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Continental & Frank Lorenzo In The 80s  
User currently offlineWGW2707 From United States of America, joined Aug 2003, 1197 posts, RR: 35
Posted (10 years 7 months 1 week 1 day 14 hours ago) and read 5596 times:

I have a historical question about Continental and the damage caused to that airline and the industry in general in the 1980s by the mush-despised Frank Lorenzo.

I have read that Frank Lorenzo, upon taking control of Continental Airlines, fired all Continental employees and hired new non-union employees, and then started an airfare war that was responsible for the Northwest-Republic and Delta-Western mergers and had a severely damaging effect to the industry. Do any of you have any additional information on this?

Also, when Frank Lorenzo fired the union staff at Continental and replaced them with non-union employees, did this effect the service quality or operational aspects of the airline dramatically? Did the route structure change?

It's interesting how it appears that CO under Lorenzo became a totally different airline, even though the livery stayed the same.

I also have read that Lorenzo's actions drove Bob Six's successor to suicide, and have read one member here refer to Continental as having become a "white trash airline". Did they attract the sort of clientele sometimes encountered aboard Greyhound busses when they slashed fares in this manner?

Finally, I am interested in information about post-Frank Lorenzo Continental. From what I understand a Scandinavian company purchased them, and from that moment they became what they are today. Did any of the employees Lorenzo fired return to the airline at this time?

Also, what is the modern day focus of Continental's route structure? Is it in any way comparable to the route structure as it existed under Bob Six in the 1960s and 70s? Is Chicago-Denver-Los Angeles still a major component of the network? From what I have read, this was a pivotal area for the airline under Bob Six and his ingenious management of this route actually drove TWA out of that market in the 1950s and 60s.

Basically, what I am trying to get a sense of, is what entirely happened to CO in the 1980s, and what portions of the former Continental legacy survive today. Can the Continental of today, with its Newark Hub and aircraft devoid of golden tails really be considered the same airline as it was in its heyday in 1970? I would be especially appreciative of any insight provided by past and present employees of Continental on this fascinating area of aviation history.

-WGW

20 replies: All unread, jump to last
 
User currently offlineAlpha 1 From , joined Dec 1969, posts, RR:
Reply 1, posted (10 years 7 months 1 week 1 day 13 hours ago) and read 5524 times:

I have read that Frank Lorenzo, upon taking control of Continental Airlines, fired all Continental employees and hired new non-union employees..

Actually, what he did in 1983, is to shut down the carrier for 4 days, tear up all the union contracts, and bring anyone who wanted to come back as a non-union worker back, sometimes for half the pay they made 4 days before.

From what I understand a Scandinavian company purchased them, and from that moment they became what they are today.

Not entirely accurate. SAS did INVEST in CO, and had an Alliance with CO in the late 80's/early 90's. SAS did engineer the step-down of Lorenzo, for like $45 million in a buyout. But CO was hardly "what they are today", when SAS left the scene. It wasn't until '95, that the turnaround really started to happen under the leadership of Bethune and Brenneman. SAS's role in CO was a distant memory by that time.


User currently offlineWGW2707 From United States of America, joined Aug 2003, 1197 posts, RR: 35
Reply 2, posted (10 years 7 months 1 week 1 day 13 hours ago) and read 5504 times:

>>Actually, what he did in 1983, is to shut down the carrier for 4 days, tear up all the union contracts, and bring anyone who wanted to come back as a non-union worker back, sometimes for half the pay they made 4 days before.

Very interesting. Do you know how many CO employees accepted the pay cuts and went back to work?


User currently offlineJsnww81 From United States of America, joined Jan 2002, 1991 posts, RR: 15
Reply 3, posted (10 years 7 months 1 week 1 day 13 hours ago) and read 5508 times:

Basically, none of Continental's pre-Deregulation route structure is intact today, except for the strong presence in Houston and the Micronesian routes.

As you said, until 1978 Continental's flagship route was Chicago-Denver-Los Angeles-Honolulu (Honolulu had been added in 1969.) In Denver, passengers could connect to flights all over the West and Southwest - ABQ, MCI, PHX, Texas, SEA, PDX, etc. There was also a sizeable operation in Houston, with flights across Texas, to Los Angeles and a single east route to Miami.

