History of the Industry

On May 23, 1926, Western Air Express inaugurated the first scheduled airline passenger
service in the United States and flew the nations first commercial airline passenger from Salt
Lake City to Los Angeles.
The airline industry in the United States has grown dramatically since the end of World War II.
In 1945 the major airlines flew 3.3 billion revenue passenger miles (RPMs). The most significant
change in the history of the industry came in 1976 when the Civil Aeronautics Board (CAB)
asked Congress to dismantle the economic regulatory system and allow the airlines to operate
under market forces. Deregulation of the industry was followed quickly by new entrants, lower
fares and the opening of new routes and services to scores of cities. The growth in air traffic
brought on by deregulation's first two years ended in 1981 when the country's professional air
traffic controllers went on strike. Traffic surged again after 1981, adding 20 million new
passengers a year in the post strike period, reaching a record 466 million passengers in 1990.
In 2001, the industry dealt with the effects of another economic downturn, as business travel
decreased substantially while labor and fuel costs increased. The events 9/11 greatly magnified
the airlines' issues, leading to a sharp decline in customers and significantly higher operating
costs. Losses continued for years; the industry as a whole didn't return to profitability until 2006.
A relatively stable period followed, although controversies arose over service quality and
passenger treatment in terms of flight delays, particularly those involving planes waiting on the
runway. In 2010 and 2011, the U.S. Department of Transportation issued a series of rules
mandating that the airlines provide adequate modifications for passengers in extenuating
circumstances.

History of Continental Airlines and Present Position

Continental Airlines began its history in 1934, when Varney Speed Lines began its Southwestern
division with a route from El Paso, Texas, to Pueblo, Colorado. During its first month of
operations, the fledgling airline carried 859 pounds of U.S. mail and nine passengers. The airline
changed its name to Continental Airlines in 1937.
Determined to expand its role as a regional airline, the carrier took a big step in its quest for
growth when in 1951 it agreed to share service across the connecting routes of Braniff and
American. The agreement soon produced Continental's longest route of the time, from Houston
to El Paso.
Deregulation allowed Continental to add 18 new routes in 1979, but it also brought about an end
to the airline's long stretch of sustained profitability. In 1980 the airline experienced a major
reduction in its workforce, the first in 46 years. Continental was forced to file for bankruptcy in
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1983. During 1984, its 50th anniversary, the airline began to rebuild itself. By year's end, while
continuing to operate under bankruptcy court protection, the company regained its competitive
position. In 1986, Continental reported the largest profit in the airline's 51-year history. In a bold
move, Texas Air Corporation, Continental's parent company, purchased Eastern Airlines. The
combined routes created the largest airline system in the United States.
Though a need for fleet modernization prompted the order of 50 Boeing 757 airplanes, escalating
fuel costs combined with other difficulties in 1990 forced Continental into bankruptcy for the
second time in seven years. The company survived through the tremendous efforts of employees,
who responded to the fuel crisis by reducing fuel use significantly.
Continental declared that a prosperous new era had begun for the airline. This was made possible
by the huge success of the "Go Forward Plan," a strategy that focused on improving profit
margins and encouraged employees to seek creative ways to enhance customer satisfaction. The
plan quickly catapulted Continental back to the top of the industry in such key performance areas
as on-time departures and record profits.
In May 2010, the airline announced that it would merge with UAL Corporation, the parent
company of United Airlines, via a stock swap. Continental's shares were acquired by UAL
Corporation. The acquisition was completed in October 2010, at which time the holding
company was renamed United Continental Holdings. During the integration period, each airline
ran a separate operation under the direction of a combined leadership team, based in Chicago,
Illinois. The integration was completed on March 3, 2012. UAL's May 2015 consolidated traffic
(revenue passenger miles) increased 0.5 percent and consolidated capacity (available seat miles)
increased 2.1 percent versus May 2014.

