flying cheap
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Interview: Gordon Bethune

“If you want to get to Seattle, do you want to drive or fly? That's your choice. What's the safest way for you to get there?”
bethune

Bethune headed Continental airlines from 1994 to 2004. This is the edited transcript of an interview conducted on Sept. 29, 2009.

I want to go back to 1994 when you arrived at Continental. ... What was going on at Continental specifically but also in the airline industry at the time?

Continental had re-emerged from its second bankruptcy. One of the things that went wrong was they believed bankruptcy will fix your company, and it won't. If you're a crummy company, it will fix your balance sheet, but you need to fix the company, and they hadn't done that. So Continental was losing money in a time when others were making money. The old adage of a rising tide lifts all boats -- not the ones with holes in them, OK?

So Continental had not repaired its image. It was 10th place in on-time and in baggage and in customer satisfaction, and you can't win being 10th place no matter what the economy's doing.

So that's where Continental was, and, you know, great that we got our act together and came out of that, but a lot of others had failed subsequently as well. ...

What had happened to Continental?

It's the old adage: You can make a pizza so cheap, nobody will eat it. You can make an airline so cheap, nobody will fly it. They had taken so much cost out that the value wasn't there for the average person. A watch only has value when it's reliable and consistent, and an airline only has value when it's reliable and consistent, and we were not. And we needed to become that, and no one had ever addressed that issue. It's not about market strategy. It's not about the flight attendants with a Kate Spade handbag. It's about getting there safely on time with your underwear every time you fly. ...

What was the competitive environment back in the mid-90s?

... Winning is defined in our business as beating your competition, just like a horse race. You don't have to be the fastest horse on the planet, just beat these other horses. And airlines with investment-grade or almost-investment-grade credit are now or have subsequently gone bankrupt. People like Delta who had a balance sheet as strong as any in the industry actually went bankrupt themselves. So a lot of heartburn has occurred from '94 to 2004.

Is it just because, relatively speaking, it's pretty easy to get in the airline business; there are a lot of new players and a lot of new kind of competition?

And you're only as good as your dumbest competitor. And you know what? P.T. Barnum said there's a sucker born every minute, and they're coming in this business, so you've got to match whatever fare is out there. They go broke, but in the meantime, they take a lot of pain with them, and your cash.

So that's what happens? You have to fight this war of attrition with these upstarts that are going to go broke, but you've got to match them.

And not just the upstarts. The big, aggressive big guys also want market share. That's what makes this business exciting. While you and I are having this conversation -- let's say we're an airline business -- our competitors would be screwing us. They'd be changing a flight of one of 1,800 at a time of day or fare or something. It never stops. Never, never stops. ...

Let's say we were at Newark [Liberty International Airport], and we were doing really well, nonstops everywhere out of Newark, and America TransAir comes in and says, "We're going to make a nonstop from Newark to San Francisco." Now, they had been flying it over Midway Airport [in Chicago], but now they're going to be a nonstop. That's direct competition with us.

Well, you've just got to go through the pain and suffering of whatever fare he puts on it to make sure your people don't walk to a competitor. You lose money for a few months. He certainly won't get any traction in the marketplace, and they exit the market.

But that never stops. If you charge too much, somebody will come in there and take your money from you. So you've got to get that price point, keeping your market and keeping your market share without attracting any competition.

So people really aren't that loyal. They're just going for the best price to get out to L.A.

Some are. I would say 40 percent of the people on an airplane today are there because it's the cheapest fare. The other 60 percent, though, you don't want to forget them, because they're on there because they like you and they're a frequent flyer and they have their miles. You can't get too far away on the price or they will go. But at the same time, you can't just run to the cheapest guy because you can't make a living just caving to the cheapest guy. It can't be done.

So making money in this business is pretty hard.

And that's why negative margins. Yeah, it is a very, very competitive business with new entrants. It's just like waves coming to shore. This wave's in; there's another one right behind it. That's probably good for the public because it keeps everybody kind of -- you know, like a walrus: It's not born fat and ugly; it becomes fat and ugly. And you can't let your company do that. Nobody's going to date a fat and ugly walrus, so you need to stay trim; you need to stay lean and productive. And that competition helps you keep that focus. ...

Southwest really rose in the '90s and became a real player. What happened there? What did they figure out?

