Bethune on Mergers
Airline Industry Makeup Needs To Change, Bethune Says
Houston Chronicle
By Bill Hensel Jr.
February 15, 2008
Gordon Bethune's name became synonymous with Continental Airlines, especially its turnaround from a twice-bankrupt carrier frequently ridiculed by David Letterman to a financially stable and growing airline.
Bethune, 67, led the Houston-based company from 1994 to 2004. He remains involved in the industry as chairman of Aloha Airlines and a consultant who most recently advised a New York hedge fund that wants Delta Air Lines to merge with either Northwest Airlines or United Airlines.
Now Delta and Northwest appear headed for a combination, and both United and American Airlines have been in discussions with Continental, according to a source familiar with the talks.
Chronicle reporter Bill Hensel talked to Bethune about the airline industry, which appears headed for radical corporate changes.
Q: With everything going on in the airline industry, do you think Continental has to be involved in a merger?
A: Take a look at the record. Continental is ... doing well. They are beating the pants off the competition every day. Even in the last quarter, they are out there by themselves, profitable. So, no, they don't need to merge.
What they need to do is when the marketplace changes, they need to change. They would be disadvantaged by a giant Northwest/Delta. Scale matters.
Q: What company would be the dominant partner in a merger between Continental and United?
A: It is all about the management. I think in fairness, nobody is going to beat Larry Kellner. I think employees on both sides would want Kellner, and Wall Street would want Kellner. (United Chief Executive Glenn) Tilton has given indications that he would accept another role. Clearly, Continental management needs to run the combined entity to get the snap and the pop in the marketplace and, quite frankly, to be successful.
Q: What do you think would be the benefits of mergers?
A: If you look at the reductions in service when United and Delta went into bankruptcy, a lot of communities lost service. What you would have is strong carriers with steady service, something you could rely on. Look at the little people, all the laid-off people. So the consumer is improved because you would have consistent, reliable service with employees who kind of like their jobs and treat you well. Having a good place to work is always good for consumers and the business.
Q: But wouldn't there also be people who get hurt by any mergers?
A: I think if one or two go away it would be good because there are too many. There are going to be plenty of ways to get to where you want to go. I read where some congressmen were thumping their chests over this, but where were all those people when all the companies were in bankruptcy and the creditors got screwed and the shareholders lost money? Things need to change, and sometimes that might mean canceling the second flight to International Falls, Minn.
Look at the employees and shareholders and creditors who have been screwed in this industry. That is not good for Boeing, it is not good for GE, it is certainly not good for pension plans. ... At the end of the day, who owns airline shares? The biggest shareholder at Delta is the Pension Benefit Guarantee Corp., and that is the taxpayers. How is that good for us?
Who got screwed on that
deal?
Q: So what do you think about a combination of Continental and United?
A: If this were a chess game, then ... Continental taking over United would be called checkmate, end of game, home run, it is all over. When you put these two companies together with their route networks, you've got the Pacific, you've got the West Coast, you've got the Midwest, you've got the Southwest, you've got the East Coast, New York, Europe and Latin America. You are all around the world. You are a really good company. You can compete with Lufthansa, British Airways, Singapore Airlines, it doesn't matter. You are a powerhouse. That is what this country needs, is a couple of those. If you are going to compete globally, and Open Skies is going to make it a global marketplace, you better have global reach.
What would be so wrong to have the biggest airline in the world right here?
This was posted at the AA pilots web site...AMR preparing for battle???