Continental Airlines Case Study
04 - 18 - 2012 Ariel Kramer
Summary
Frank Lorenzo, in 1986, owned one of the largest airline networks in the world. From a small investment in Texas International Airlines, after restructuring it and bringing the company to profitability, Texas Air bought Continental for $154 million. In order to reorganize the corporation as a more viable enterprise, Lorenzo took Continental into bankruptcy. This process caused a walkout by many union workers, so Lorenzo replaced strikers with nonunion workers at much lower wages. Low-cost operator and cut-rate prices was Lorenzo's way to manage the company. After the corporation emerged out of bankruptcy, Lorenzo bought Eastern Airlines. In an environment of heavy losses, he instituted a severe downsizing program. At first Lorenzo's move appeared to be successfully, but he was wrong and Eastern went out of business. In 1993, Continental tumbled again into bankruptcy. The court approved a reorganization plan for Continental to emerge from bankruptcy. In the early 90's, a sick airline industry caused heavy losses not just for Continental but for all the companies. In 1994, Gordon Bethune became chief executive officer of Continental Airlines. He made dramatic changes. Since Continental was by far the worst among the nation's 10 biggest according to the Department of Transportation, Bethune renewed focus on on-time flights, lost luggage, and customer complaints. Customers began returning and Bethune transformed the workforce in a happy one by giving them benefits through achieved goals. The new company's manager apologized to their customers and asked them how we could be better being serving you. Instead of the company's old focus on cost savings, efforts were directed to putting out a better product. By giving employees bonuses for meeting certain
Summary
Frank Lorenzo, in 1986, owned one of the largest airline networks in the world. From a small investment in Texas International Airlines, after restructuring it and bringing the company to profitability, Texas Air bought Continental for $154 million. In order to reorganize the corporation as a more viable enterprise, Lorenzo took Continental into bankruptcy. This process caused a walkout by many union workers, so Lorenzo replaced strikers with nonunion workers at much lower wages. Low-cost operator and cut-rate prices was Lorenzo's way to manage the company. After the corporation emerged out of bankruptcy, Lorenzo bought Eastern Airlines. In an environment of heavy losses, he instituted a severe downsizing program. At first Lorenzo's move appeared to be successfully, but he was wrong and Eastern went out of business. In 1993, Continental tumbled again into bankruptcy. The court approved a reorganization plan for Continental to emerge from bankruptcy. In the early 90's, a sick airline industry caused heavy losses not just for Continental but for all the companies. In 1994, Gordon Bethune became chief executive officer of Continental Airlines. He made dramatic changes. Since Continental was by far the worst among the nation's 10 biggest according to the Department of Transportation, Bethune renewed focus on on-time flights, lost luggage, and customer complaints. Customers began returning and Bethune transformed the workforce in a happy one by giving them benefits through achieved goals. The new company's manager apologized to their customers and asked them how we could be better being serving you. Instead of the company's old focus on cost savings, efforts were directed to putting out a better product. By giving employees bonuses for meeting certain