They're good at what they do, which is one kind of airplane, point-to-point service, and they keep focusing. You've got to give them credit for the discipline. Not anyone else has ever done that.

Continental, when I was at Continental, competed very well here in Houston with Southwest. But they're not in the same business. ... Southwest doesn't do a lot of flying, and Continental does. Continental has about half of its flights international. So you need that mix, that balance, in what business you want to be in. ... I think Continental has done a good job of hedging its flying and its market presence, where Southwest has put all of its money into the domestic business and done well at it.

They've got focus, which is important, right?

Yeah. It's kind of tough now. ... They will publicly tell you it gets harder to grow because there's no markets that they can enter without a lot of competition and be profitable. So as you get those new airplanes, you've got to figure out how to pay for them, and that means new markets and new entrants, and they're running out of places to go. It's kind of tough.

I think there's, what, 19 airlines in our country that handle about 95 percent of the business? How many do they have in the U.K.? One, two. How many in Germany? One. And how many in France? One.

So do we really need 19 airlines to have competition? I don't think so. I used to tell the Transportation Department, I said, "You just need one, and we'll do it."

What are you saying, bring back regulation? Is that it?

No, no. I'm just saying that, you know, that old hubbub of more competition is better, I'm not so sure. If you look at the airline industry and the jobs they've lost and the bankruptcies and the creditors that have been stiffed and the plane makers [that had] been not paid for their product, doesn't have a really good record. Do we really want to continue that, or would it be better for us as a country to have jobs that you retire from and your children can go to work there, people who actually get paid for the services they provide? We haven't got there yet.

I mean, really since the beginning of airline flying, ... the airline industry collectively hasn't made any money, right?

That's right. And it's timing. What happens is a lot of people have made a lot of money in this business. You get in here and you get out here, but if you just stay in it -- it's just like if you go to the horse track and bet on the horses, you're going to lose your butt. But if you bet on this horse in this race with this jockey on these track conditions and you know what you're doing, you can make a lot of money in this business, and they have.

But over the long haul?

No, don't let it ride. If you go to the craps table, don't let it ride; drag some off. ...

Let's talk about the rise of the regionals and how that changed the business. First of all, help us understand how important the regional traffic is. ...

... Cities like, let's say, Corpus Christi, Texas, want to have jet service, and until there was a regional jet invented, they had turboprops. But they need to go to Paris just like anyone else in their business, so they would come to Houston and then take our flight to Paris. That catchment basin, they call it, of a market feeds your hubs, and that's why hubs are so powerful, because they offer transportation, competitive transportation. Let's say you are in Sarasota, Fla., and you wanted to go to Spokane, Wash. There's never going to be a nonstop flight. There's just not enough people between those cities there. You can do that over at Atlanta, over Dallas, over Houston, over Chicago -- a lot of competition for your flight. So that's where the regional jets come in, offering small cities competitive fares that they didn't have before.

... For a long time, many of the airlines owned these small airplanes, which fed their systems. That was the case at Continental when you got there, right? Explain how that worked or didn't work for you.

Continental Express was a wholly owned subsidiary of Continental, but there really is no need to do that. ... It's like anything else: We don't do our own engine maintenance; we let the manufacturer do that for us. They do it more effectively.

So regional flying can be done under contract to be competitive. ... Having an independent allows an airline to bid that and have a competitive relationship and make sure they get their flying done at the lowest cost.

How does that save you, though? Labor cost primarily? Is that it?

No, it's everything. In other words, it's like any other company. You have efficient companies, and you have inefficient companies. ... We compete with United, American and Delta for your business based on price, but if that price gets fixed in the marketplace, we have to get our cost below that to make a business. That's our pressure, and it's on us. And the regional supplier has the same pressure.

So you were there and presided over outsourcing a lot of this business.

Yeah, ... allowing Continental to have a really competitive environment in which to choose a partner. Continental Express still is Continental's provider, but they did it on a competitive basis.

What was the whole thought process in putting this type of flying on to another company?

It's a different kind of business. Regional jet flying in smaller airplanes aren't big airplanes and different employees, different labor standards, different wage rates, right?

So if you want to be competitive, you can't start your pilots -- let's say if you join Continental Express as a first officer, you wouldn't automatically matriculate to a 737 captain at Continental. You need to keep that competitive in the business it's in, not in your business. And I think we did that. ...