TWA always had a decent-sized presence at Denver Stapleton but you are right: aggressive marketing by Continental and the deployment of all its 707 jets on this 'flagship route' ultimately made TWA the number three carrier in the market (after CO and United.)

The 1981 Texas International merger looked like a good idea on paper - it solidified Continental's Houston hub operation and provided additional links across the southwest and midwest. Things didn't go as smoothly in reality, however. That, plus personnel conflicts, led bankruptcy #1.

Throw in the 1987 acquisition of People Express, New York Air and Frontier - THREE airlines in one year, plus a new hub in Cleveland - and you have too much growth for any airline to handle. Add the Gulf War to the mix and it's time for bankruptcy #2.

Gordon Bethune pared down the route strucutre and focused on making Newark the airline's main international gateway. Today, the Houston hub, Micronesian network and LAX-HNL route are the only vestiges of the old golden-tail Continental.


User currently offlineConcordeBoy From , joined Dec 1969, posts, RR:
Reply 4, posted (10 years 7 months 1 week 1 day 13 hours ago) and read 5474 times:

Today, the Houston hub, Micronesian network and LAX-HNL route are the only vestiges of the old golden-tail Continental.

As their largest/busiest hub and center of operations... I'd say it's rather unfair to group the Houston hub as a sort of handmedown from former days.  Big grin


User currently offlineSccutler From United States of America, joined Jan 2000, 5393 posts, RR: 26
Reply 5, posted (10 years 7 months 1 week 1 day 12 hours ago) and read 5465 times:

Be careful where you get your information, your source was oh-for-everything in accuracy.



I have read that Frank Lorenzo, upon taking control of Continental Airlines, fired all Continental employees and hired new non-union employees, and then started an airfare war that was responsible for the Northwest-Republic and Delta-Western mergers and had a severely damaging effect to the industry. Do any of you have any additional information on this?


No, actually, the airline was bankrupt and, under then-applicable law, the union contracts were no longer valid. Every union except the IAM had agreed to negotiated concessions to allow the airline to survive without the bankruptcy; unfortunately, the IAM was characheristically obstinate (and short-sighted), thus forcing the bankruptcy. No one was fired.

Ironically enough, Texas Air's purchase of Continental likely saved the carrier; it was financially moribund when Texas Air bought it. Historical revisionists like to recast the facts.

Also, when Frank Lorenzo fired the union staff at Continental and replaced them with non-union employees, did this effect the service quality or operational aspects of the airline dramatically?

As noted above, question assumes a false predicate. No answer required.

Did the route structure change?

Dramatically; upon its initial re-start, CO was a fraction of its former self, and it grew with amuch greater emphasis upon the IAH hub.

It's interesting how it appears that CO under Lorenzo became a totally different airline, even though the livery stayed the same.

Yep. Among other things, it had money in the bank with which to pay its operating expenses, and a fighting chance to continue in business.

I also have read that Lorenzo's actions drove Bob Six's successor to suicide,

No, actually, it was Six's failure to maintain the airline's financial viability and to successfully restructure the airline which (apparently) led to his suicide. This occurred long before the bankruptcy.

...and have read one member here refer to Continental as having become a "white trash airline". Did they attract the sort of clientele sometimes encountered aboard Greyhound busses when they slashed fares in this manner?

Glad to hear we are all open-minded and egalitarian here! Actually, since CO was the dominant carrier at IAH and a major player at DEN, they attracted much the same cientele they had before- business and leisure travelers. I (as a Houstonian in those days) flew them a lot, and especially appreciate dthe fact that, in the immediate post-bankruptcy period, I could often trade the AA coach ticket my company would send me from home office in Skokie ("purchased with special promotional discounts," they said!) for a First Class ticket on CO. The service and attitude were, from my perspective as a frequent business traveler, very good. If staff were unhappy, they certainly did not take it out on the passengers.

Finally, I am interested in information about post-Frank Lorenzo Continental. From what I understand a Scandinavian company purchased them, and from that moment they became what they are today. Did any of the employees Lorenzo fired return to the airline at this time?

Mostly answered above, but since Francisco Lorenzo did not fire anyone, again, part of the question assumes a false predicate and cannot be anwered as asked.



