his focus will remain on international routes as it is "where the business traveler will pay a premium for a better product";
  • Alliances: Smisek stated the Star Alliance is "vastly better than Continental's former alliance...(Continental's) actual network and synthetic network through Star have never been stronger or more attractive to business customers";
  • B787 delays: Smisek stated "there is no question that the 787 delays have hurt Continental", but the airline still expects to receive its first B787 in 3Q2011. He noted the 787-777 commonality will increase flexibility and Continental will be able to optimise the aircraft for seasonality. He believes the comparatively early delivery of the 787 to Continental will be a competitive advantage in the US market,
  • International outlook: Smisek stated Continental is in a "good position" with Star's transatlantic JV, and the proposed Star transpacific JV. He stated Continental "desires to create a JV for Latin America", and hopes to grow presence across these three markets;
  • Continental Micronesia: Smisek considers Continental Micronesia "a solid operation and a good contributor year in, year out." But he noted there are limits to its growth because the market out there is only so large";
  • M&A: Smisek stated "he is not a big fan" of mergers and acquisition, preferring Continental's independence. He stated he voted against merging with United in 2008. But he remains open to future deals;
  • Environment: Smisek stated "we are being responsible as an industry", however he believes "local regulations makes no sense at all for a global and mobile business like aviation.... The only way to get pollution under control is to have rational economics tied to it";
  • Security: Smisek noted there has been improvements since 9/11, but stated "it is important for the Transportation Security Administration to be less reactive and more proactive." He encouraged TSA to use biometrics and "advanced technology like body scanners" for passenger screening. He noted privacy concerns, but stated "we all have to surrender a certain degree of privacy for the greater good of security";
  • Biofuel: Smisek stated the airline is "obviously a big fan" of biofuel. He noted fuel volatility is "the most difficult thing" for the airline, all that stakeholders would benefit if biofuels were available at a "rational" price, but doesn't expect biofuels "in a scalable, saleable size for at least a decade." [more]

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