Help a lay audience understand how it's a different business. It's still airplanes, transportation and moving passengers safely. How does the distance traveled and the size of the airplane make it a different business, from your perspective?

One, let's just take cost of people. You don't pay people the same to be a first officer on a regional jet as you do the first officer in a 747. ... The marketplace for those people are different. Whether you have a pension or whether you have days off or salaries or all those, that's a different business. ...

They're all flying airplanes, but they're not flying the kind of airplanes you are with the same kind of standards that you're flying, and so you let that operate as if it's an independent business because other people are in that business. That's all they fly is regional jets, and you have to be really good at it, but you can't afford to have a lot of excess cost and still win a contract. So it makes the management be cost-effective.

So it's a different business.

Yeah, it is. But it's an important part of your business, and that's why you put your name on it. And one of the things that you get is an extra layer of -- from a safety perspective -- an extra layer of management or an extra layer of oversight, because not only do you report to the federal government -- you can't lay that off; it's your airplane and your certificate. You're responsible to the government for compliance. But Papa over here -- the major airline -- also looks at you because it's their name, and they want that compliance, too. So there's a lot of focus on protecting your brand and your image.

So when you were running the show at Continental, was it your idea that it would be important for Continental to be watching what these regionals are doing very closely?

Yes.

So did you do safety audits, that kind of thing?

Sure. As you do on any supplier, whether it's the engine manufacturer doing the overhauls, it's still your responsibility, and you need to ensure the compliance with your standards. ...

I find it interesting that at the NTSB [National Transportation Safety Board] hearing in the wake of the Colgan-Continental 3407 crash, the testimony was from Continental that it's up to the FAA [Federal Aviation Administration]; we don't audit Colgan for safety. Has that changed since your time?

I'm not sure you say you audit for safety. It is up to the FAA. You can't lay that off. You can't assume that, right? That guy has an operating certificate. It's an independent company, and they have to comply with their standards to the FAA.

You can, because it is your brand, make sure those planes are clean, those uniforms are bright, the planes are on time. Those are things that you need to make sure are happening. And quite frankly, you do look at their general level of maintenance and training, and whether you do it officially or you do it unofficially, it's your business partner, and so you do pay attention to that.

Why don't you explain for me how the code-share arrangement works. How do they make money? How do they work? They can't exist without you, can they?

Yeah. Code share is slightly different, but what you do is you hire somebody to operate your franchise. They get paid by the hour. They have no revenue responsibilities. If a plane's empty, they get paid cost plus X percent. That they are competitive on that bid keeps their cost low.

You pay them, the regionals, to fly segments.

You pay them to fly, but it's up to you to sell and book it and make some money on it, right? That's a code share. It is really a contract line for you under your brand. When you have a code share with a partner like we have with Delta, we may operate a flight along with them as an alliance partner. We'll put their number on it, and they can sell that as their flight even though it's on our hardware. So it's a looser term, like Air France has a code on some of the Continental flights, Continental has codes on some of Air France's flights.

Right. I'm thinking more about the code shares with the regional flights.

And that's under contract. That's contract flying which you can set that contract up with risk for revenue or non-risk for revenue. You can get you a partner who wants to take the revenue risk in a market and some of the upside, or they just want to be your service provider, and you pay them to fly and they have no risk. Continental Express is one of those that's paid to fly service without revenue risk. They don't sell it; they just operate it.

And what about liability? Who's responsible for what when something goes wrong?

They have their own insurance and liability, but at the same time, ... Continental deeply cares about Colgan as their business partner and what happened to those families. I thought they were exemplary in the way that they took an interest and provided relief and help and comfort.

So it's not a legal liability, but you do have a sense of proprietary. It did say "Continental Flight so-and-so," and so it's sold as that. And while there's a difference between legal liability and what you feel that you need to owe your passengers because you're you -- ...

[The code-share agreements are] closely held, aren't they? It's not like you can get these on the Web.

I think a lot of things are. The purchase of airplanes and engines are closely held because it's competitive. Your competitors are not your friends, so if you tell them everything you're doing, they'll exploit that. So you do compete for the business.

There are a number of air carriers that fly for multiple airlines -- Mesa is a good example who flies for United, USAir and Delta. So they're competitive, and Delta chose them because they provided the best offer. That's just the kind of business they're in. ...

