My Life and Times

October 17, 2004
Lower Your Window Shades. Today's Film Is 'The Rookie.'By MICHELINE MAYNARD
S the Civil War burst into full flame, Abraham Lincoln went through one commander after another, searching for a leader to resolve the desperate situation, all while losses were mounting.
Surely, board members at the nation's airlines would sympathize. At a time when the airlines are facing their most difficult challenges in recent history, they are running through one chief executive after another. And as they fire or otherwise lose the old and hire the new, they are left with chief executives who are the least-seasoned industry leaders in decades.
All seven of the major airlines have changed C.E.O.'s since the Sept. 11, 2001, terrorist attacks. The full rotation was completed this month, when Richard H. Anderson left Northwest Airlines for a health care company. What's more, four airlines got new leaders just this year; a fifth, Continental, will do so in January, when Larry D. Kellner is scheduled to succeed Gordon M. Bethune, now the dean of industry chief executives.
The turnover has coincided with bankruptcy filings at US Airways and United Airlines, a unit of the UAL Corporation; the threat of a filing at Delta Air Lines; and a close call at American Airlines, a unit of the AMR Corporation, which avoided having to seek bankruptcy-court protection only by receiving last-minute employee concessions. Over all, the major carriers have shed 100,000 jobs and reported losses of $30 billion in the last four years, with billions more in losses expected this year and next.
The C.E.O. churn shows the depth of the industry's problems - and suggests a paucity of solutions. "This is a picture of an industry in crisis," said John A. Challenger, president of Challenger, Gray & Christmas, the outplacement firm based in Chicago.
Certainly, airlines have not been alone in shuffling top management. So far this year, 516 major companies have changed C.E.O.'s, a Challenger, Gray survey showed.
But few other industries face the kinds of problems found at the major airlines. Their two biggest operating costs - labor and fuel - have been difficult to rein in. They have no power to raise fares because of competition from lower-cost rivals, whose discounted prices are all the more visible as consumers compare fares online. Their debts and pension obligations are crushing. Their very business models are under attack.
Herbert D. Kelleher, who stepped down as chief executive of Southwest Airlines in June 2001 but remains chairman, calls the situation "the denouement of deregulation."
Once Mr. Bethune departs Continental, the longest-serving airline chief executive will be Glenn F. Tilton of United, a former oilman who took charge there in September 2002. Ranking behind him in C.E.O. seniority in the industry is Gerard J. Arpey at American, who has spent 18 months in that job.
The relative lack of experience is a recent phenomenon. Chief executives in the airline business were once like those of many other industries, spending many years rising through the ranks of their companies, then many more years at the top. Mr. Bethune, who came from Boeing, is leaving Continental after 10 years in his job. Robert L. Crandall spent 13 years as chief executive at American before retiring in 1998 after a 25-year career in the industry. And Mr. Kelleher ran his airline for two decades.
"You ask yourself: Why are there so many rookies?" said Michael Useem, a professor at the Wharton School at the University of Pennsylvania. "I guess the impish answer is: You might as well give it a try."
Whether the corner-office quadrille is good or bad is a matter of debate. "On the good side, you'll get some fresh looks" at airlines' problems, said Noel M. Tichy, a University of Michigan professor and the author of "The Cycle of Leadership" and other management books. "On the bad side, mixed in there are probably some rank amateurs who are not going to make it."
The new chief executives acknowledge that they are guiding the industry through uncharted territory. "We're now in a deregulated, e-commerce world," said Douglas M. Steenland, who was named chief executive at Northwest on Oct. 1.
Although he is the rookie among the rookies, Mr. Steenland said he believes he came to the job well prepared, having served as Northwest's president for more than three years before his promotion. Indeed, three of the five newest C.E.O.'s were promoted from within. Mr. Steenland and Mr. Kellner were both presidents, and Gary C. Kelly of Southwest was chief financial officer before he was promoted in July, replacing James F. Parker, who had succeeded Mr. Kelleher.
Mr. Kelleher said he helped to groom Mr. Kelly over the years by making sure that he took on extra duties. But Mr. Kelleher said such training was still no substitute for time spent at the top. "There's always some new little surprise" that a new C.E.O. encounters, he said.
This year's other newcomers - Gerald A. Grinstein at Delta and Bruce R. Lakefield of US Airways - were board members before taking over. Mr. Grinstein ran Western Airlines before it was acquired by Delta in 1986; Mr. Lakefield was a Lehman Brothers executive with no previous airline experience.
Appointing board members rather than promoting executives reflects those airlines' inability to recruit and groom their own successors, Professor Tichy said. "It's not an industry that's attracted the best leadership talent," he said. "Nobody is dying to go work for an airline. You won't get rich on stock options in the airline industry."
In the latest crop of C.E.O.'s, only Mr. Kellner had any chance to anticipate his promotion. It came after a lengthy battle of wills between Mr. Bethune and David M. Bonderman, the chief executive of the Texas Pacific Corporation, the investment firm that was once a major shareholder of Continental. Each agreed to leave the airline's board; Mr. Bethune also agreed to retire.
The other four found out with as little as a few hours' notice that they would be assuming the top positions at their companies. Mr. Steenland said the lack of advance word did not throw him, because he had been working closely with his predecessor. On Thursday, Northwest reached a tentative deal with its pilots' union on $265 million in cuts.
It helps to be picked to run the right airline, of course, one with a clearly defined strategy like that at Southwest when Mr. Kelly took over. Southwest has not deviated from its lean approach or its perky culture since it was founded in the 1970's. For now, that approach has paid off. On Thursday, Southwest beat estimates with a modest third-quarter profit, despite higher fuel costs; that profit will probably be the only one at a major airline this fall.
Mr. Kelly's rivals can only wish for such a debut. At US Airways, Mr. Lakefield is consumed by its second trip through bankruptcy court in two years, and Mr. Grinstein is trying to keep Delta from making its first visit there. While facing challenges like these, C.E.O.'s will also have to decide how to approach employees and the public.
THE macho styles of Mr. Bethune, Mr. Crandall and Mr. Kelleher, which made them business celebrities during the 1990's, could seem jarring at a time when David G. Neeleman, the chief executive of JetBlue, the upstart low-fare airline, is regularly found in an apron serving snacks to passengers and hauling trash. Moreover, experience in bankruptcy court is now as valuable in the industry as time spent running an airline.
"You do need different leadership styles, according to the era, the challenge, the contingency," Professor Useem said.
For, as President Lincoln discovered, it sometimes takes the challenge of being in charge to reveal hidden abilities. Once Ulysses S. Grant finally was put in overall command of the Union Army, he brought the Civil War to a close, albeit a bloody one. Whether the new airline generals will prove as successful remains to be seen.
Copyright 2004 The New York Times Company Home Privacy Policy Search Corrections RSS Help Back to Top