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Continental makes pitch No. 2 to DSM


For the second time in three months, Continental Airlines sent one of its top brass to Des Moines last week to plea for more passengers on its flights to Newark, N.J.

Last Thursday, the company’s president and chief operating officer, Lawrence Kellner, ate breakfast with representatives from the Greater Des Moines Partnership and then headed off to Meredith Corp. to meet with the publisher’s chief financial officer, Suku Radia. He traveled from there to Principal Financial Group Inc., and then to a luncheon meeting of the Downtown Des Moines Rotary Club.

Kellner had several points to get across during the half-day sweep, including the announcement of a fare sale on flights between Des Moines and Continental’s hub in Newark. Mostly, he wanted to build relationships with top executives in Des Moines, explaining to them that the airline might not make it in the city without support from their companies.      During Kellner’s prior visit Jan. 31, he told city politicians, business leaders and area travel agents that Continental may not continue its service past this summer unless passenger traffic for its regional carrier, Continental Express, improves.

“Larry’s making an extra effort to try to help the community, and to help our business, by getting out and meeting with business leaders personally,” said David Messing, a Continental spokesman. Des Moines was the site of Continental’s first expansion following the terrorist attacks of Sept. 11, 2001.

According to Continental’s market research, the No. 5 U.S. air carrier is facing difficulties winning passengers away from its competitors, particularly because of loyalty generated by the other airlines’ frequent-flier programs, Messing said.

“What we’re battling is an entrenched mindset,” he said.

As a result, the company again cut fares on its Des Moines to Newark flights, knocking them down to $204 round trip, including taxes and fees. Northwest Airlines, the fourth-biggest air carrier, last week announced $218 round-trip flights from Des Moines to Newark, but the flights aren’t non-stop and it wasn’t clear whether that fare included taxes and other fees.

In Continental’s case, the fare sale will last through Labor Day.

Des Moines is clearly better off with Continental in town. New York City is one of the most popular destinations for business and leisure travel. Short of a private jet, there’s no other way to get to the region non-stop. Ticket prices have dropped dramatically since Continental announced its service.

Still, however flattering to the city it is to receive such personal attention from the president of a major airline, Keller’s visits also illustrate the depths of the troubles that have engulfed the airline industry.

It’s a cliche at this point to say that the U.S. airline industry is struggling. More than 110,000 of its workers have lost their jobs since the 2001 terrorist attacks.

U.S. Airways Group Inc.’s U.S. Airways, the nation’s seventh-largest carrier, has recently emerged from bankruptcy protection. The airline is now much leaner and, more important, saddled with far less debt than it had when it went in.

UAL Corp.’s United Airlines, the second-biggest air carrier, is still operating under bankruptcy protection and paring costs like crazy. AMR Corp.’s American Airlines last week won wage concessions from its three unions, which will let the nation’s biggest airline wring roughly 21 percent in expenses from its payroll.   The point is that these airlines are slashing their costs, and there likely will be ugly results for competitors, including Continental, that have so far managed to avoid bankruptcy. It is a peculiarity of U.S. law that companies emerging from bankruptcy protection sometimes are in a position to undercut competitors that managed to avoid bankruptcy. Just watch what happens with WorldCom Inc. freed up and on the prowl.

Government officials recognize this, but that recognition doesn’t necessarily solve the problem.

There is a real danger that Des Moines will lose Continental if passenger loads to Newark doesn’t improve. Loyalty to frequent-flier programs is understandable, but so it paying attention to prices. Right now, Continental has the lowest fares and the only non-stop route to the Big Apple. It’s also one of the few airlines that hasn’t stopped serving in-flight meals.

Des Moines Business Record staff writer Michael Lovell writes a weekly column on business issues affecting Greater Des Moines. He appears on Sunday mornings to talk about business trends on WHO-TV. Contact him at 288-3336 or by e-mail at michaellovell@bpcdm.com.

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