Business Fights Back: Continental's Turnaround Pilot

Before September 11, Bonnie Reitz was a central figure in the transformation that saved Continental Airlines. Now, in the aftermath of terror, she gets to do it all over again: "This is our time to lead. How we respond can set us apart."

"Did I tell you about the time I fell off the horse?" asks Bonnie Reitz. "We were doing a rodeo, a customer-appreciation event in Denver. When the chuck wagon tore out around the ring, our horses tore after it. And I don't know how to ride a horse. So I kicked in on my horse's sides instead of pulling back, and it went faster. Finally, it stopped, and I hung on. But it was a big horse, and it shook me off. I landed on my butt, in front of my biggest customers.

"That's how it felt here last Friday, when we laid off all those employees. I walked around the cubicles, watching people pack their boxes. We were all hugging, crying. One guy gave his boss a hat with all the pins that he had collected from the countries that he'd visited. And he said to hang on to it, because he was sure that Continental's business was going to come back and that he'd be rehired.

"It just broke your heart. We had worked so hard. We had created a good company, we were winning awards, we were making money. We were just hitting our stride -- and then we got knocked on our butt. I was stunned.

"Now we've dusted ourselves off, and we've said that we're going to get back on the horse. The only problem is, we haven't got a year to rebuild. And I worry that there are things we can't do anything about. Perhaps war. Or more terrorist acts. Or just fear. We have no control over people being afraid."

Just as there was no antecedent for the terror that stilled America on September 11, there also is no obvious benchmark to suggest what comes next. Is the world changed? Are we? Will we go back to doing what we did before? Or will fear alter the way we think and behave -- who we see, what we buy, and where we go? And one question more: Wherever we go, will we get there by airplane?

On the morning of September 11, the board of directors of Continental Airlines filled a conference room in Houston and gaped, like the rest of the world, at a television screen. What they saw was a commercial jet slamming into one of the two tallest buildings in New York. "It was a surreal experience," recalls Karen Hastie Williams, a Continental board member and a partner at Crowell & Moring, a Washington, DC law firm.

The tragedy shot massive uncertainty into an industry where even minor disruptions cause epic systemic shudders. Airlines model everything, trying to anticipate the unexpected. Passengers show up -- or not. Storms mangle flight plans. Carriers know how to react to such externalities, and worse. But this -- four deadly, deliberate plane crashes, one televised live -- this exploded all of the models.

At Continental, the fallout was all the more staggering for the sense of victory lost. No employees perished; none of its planes were involved in the disaster. But consider this: Seven years ago, the airline had been a flying basket case, a perennial money loser facing a third go-round in bankruptcy court. Then, famously, it started flying its planes on time. It rebuilt relationships with corporate customers and travel agents -- and with its own employees. Continental asked passengers what they wanted, and then followed through. In the first half of 2001, it was one of only two big U.S. airlines to make money.

In the space of a few hours, that storied comeback had been put in jeopardy. Highly leveraged, with no revolving credit in place and its cash flow truncated, suddenly this was a company without a sustainable business model. Continental was not so desperate as chairman and CEO Gordon Bethune described when he barnstormed for government assistance. Still, the situation was dire enough.

And so, as the initial shock waned, as the incalculable human tragedy blurred into a profoundly calculable financial disaster, Continental began the task of rescuing itself. Bethune, confrontational and blustery, focused on securing a federal bailout. In a way, that was the easy part. The difficult part was Bonnie Reitz's job. She had to get people on planes again.

Before September 11: Learning to Fly Right

Reitz, 49, is Continental's senior vice president for sales and distribution. She is an infectiously agreeable woman, the sort who remembers small things and asks about them months later. She is a no-nonsense boss and negotiator, according to those who have worked with her -- "a very tenacious person," says Bethune. But put her around customers, and, well: "I've watched her," says Mary Lou Quinlan, former CEO of NW Ayer & Partners, Continental's advertising agency. "If there are customers in the room, Bonnie lights up. She has personal relationships with all of them."