Product & Services

United Continental Holdings unites cities around the globe through subsidiaries United Air
Lines and Continental, titans among passenger and cargo air carriers. While United Air Lines and
Continental are its main lines, the company also has regional operations, which are operated
under contract by United Express, Continental Express, and Continental Connection. United
Airlines and United Express operate an average of nearly 5,000 flights a day to 373 airports
across six continents. In 2014, United and United Express operated nearly two million flights
carrying 138 million customers. United has the world's most comprehensive route network,
including U.S. mainland hubs in Chicago, Denver, Houston, Los Angeles, New
York/Newark, San Francisco and Washington, D.C. United operates nearly 700 mainline aircraft,
and this year, the airline anticipates taking delivery of 34 new Boeing aircraft. The airline is a
founding member of Star Alliance, which provides service to 193 countries via 27 member
airlines. The company uses social media like Facebook, Twitter and its own website to provide
information to its customers.
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Worlds Most Comprehensive Route Network

373 Destinations (airports served)

235 Domestic destinations (airports served)
138 International destinations (airports served)
60 Countries Served
4,935 Daily Departures
138 Million Passengers in 2013
Uniteds Mileage Plus is the worlds most rewarding loyalty program, with a wide array of
travel, credit card and retail partners. Mileage Plus members may earn elite travel benefits,
including Premier Access airport services, and have access to one of the most extensive
merchandise redemption programs in the industry. With Uniteds industry-leading global route
network, no other airline offers more destinations for award travel. Nearly 50 United Clubs in 34
airports worldwide offer members complimentary bar service, light snacks and beverages;
business amenities such as Wi-Fi, conference rooms and workstations; and personalized
assistance with reservations, seat selection, upgrades and boarding passes.

Market Share
The following pie chart represents the U.S. domestic market share of leading airlines between
January and December 2014

Market share
Southwest

Delta

United

American

17%
39%

17%
12%

15%

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Others

Competitors
United Airlines closest competitors are American Airlines (AMR), Delta Air Lines Inc. (DAL),
and Southwest Airlines Company (LUV).
American Airlines (AMR): The Company is headquartered in Fort Worth, Texas. American
Airlines flies approximately 3,400 flights between 250 countries.
Delta Air Lines Inc. (DAL): The Companys headquarter and largest hub at HartsfieldJackson
Atlanta International Airport is in Georgia. The airline and its subsidiaries operate over 5,400
flights daily and serve an extensive domestic and international network that includes 333
destinations in 64 countries on six continents, as of June 2014.
Southwest Airlines Co. (LUV): It is the world's largest low-cost carrier, headquartered in
Dallas, Texas. The airline has nearly 46,000 employees as of December 2014 and operates more
than 3,400 flights per day. As of June 5, 2011, it carries the most domestic passengers of any U.S.
airline. As of November 2014, Southwest Airlines has scheduled service to 93 destinations in 41
states, Puerto Rico and abroad.

Objectives
1. The specific steps followed as a manager for the turnaround of a distressed organization.
2. Primary reasons worked behind the sudden change of employee morale at Continental
Airlines.

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Question-1: If you were the manager of a distressed organization, what specific steps
would you take to turn the organization around?
A distressed organization displays continuous underperformance in the market. As a manager,
one must refocus on the company and mainly the employees to lift up the overall company
performance as because a companys people are vital to its success. To do so, we would take the
following steps mostly related to Human Resource practices.

Recruitment
We would make a list of most consistent underperformed employees under different levels of
position hierarchy and then replace them with new employees which would be less than total no.
of eliminated employees so that new or fresh ideas can be come up. But we would pay the
eliminated employees a specific amount so that he or she could bear his/her expenses for a
particular time period till getting another job. Otherwise, it would be unfair and the old
employees would be too demotivated which may have adverse impact on future candidates as
well as on the company.

Outsourcing
Outsourcing involves the contracting out of a business process to another party. We would
outsource the processes or tasks which are less confidential as well as costly to perform for the
company itself. Thus, the company could get professional service at a lower price.

Training and Development

We would instruct the departments to arrange various types of professional training programs for
employees where different skills will be developed practically. For example- An employee of
Marketing Department can be trained to convince customers for buying products or services by
letting him/her deal with such situation on the spot.

