Let's talk about the rise of the regionals and how that changed the business. First of all, help us understand how important the regional traffic is. ...

... Cities like, let's say, Corpus Christi, Texas, want to have jet service, and until there was a regional jet invented, they had turboprops. But they need to go to Paris just like anyone else in their business, so they would come to Houston and then take our flight to Paris. That catchment basin, they call it, of a market feeds your hubs, and that's why hubs are so powerful, because they offer transportation, competitive transportation. Let's say you are in Sarasota, Fla., and you wanted to go to Spokane, Wash. There's never going to be a nonstop flight. There's just not enough people between those cities there. You can do that over at Atlanta, over Dallas, over Houston, over Chicago -- a lot of competition for your flight. So that's where the regional jets come in, offering small cities competitive fares that they didn't have before.

... For a long time, many of the airlines owned these small airplanes, which fed their systems. That was the case at Continental when you got there, right? Explain how that worked or didn't work for you.

Continental Express was a wholly owned subsidiary of Continental, but there really is no need to do that. ... It's like anything else: We don't do our own engine maintenance; we let the manufacturer do that for us. They do it more effectively.

So regional flying can be done under contract to be competitive. ... Having an independent allows an airline to bid that and have a competitive relationship and make sure they get their flying done at the lowest cost.

How does that save you, though? Labor cost primarily? Is that it?

No, it's everything. In other words, it's like any other company. You have efficient companies, and you have inefficient companies. ... We compete with United, American and Delta for your business based on price, but if that price gets fixed in the marketplace, we have to get our cost below that to make a business. That's our pressure, and it's on us. And the regional supplier has the same pressure.

So you were there and presided over outsourcing a lot of this business.

Yeah, ... allowing Continental to have a really competitive environment in which to choose a partner. Continental Express still is Continental's provider, but they did it on a competitive basis.

What was the whole thought process in putting this type of flying on to another company?

It's a different kind of business. Regional jet flying in smaller airplanes aren't big airplanes and different employees, different labor standards, different wage rates, right?

So if you want to be competitive, you can't start your pilots -- let's say if you join Continental Express as a first officer, you wouldn't automatically matriculate to a 737 captain at Continental. You need to keep that competitive in the business it's in, not in your business. And I think we did that. ...

Help a lay audience understand how it's a different business. It's still airplanes, transportation and moving passengers safely. How does the distance traveled and the size of the airplane make it a different business, from your perspective?

One, let's just take cost of people. You don't pay people the same to be a first officer on a regional jet as you do the first officer in a 747. ... The marketplace for those people are different. Whether you have a pension or whether you have days off or salaries or all those, that's a different business. ...

They're all flying airplanes, but they're not flying the kind of airplanes you are with the same kind of standards that you're flying, and so you let that operate as if it's an independent business because other people are in that business. That's all they fly is regional jets, and you have to be really good at it, but you can't afford to have a lot of excess cost and still win a contract. So it makes the management be cost-effective.

I think there's, what, 19 airlines in our country that handle about 95 percent of the business? How many do they have in the U.K.? One, two. How many in Germany? One. And how many in France? One.

So do we really need 19 airlines to have competition? I don't think so. I used to tell the Transportation Department, I said, "You just need one, and we'll do it."

Continental Express was a wholly owned subsidiary of Continental, but there really is no need to do that. ... It's like anything else: We don't do our own engine maintenance; we let the manufacturer do that for us. They do it more effectively.

So regional flying can be done under contract to be competitive. ... Having an independent allows an airline to bid that and have a competitive relationship and make sure they get their flying done at the lowest cost.
....In other words, it's like any other company. You have efficient companies, and you have inefficient companies. ... We compete with United, American and Delta for your business based on price, but if that price gets fixed in the marketplace, we have to get our cost below that to make a business. That's our pressure, and it's on us. And the regional supplier has the same pressure.