This was at the core of Continental's first comeback. The airline built relationships, one by one. It communicated relentlessly, it listened closely, and then it delivered the goods. In the weeks that followed September 11, Reitz and her team would return to that same strategy. Communicate. Listen. Deliver. "This takes us back to all of the things we laid the groundwork for," Reitz said shortly after the disaster. If, in fact, Continental does regain viability, that act will speak to the power of a simple precept: Above all, pay attention to your customers.

Back in 1994, the customers desperately needed attention. When Reitz signed on as head of sales and marketing, the airline was a horror show. It offered cheap fares on out-of-the-way routes, but it lacked the operational efficiency to make the lowball strategy pay off. Its jets were old, its on-time record lousy. More to the point, Continental had decimated the relationships it needed to fly high. It had reduced or eliminated agency commissions on low-priced routes, and it had laid off half of its sales reps. It rarely called on corporate purchasers. It had gutted its OnePass frequent-flier program.

Continental's initial flight plan was straightforward enough. It already had begun improving operations, cutting delays and complaints. To survive, though, it had to lure more full-fare-paying business passengers. And that meant winning back favor from three groups: the travelers themselves, the employers who paid the tab, and the big agencies that booked the trips. "Bonnie had a huge rebuilding job to do," says Jack O'Neill, president of corporate travel for Maritz Travel Co., a St. Louis-based agency with offices nationwide. "Beyond being a bad airline, Continental had frozen us all out."

Reitz hired back half the number of sales managers her predecessor had let go, and she created a small force dedicated to large, corporate customers. She convinced Continental's senior executives to take ownership of important agencies and corporations in assigned territories, and to join marketing staffers on sales calls and at the twice-yearly customer confabs.

With Ayer's Quinlan, Reitz also launched a new ad strategy. Continental was, by then, posting the best on-time record in the business, and passengers were voting it the nation's best airline in annual surveys conducted by J.D. Power & Associates. The "Work hard. Fly right" campaign in 1998, which was inspired by an irreverent series of ads touting Continental's Newark, New Jersey hub, drove to the heart of what the company was becoming. This was an airline that could have fun -- but damn it, it got you home on time.

Finally, Reitz worked to make Continental's 56,000 employees think about their customers too. "That was the most difficult thing," she says. "In an operationally driven company, how do we show that being customer oriented is important? How do you turn the company inside out?"

You do it by sending employees daily news updates by email and fax, and by having regular visits from top company executives. But a turning point, Reitz says, was a party thrown at Bethune's Houston home for 100 elite-level OnePass members. News of the event, where Bethune essentially apologized for the airline's decline, roared around Continental's headquarters and hangars. "Nobody could believe the CEO would have actual customers to his home," Reitz recalls. "It sent a message. It said, We're going to do what customers want us to do."

After September 11: Starting to Fly Again

The first 48 hours after the hijackings were a blur. It was clear even at Tuesday morning's board meeting that radical changes would come -- schedule cutbacks and layoffs were discussed, as was government intervention. But there was no precedent, little concrete information, and no clear plan. "We have had some horrendously frustrating days of stops and starts," Reitz said at the time.

One immediate problem was staring Continental in the face. When the FAA ordered all planes out of the sky at 9:30 on the morning of the 11th, 91 Continental jets were forced to land at airports that were not their scheduled destinations. Flight 1917 to Vancouver landed in Green Bay, Wisconsin. Flight 14 from Honolulu to Newark stopped in Youngstown, Ohio. Planes from Europe were scattered to obscure Canadian runways.

At Continental's System Operation Coordination Center (SOCC), hundreds of workers tried to figure out how to get all those planes back to where they belonged -- and how they would restart the airline essentially from scratch whenever flights were allowed to resume. On a normal day, one off-schedule flight can disrupt dozens of other flights. So imagine the complexity of reordering an entire system, all at once, with nothing to go on. "There was nothing in the book explaining how to do this," says Mike Bleike, senior director of the SOCC.

