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Turnaround Artist Faces Down Bankruptcy
In an industry known for stiff competition, market volatility, and demanding customers, Continental Airlines CEO Larry Kellner found a formula guaranteed to smooth the ride.
When Kellner joined Continental as CFO in 1995, he confronted $2.3 billion in debt defaults, no cash, and a third potential bankruptcy. He proceeded to come up with a turnaround plan that defied conventional wisdom and some of the standard operating practices of the times.
“If you don’t spend any money you’re not going to make it,” he told a Business School audience in October. His number one priority: Bring flights in on time. How to do it? For every month the company made it to the top five for on-time arrivals, employees would earn an additional $65.
Within 30 days, Continental moved up to fourth place for on-time arrivals, and within two months, gained the number one slot—a ranking it still holds. “All of a sudden the employees who had been ripping the Continental patches off their uniforms when they went to Wal-Mart after work were in the company store buying Continental hats,” Kellner said.
Continental’s “Go Forward” plan gave employees more ownership in the company’s success and more transparency about how the company was run. Kellner, who is credited with making Continental the world’s fourth-largest airline, is not stopping there. “You’ve got to constantly reinvent the business, reinvent the way you do it, and keep your product fresh,” he said. “I fly our competitors on a regular basis—I want to see what they are doing, how they are rolling out their service, what we can take from them. I will gladly take anything anyone does that’s smarter.”