highflyer16
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Why Is Continental So Afraid Of Competition?

Tue Jun 10, 2003 10:41 am

There was once a time when Continental Airlines called itself "The Proud Bird with the Golden Tail". Evidently those days of pride and confidence are a thing of the distant past, just like that slogan.

While it never ceases to amaze me how deathly afraid the majors are of competition, this example really takes the cake. The following is an excerpt from "The Changing Face of Business Travel" written by Jerome Greer Chandler and Norman Skarlewitz in last month's issue of "Frequent Flyer Magazine". They detail Continental's angst over AirTran running a few planes out of Akron OH, about fifty miles from Cleveland's Continental hub:

HUB REPORT
Of all the airports in the Midwest, why would you look to Akron/Canton as an exemplar of change? Because it serves to illustrate what happens when a low-fare carrier moves into an airport near a major’s hub. The low-fare carrier is AirTran, which now flies from CAK to New York LaGuardia. The major is Continental, which operates a domestic hub at Cleveland.

In the midst of war, in the throes of economic angst, Akron/Canton set a single month boarding record. Fliers were flocking to the Ohio’s alternative airport to catch AirTran to LGA and Atlanta. So concerned about the state of affairs is Continental that CEO Gordon Bethune has suggested that CAK potentially threatens CLE’s status as a Continental hub.

Query: As AirTran adds new Boeing 717s to its fleet this year, could it be planning other routes out of Akron/Canton? If so—and assuming they’re as successful as the LaGuardia run—will this cause Continental to bail out of its hub at Cleveland’s Hopkins International?


This statement by Gordon Bethune is incredible: Continental spent many years building up Cleveland as a viable eastern hub. Air Tran doesn't even fly into Cleveland, and they only have seven flights a day from neighboring Akron as of their last timetable.

And these seven flights a day threaten Cleveland's status as a hub? Even if Air Tran doubled its flights and destinations to fourteen and six, I can't see this shutting down Continental. That is, unless Continental's business model is only viable if they operate in a vacuum with no competition whatsover.

That,sadly is probably the case. If so, then Continental, like most of the other "dinasaurs", is doomed unless they can reinvent themselves somehow. In the current market environment, perhaps Continental's new slogan should be "The terrified bird with the yellow tail".  Embarrassment















 
TLHFLA
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RE: Why Is Continental So Afraid Of Competition?

Tue Jun 10, 2003 10:46 am

The majority of the Continental flights in/out of CLE are ERJ's now. I thought that move was intended to make operations there more profitable for CO. I guess this isn't the case. I am assuming that there are still some mainline CLE-LGA flights. Given that EWR is a CO hub there must still be mainline flights to/from EWR.
Bill in ATL
 
luv2fly
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RE: Why Is Continental So Afraid Of Competition?

Tue Jun 10, 2003 10:49 am

That,sadly is probably the case. If so, then Continental, like most of the other "dinasaurs", is doomed unless they can reinvent themselves somehow.

Here you said a mouthful.

Stop worrying about what others are doing and just worry about what you have to do. Airlines always remind me of what Mom always said to me when I was a child, "If everyone was jumping off a bridge would you join them?"

With CAK you have people who would not drive there to catch a flight. Also let us be realistic CLE does have WN and they operate way more flights a day than AirTran does from CAK!
You can cut the irony with a knife
 
luv2fly
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RE: Why Is Continental So Afraid Of Competition?

Tue Jun 10, 2003 10:58 am

CLE has more than ERJ's a slew of mainline also, tho the ERJ's do tend to dominate the landscape.
You can cut the irony with a knife
 
flyCMH
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RE: Why Is Continental So Afraid Of Competition?

Tue Jun 10, 2003 11:28 am

According to Continental's latest fact sheet (dated 03/03) Continental operates 55 mainline flights and 158 regional jet flights from CLE. Given those figures, approximately 74% of CLE flying is with regionals. Add to that CommutAir's re-introduction of Beechcraft 1900s into CLE (after those figures were published) and the disparity becomes even greater.
 
