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Continental Boss Raises the Flight Cancellation Bogeyman

Posted by: Justin Bachman on March 09, 2010

Smisek.JPG Continental Airlines’ chief, Jeff Smisek, offered a rare public CEO tantrum on Tuesday at a J.P. Morgan investor conference. He was asked about the general tone in Washington toward the airline industry and took the opportunity to vent about the new federal rule targeting tarmac delays exceeding three hours. Smisek’s blustery prediction that the public would suffer waves of canceled flights garnered heavy press attention so I thought it was worth transcribing the entire rant:

The day that I rely on government to help this industry you should make sure that I get fired. Look, my goal in Washington is just to prevent them from doing more harm. And candidly what I’d like them to do is just leave us alone for a while. Because every time they try to make things better they just make things worse.

An example of that is long tarmac delays. That’s solving a problem that doesn’t exist. I mean long tarmac delays are extremely rare. They do occasionally occur, there’s no question about it. But having a rule that requires us to cancel flights at three hours or suffer a fine of $27,500 per passenger, is inane. And so what we do in the face of a fine like that is we’re going to cancel a lot of flights. Which means customers who would have gone at two hours and 45 minutes – and by the way they’re being held on the tarmac … the reason they’re on the ground is because we use the very finest 1950s ground-based radar technology in our air traffic control system.

So the government sticks us on the ground because they refuse to invest in the highways in the sky, right? Because no Congressman ever looks up, as far as I can tell. And then they fine us when, as a result of their incompetence, we’re held on the ground, right. And so we’ll cancel flights. Well, many passengers at two hours and 45 minutes, they really want to go to LA or Mumbai or wherever, but the government by God says, ‘We’re going to fine you $27,500.’ So guess what we’re going to do? We’re going to cancel the flight. And with the loads we’ve got today you’re not getting there for maybe days. And so the government is inconveniencing more passengers by passing what is candidly a very stupid rule. Ask me how I really feel.”

So are travelers doomed to endless days in airports pleading for a seat on the next flight to Frankfurt or Omaha? I’m not terribly worried because a hub-and-spoke airline operation like Continental’s – and all its major domestic rivals – requires planes to be at certain spots at certain times. When they’re not, it is most often due to the kind of extreme winter weather much of the country experienced in February – and a safe airline won’t fly then anyway. So when the poor weather passes the planes move as quickly as possible and an airline suffers disruption costs as a result. The outdated U.S. air traffic control system is a handy villain (which, of course, requires replacement) but is not a terribly compelling culprit for a problem that is so extremely rare. Airlines have already become far more aggressive about canceling ahead of foul weather and I consider that just smart.

Based on the vitriol in Smisek’s condemnation, I think the tarmac delay rule is a rare instance when industry lobbying was completely demolished by a new administration’s need to do something perceived as consumer friendly. The size of the fines was clearly surprising. One might also consider Smisek’s aside a calculated effort to nudge the Dept. of Transportation toward approving some waivers for the rule at New York’s three main congested airports, one of which serves as a Continental hub. The rule takes effect April 29 and JetBlue and Delta are requesting leniency at JFK for rule compliance, citing the runway construction there that is scheduled to last until July.

Smisek is a colorful, blunt fellow who is cast far more in the mold of predecessor Gordon Bethune than the just-departed Larry Kellner. For example, here’s Smisek’s description Tuesday of Delta, Continental’s former partner in the SkyTeam alliance: “It was a lot like being married to a woman who wants to poison your food. It’s just generally not a good idea.” Well, neither is spooking passengers about flight cancellations. But I do think it’s refreshing to see a CEO publicly unshackle his tongue once in awhile.

Reader Comments

JM

March 9, 2010 09:47 PM

Wait, so you're telling me that the horrendous stories of being stuck on tarmacs overnight, for well beyond six hours, overflowing airplane toilets, no water, no food....that's good for Airline biz? And you're telling me that these airlines are crying rather than enacting solid business practices and pushing for reform in the ATC practices?

OK....thanks Mr. Smisek. As a Continental Platinum Elite (100k+ EQM last year alone), have some regard for your passengers. You weren't willing to solve the problem on your own, so the government stepped in. I, for one, think your industry is inflexible and silly.

