Rare Common Sense: Continental Airline's Kellner

Continental Airlines shareholders should be very pleased to have such a sane, reasonable, pragmatic CEO in Larry Kellner. Succeeding Gordon Bethune on January 1, 2005, Kellner seems to have continued Continental's relatively good performance among other US airlines.

The nearby two-year price chart for Continental (CAL), UAL (UAUA), Delta (DAL), and Northwestern (NWA) and the S&P500 Index shows that, of a badly performing bunch, Kellner's Continental is the best. By a lot. His airline declined nearly 40%, which is bad, but much better than the other three, which all fell by nearly 60%.

Regarding the putative UAL merger, it was reported that Kellner explained,

“The best course for Continental is to not merge with another airline at this time,” Larry Kellner, chief executive, and Jeff Smisek, president, said in a message to employees. “The board very carefully considered all the risks and benefits of a merger with another airline, and determined that the risks of a merger at this time outweigh the potential rewards.”

How refreshing! Kellner avoided the temptation which so often sways CEOs- instantly growing larger - in favor of remaining in the best operating shape he can under currently difficult conditions.

All of the airlines have felt the effects of higher fuel costs, as portrayed in these additional Yahoo-sourced price charts for the past six and three month timeframes.

According to the Wall Street Journal piece on the prospective merger with UAL, Continental's Kellner was

"obsessing over the calculations around synergies, the costs savings and revenue enhancements central to a merger."

The Journal also reported in Monday's edition that,

"Mr. Kellner has publicly questioned whether mergers would create service problems and labor tensions, and until recently said Continental preferred to remain independent."

Airline total return performance hasn't been a pretty picture of late- not for years, in fact. But at least Kellner's management team is sanguine about complicating an already tough situation by adding the difficulties of merging with another carrier, UAL, which isn't really even finished resolving all of its Chapter 11 issues.

It appears that Gordon Bethune performed well as CEO of Continental for so many years. He recruited and developed his successor, Kellner, in a manner that continued Bethune's own sense of restraint and focus on performance for shareholders, not just his own ego.