Gordon Bethune

Deltasig 1999 National Honorary Initiate Gordon Bethune

As a highlight of Delta Sigma Pi's 1999 Grand Chapter Congress in Houston, Gordon Bethune, former chairman and chief executive of Continental Airlines, was made an honorary brother of Delta Sigma Pi and offered keynote remarks. The Seattle Times generously allowed Delta Sigma Pi to reprint the following article about our Deltasig 1999 Honorary Member—a man who has made a significant difference in corporate America and who is now proud to be a Deltasig.

A Leader “From Worst to First”

By Polly Lane, Seattle Times Business Reporter

Renowned for collecting traffic tickets while racing his Porsche around Seattle during his five-year Boeing stint, Gordon Mason Bethune is clearly a man addicted to speed. Bethune, 56, said the car is well-engineered and meant to go fast, like his favorite airplane, the Boeing 757. Now chairman and chief executive of Continental Airlines, a Boeing customer, Bethune often pilots 757s and 767s on delivery flights from Seattle to Continental’s headquarters in Houston to get speed kicks.

Bethune is a man in a hurry in the corporate world, too. He's "always two steps ahead of you," spotting problems and identifying solutions, said a colleague.

In a little over three years, he has rescued Continental from near bankruptcy and transformed it into the nation’s fifth largest carrier as measured by passengers.

Last year, its profits were $385 million, compared with a $613 million loss in 1994, the year Bethune became Continental president. At that time, the airline had no cash, a mistrustful and bewildered work force and little respect from the industry and customers.
"We weren’t just the worst major airline. We lapped the field," Bethune wrote in "From Worst to First" (John Wiley, $24.95), a recent book written with Scott Huler.

Flying routes no one used, Continental was careless and sloppy in the way it treated customers. Ranking last on the Department of Transportation"s quality list, it received complaints that were three times the industry average. Losing money rapidly, its stock was at "rock bottom" ($20 a share compared with near $60 today).

Reversing these trends required some painful acts, including the elimination of about 4,000 jobs. Loans were refinanced at lower rates. Unprofitable routes were dropped. And Bethune had to call on some of his old friends at Boeing for immediate help.

Needing money to keep Continental afloat until he restructured, he convinced old friend Ron Woodard, Boeing Commercial Airplane Group president, to return $29 million in deposits for jets Continental could no longer afford.

Bethune persuaded General Electric, the airline's largest creditor, and others to extend three-year loans. He and top officers also went in person to apologize to travel agents and others for their previous mistreatment by the airline and to beg for business.

Another tough challenge was to convince unhappy employees that something good could happen under his management. After showing them what he wanted, he raised wages as profitability improved.

He began to give eligible employees $100 bonuses every month Continental ranks first in on-time arrivals, $65 for ranking second or third. In addition, names of those with perfect attendance for six months are entered in a twice-a-year drawing to receive a deluxe version of the Ford Explorer. Thirty have been awarded.

"No Autopilot for Success"

Bethune will have to keep moving fast to keep up with changes in the competitive airline industry.

The challenge now is to keep Continental's 41,000 employees providing top service while the airline grows and improves profitability, something Bethune believes may be as difficult as the turnaround itself.

"Once you're there, people take things for granted, but there is no autopilot for success," Bethune said. He also has to be prepared for an inevitable industry downturn ahead as the economy cools down.

To help maintain intensity, he frequently works beside employees to remind them that every flight experience is important to customers. He works lines with baggage handlers, or meets in lounges with pilots and flight attendants, often on holidays.

Bethune hired top people to help transform Continental, and they drafted a "Go Forward" plan.

It calls for achieving top industry profit margins, reducing interest expense, developing hubs and laying the foundation for future growth. It also calls for an environment where employees enjoy coming to work every day and are valued for their contributions.

The blueprint has worked. In March, Fortune magazine named Continental the company that has "raised its overall marks more than any other in the 1990s," and the airline climbed to third, from sixth, in the "most-admired" ranking.

Travel Trade Gazette Europea named Continental the top airline in America the same month. Frequent Flyer/J.D. Power Associates chose it the top U.S. airline for customer satisfaction on long-distance flights for two consecutive years.

Bethune's attention to people is based on the Boeing theme of teamwork. He describes this success as "an understanding of human behavior" based on common sense, decency, respect and communication.

"You have to figure out what motivates workers and find incentives that work for them," he said. "It’s easy. I used to be one," he said, recalling some dismal treatment from higher-ups while an enlisted Navy mechanic.

Respect for Boeing

Son of a crop-duster, Bethune was a high-school dropout who joined the Navy at 17. He was a technical worker before becoming a manager, and his conversations are sprinkled with airplane lingo. He said technical knowledge has helped him lead because he understands problems and how they can be fixed.

Bethune worked in operations at several smaller airlines, including Piedmont, before joining Boeing in 1988. Working for Boeing felt like working for the government, he said, because of the company's bureaucracy.

Still, he respects Boeing and left his mark there. He headed the customer service division, where his major influence was on design of the new generation of 737s.

Bethune, a risk-taker himself, praised Boeing leaders for taking the gamble of increasing production rates to meet surging orders while going ahead with plans to streamline processes at the same time. The move has cost Boeing financially and resulted in severe production delays.

"Critics are measuring Boeing against perfection. There are bound to be problems in taking risks," he said. "The old conservative Boeing would have waited to make the changes - and lost customers."

Continental, like other airlines, has had to cope with late airplane deliveries from Boeing. But Bethune said, "It"s worth waiting for a better product."

His airline, which has a 20-year plan to buy Boeing jets, is taking delivery of 64 this year - giving back far more business than it cut when strapped for cash. (The deposits have long since been repaid.)

Bethune laughs a lot. He's approachable, always has an anecdote or a story to tell and appears to be easygoing. But he demands loyalty and hard work. His former charges at Boeing recall anxiety over being called in to his office when things weren't going right.

"When he said, 'how about a little talk,' you knew you were in for it," said Fred Mitchell, production manager at Boeing Commercial Airline Group.

Jeff Smisek, Continental executive vice president and general counsel, also described Bethune's straightforward criticism as sharp. He said Bethune is a "real straight-shooter," a no-nonsense guy who gets to the point in a hurry, who "really truly manages with heart."

Workers were initially skeptical about Bethune’s ability to rejuvenate Continental because nearly a dozen predecessors had failed to deliver, said Leonard Nikolai, president of the Continental pilots union.

"But Gordon lived up to it," Nikolai said. He said Bethune is a tough negotiator who can be "cold-hearted" at times during bargaining.

"Customer is the Point"

Bethune said he keeps the focus on the customer. "The customer isn’t always right," he said, "but the customer is the point."

Typical of his down-to-earth style is the "Row 5" test.

When designers wanted simpler cockpit switches, Bethune asked: "Will the guy in Row 5 pay 50 cents more for his ticket to cover the new equipment?"

Bethune said he plans to stay at Continental, even though he has had job offers from other airlines.

But with a personality that thrives on risk-taking and problems, few would be surprised if Bethune one day races into another situation that needs help. He stayed at Boeing, his longest job stint, only "long enough to get my five-year pin."

Editor’s Note: This article first appeared in the June 28 edition of the Seattle Times. It is reprinted here with generous permission. Copyright 1998 The Seattle Times Company.