Scott

March 9, 2010 10:57 PM

As corporate airline executive, Jeff Smisek has NEVER had to sit in an airplane for 3 or 4 hours while it sits on the tarmac waiting to take off knowing that you have a another 3 or 4 hours of flight when the plane finally makes it into the air. If he had, he would understand what utterly horrible experience this is. I would rather go back to the gate and wait in the airport and possibly have my flight canceled than sit for hours in a grounded airplane.

By his own statement he says "That’s solving a problem that doesn’t exist. I mean long tarmac delays are extremely rare." If they are extremely rare, why would his airline need to "cancel a lot of flights" in response to this new rule? I guess his idea of a "long tarmac delay" is not the same as the airline flying public, which is EXACTLY why the FAA enacted the new rule.

If I were married to this guy, I'd want to poison him too.

ejj

March 9, 2010 11:10 PM

The comments of this pathetic CEO are downright disgusting. The Pat Riley Gordon Gekko look gets him nowhere. Every CEO of an airline whose plane is delayed on the tarmac should be LOCKED IN the very stinky-toilet-overflowing plane that was delayed, for the amount of time it was delayed, multiplied by every passenger (150 passengers times 4 hours = 600 hour confinement to plane). Complaining about 1950's ground radar technology? The airlines should have used their special interest lobbying powers to have that changed FIFTY YEARS AGO.

O. Wright

March 9, 2010 11:57 PM

Comments here do nothing to dispute Smisek's point: while "toilet-overflowing" delays happen, they happen extremely rarely (Mr 100k+, you fly alot, has it ever happened to you?) but 2-3 hour delays happen all the time. So now, because you (and Congress) over-react to rare but dramatic events, all the rest of us are going to get cancelled flights a lot more often. And you haven't even discussed his real point -- the problem is not the airlines, it is the radar in the towers, so these fines won't do a darn thing in fixing delays. Is that true?

A EverWebby

March 10, 2010 07:36 AM

Airline delays happen for a reason, most likely safety reasons. You cannot make a profit parking taxi, right? But then again, I do not fly enough to claim that delays happen all the time, though out of 25 flights that I have been on, I had been delayed more than 3 hours on two occasions.

On one American flight, there was a problem with the engine which needed repair. On the other delay, it was really unknown why we were sitting so long, unable to un-board before the next leg of the trip.

Being unknown, you begin to wonder what could keep the grounded, after all, they are running a business and the plane surely has other scheduled destinations. Perhaps they might have a fugitive or suspected terrorist on board, the plane has critical parts in disrepair, maybe the pilot is ill or drunk, or the airfield is just too congested at the current time. In all of the above scenarios, I am certainly willing to wait, how about you?

Now look at it from airlines perspective, if you will. You know that problems happen, but now you must either roll the dice by putting more passengers at risk, cancel flights leaving passengers stranded and terminals flooded for hours or even days, or face fines which the struggling industry cannot and will not afford anyway. All the above choices leads to airline ticket price hikes or airline closures because of increased accidents, insurance, tarnished brand image, and/or further regulation. And from what I understand, the airlines are subsidized by tax payers anyhow, so what is really being accomplished by adding a fine to the airlines: lower volume ticket sales, loss of jobs, and a couple of accidents along the way.

SSW

March 10, 2010 07:51 AM

The ground-based radar system is there every day, for every flight, nationwide. Yet lengthy on-ground delays where passengers are unable to get off the plane are "extremely rare." Therefore, logic dictates that the radar system is not the culprit.

The real issue is that airlines sometimes have a basic common sense deficit so appalling, it has taken draconian government intervention to prevent airlines from incarcerating hundreds of people in airplanes for hours on end.

It would be easy to come up with a better system -- graduated penalties which get larger with each passing hour, for example -- but the airlines have nobody to blame but themselves on this one.

AirFrank

March 10, 2010 09:02 AM

I use to fly commercially 20-30 times a year. Only once was I grounded for over 3 hours. This is just another example of how incompetent the US gov't is. A 100 passenger plane yields a net $53,000 per flight yet the feds want to place a fine of $3.5 million? Inane is too nice a word to describe this stupid rule. Time to eliminate 90% of the feds and return to a limited federal gov't.

KSU~Fan

March 10, 2010 10:08 AM

As someone who has been intimately involved in the commercial aviation industry for over 30 years, I find it laughable that so many of you do NOT understand the complications of operating a scheduled flight.