While Bleike's crew tried to recover planes, Reitz's team did the same for stranded passengers. Sales managers called their biggest corporate clients in order to find how many of their employees were stuck in which cities. Wherever possible, it offered office space and reserved hotel rooms. Then, one by one, Continental booked passengers on the limited flights that would be allowed on Thursday.

Information, much of it sketchy and conflicting, poured in continuously from the federal agencies. As Continental made sense of it all, it kept customers and travel agents in the loop. By the afternoon of the 11th, it had cleared its home page of all marketing pitches and created an online command center for emergency information. As the week unfolded, Kevin McKenna, the head of electronic marketing, and his team of 17 posted a list of diverted flights, contact information, and continuously evolving security regulations. "Once we started, we couldn't stop," he says. "It was bewildering, but exciting too. We knew that people were relying on us." In fact, traffic to the site soared 80%.

The airline's top management gathered several times a day through the week -- and after each meeting, decisions were passed along to important customers by email, fax, and phone. "Very early on Wednesday morning, I knew exactly what Wednesday was going to look like. Thursday too," says Paul Tomaszeski, executive director of administration (which includes travel) for Novartis Pharmaceuticals, a big Continental customer.

Reitz had an agenda here, of course. In the past seven years, Continental has raised the number of business passengers from 32% to 48% of its total mix, a key factor driving its profitability. Reitz had hoped to improve that ratio another few points in the next few years, which would have yielded $100 million a year in new profits. Now the mix was at risk. Whatever she could do to keep businesses happy, she would do.

As much as that, each conversation with a customer represented an opportunity to gather intelligence. Were companies restricting or barring employee travel? Would they cut budgets? As Continental tried to gauge demand and reduce capacity, "there was nothing to help us anticipate what the world would be like," Reitz says. "Numbers aren't going to tell the story. Being out there in the marketplace, talking to customers -- that's what's going to tell us what's going on."

By week's end, Continental understood that a big chunk of its business wasn't going to be coming back anytime soon. Exactly how big a chunk, no one knew -- but it surely was enough to justify trimming 20% of its flights. That Saturday, September 15, Bethune announced that Continental would furlough 12,000 workers.

"How do you take all these people and tell them they're gone?" Reitz asked later. The task of identifying cuts had consumed her for much of the second week, and the experience had been draining. A decade ago, job insecurity was ingrained in the airline's mind-set. Now, after seven years of success and cultural transformation, the decision shocked people. "We communicated throughout. We told people they were great. We told them it wasn't their fault," Reitz says. But the reality was that, even with a reduced schedule, only half of Continental's seats were being sold. Over the course of four days, starting on September 20, nearly one-fifth of Continental's workers were let go.

Cutting expenses would stanch the cash drain, of course, but it did nothing to fill more seats. "We went through our grieving," Reitz says. "But then we woke up pretty quickly." Her team refocused on the question at the heart of everything: How do we counter fear?

Mass advertising wasn't the answer. "We don't think anyone out there is hearing anything," Reitz says. Indeed, Continental decided to pull its acclaimed series of print ads and posters, which suddenly seemed too edgy for the times.

Instead, Reitz's staffers designed a communications strategy targeted at salving would-be passengers' security concerns. On September 23, Continental "burst-faxed" letters to 15,270 travel agents and 8,293 corporate-travel managers. It produced a flyer for distribution at agencies and a PowerPoint presentation for its sales reps. It even composed a letter for companies to send to traveling employees on their own letterhead.

The basic message: Flying is safer than ever and is still relatively convenient. The letters detailed stricter security procedures and described cooperative efforts with plane manufacturers and federal authorities to preclude more hijackings. And they offered a hopeful cry: "We need to refuse to give the terrorists what they want -- a disruption of our lives, our economy, and our country. We need to return to business as usual."

