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Continental Airlines CEO balances frills with frugality

Continental Airlines CEO Larry Kellner arrived in the Tampa Bay area to news that average U.S. air fares hit a record high this year and rivals Delta and Northwest got the government's blessing for their huge merger. Just another day in the roller coaster world of airlines.

A key player in Continental's dramatic turnaround in the 1990s and the airline's boss since 2004, Kellner on Thursday accepted the Tony Jannus Award for his contributions to commercial aviation at a dinner at the Renaissance Vinoy Resort in St. Petersburg.

In an interview earlier with the Times, he talked about airline fees, free meals on planes and where that merger leaves Continental.

Are airfares going to go down to reflect lower fuel prices for airlines?

Because of (illegal price) signaling, I can't talk about "forward fares." Even in the last month or so you've seen more sale activity. If you look at history, as the economy softens you tend to see more fare sale activity. We'll have to see what happens this time.

How is Continental trying to keep customers who don't want a no-frills experience but still not miss out on revenue from all the new fees competitors are charging?

Any flight where it's long enough that we can serve a meal — which is a couple hours — and when it's meal time, we're going to keep (free) meals. We're going to keep the pillows and blankets. We're going to keep the tools so our people can provide good customer service.

Then why did you join most of the others with a $15 fee for the first checked bag?

We waited a while. In general, people may not like fees. But we weren't seeing the share shift we needed (from airlines charging the fee). From an economic side, we had to remain competitive with other carriers. We're trying hard to find a mix. We're not going to be like the other guy. But we've got to be competitive.

The merger of Delta and Northwest creates the world's largest airline with global reach. What will be the impact on Continental?

We're in a network business, so size does matter. But the quality of your product matters, how you deliver to repeat customers matters a lot. We have a long, successful history of competing with larger competitors. I wouldn't tell you it's positive. But we're reacting to that by going into the Star Alliance (with United, US Airways, Lufthansa and others).

Continental Airlines CEO balances frills with frugality 10/30/08 [Last modified: Monday, November 3, 2008 6:39pm]
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