...three miles from BRONS, clear for the ILS one five approach...
User currently offlineWGW2707 From United States of America, joined Aug 2003, 1197 posts, RR: 35
Reply 6, posted (10 years 7 months 1 week 1 day 12 hours ago) and read 5429 times:

Thank you very much Sccutler. I must say, it is plainly evident there is a great deal of historical revision occuring. I can see the political motivations behind the villification of Lorenzo, and for the stating of this blatantly false information that I had read.

By the way, the source from which I had read that false information was "Classic American Airlines", a widely sold book published by Motorbooks. Which gives me greater reason to doubt its accuracy, as frequently much "historical revision" is actually practised by the publishing houses, for their own political interests. The style of writing in the book is of the simplistic variety often found nowadays in books on transport intended for a "popular audience"; I personally deteste it.

Sccutler, prior to your posting this reply, but after posting this topic, I did a search for "Frank Lorenzo" and discovered your fascinating posts about his alleged "hand" in the demise of Eastern. Your insights there immediately made me begin to doubt the reliability of the "prestigous" sources that I had been quoting.

I will investigate this further, and if you are right, then I will boycott Motorbooks International and their products for deliberate and intentional historical inaccuracy.

-WGW


User currently offlineSccutler From United States of America, joined Jan 2000, 5393 posts, RR: 26
Reply 7, posted (10 years 7 months 1 week 1 day 12 hours ago) and read 5426 times:

I should hasten to add, nothing I post is intended to suggest that Lorenzo was a saint; he was a financial genius, with an ego that did not allow him to know his limits.

He's just not the anti-Christ some would paint him to be.



...three miles from BRONS, clear for the ILS one five approach...
User currently offlineWGW2707 From United States of America, joined Aug 2003, 1197 posts, RR: 35
Reply 8, posted (10 years 7 months 1 week 1 day 12 hours ago) and read 5425 times:

"I should hasten to add, nothing I post is intended to suggest that Lorenzo was a saint; he was a financial genius, with an ego that did not allow him to know his limits."

Well, naturally. A large number of successful businessmen meet this description. I did not for one moment, even bearing in mind the corrected data you presented, suspect Lorenzo to be a heroic, philanthropic figure.

-WGW


User currently offline727LOVER From United States of America, joined Oct 2001, 5955 posts, RR: 17
Reply 9, posted (10 years 7 months 1 week 1 day 11 hours ago) and read 5407 times:


He's just not the anti-Christ some would paint him to be.


Hmmm..... 3 airline bankruptcies in less than 10 years. Thousands of lives destroyed. anti-Christ sounds good to me  Smile



Listen Betty, don't start up with your 'White Zone' s*** again.
User currently offlineSccutler From United States of America, joined Jan 2000, 5393 posts, RR: 26
Reply 10, posted (10 years 7 months 1 week 1 day 11 hours ago) and read 5395 times:

Meanwhile, numerous other airlines have somehow managed to bankrupt themselves without any help from Frank Lorenzo at all. Maybe (could it be?) the culprits were and are changing times and outdated business models.

Believe what you will. Absent Frank Lorenzo's innovative use of the bankruptcy laws, CO would be where BN is. Dusty history.



...three miles from BRONS, clear for the ILS one five approach...
User currently offlineMatt D From United States of America, joined Nov 1999, 9502 posts, RR: 48
Reply 11, posted (10 years 7 months 1 week 1 day 11 hours ago) and read 5383 times:

You've all heard the story:

There's his side

There's her side

And then there's the truth.


Management blames labor.

Labor blames management

Non union personnell blame both

Both management and labor blame non Union

...and everyone else blames "outdated business models".


Glad I got that cleared up.  Insane


User currently offlineSccutler From United States of America, joined Jan 2000, 5393 posts, RR: 26
Reply 12, posted (10 years 7 months 1 week 1 day 9 hours ago) and read 5334 times:

I think Matt's got it.

There is rarely one cause- for anything.