Employee Engagement
Employee engagement in various decisions making processes is very crucial as it enables a fact
in the mind of the employees that they are also important part of the organization. We would
involve our employees in such processes by reducing the communication gap of employees of
different positions of top-mid and lower level employees, taking suggestions or opinions from
them regarding different strategies or policies of the company as sometimes a valuable decision
can be generated from a mid or lower level employee. In the case, Gordon Bethune followed
some steps to do so such as decisions taken from employees regarding layoffs, handling
employee complaints via toll free numbers and creation of committee to solve these problems.

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Performance Appraisal
We will divide a calendar year into 12 months. The performance of each employee will be
reviewed monthly by the departments. Each employee will be assigned specific targets and
instructed to focus on customers to ensure good quality products or services. We saw in the case
of Continental Airlines that the new CEO changed the performance appraisal system and to do
so, he ordered the departments to focus on specific targets regarding customer service rather than
cost based measure.

Compensation
Besides basic salary, we will start to compensate our employees in various ways to encourage
them in performing as well as meet their diverse needs. For example- in each department, a
refreshment bar will be built so that employees can gossip or take tea or coffee when they want
to take a short break from their work. Compensation will also include Medical and house rent,
lunch and transport facilities, salary increment, bonuses, leaves encashment, share from profit
etc.
Besides, we will provide incentives for the best performance under different categories which
may be monetary or best performer recognition trophy to motivate employees psychologically. In
the case, we saw that the CEO devised a monetary incentive system where each employee would
receive $100 if the company achieved the no. 1 ranking. We also noticed that seven workers were
rewarded with new sport utility vehicles for being perfect attendants.

Employee Turnover Reduction

Following the above steps in the same way forever is not enough. We will continuously try to
develop the steps to keep our employees loyal and thus reduce turnover. This will also motivate
potential candidates to join our organization.

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Question- 2: What are the primary causes for the sudden change in employee
morale at Continental Airlines?
Connection
Employees need to feel there is a connection between themselves and management. They share a
common purpose and common goals. They need to know that management knows who they are
what are going on with their job and that management is there to help them when needed. Oneway to connect with employees is to spend time with them. We should regularly work along with
them if possible. If not then take some time and find a reason to sit with them at their desk.
Perhaps to check something they are working on or just to stop in and see how they are doing.

Credit
Employees want recognition and acknowledgment that their work has purpose and that it is
appreciated. Never miss an opportunity to recognize when someone has done good work. Even a
simple Thank You when an employee completes a task for you will help them see their work is
appreciated. If employees have worked hard on something and done a good job, they almost
expect to be recognized for it. It affirms that their work is appreciated and that you respect the
work that they do. Awards and public recognition of work above and beyond are excellent ways
to recognize the hard work of your employees. All employees want recognition from
management and their peers. A manager may also benefit from the increased performance of
others so they also can get an award.

Effective Teams
Team building is a more complex challenge than fostering high morale in individual employees.
Here are five problems that many teams develop that keep them from being as effective as they
want to be in accomplishing company goals:
Absence of TrustBuilding a layer of trust within a team is crucial to a team achieving results.
When you don't have that trust level between co-workers, you end up with people that feel they
need to put on their Superman costume every day; they need to be invulnerable, but that leads to
defensiveness and attitudes of survival more than co-operative thriving.
Fear of ConflictFear of conflict is essential to overcome in order to build a strong foundation
for a team. It is important, to distinguish between healthy conflict and detrimental conflict.
Teams that engage in healthy, productive conflict will resolve issues quicker and more effectively
than teams who do not engage in conflict.
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 Lack of CommitmentFrom a team prospective, lack of commitment deals with two key
things, clarity and buy-in: Clarity because good teams make clear and timely decisions. Buy-in
because good teams move forward with complete buy-in from every member, even those who
wanted to go with a different idea.
Avoidance of AccountabilityAccountability issues can be a real problem when it comes to
teamwork. A lack of commitment and buy-in puts an undue burden on other team members and
ultimately the supervisor. Many people will tolerate this counterproductive behavior in order to
avoid uncomfortable situations. They fear they could jeopardize a close friendship or create
animosity if they call the person out. However, resentment will eventually set in and the team
morale will start to quickly erode.
Inattention to Results A successful team focuses on setting clear goals and publicly
displaying the outcomes. Team members must start by clearly defining goals and establish how
to measure them. Results orientated team places an emphasis on the team success over any
personal success.

