Continental Company Analysis and Generation of New Solutions
1. Continental airlines Jacopo Butti Tamara DeAngelis Jillean Cooper Joshua Moran James Spurlock “Work hard, Fly Right”
2. Company History 1934, when Continental was operating under the name Varney Speed Lines July 1937 R. Six change the name with Continental Airlines and moved the HQ to Denver, CO In the 40’s and 50’s with the participation in WWII grew profits and the fleets of aircrafts End of 50s it started to operate other routes, like Chicago and Los Angeles, plus it was operating 7 days a week Early 60s Continental HQ moved to Los Angeles and provided air transportation for the US Military troops in Vietnam. Deregulation act of 1978 allowed the carriers to expand their routes systems and developing new pricing structures. 80s lead to an expansion in S. America, Asia and Australia and had a fleet of over 100 aircrafts. 1983, Continental filed bankruptcy with losses of $218,000,000. 1990, due to high rise of fuel costs and Kuwait invasion Continental filed for bankruptcy again. 1993 the company purchased 90 new Boeing aircraft with the investments by Air Canada and Air Partners. 1995 Initiation of the campaign “Go Forward Plan.”
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4. OrganizationalChart Jeffrey Smisek Chairman, President and CEO Jim Compton Executive Vice President and CMO Mark Moran Executive Vice President and COO Zane Rowe Executive Vice President and CFO Dave Hilfman Senior VP-Worldwide Sales Mark Bergsurd Senior VP-Marketing Programs and Distribution Ron Anderson-Lehman Senior VP and CIO Mike Bonds Senior VP-HumanResources And Labor Relations Gerals Laderman Senior VP-Finance and Treasurer Mark Erwin Senior VP-Corporate Development and Alliances Leon Kinloch Senior VP-Pricing and Revenue Management Holden Shannon Senior VP-System Operations and Real Estate Bill Meehan Senior VP-Airport Services Jaques Lapointe Senior VP-Procurement Jennifer Vogel Senior VP, General Counsel, Secretary and Chief Compliance Officer
6. SWOT Analysis Strengths Weaknesses High Commitment to customer service Fortune Magazine’s No. 1 most admired global airline Flexible Fleet Plan 70% of their fleet consists of common rated Boeing 737 aircraft “Go-Forward Plan” Well-defined target market: services to upper-class and business travelers BusinessFirst cabin service Serves more international destinations than any other U.S. carrier Teamsters won election to represent Continental Airlines ground workers. Shifts negotiating power away from management to the ground workers and limits their “lee-way” in cost costing. High interest expense Due to the amount of debt they have contributed to the company regularly operating at a loss. 2009-$72 million loss before income taxes Removal of all Boeing 737-300 and 737-500 aircraft High cost of retiring airplanes
7. SWOT Analysis Threats Opportunities Growth in flights to China Continental is the largest U.S. carrier to service Japan Proposed merger with United Networks of Continental and United are complementary. News reports say an agreement may be finalized Monday Continental will be the first U.S. carrier to fly the new Boeing 787 New features: bigger windows, superior cabin air, more stowage space, advanced lighting and new in-flight entertainment systems More fuel efficient than the B737 Food For Purchase Lower in flight costs Current economic conditions Nearly impossible to achieve capacity growth Demand for air travel is not growing Business travel budgets were slashed by as much as 20% - 40% Delay in delivery of new Boeing 787s Causes the cost-savings in fuel to be delayed. Delay of aircraft delivery damages Continental’s long-term planning Increase in federal and airport taxes Due to heightened security measures, i.e., the implementation of full-body scanners Technology Enables companies to hold conferences and meetings without travel
8. Porters 5 Forces The entry barriers in the airline industry are high: Airport and government regulations High capital for entering the market The supplier power is that it is high: Few suppliers support the large number of established airlines High switching costs in changing supplier The buyer power is medium/high: Carriers compete on low price the consumer retain some power in the purchase process Business consumers seek for the brand that they are loyal to, so they are willing to pay any price Existing rivalry is high: The industry is cyclical High exit costs Threat of substitutes is high: For short distances, airplanes will be substitute with automobiles Numerous macroeconomic variables: There is a strong correlation between the U.S. GDP and the growth of the airline industry on a year bases. Adaptation to raise in fuel costs, that already led Continental to a bankruptcy in 1990
9. Recommendations What How Reduce the number of brand names advertise under Revise marketing campaign Take advantage of major presence in Japan and expand into China & India Realize the cost synergies of a merger Improve productivity for in-flight cost Cut marketing costs; increase brand awareness to provide a more cohesive image Focus on comfort and reliability New leases/landing rights Successfully merge with United Utilize B787s and charge for meals
Continental serves more international destinations than any other U.S. carrier, and also has the most destinations in Japan for a U.S. carrier. *New, nonstop service from Newark to Munich began March 27, 2010.* This is the 30th destination in Continental’s trans-Atlantic network.
Both have agreed that Continental’s CEO Jeff Smisek will head the combine airline.Disagreements have emerged over which stock price to use