...three miles from BRONS, clear for the ILS one five approach...
User currently offlineIflewrepublic From United States of America, joined Jun 2000, 537 posts, RR: 3
Reply 13, posted (10 years 7 months 1 week 1 day 6 hours ago) and read 5271 times:

The merger between Northwest and Republic was not brought about by Frank Lorenzo. Northwest Orient needed to merge with a carrier that had a strong domestic system to feed its strong international network. Republic needed to merge with a carrier that had a strong international network to augment it's strong domestic system. Neither carrier was going any place fast at this time. Each needed the merger just as badly as the other in order to remain economically viable. Of course, there is also the story of Stephen Wolf at Republic who desperately need to off load his ailing airline...but that's another story.

The two carriers entered into secret negotations LONG before anything was ever made public. When the State Government of Minnesota suggested that the two carriers merge to secure thousands of jobs for their employers, the two carriers decided to make it known they were looking at the possibility of a merger. Northwest and Republic started negotiating for Northwest to take over Republic and thus remain the surviving entity. In the transaction, Northwest would receive smaller aircraft to complement it's fleet of 747's, 757's, 727's, and DC-10 aircraft. They would receive Detroit and Memphis as hubs to coincide with their new fortress hub of Minneapolis-St Paul.

When the merger was completed on October 1, 1986, Northwest Orient was propelled from the seventh largest to the fourth largest carrier over night. Employee ranks went from about 17,000 to just over 31,000. The nightmare that scheduling encountered when the two crews were finally merged a year later, had yet to happen. WHen the two systems were merged, it caused the computer to overload and crash. Comforting thought, isn't it?

Now...I still can't figure out the logic behind the Delta-Western merger. I think it was so Delta could gain a west coast hub, as well as a west coast presence and system. Well...they could never figure out how to make the Western system work. What Delta has now, is merely a shadow of it's former self.

Iflewrepublic.



Aviation is proof that, given the will, we have the capacity to achieve the impossible.
User currently offlineWGW2707 From United States of America, joined Aug 2003, 1197 posts, RR: 35
Reply 14, posted (10 years 7 months 1 week 1 day 5 hours ago) and read 5250 times:

Actually, a very signifigant part of Delta's current route structure is of Western heritage. The hub in Salt Lake City, one of Delta's most viable strategic assets in my opinion, is still thriving, and was Western's largest contribution. Western started flying to Alaska after they purchased Pacific Northwest Airlines in the 1960s, and Delta continues to serve that state today (albeit from different destinations). Delta's heavy presence at LAX (which includes the most relaxing terminal at the airport, the luxurious Oasis Terminal [Terminal 5]), is largely thanks to the merger with Western. In fact, nearly all of Delta's route network in the Western US is a heritage of the merger with Western.

Prior to this, Delta's only major operation in the Western US was the Southern Transcontinental service, that connected the South with California. It was basically, a foothold in the West, but nothing more. The merger with Western was very possibly directly responsible for Delta being the airline that it is today. Delta has had a history of intelligent, well-planned mergers that included respect for personell of the airlines they merged with. In fact, Delta's president in the 1970s actually started with Chicago and Southern, which was the first major airline to merge with Delta, in the 1950s.

The main area where Delta seems to have lost ground on the former Western network is on the Pacific Coast services. Western I believe had services running the length of the West Coast and (courtesy of PNA) connected from Seattle to Alaska. These routes have vanished. However, I can understand why, as there is intense competition on these services, from low fare airlines, other network carriers, and also from private automobile traffic (these days especially many people prefer to use Interstate 5 instead of flying).

-WGW


User currently offlineIflewrepublic From United States of America, joined Jun 2000, 537 posts, RR: 3
Reply 15, posted (10 years 7 months 1 week 17 hours ago) and read 5196 times:

I have several friends who are former Western employees. Some of them are still based in Salt Lake City, and some of them are still based in Los Angeles. After talking with them about Western Airlines itself, as well as its route system, they are also inclined to agree that what Delta has in the western half of the United States is not nearly what Western had at the time of the merger. These said employees have watched as their system has been slashed several times. They've even watched as their milk run routes have been turned over to the Express feeder services.

I'm not trying to dispute anything you've said. I, myself, am not that familiar with the Delta-Western merger. All I know is what I've been told by the people who worked for Western and who now work for Delta.

Iflewrepublic.