Promotion & creativity

Once youve built trusting relationships and developed a foundation of respect, employees will
automatically respond with more creativity. The best way to nurture and benefit from their newfound creativity is to go by the philosophy that there are no bad ideas, only undeveloped ones.
Trusted and respected employees with managers who reinforce the fact that they have some
flexibility to try new things will surprise you with the creative ingenuity that they bring to their
work. The best part is that you get this for the same price youre paying unhappy employees
who are doing just enough to get by.

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Based on case
One of the first things that Bethune recognized needed change at Continental was employee
morale. This would be no easy task as many workers at the airline felt completely detached from
the organization, which was due in large part to the previous management team. Lorenzo, the
former chief executive, was cut off from employees and did not communicate. Bethune
immediately created change by establishing an open door policy and encouraging employees to
participation with management. One mechanism employed to build participation is a toll-free
hotline to handle employees suggestions, which is managed by a cross-section of the employeebase. He wanted to establish a new corporate culture where employers and employees will work
together. As a result he involved his workers in the decision making processes at Continental.
Bethune was ready to listen actively to worker concerns. Therefore, he invited workers to call his
voice mail, and when they called, he called them back. When he personally returned calls and
employees started to realize that the management team was really listening to their suggestions.
These important steps helped Bethune to gain the trust of employees and by extension, care
about their work.
To boost up employee morale, Gordon changed performance appraisal practices. The focus of the
performance appraisals shifted toward achievement and facilitation of on-time flights. To
emphasize the importance of this goal, management devised an incentive system that promised to
reward each employee $100 if they achieved the number 1 ranking in the Department of
transportations. Moreover, to acknowledge perfect attendance by employees, seven workers
were rewarded new sport utility vehicles at the companys expense.
To sum up it can be said that, by focusing on the workers and rewarding them for displaying the
behaviors and actions necessary to the companys success, Gordan Bethune was able to change
in morale at Continental Airlines.

Recommendation
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 Every company should recognize that Leadership at all levels would be significant to
success. The greatest challenge Continental has faced is a lack of leadership. Since the
arrival of Gordon Bethune, continental new CEO the company seems to have got a new
direction and it was back on the right track again.
In my opinion every company should have a strategy that covers the four elements of
market, financial, product and people, whether it's in crisis or not. Continental organized
their solutions to those problems into a strategy that they called the Go Forward Plan.
This Plan had four foundations: Fly to win was the market plan, Fund the Future was the
financial plan, Make Reliability a Reality was the product plan, and Working Together was
the people plan.
Organizational change is key since without change businesses would likely lose their
competitive edge and fail to meet the needs of their customers. Continental eliminated
layers of management during its restructuring, for that communication and decision making
were improved. The most important changes were the actions taken to regulate the HRM
practices to facilitate the achievement of the companys new objectives.
Working together this is the organization's people plan, with the strategic goal of building
a new corporate culture. Gordon Bethune was able to enhance teamwork, where
management committed to supporting and fostering every employee that they work
together in order to create a true community atmosphere. Key elements of this plan were to:
restore employee confidence in management; maintain peace among the work groups and
establish a results-oriented culture.
Continental should have arranged training and developmental function as well as
employee counseling. T & D add value to achieve excellence which is all about making an
organization perform better; produce better profits; achieve success; deliver its aims.
Employee counseling helps the employee understand situations and develop new ways for
dealing with current and future difficulties.

Conclusion

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Bethune is credited with reviving Continental Airlines, the flagging carrier he led from 1994 to
2004 that has since been acquired by United Airlines. Perennially ranked last among major
airlines in customer satisfaction, Continental was losing hundreds of millions of dollars each year
and fighting insolvency. Bethune, who was promoted from COO to CEO less than a year after he
joined the company, successfully transformed the long-suffering airline into a profitable and
respected industry leader. People are the key asset in an organization. It is acknowledged that
HRM can positively affect organizational performance and boost up employees moral. Behind
every success or failure HR Activities (Recruitment & Selection, T & D, Performance Appraisal,
Compensation & Benefits, Employee Relations, Rewards and so on)are considered the ultimate
deciding factor.

References
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