Larry Kellner: Business travelers hold key

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Continental Airlines Inc.

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Continental Airlines Inc. is pressing its corporate customers to step up their travel because business traffic holds the key to recovery in the slumping airline industry, Chief Executive Larry Kellner said Thursday.

Business travel slumped several months ago as turbulence rocked the financial industry, and that led to cascading problems for airlines.

For starters, business travelers are airlines’ most profitable customers, often buying first-class seats or pricey last-minute fares. When those people stopped traveling, airlines cut fares to fill seats with leisure travelers, meaning that side of the business also became less lucrative, Kellner said.

The good news, Kellner said, is that business travel turns on and off quickly.

“We’re working our business (traveler) side very hard because clearly this is where we could also see a recovery much more quicker if we could get the business traffic back on the airplanes,” he said.

Kellner made the comments during a wide-ranging discussion at an investor conference in New York. He also said the current systems of airline regulation isn’t working — but offered few tips for improvement — and said Continental would consider consolidation with other carriers if industry leader Delta Air Lines Inc. seemed to be growing too strong.

Continental was considering combining with UAL Corp.’s United Airlines last year but broke off talks when UAL’s financial condition worsened. Meanwhile, Delta became the world’s largest airline operator by buying Northwest.

Houston-based Continental, the nation’s fourth-largest airline company, has always said it would prefer to stay independent, viewing airline mergers as risky.

“But if we see either others in the marketplace getting ahead of us — for instance, Delta because of its consolidation — we’ll clearly step back,” Kellner said.

Continental is already moving from one alliance of airlines including Delta to another that features United. Continental is seeking antitrust immunity to work with United and Lufthansa on setting fares and schedules for trans-Atlantic flights.

Without addressing the antitrust issue directly, Kellner said the system of airline regulation dating to 1978 needs an overhaul.

Kellner offered few specifics other than to say fares shouldn’t be regulated — the federal government had to approve most fares that airlines charged before 1978. He said the rules governing labor negotiations could be improved, and that management of crowded air space such as above New York could be managed better.

Kellner praised the work of two regulatory agencies, the Federal Aviation Administration and the National Transportation Safety Board. The safety agency is investigating the January crash of a flight operated under the Continental Express name. Fifty people died in the crash outside Buffalo.

Critics complain that such investigations can take many months, but Kellner praised the process that “doesn’t rush to judgments, doesn’t try to criminalize things.”

“The NTSB and the FAA will come to recommendations, and we will be very good partners in how we move forward with those,” Kellner said. “Every time there’s an incident in the industry, we’re watching that incident saying, what can we learn from that?”

On Wednesday, a group of senators urged the FAA to enact an NTSB recommendation from 2005 that would require airlines to check the training history of the pilots they hire. The captain in the Buffalo crash didn’t tell the airline that operated the flight for Continental that he had failed several flying tests.

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Editor in chief is Linda Hohnholz.