Aviation is proof that, given the will, we have the capacity to achieve the impossible.
User currently offlineWGW2707 From United States of America, joined Aug 2003, 1197 posts, RR: 35
Reply 16, posted (10 years 7 months 1 week 16 hours ago) and read 5146 times:

Well, looking at the route map of Delta and Western at the time of their merger, you can clearly say that Delta has cut back Western by about 20% or so, in particular, everything that does not run through SLC appears to have been cut back to a high degree. However, SLC is one of the most important hubs on the system. Delta uses what I call a "tripod hub structure" with three hubs, one in the Southeast, one on the rim of the Northeast and the midwest, and one to serve the West. This network is very effective in my opinion as it allocates primary capacity towards the high population East Coast area where Delta is so well established, yet adding a third, massive strategic hub in the west that supplies passengers to the Eastern network and at the same time avoids deeply placing the airline into the West's low population density/high LCC compatition marketplace conditions. It's a logical system, and one that can operate profitably.

I was actually amazed when yesterday I studied a Continental route map. They actually do not even fly LAX-DEN-ORD any more. They seem to have literally "migrated" from the Western US to the Eastern US. It was rather astonishing. Personally, I think CO's two Eastern hubs are too close together and that their current operations are alarmingly decentralized, with no real "focus" for the airline, placing them at long term risk.

-WGW


User currently offlineJsnww81 From United States of America, joined Jan 2002, 1991 posts, RR: 15
Reply 17, posted (10 years 7 months 1 week 10 hours ago) and read 5092 times:

From what I've read, the Delta-Western merger was one of the smoothest and most successful mergers in airline history... in sharp contrast to Continental's mergers with TI, People Express and Frontier. While Delta may have pared back some of its SLC operations (or at least converted much of the mainline flying to RJs) I think they realize the importance of the hub.

Hell, Western was a shadow of its former self by 1987. My 1985 Western timetable shows that almost all routes radiated from SLC and LAX, and most point-to-point flying had been abandoned. SLC was Western's new "center of the universe" due to its more strategic location, while LAX had become primarily a north-south hub, connecting seven or eight Mexican cities to various points in California, Oregon and Washington. The HNL and OGG flights left from LAX, SAN and SFO - all services Delta retained (the SAN-HNL flight was finally axed in the late 1990s.)

I think Delta did a fine job preserving the best the Western had to offer.


User currently offlineDrdivo From United States of America, joined Feb 2003, 118 posts, RR: 0
Reply 18, posted (10 years 7 months 1 week 7 hours ago) and read 5049 times:

People think that CO merged with PeoplExpress and Frontier - what really happened with PeoplExpress was that the airline was literally about to fail - in default on its financing and unable to make payroll, and CO bought their assets. Frontier did fail as a going enterprise before CO bought them.

The shares that SAS bought in Texas Air (the holding company) belonged to Frank Lorenzo and Jet Capital - taking Frank's personal holdings in Texas Air down to nearly nothing. SAS took a total bath on that investment.

CO was primarily a western US airline prior to the TI takeover - with the absorption of the PeoplExpress operation in Newark, the absorption of the Texas Air "New York Air" operation, also at Newark, and the "trading" of CLE for IAD with UAL, their center of operations shifted, and they became the largest airline in New York overnight.

IAH has been CO's gold mine since the first bankruptcy. Read "Hard Landings" for some great information about CO and Frank Lorenzo -



Respectfully - the Divo
User currently offlineAlpha 1 From , joined Dec 1969, posts, RR:
Reply 19, posted (10 years 7 months 1 week 7 hours ago) and read 5039 times:

In reality, Frontier was, in essence, carved up, between UA and CO. CO got a good many of the assets, but if I'm not mistaken, UA got the lion's share of the gates and facilities and Stapleton.

User currently offlineJsnww81 From United States of America, joined Jan 2002, 1991 posts, RR: 15
Reply 20, posted (10 years 7 months 1 week 7 hours ago) and read 5022 times:

Alpha1:

To the best of my knowledge, United gained nothing from Continental's absorbtion of Frontier assets.

Continental got all of Frontier's gates on Stapleton's Concourse D (which it used for a few years before scaling back its operations and moving CoEx to Concourse D) as well as the old Frontier hangar.

The Frontier acquisition gave Continental almost 50 gates at Stapleton - United stayed on Concourses A and B, which offered a total of about 30 gates.


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