777gk
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RE: Why Is Continental So Afraid Of Competition?

Tue Jun 10, 2003 11:35 am

Just like an athlete with an injury, we are rehabbing ourselves at the current time so we can get back in the game at 100%. We can't perform against profitable competitors while we are still bleeding cash. Things are looking up around here, though.

AirTran has found niche success operating in a market ripe for low-fare competition, and this was expected. However, do not look for such a minor operation to actually threaten a full-scale hub. If anything, it would warrant a capacity adjustment on a route-by-route basis, not a complete pull-out. CLE isn't going anywhere for the time being, it's the best option we have unless something better comes along...
 
DCA-ROCguy
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RE: Why Is Continental So Afraid Of Competition?

Tue Jun 10, 2003 12:20 pm

For some reason--777gk or another CO employee can give more info--Bethune has been making bombastic statements since 9/11. Seven AirTran 717's, and the handful of network-regional RJ carriers that match fares at CAK, are hardly going to have an effect on CO's CLE hub. The Plain-Dealer says that CLE handles *twelve times* as many pax as CAK does. Even in a narrow-margin business like air travel, such a small competing facility isn't going to have an effect on a neighboring hub.

Unless UA goes under and DEN opens up, it's very unlikely that CO is leaving CLE anytime soon.

Jim

Need a new airline paint scheme? Better call Saul! (Bass that is)
 
Prinair
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RE: Why Is Continental So Afraid Of Competition?

Tue Jun 10, 2003 12:45 pm

Perharps Bethune is afraid that people will realize that CO is nothing special after all....
PRINAIR : Puerto Rico International Airlines
 
highflyer16
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RE: Why Is Continental So Afraid Of Competition?

Tue Jun 10, 2003 1:09 pm

Several of these posts mention Continental's move towards more regional jets at Cleveland, a trend that I was already aware of. Yet it is also a development that may allow the competitive carriers to cut even more into Continental's market share in the Cleveland area.

Another post currently running here talks about why passengers love or hate regional jets. The general consensus is that the flying public sees RJs as a good thing when they replace props, but disdain them when they replace mainline jets. In this case, Continental is putting RJs into markets that are used to mainline jets, and also where the competitive carriers are using mainline jets. That trend can only serve to make their market share even smaller, which is why Gordon Bethune stays up late nights worrying about whether Cleveland is a viable hub.

There has been a lot of talk about how much of a load a route has to have to make mainline jets profitable (as opposed to RJs), but competitive carriers are proving that mainline jets can be profitable on routes which were thought by the majors to be unprofitable even for a Beechcraft! Akron, which is really a separate city from Cleveland, and underserved for years, is only the latest example.

With respect to your analogy about the wounded athlete Gene, the problem is that it is late in the fourth quarter for most majors and the clock is running. There will be no tomorrow unless they can compete now. Today, there are only two types of carriers:
"Competitive" airlines and
"Moribund" airlines.

In another two or three years, there will only be competitive airlines. The "major" (moribund) carriers need to redefine their behavior in the marketplace and do what it takes to be a competitive airline NOW!. It is only then that they will stop "bleeding cash".

Changing their vision will also necessarily mean making changes to their business model.
I sincerely hope that they are able to make the leap. I don't think that the marketplace would miss most of the network carriers all that much, but at each of these carriers, I know that there is a dedicated team of professionals who have worked their entire careers to build a world-class airline, but whose efforts have often been betrayed by the short-sightedness of upper management. That is the real tragedy when one of the old carriers dies, as we all saw when Eastern, Braniff, Pan Am, TWA and others were swallowed up.
I hope we don't lose anymore, but it seems to be inevitable unless those carriers re-dedicate themselves to being competitive, no matter what the cost or what changes they have to make.

 
artsyman
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RE: Why Is Continental So Afraid Of Competition?