Without sharing the contract, give us an idea of the kinds of things that are in there.

Well, the cost of fuel, dollars per hour on the aircraft and the equipment cost. Those are still things that you kind of decide -- what kind of equipment you want them to fly -- and you have to protect them against the vagaries of the marketplace.

At the same time, their overhead cost is not in there, but that's a negotiated deal. But if they exceed it, it's on their nickel, so it eats into their margin. Nobody wants to do a negative margin contract, so it's got to be profitable to them. You just want to make sure that it's not at your expense, that the profits don't come from getting fat like that walrus we talked about.

So it's not a cost-plus deal. You don't want those.

Some costs are cost-plus; some are not.

Like what?

Well, just things they can't control are cost-plus, like fuel.

I see. So they pay the fuel, but there's a cost-plus deal.

Cost goes right through to us.

Do you tell them how the crew should look, how the plane should be painted and all that kind of stuff?

To the extent, yes, because it's your brand, so it says "Continental Express," so that's your logo. ...

When you're looking for a regional to do some flying for you, what's the criteria? What are you looking for?

Well, the type of equipment and the cost of -- it's a very, very competitive business, but, I mean, there are not that many of them.

So, low bidder? You just want the low bidder?

No, no, because that's not the way you do it. I said earlier you make a pizza so cheap, nobody will eat it. It's not the cheapest pizza. ...

You want the lowest cost, but reliability and dependability are part of that cost, so it's not just the price per hour, but it's the total cost. If you're losing passengers through unreliable service, that cost is too high. You don't shop for a physician in the Yellow Pages and say, "Hey, who's the cheapest brain surgeon I can get?" That's not the way you pick a brain surgeon, and that's not the way Continental would pick anybody. ...

How much do you want to be in their business when you have a relationship like this?

Like with Boeing and General Electric and other partners, you need to -- like what the carpenters say -- measure twice and cut once. So be real careful who you pick. I think having a relationship is important, but you need to trust those people to do what they say they're going to do. ...

But when it comes to safety, you rely on FAA standards, right?

Yeah, obviously you have to comply with the federal air regulations, and that's implicit in your contractual obligations.

But at the mainline you go way beyond the FAA standards, right?

Yeah. And sometimes you just meet them; sometimes the standards are more than adequate, but it doesn't restrain you from doing more. In other words, I could always look again if I want to look twice. Like I said, measure twice, cut once. But standards are standards, and if you meet them, then you've met them.

And the FAA standard is good enough.

Very. It's very high, probably the highest in the world. I don't know of anybody who has flight standards as stringent as this government. ...

I guess the issue is the way the industry has evolved, ... the way the code shares and the regionals have been set up and the outsourcing of flying. That's crucial to the business, right?

It's crucial to those communities that want that service. In other words, this whole country and the economy is driven by air transportation, and if you don't have it, you don't get companies moving into your area. Houston competes with Dallas and Atlanta and Detroit for business, and business can move to cities that have good transportation systems so that they can prosper. And if you don't have it, you're not competitive. ...

Would it work if you didn't paint the airplanes with your logo? In other words, does it have to have to be a Continental Connection in order for the whole thing to work?

It represents a standard, and so Continental says that one, you check in in Lafayette, La., you're in our system already. We know you're coming when you get to Houston. We wait for your bag. You're part of the system. You're not independent. You expect this level of service because you know Continental is not going to allow anybody to operate with their colors without this level at least standard or service. And so it's a very big convenience for you as a passenger to have somebody that you know and trust come and get you.

So expect Continental level and service and safety, but do I get it?

If you're unreasonable, you don't. If you're reasonable, you do. If you're going from Miami to Key West, we're not going to send a 777 for you, OK? You're not going to have a meal. You're just going to Key West. That would be a reasonable expectation. Should it be clean, safe and reliable? Yes, it should, and it is.

But I would expect the flight crew to be properly trained, rested.

They are, and they certainly are.

And paid.

Absolutely. I would, too. And I'm sure they are.

Really? You think $16,000 a year as a starting salary for a first officer is enough?

