Case Study: Continental Airline’s Tech Strategy Takes Off

When it comes to airline travel in a post-Sept. 11 world, you probably know what to expect: long lines to check luggage, pass through security and change seats; snarky airline employees who may or may not have just lost their pensions; a middle seat; and eight salty peanuts and a stale deli sandwich. And that’s on a good day.

Yes, the days of stretching out across three empty seats are over. And so are the eye-popping profits enjoyed by virtually all carriers during the late 1990s, when travel was up and fuel costs were down. Today, soaring oil prices, an antiquated air-traffic-control system and the success of low-cost carriers have conspired to change forever the airline game. In 2005, not one of the big six airlines—American, United, Delta, US Airways, Northwest and Continental—posted a profit. Delta Air Lines Inc. and Northwest Airlines Corp. are bankrupt; United’s parent, UAL Corp., and US Airways Group Inc. recently emerged from bankruptcy; and American Airlines’s parent, AMR Corp., has just barely dodged it, for now. And while most of the older airlines continue to confuse and annoy customers with restrictions, delays and withering customer service, passengers are increasingly opting to fly with regional, no-frills carriers that have straightforward policies and still-affordable rates.

But not all of the majors have stripped service to the bone. Houston-based Continental Airlines Inc., the fourth-largest airline in the U.S., has actually invested in customer-service improvements, increased its routes, and kept prices steady, all while managing to lose the least money last year. Continental posted a mere $68 million net loss in calendar year 2005, a lot less than Northwest and Delta, which lost $2.5 billion and $3.8 billion, respectively. In fact, many analysts expect Continental to return to profitability this year. “Operationally, Continental is doing a terrific job,” says Helane Becker, a transportation analyst at the Benchmark Co. LLC, a New York City brokerage firm.

The company’s strategy is simple: identify and increase the loyalty of Continental’s most valuable customers while luring new, more profitable customers—many of whom do not live in the U.S.—into the fold with top-notch customer service. Straightforward as that might sound, it’s a goal that continues to elude other legacy carriers. To get there, Continental is going beyond the typical airline technology plays such as online check-in and electronic ticketing. It’s relying on a nimble IT department that is creating automated tools, boosting efficiency and sharpening business intelligence to help return the carrier to profitability and make it a favorite among the flying public.

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