Flight Plans for the Future

What is the calculus of fear? Following the Gulf War, air-passenger traffic dropped by 4% compared with the previous year. After four months, those numbers snapped back to normal. This time, obviously, is different: Commercial planes carrying civilian passengers killed thousands on American soil. How does business recover from that? What does the curve look like? Will traffic rebound quickly? Will travelers return gradually over months? Over years? How many will never fly again?

Bonnie Reitz still has no clue.

Three weeks after the disaster, Continental began seeing signs of recovery. In its Richmond, Texas specialty-sales center, sales manager Lacey Mizell asked an Ohio travel agent whether business was picking up at all. After a pause, the woman replied, "Yes. At all." Air travel nationwide was creeping up -- and during the week of September 24, Continental's planes were 54% full, four percentage points higher than the industry as a whole. "I needed some good news then," Reitz says. "That was it."

To be certain, it wasn't good enough. Continental estimates that, given its present passenger mix, its planes have to fly 70% full to break even. At 54%, it lost $8 million a day. That's why, in early October, Reitz's direct reports in sales and marketing sat down to weigh the impact of cutting back on meal service, as most of Continental's rivals have done. And on October 2, Continental matched steep cuts by United Airlines on many business fares. The upheaval isn't over.

Here's the thing, though. Upheaval creates dislocations -- and in dislocation, smart people see opportunity. On the evening of Sunday, September 16, Bonnie Reitz still was stunned and saddened by all that had passed in the previous five days. She was weary after a string of 16-hour days at the office and take-out dinners late at night with her husband. But she also was juiced.

Already, she could sense the rumblings of tectonic shifts beneath the tarmac. As the carriers cut back on routes, some big corporate customers were already reconsidering their travel preferences, opening some contracts to bid. As much as that, she believed, the disaster gave Continental an opportunity to show what it could do under extreme adversity. If it could connect with more customers, make them feel safer, and get more flights off the ground sooner, then customers might pay attention.

At Continental's headquarters, the mood has graduated from astonishment and ensuing grief to . . . something else. There's still pain, but also determination. "Get out there! Keep traveling! Do the things you do!" exhorted national agency sales director Kelly Hart in a meeting with his staff on October 1. "Give them free tickets. Get them on airplanes. We want them to see that we're safe, we're reliable, and we're ahead of the curve."

It is a crazy enterprise, flying airplanes. But perhaps not everything is beyond control. Maybe fear can be countered with grit -- plus incentives and a few thousand well-placed emails. And maybe things will get better. "This is our time to lead," Reitz says. "How we respond can set us apart."

Keith H. Hammonds (khammonds@fastcompany.com) is a Fast Company senior editor based in New York. Contact Bonnie Reitz by email (breitz@coair.com).

Sidebar: Turnaround Leadership

Bonnie Reitz, senior VP for sales and distribution at Continental Airlines, helped engineer the company's turnaround based on seven attributes of leadership. She plans to use the same leadership principles as she works to save the company again.

Listening: "Listening is the key to knowing if what we're doing is right. Listen to what your customers have to say. All their ideas are good. You may not agree with them all, you may not use them all, but there's always something to be learned."

Focus: "You can't do everything. Focus on what will make the biggest impact. Communicate your goals relentlessly, so that everyone else knows what their own focus should be."

Action: "Don't think and think about doing what has to be done. If it's worth doing, do it. We have 2,000 flights every day. All those accolades we got yesterday? Poof! They were yesterday. It's today, and we've got to do it again."

Measurement: "What gets measured gets done. I believe in unshakable facts. Get as many facts as you can. Don't spend forever on it, but if you have enough facts and the gut intuition, you're going to get it right most of the time."

No Surprises: "If something's not going well, tell us so that we can deal with it. That's a core strength of Continental. We're willing to stand up and talk about issues so people can say, 'Well, it's not as bad as I thought.' "

Strength: "My people know that no matter what they do, I will be right there next to them. Stand up. Have strength of character in good times and in bad. If you do those things -- and people know that's how you operate -- that's how they start to lead."

Integrity: "You have to be able to look yourself in the mirror every day and say, 'I did the best I could.' "

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