Can I tell you how they get to that, just so that the public knows? Every three or four years, there's contract negotiations between labor groups and the company. The company says: "We can afford to pay this much money. This is total dollars. How would you like to allocate it?" The union who's negotiating on behalf of its members allocates that money in a way that can get ratified by the vote of the pilots. You know who's not there? The people you haven't hired yet. You know who always gets left, because the captain wants $2 more? And everybody says, "Well, you know, my first year we didn't get paid anything either, so tough shit for them." ... The reason it's $16,000 a year is because that union wanted that money somewhere else, and that's the way it works.

It's the union's fault.

Well, you only get so much money. How much would you like to allocate? Would you like to have every pilot get $2 less than ours so we could pay the first-year people this much, or would you rather have the $2 an hour in your paycheck and let the first-year people go probationary as they are, like every other, and you were? And that's what they elect to do. ...

But a lot of these regionals are non-union, so that doesn't make much sense, does it?

I don't know. Then you have the marketplace. Then can you afford to pay your pilots a lot more than your competitor, yes or no? You're a horse. Can you afford a fatter jockey on your ass than your competitor? No, you can't, not to be competitive.

So you need to kind of take salaries and a competitive environment. You're not in a vacuum. All of those things matter. What you pay your people matters. That's how fat your jockey is, and you need to win this race, so you need to be fair. You need to be fair. You need to keep your people, but you need to be competitive.

But these regionals are making a lot of money.

Are they? I didn't see that.

Yeah. Yeah.

I must have missed that.

… I saw some financials on them, and [their] 10 percent [return] is enviable.

And you can look at it. That's a business that you could get into. We could be in furniture business. I mean, if you really want a margin and stability, you wouldn't be in the airline business, but that part of the airline is under contract, so it tends to be more stable.

Now, the facts are that it isn't stable if the large carrier goes bankrupt because that contract's no good anymore, and then you lose all of that, so you have some risk in that business. It's just contractually you don't.

A lot of the risk is out of your control, isn't it, in that respect?

But in other words, we used to talk about it like a tapeworm, you know. Why do tapeworms make a good pet? Well, they go where you go, eat what you eat, and die when you die, OK? So if your business is 100 percent dependent on me, that's all you do is provide me services, if I'm sick, you're going to die. So that is a risk you have to take. You're not in a vacuum over there either. You might have a good return as long as I'm alive and well and paying it, but if I don't stay alive and well, you won't get it. ...

An important part of the model, the brand is out there, they are the steward of the brand, and yet you say "Leave it to the FAA" when it comes to the issue of safety? Does that make sense?

I'm not sure. I think the representation is that you get a standard when you buy it. Let's go to the grocery store and buy sugar. We go to the aisle, and we pick up a blue bag, and it says "USDA granulated sugar," and so does the red bag, and so does the yellow bag. Now, we all know what the standard is inside. Now we go for the price -- the cheapest. Right adjacent to that is Larry's Haitian sugar. We think it's clean, half off. Do you buy it? No, because it doesn't meet the standard. So when you are a regional flyer under contract for a major airline, you have to meet the standard like USDA sugar -- which, if you do that, you can fly. If you don't do that, you can't fly.

No one says Colgan is below the standard. They say they're at the standard, and the suggestion is that's not enough.

Well, then why don't you change the standard? But don't say that's not enough if you set the standard and you meet it. ...

So why is the standard not good enough for the mainline carriers? Why do they exceed it?

They can choose to do it. I mean, you can choose to do anything you want, and I don't say that they do exceed it all the time, but they meet it for sure.

By and large they do, don't they?

Which one are we talking about?

Well, certainly crew-rest issues.

Crew rests are negotiated things. Sometimes that's how you have your unique route system and your unique flights, and you negotiate with your pilots, and you want to be fair to them. You don't necessarily have to do the minimums of everything.

Right, but that's what's done at the regionals. That's the point.

I don't think you're right. You say that that's what done in the regionals, and I would disagree with you, that there are a lot of parts of the operations and regional carriers which I don't have. But they exceed standards.

What about training, though?

I'm sure they do. I'm sure they exceed training.

For example, that crew in Buffalo, they had never experienced a stick shaker or a stick pusher in training.

That's ludicrous. That is absolutely ludicrous. He got that when he was a private pilot. ... I think the crew that you're talking about had thousands of hours of experience.

Not so much on that type.