Tue Jun 10, 2003 2:44 pm

I don't see what the big deal about flying so many Embraers is all about. Continental unlike many of the other cartel carriers tries really hard to match capacity and demand. If they can only fill an ERJ-145, then why put a 737 or larger on the route ?

All cartels are doing their best to adjust to the changes in the marketplace, and Continental being profitable in May, and profitable this far for June are one of the few, if not the only cartel carrier to be making any money.
 
IslandHopper
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RE: Why Is Continental So Afraid Of Competition?

Tue Jun 10, 2003 3:48 pm

CO being afraid of competition doesn't surprise me...they've had a monopoly on the Micronesian islands for years, and they successfully lobby the island governments not to allow any other service. So whenever I visit Pohnpei or Chuuk, I must pay upwards of $2000 from LAX. Don't like it? Your only other choice is a boat.
 
artsyman
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RE: Why Is Continental So Afraid Of Competition?

Tue Jun 10, 2003 6:31 pm

CO being afraid of competition doesn't surprise me...they've had a monopoly on the Micronesian islands for years.
***************
Pretty much every carrier is protective of their home turf. Delta does it in Atlanta, United does it at their hubs, as does Northwest, American, and believe it or not, so will Jetblue, Southwest and Airtran. Just because Jetblue can make a profit at a $99 dollar fare, doesn't mean that they wouldn't prefer a higher fare. I believe in the case of Continental Micronesia, I think Continental invested and built into that airport and the services involved in order to make it a functional airport. I think they probably had a deal that said if we do all this investment, we must have protection from serious amounts of competition for a certain period of time. This is pretty standard stuff in most businesses.

 
DTWNWA
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RE: Why Is Continental So Afraid Of Competition?

Tue Jun 10, 2003 6:42 pm

NWA, Continental and Delta are all afraid of AirTran. The saying in the aviation industry is: "Not another AirTran again.'' I won't be surprised if big airlines come together and go after AirTran pretty soon.
 
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RayChuang
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RE: Why Is Continental So Afraid Of Competition?

Tue Jun 10, 2003 9:11 pm

Why is NW, CO and DL concerned about FL when they should have been concerned about WN like at least 13 years ago??  Confused

 
flyinryan99
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RE: Why Is Continental So Afraid Of Competition?

Tue Jun 10, 2003 11:11 pm

"I don't see what the big deal about flying so many Embraers is all about. Continental unlike many of the other cartel carriers tries really hard to match capacity and demand. If they can only fill an ERJ-145, then why put a 737 or larger on the route ? "

I agree with you Artsyman. The thing is I have noticed that since the conception of Commutair B1900s in TOL that the connections are constantly full thus reducing the possibilities out of the connector cities reducing loads. The smallest mainline type that CO has is the 737 - 500 correct? How many does that seat (115 - 130???)?? To me that is a huge gap between the E145 and the 735. To get something back into that 80 - 100 seat range would be nice to allow for more connecting opportunities and more passenger growth IMHO. I just don't see how they can be making money on the 1900 service out of CLE without opening up some more connecting possiblities with bigger airplanes.

Ry
 
luv2fly
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RE: Why Is Continental So Afraid Of Competition?

Tue Jun 10, 2003 11:20 pm

I think CO is adjusting as much as possible to current market conditions. I do not like seeing the smaller aircrafts all the time, tho I will take the smaller aircraft if it means keeping CO and CLE as a hub. Great airline and one I try to fly when ever I can.
You can cut the irony with a knife
 
Alpha 1
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RE: Why Is Continental So Afraid Of Competition?

Wed Jun 11, 2003 12:40 am

Listening to everyone on here, you would think CO should just say "Go ahead, Airtran, take some market share from us." I mean, come on! In the economic climate that still remains in the industry, you can bet airlines are going to protect their markets shares like a momma bear protecting her cubs from a predator. Some of you scoff that Airtran may be taking only a "little" of CO's market share to CAK, but if I were running an airline-any carrier-especially in these times, I'd do what I could to protect it as well.