Oddly enough the FAA flight plans and Air Traffic Controls are horrendously outdated. The airline lobby's have petitioned Congress for years to update the system with modern technologies, to implement a gradual induction of systems that will allow aircraft to fly a more direct route, thus decreasing flight times, increasing utilization of routes and reducing congestion times.

We now have commercial aircraft that will perform the entire flight regimen with the exception of the taxi process via computer. We have, in air internet, live TV, air phones, yet we continue to monitor and track aircraft on paper!

Granted the airlines are culpable in these delays as well if for no other reason than the schedules they attempt to provide so that you the customer can get to where you want to go, at the time you wish to travel. Paring down some of these schedules would help in the delay problem, however there is nothing you can do when the weather prevents operations.

When given the option of canceling a flight and facing the loss of revenue etc., or paying a fine of $27,000.00 per delayed passenger it's easy to see where the airlines will go. This legislation is a result of knee-jerk passengers and Congressmen, as well as a defensive posture taken by the airlines.

Smisek, only said what the other airlines want to say. Now you most likely will see other airlines try to spin this situation in other ways, but trust me, the bottom line is that they will ALL do exactly the same thing. IF it is unsafe to fly, and time is running short, they will cancel the flight.

You'll be left at the terminal to fend for yourself, and the best you can hope for is to reschedule on another flight and find a hotel room. Just work the numbers of 4 wide body aircraft with 200 or more passengers, and everyone of them trying to reschedule on another flight or get a hotel room in the airport area, do you think that everyone is going to be accommodated? Keep in mind, that if the weather is such that one airline is not flying, most if not ALL of the airlines are not flying, and you're NOT going to go any sooner, and most likely incur a significant cost of the delay personally, as well as the disruption of your travel plans.

It is time to update the system, and allow the technological advances that have been made in the last 30 years to be used to their utmost capacity. It's a win win for everyone.

flyer

March 10, 2010 05:07 PM

Notice that none of the $27,500 per passenger goes to any of the passengers. It goes to the government. Nice little tax. If the new rule said the airlines have to give passengers compensation for the inconvenience, like a free flight, then maybe it'd make some sense.

Robert

March 10, 2010 05:44 PM

I sense most of the comments so far are from individuals who travel regularly on commercial airlines. I'm one of those leisure travelers who uses an airline occasionally - perhaps for vacations. I read story after story online whether on Bloomberg Business Week, or elsewhere about the behavior of the airlines - most of them in my opinion making me feel more animosity towards the airlines. Slowly but surely I've reached the point that I hate the idea of airline travel, and only want to use this option when I'm absolutely forced to! I wonder if the airlines continue their present course, whether people like me will be so alientated, and "peeled off" that the airlines will never return to profitability?

Tony Taravella

March 16, 2010 08:46 PM

I have flown on Continental Airlines, and without a doubt this company couldn't care less about the paying passengers. I had reported very RUDE behavoir from Continental's employees and only after several times did I get a reply that amounted to a "This is our policy-- like it or not!" Well I try my utmost to AVOID flying Continental. Their attitude is very poor towards the paying, flying public!

FlySouthwest

March 16, 2010 08:55 PM

WE ALL NEED TO REWARD SOUTHWEST AIRLINES FOR THEIR FORESIGHT AND FISCAL RESPONSIBILITY AND FOR NOT NICKEL AND DIME'ING THEIR PASSENGERS... GO SOUTHWEST. (CONTINENTAL WILL SOON BE OUT OF BUSINESS ANYWAY FOR THEIR INEPTITUDE AND ARROGANCE)!!

Tod

March 16, 2010 09:48 PM

You GUYS SUCK! there is NO reason you cant get people off the plane...JUST DO IT....

Tom Harmon

March 16, 2010 09:53 PM

Are they (delays) rare or are you going to cancel a lot of flights? Try to be consistent.

James

March 16, 2010 10:07 PM

Smisek is one sorry excuse for corporate leadership. Clearly Continenal under his leadership should be in the cattle hauling and slaughtering business, rather than transporting and serving human passengers. Perhaps the way airport gate access is awarded should require a service measurement, with the poorer performing airlines losing gates to those who score higher, much like an English soccer team is demoted to a lower league for finishing last.