OK, but how many thousands of hours do you need before you know that when the airplane stalls that you should push the yoke forward? I mean, you said you're a pilot. Did you learn that? I did.

That's one of the first things you learn.

So with thousands of hours, you should know that.

A critical thing like that, it wouldn't hurt to run you through that in a simulator, right?

I don't disagree with that.

So maybe the training wasn't enough.

You could always say that. Why don't you tell me what's not enough in the traffic situation out here? I mean, sure, ex post facto you can find out anything. But all right, then put it in there. I mean, if that's not enough at that level, then include it.

So raise the standards, you'd say.

If you think they need to be raised, do it.

I'm asking you.

I really don't want to comment on that because I don't know; I wasn't there. That seems so fundamental to me that I don't understand why we would have to make an issue out of it in a new aircraft training program. That's fundamental. But if that would be helpful, then put it in there. ...

How much are these operations policed by the mainline carriers?

You could use a proctoscope, I guess, but how much policing do you need to do? I mean, you have a business partner. They have a right to do business in the way that they need to meet their standards. ... That's kind of what you pay your doctor to do, and you choose your doctor wisely, and you just let him do it. You don't supervise him.

It's interesting though. If you opened up a McDonald's franchise, McDonald's tells you a lot of things about how to do your business, you know -- big, long explanation about how to cook the french fries because they want to make sure their brand is consistent and is protected and the customer gets the same experience every time.

It's a little tougher running an airline than cooking a hamburger, so I understand that. That's called repetitive, a kind of process. That's in manufacturing. I used to be in manufacturing. But we're not in manufacturing.

This is not a static environment; it's a fluid environment. You have judgment. Every time you take off, you use judgment; you land, you use judgment.

You can't supervise all that. You've got to get a guy and give him the airplane and train him and then let him use his judgment. ... That's why there's a single seat in the left seat. It's not a bench; it's not a committee. It's one person decides. And you hope you picked it right. You hope you got a good one. You hope your doctor's a good one, because he's going to make some judgments that are going to affect your health.

Now, the difference between your physician -- when you die, he doesn't die. The guy in the airplane goes with you. So he has self-interest to do the good things, too, and I don't know of any pilots that don't have a self-interest in staying alive. I've never met one. ...

Safety is implicit, but shouldn't it be overt?

It is overt. Did the airplane take off? I mean, what's the manifestation of having everything together? Do you just watch all the pieces that are there? How do I know they are there? Well, the watch is working. There's a good damn clue right there. So if you reliably consistently fly for me 1,000 flights a day and you've been doing it for a year, how are you doing?

Right, but --

No, I mean, how are you doing? You know how you're doing.

You're meeting the terms of the contract, but what you don't know is the relative how many service difficulty reports have been on the airplanes, how well trained the crew is.

That will show up in the operation.

How fatigued they might be.

That will show up in the operation, too. All of it shows up. All of it manifests itself in unreliable operations. ...

And that's why Continental did so well, because we understand that, but there's no shortcuts down here. A cheaper overhaul on a pump is not cheaper if the pump fails at twice the rate because the airplane's out of service and I would lose a day of revenue. So we understand that. That's the difference, I was trying to tell you, between price and cost. But the manifestation of doing it correctly is that it works reliably and consistently year after year after year. ...

You can push it, though. You know that. You can push your flight crews. You can give them, you know, minimum rest periods, you know, eight hours total rest periods; you can give them the bare minimum of training; you can pay them low wages. All those things are pushing it, right? And they may get there on time, but how close are we to toppling over?

How many years would you like to take to look at the record here? ... If you look at U.S. air transportation safety, I don't know where you're going to compare to something that's better. I don't understand what you want. I know there are some people that are never happy. People that are having unreasonable fear of flying, you know what I tell them to do? Take drugs. You can't reason with an unreasonable.

I'm trying to tell you that reasonably, that people who demonstrate day in and day out a safe, clean, reliable operation are doing it, and there's no corners cut, because you can't cut corners and do that. It doesn't work.

All right. Agreed. And the majors have an incredible safety record. It's astounding. It really is. And you presided over a part of this, and you're all to be applauded for that. But the last six accidents in this country that involved fatalities have been regional.

Really?

Yeah.

How many years are we talking about?

Over the past seven years.

So that's less than one a year.

All regionals.

Less than one a year. ... How many flights do you think that is?

