THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: SUNDAY, June 26, 1994 TAG: 9406260073
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY PHIL MURRAY, STAFF WRITER
DATELINE: 940626 LENGTH: Long
Hardly.
{REST} The plane for their 3:30 p.m. departure from Greenville/Spartanburg, S.C., airport was hours late. So by the time they made it to Greensboro, their connection was long gone.
Her parents, who had booked a cheap fare for a weekend visit, finally rolled up to the gate at Norfolk close to 11 p.m. that Friday - nearly four hours later than the original arrival time.
Goodpaster might have been willing to chalk up the incident to bad luck. Everyone has a favorite war story about a flight-from-hell. But since she'd had a similar experience on Continental three months earlier, Goodpaster wasn't in a forgiving mood.
``Continental's definition of on-time leaves a lot to be desired,'' the Virginia Beach resident said. ``I've flown quite a bit and I've never seen so many delays.
``I'd probably pay more to avoid them at this point.''
Sagas like that are all too common for Continental these days.
The airline's cut-rate fares have drawn new passengers to Norfolk and other East Coast airports by the tens of thousands. But after a successful start-up last fall and expansions this spring that made Continental the No. 2 carrier at Norfolk International, rips are starting to appear in the fabric of its service known in the industry as CALite.
Continental's on-time performance is the worst in the industry among major carriers. Recently it boosted fares at Norfolk International Airport on many routes. And some local travel agents are telling business clients to stay away from Continental, particularly if the trip takes them through the airline's busy operation in Greensboro.
The question now is this: Are these merely growing pains at Continental, which has undertaken a massive buildup on the East Coast in the past eight months? Or are they symptoms of deeper troubles at the nation's fifth-largest carrier?
Skeptics abound.
``Initially there were just cracks in the Titanic, too,'' said Tim Sieber, director of research at Aviation Systems Research Corp. in Denver. ``From what we've heard, CALite is not working. . . . They went into it with a fantastic marketing plan, but no operational plan.''
But others aren't ready to bury CALite yet.
``Continental is in a position to make service like this work,'' said Philip Roberts, chairman of Roberts, Roach & Associates, a San Francisco aviation consulting firm. ``When they are trying to change over their entire system, they have got to have some problems here and there.''
Norfolk was among the first cities tapped by Continental in October for its new low-fare, no-frills service. Since then Continental, formerly a non-factor at the Norfolk airport, has garnered a 22.4 percent market share here with fares at one time as low as $69 round-trip to Newark.
The strategy mimics the successful formula used by Southwest Airlines for more than 20 years: Stick to short routes, avoid busy hub airports, cut out a lot of the amenities and increase the frequency of the flights. Continental also chose to take on high-cost rivals in the East like USAir, Norfolk's dominant carrier.
The key to the strategy is more efficient use of the aircraft. If you can manage a couple of extra flights a day out of the same plane, you can make money on cheap fares.
To accomplish that, however, Continental must get its planes back into the air quickly - usually within 20 minutes of landing. Scheduling is tight.
That's where things begin to break down. Small delays can quickly get magnified. And Continental built up so quickly, analysts say, it didn't have the personnel and systems in place to keep things running on time.
In Norfolk, for example, Continental has gone from three flights a day to 28. In Greensboro, the number of daily flights has risen from nine to 79. Service in Richmond began Thursday.
``They made some mistakes in the big ramp-up in March,'' said Phil Baggaley, a stock analyst at Standard & Poor's in New York. ``But I don't think it's an insurmountable problem.''
For its part, Continental acknowledges that it has experienced some ``transitional challenges'' in building CALite. Spokesman Ray Scippa, however, said they are being corrected.
Scippa said the airline's on-time record has been improving recently and predicted that the airline would rank in the top half of major carriers by the end of the year.
``What we are doing is we are learning. We've gone in and changed the way we do business,'' Scippa said. ``There was a little lag time before we had the people and parts in place.''
In the meantime, however, Continental risks alienating the traveling public.
To be sure, some local travel agents say their customers have no complaints about Continental. Problems with delays and service are no worse than other airlines, they say.
But others say clients gripe about harried - and sometimes curt - Continental employees. Some grouse that they can't get a boarding pass ahead of time. Flights occasionally are canceled. There are those who just say no.
``I have corporate clients who won't fly Continental,'' said Michael Collins, manager of Omega World Travel in Norfolk. ``They can't afford to be late to a meeting.''
Meanwhile, Continental's model, Southwest - king of cheap fares in the West and Midwest - is consistently at the top of the industry's on-time list.
``The answer is going to be in the eyes of the consumer,'' said Sandy Gardiner, a senior vice president at British Airways, which has a major stake in USAir. ``If a lot of flights start to getcanceled, then the consumer at the end of the day is the judge.''
Continental's ability to sustain and expand CALite will depend ultimately on its profitability.
Airline spokesman Scippa insists that many of the initial CALite routes already are making money. On other routes the airline expects to at least break even in six to nine months.
Indeed, Continental has several advantages over its competitors in the East, which are scrambling to match fares and lower their own costs to compete.
Continental emerged from bankruptcy last year with a lighter debt load. And the airline broke union contracts during the contentious tenure of Frank Lorenzo in the 1980s, giving Continental more flexibility with its employees.
In response to the Continental challenge, USAir said recently that it will try to save $1 billion through union concessions and other cost-cutting measures.
Even so, recent fare increases in Norfolk and elsewhere indicate that Continental may not be getting the revenues it needs to turn a profit, analysts say. The Norfolk-to-Newark round-trip, for example, is now $99 on a restricted basis.
Wall Street continues to be pessimistic. Continental lost $71.6 million in the first quarter of 1994, and the stock has been beaten down to about half of its value at the beginning of the year.
``Is Continental Airlines going to be around three to four years from now? That's a big question mark,'' said consultant Sieber. ``The future of this company is based on CALite working. But right now, the customer would say it ain't working and the stockholders are saying it ain't working.''
Goodpaster is one customer who would certainly agree: ``I've never seen an airline that bad.'' by CNB