It has nothing to do whether an airline is "special" or not, as Prinair said-that's just an uneducated comment, in my view. It's about economic survival in probably the most turbulent times the industry has ever seen. And, obviously CO is trying to do it's utmost to preserve CLE as a hub-and it will, if the economy rights itself soon enough. It made money here before, and it can again. I do have to laugh when people say how economically deficient a hub CLE-you show me ANY major's hub that is doing well financially-look at their quarterly economic numbers, and you'll see what I'm talking about.

An airline CEO isn't doing his job if he doesn't try to protect market share. I am a little surprised that COEX hasn't jumped into the fray with CAK-EWR RJ service as a competiton. It may pull some business from CLE, but if it keeps the money in CO's pocket, who cares if a few people take CO out of CAK instead of CLE?

Love these armchair CEO's on here. Amusing insights.
 
A330_DTW
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RE: Why Is Continental So Afraid Of Competition?

Wed Jun 11, 2003 1:06 am

This sounds like the same hype as the thread where the Red Tail has moved into MKE because they're "afraid" of YX taking away their business. With the addition of 6 (SIX) flights at MKE, ol' Red Tail is NOT looking to put YX out of business, nor does not denote that they are afraid of YX.
 
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EA CO AS
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RE: Why Is Continental So Afraid Of Competition?

Wed Jun 11, 2003 2:21 am

Listening to everyone on here, you would think CO should just say "Go ahead, Airtran, take some market share from us."

Amen to that, Alpha 1 !

Of course you have to realize that these are the same people who would accuse CO of being predatory if they DID launch competing CAK-EWR ERJ service.

As you said, these are the uneducated ramblings of armchair CEOs.  Insane
"In this present crisis, government is not the solution to our problem - government IS the problem." - Ronald Reagan

Comments made here are my own and are not intended to represent the official position of Alaska Air Group
 
Tango-Bravo
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RE: Why Is Continental So Afraid Of Competition?

Wed Jun 11, 2003 3:01 am

Reminds me of one of the more memorable lines I heard from a player during 1,000+ softball games I have umpired. As the better team was coming off the field to bat against a last-place team, the word from the better team's leader to his teammates was "just put the ball in play guys, and they'll take care of the rest for us" by which he meant hit the ball somewhere in fair territory and the ineptitude of the team in the field will ensure that we score some runs (due to errors on what should be routine plays).

In the same manner, it seems that the FLs, B6s and WNs need no more than to put their product into play and the self-destructive bent of the cartel airlines will take care of things for the no-nonsense LCCs where they in any way even remotely challenge the cartel status of the Big Six.
 
luv2fly
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RE: Why Is Continental So Afraid Of Competition?

Wed Jun 11, 2003 3:10 am

Tango-Bravo

I can not agree with you more, the LCC's just need to keep doing what they are all doing so WELL! And let the so called majors fight it out, or get so focused on what the LCC's are actually doing that they lose sight of what they should be doing, that being worrying about there own airline.
You can cut the irony with a knife
 
ncflyer
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RE: Why Is Continental So Afraid Of Competition?

Wed Jun 11, 2003 7:50 am

I just flew CLE LGA on an ERJ Friday AM and it was full, only one empty. On the other hand, I flew first flight Monday AM LGA-CLE mainline, and it was absolutely empty, I would have expected first flight of week to be close to full, but I doubt there were 60 or 70 pax onboard. I know its only one anecdote but it's all I got. Didn't make me feel good about sustainability of any mainline in CLE-- if a Monday AM flight from LGA isn't full, what is?

I'm quite surprised CO hasn't adjusted its pricing on select flights to meet Airtran to LGA-- CO surely matches WN to BWI and MDW?? I know CAK is an hour away and there are hardly any flights, but Airtran has got to be peeling business away from CLE.
 
acidradio
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RE: Why Is Continental So Afraid Of Competition?

Wed Jun 11, 2003 9:11 am

I would think that only lower-yield leisure travellers are going to drive an hr to CAK to get a lower fare. Then again times are changing.
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