All these things are true. All those things are true, except if you are a loved one who has lost somebody on that plane and you think to yourself, well, wait a minute, did this have to happen?

Let's take it this way. Let's say we're in Houston, Texas, and there was a crime committed last night. Do we need more police? Obviously we do. We had a crime. How come we don't have more police? Well, because reasonably we have enough police to minimize the crime. Does that mean eradicate crime or to minimize crime? ...

But I know that if you're saying six accidents in seven years and you want to tell me how [there were] millions and millions and millions and millions of successful flights for those seven, I'd say, "Hey, pretty good safety record." Do you know any better place for a safety record? I don't.

All that is true. But can it be better? It could be better.

Sure. And you know what? The chicken soup I ate for lunch could be better, too.

Yeah, but the chicken soup's not going to kill you. We're talking about people who are trying to get to Buffalo.

If you really want a safe place, I advise you to crawl under your bed and stay there, if that's really your motivation. ... The facts are that if you want to get to Seattle, do you want to drive or fly? That's your choice. What's the safest way for you to get there?

All this is true, but an accident should be a learning experience. What do you take away from Buffalo?

... I'm sure the NTSB is going look into all that. I don't know. I'm a casual observer like you were. ... All I know is what I read in the papers, and there's a lot more data. It's an unfortunate accident. ...

So you don't see anything that screams out at you that says this regional business needs some fixing.

I read that Mr. [Randy] Babbitt, the FAA administrator, said that he was appalled by the pilot's apparent lack of professionalism. That was his judgment. They were highly credentialed crew members. I saw that. New airplane, beautiful airplane.

So I don't know. It's unfortunate. More than one thing went wrong there. It had to be. Air accidents are so infrequent because multiple things have to go wrong sequentially to have an accident, and when it does, unfortunately there's an accident. The good thing is it's pretty rare, pretty damn rare. ...

But that accident didn't have to happen, did it?

None do. In other words, the boat wouldn't sink if you'd have put the plug in before you left the dock. All of us know that accidents are caused, but what is that cause and how many preventative measures were put in place or defeated through some circumstance, I can't tell you. But it usually is three or more to have an accident; this failed and this failed and this failed and all at this time.

Because, you know, being in the business at Boeing, we have so many redundancies on the airplane -- got redundant pilots, redundant systems, redundant engines. But at the same time, it's not infallible. But if you really want to be safe, I'd get under that bed and stay there. But it's not much of a life. ...

Going back to the '90s again, after all those crashes, there was this whole talk about having one level of safety industrywide. Do you buy that?

Never heard of it.

You never heard of one level of safety?

I don't know how you would do it since we're so different and we operate different. But I think there is a common standard. I know that the license I hold in my pocket as an airman is a common standard that every other airman meets.

But airlines are different. Southwest is not flying to Tokyo. They're not going to Tel Aviv every day. And so it's different over there. Now, they need to meet a standard for what they do, but that might be different than the standard that American is flying when they're on their way to Hong Kong. It's a different environment; it's a different trip; it's a different airplane.

So there are multiple standards, depending on whether it's Lubbock, [Texas], or Paris.

Well, no, you have standards to fly the 737 airplane. It's called a type rating, and you have to meet that federal standard, and you have to fly in accordance with your high operation certificate. That's also different than his operational certificate. ... A maintenance program could be different for FedEx who uses airplanes four hours a day so you wouldn't use daily; you would use hourly, where a commercial airplane might be flying 15 hours a day. So the utilization is different; so maintenance programs will be different. They'll meet that standard, but they'll meet it in a different way. Could be the same airplane, though.

Don't you think most passengers assume that safety is standard across the board?

Rightly so. It does meet a standard. There's a universal standard that the pilots will have these kinds of licenses, that they will have passed these rigorous FAA-mandated inspections, that they will be monitored for safety and their compliance is made public. And so the public gets that.

Does the public have the right to expect that nothing ever goes wrong, that the toast won't be burned when we order it? I don't think so. I think they're reasonable. But certainly the standards in this country are higher than any other country I know of, and the public has demanded that, and they get it.

But it sounds like when you get on the Colgan regional which is outsource flying by Continental, even though it says "Continental," you're not getting Continental standards.

I'm not sure that I would agree with you there. What you're getting is a clean, safe, reliable transportation to a small city that Continental has arranged, and you have a right to expect to be safe. ...

