Lorenzo's Airline Conglomerate Still Hitting Turbulence
Jul. 25, 1987
NEW YORK (AP) _ Fancy Frank Lorenzo as a mad scientist, stitching together unmatched parts to form a creature called Texas Air Corp. that at times has seemed unwieldy, lumbering and a little out of control.
Lorenzo began his grand experiment in 1982 with his acquisition of Continental Airlines. But the laboratory has heated up since January when he attached People Express, New York Air and Frontier Airlines.
One industry observer said Lorenzo, chairman of the Houston-based conglomerate, ''has a hell of a tough job ahead of him in bringing all the pieces of that thing together in one homogeneous whole.''
The strain was evident again this past week when Texas Air posted a larger- than-expected loss and Continental's top executive was fired.
Analysts, customers and travel agents alike agree that the greatest challenge facing the company is to bring an aura of reliability to Continental.
''The biggest problem is the fact that they're late,'' said Orly Jellinek, a vacation counselor at Thomas Cook Travel in New York. ''If I can find my customers another airline at the same rate and the same time, I will definitely switch.''
One day this past week, Jellinek said that ''just 10 minutes ago'' a customer chose Delta Air Lines over Continental, despite the recent spate of air-safety problems at Delta.
But Texas Air spokesman Richard Scott said the company's own internal quality checks have shown ''dramatic improvements'' in on-time deparnoted that airline complaints in general are up sixfold this year at the Department of Transportation, and that increased consumer criticism of Continental is merely part of a larger trend.
Despite the problems at Continental, travel agents admit the company is hard to avoid. With major hubs in Houston, Denver, Newark, Cleveland and Dulles International in Washington, D.C., the airline has ''an excellent route system,'' said Edward Starkman, an airline analyst with PaineWebber Inc.
And coupled with a new reservation linkup announced Friday, the airline will have greater access to travel agents in Europe. Texas Air said it will link up with Amadeus, the reservation system of high-profile foreign carriers including Air France, Lufthansa, Iberia and the Scandinavian Airlines System.
While the company's problems are much more immediate to the hysterical passenger whose luggage has been lost or who can't get home for a family reunion, analysts are more willing to give Lorenzo time to fuse his airline companies.
''I think they have tremendous potential,'' said Starkman. ''It's just a function of time and training.'' And it will take time.
Texas Air has to worry not only about maintaining its 20 percent market share, the highest in the industry, but also about hanging on to key executives. With the firing of Continental President Thomas Plaskett on Tuesday, observers began referring to the revolving door at the executive suite. He is only the most recent in a string of executives to leave the company.
Plaskett, who had served at the helm of Continental for only eight months, was highly regarded as an excellent manager with a long line of successes. Plaskett had served as senior vice president for marketing at American Airlines, which he joined in 1974.
His departure sent tremors through the industry. Some speculated Plaskett clashed with Lorenzo, while others felt he may have been unable to adapt to Texas Air's freewheeling management style, which often requires quick decision-making in the face of continuous crises.
''That takes a certain personality,'' Starkman said. ''Some people don't like to deal in a quick-action environment. Someone who came out of American - which is more staid and traditional, where there's more time to make decisions -could be very uncomfortable'' at Texas Air, he said.
Despite his well-known disdain for having to play the role of a hands-on manager, Lorenzo said he will run Continental in the wake of Plaskett's departure.
The announcement of Plaskett's firing came a day after Texas Air posted a $27 million, second-quarter loss. Continental alone lost $71.1 million, up from the $56.8 million it lost in the year-ago quarter.
Passenger traffic was relatively light at Continental, and the airline's load factor was below the industry average at 63.3 percent.
But that figure did not alarm analysts, who noted that the industry average was only 65.3 percent in June. Another of Continental's cousins in the Texas Air clan, Eastern Airlines, also posted a below-average load factor for June of 64.6 percent, Starkman said.