Dennis

March 17, 2010 02:07 AM

I've flown over a million miles and I see both sides of it. And I've spent more time on the tarmac then I would ever care to remember.
People are right when they say it will be a mess when flights are cancelled because of weather. One thing no one has mentioned yet is when the weather is bad and you are waiting on the tarmak, all of the gates are usually full with planes that pulled in after you pulled out. So, how are the airlines going to get you off? They are going to have to shuffle a lot of planes. What a mess.
That being said, when flight are currently cancelled due to weather, you are currently on you own. If you departing flight is late, then your connection is probably gone. The airlines will rebook you on a flight as soon as they can, but if the flights are full what can they do? But that is no different than it currently is, so that won't be any different.
The airlines have brought this on themselves. Look at this weekend's events with Virgin Air. How can these airlines let people sit without bring them food and water? And what about emptying the toilet tanks? Granted, Virgin Air probably did not have a contract with tthe local facilities, but that could have been taken care of on an emergency basis. I'm sure the vendor would have been happy to pick up some extra money had the airlines cared enought about their passengers.
I disagree with many of Mr. Smisek comments, especially with respect to "...long tarmac delays. That's solving a problem that doesn't exist." Hmm, I guess Virgin Air should have told that to the people on the plane this weekend. I've been on the tarmac for many hours, waiting. Mr. Smisek, take it from one of your passengers, the problem does exist!
He is right when he said it is idiotic to fine the airlines $27,000. There should be some laws regarding this issue, but I'm not sure the $27,000 fine per per passenger is the answers. Instead, if there really was a Passenger's Bill of Rights, there should have some laws regarding the care and feeding of the passengers while on the plane.
The rules for weather delays would be totally different that the rules for mechanical failure. The last time I checked, Mother Nature does not follow our time tables when she is throwing a fit. However, I've waited for over 6 hours on a plane with mechanical failures. One time, we were waiting for parts to come in, which they did five hours latter. By that time, if the crew had taken off they would have violated them flight time limitations. So we had to wait while another crew was brought in. Yes, for that incompentence the airlines should be fined.
Anyone who has flown into Dallas in the summer time knows about the thunder storms. It is very dangerous for the ground crew to be out in the open when lighting is striking within 3 miles of the airport. I don't remember the number, but the number of ground crew that died due to thunderstorm is pretty high for that rare event. Is you day so important that you are willing to risk the life of one of the ground crew.
Have said of above, I truly believe that the airline industry has brought this on themselves. This idea of a Passenger Bill of Right has been floating around for at least 10 years. Years ago, I read that it was killed because the airline industry stated it would police itself and there was not need for any law. Hmm, I guess Virgin Air and other airlines have proved that they will not police themselves. While I applaud Congress for finally doing something, but I truly believe that they screwed up again. Yes, and these are the people who want to revise health care! I have nightmares thinking about that.

J. Gordon

March 17, 2010 03:18 AM

"I mean long tarmac delays are extremely rare," Continental Airlines CEO Jeff Smisek said at a conference this month. "They do occasionally occur, there's no question about it. But having a rule that requires us to cancel flights at three hours or suffer a fine of $27,500 per passenger is inane. And so what we do in the face of a fine like that is we're going to cancel a lot of flights.

First you say that such delays are "extremely rare" then you say that you're "going to cancel a lot of flights. If such delays are so rare, why will so many flights be cancelled???

Jo Lewis

March 19, 2010 10:41 AM

Mr. Smisek: Americans do not want the Occasional Tarmac Delay policy. We have a Zero Tolerance Delay policy for your abusive airlines. If Congress had any sense, and if we could get their attention, you would get zero from Americans every time you cry Union.

Jo Lewis

JR

March 19, 2010 01:11 PM

"I mean long tarmac delays are extremely rare," Continental Airlines CEO Jeff Smisek said at a conference this month. "They do occasionally occur, there's no question about it. But having a rule that requires us to cancel flights at three hours or suffer a fine of $27,500 per passenger is inane. And so what we do in the face of a fine like that is we're going to cancel a lot of flights."

Yo, Jeff, everytime I fly into Newark I get stuck on the tarmac. Does this mean Continental is going to pull out of Newark? What a dimwit. No wonder the airlines are hurting. Jacka$$e$ like this running them you can't help but offer poor service. I'll never fly Continental again.

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BusinessWeek editor Justin Bachman provides road warriors with the latest news, trends in business travel, which as most readers are aware, has all the romance of taking a school bus cross country. Come here to pick up travel news and tips or just commiserate about your latest business trip gone awry.

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