But is it a little deceptive to have that logo on there and those uniforms? And aren't you telling people: "Hey, this is Continental. It's OK"?

Continental itself, as other major U.S. air carriers, has had accidents. You know that, right? I mean, you've read about this.

Actually Continental has a pretty good record.

Wonderful record, but I'm saying it's not 100 percent. It's good or better than anybody in the world, but it's not 100 percent. So did you know that as a customer? Would you expect that? You do know that, because you read about it in the paper. Do they still get on? You know why? Because you can trust these guys to do the absolute very best that can be done. ...

Are you being up front, though, with those customers?

Sure. Absolutely. Absolutely. You've provided the very best way for them to get to Buffalo tonight.

But I thought it was Continental.

It is.

No, it's not.

Continental arranged it. It says on the ticket, "Flown by Colgan." I mean, if you can't read, you probably need a dog to get you onboard. The government requires disclosure, and it's made at every point, not only in the booking but in the ticket and on the boarding pass, in writing.

But no one getting on that plane knew what Colgan was.

I'll bet you that you're wrong. I'll bet you they did. You'd be wrong. It said it on their boarding pass. I bet you some people read it. When they booked it, they saw it, and on the Internet they saw it. So if you didn't see it, you didn't look.

You just didn't know maybe what it meant, but that's OK, because a lot of things that you buy you don't know either. Where was your Honda made? Was it made in Japan or Marysville, Ohio? You don't probably know. ...

I know you are a big believer in the consolidation of the airlines, and you'd like to see fewer airlines. Would that ultimately make things safer?

Make them more predictable. I think predictability helps in safety, yeah, I would say. Every time you reduce the variables, you do the predictability analysis, and it gets more predictable. So if you want to extend that logic, you'd say yes.

So we don't need all the airlines we have in this country.

I told them we only needed one. Continental can fly all of that shit for them safely every day, and I don't understand why the DOT [Department of Transportation] didn't agree. ...

[The pilot of Continental 3407] was hired with 650 hours; he had failed five check rides and did not have any simulator training on the stick pusher. ... Continental wouldn't tolerate that, the main airline, right?

Well, here's what you're leaving out unsaid. I was at Boeing, and we were training pilots at Boeing. We trained to the proficiency. Doesn't mean that you get it right the first time, but when you quit learning and you reach a plateau where you can't learn anymore, we flunk you. But we just let you do it again. So when you flunk a check ride, it isn't the end of the world. It just means that you need to do some more work, and you can only pass a check ride when you have done all the work. ...

We were talking to somebody the other day, and he said, you know, more people die in their bathtub than in an airplane or whatever, and maybe we should do an hour documentary on bathtubs. But the airlines are a business because they set such a high standard. When they fall short of the standard, when people die, number one, it gets a lot of news attention; number two, the question is, "Well, how did that happen? You are the best," right?

Since it's so rare. I had the NTSB here talking a few years ago, the previous administration, and he had an organizational chart. You know, they've got the highways, they've got everything -- the transportation safety bureau -- and there's one little box over here on the right; it says "Aviation, Air Carriers." I said, "... What percentage of your budget is that?" He said, "Ninety percent of my budget is over here." I said, "What percent of the fatalities in this country are over there?" He said, "None, almost none." I said, "Well, why is all the money being spent in a place where there's no fatalities?" He said: "It's politics. It's what the public wants to read about. It's the zing in the news media."

So if you really, really want to be safe, you fly on an American air carrier. That's it. Is it perfect? No. But I don't know where you're going to go any better than that. Whether it's a Colgan or American Airlines, you're safe. This is as good as we know how to make it. Could it be better? We're always evolving. It's not static, and so this will evolve to something else, and another layer, but you know what? It is the best of any place in the world. The best. If you want to get from here to there, I wouldn't drive.

So it will be safer because of Buffalo, and there will be things that will change?

It's all compound learning, sure. Everything that happens, we take in to that knowledge base, and say: "Let's not let that happen again. What do we need to do?" And that's why the government is using this, investigating every facet of that to see what we can learn from that. I told you I don't know of a pilot until the time he retires that doesn't continue to learn about how to fly the airplane and airlines learn every day. And this will help them.

posted february 9, 2010

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