INTERVIEW-Continental Air COO sees business demand up in 2010
* COO and CEO-elect says business travel won't die
* Says has some indications business traffic improving
* Says to add more China routes ahead of fresh growth there
* Says rivals who postponed China service made a mistake
* Says currently has no M&A plans
by Maria Sheahan and Angelika Gruber
FRANKFURT, Nov 3 (Reuters) - Demand for business-class plane tickets will pick up again in 2010 as companies loosen travel restrictions amid a global economic recovery, Continental Airlines' CAL.N chief operating officer told Reuters.
"People who have predicted the demise of business travel are wrong," Jeff Smisek, who is also set to become chief executive of the U.S. airline on Jan. 1, said in an interview on Tuesday.
Airlines around the world have been crippled by a toxic mixture of reduced spending on travel, a drop in global trade and rising oil prices. To cut their bloated cost bases, many have grounded planes and cancelled or deferred plane orders.
Industry body IATA said last week it was still too early to talk about a recovery. It has said it sees the world's airlines losing $11 billion this year as consumers tightened their purse strings and companies cut travel budgets. [nLT249034]
"We're having some indications of a return to business traffic from our corporate travellers as they are loosening up some of the travel policies and we are seeing a bit more close-end bookings than we have seen in the past," Smisek said.
He travelled to Germany this week to see off Continental's first non-stop flight from Frankfurt to Houston, where the airline is based. The occasion was marked by a ribbon-cutting at the airport gate where he cut a large airplane-shaped cake while a band played live music.
Continental, the world's fifth-biggest airline, is gearing up for an anticipated global economic recovery by charging into new markets such as China ahead of rivals and boosting capacity.
Continental earlier this year started a daily, non-stop flight between Shanghai and New York, just as United Airlines UAUA.O and American Airlines AMR.N put off launching new non-stop service to Chinese cities.
"In any international market there is a first-mover advantage where you become known and you also become depended upon by corporate travellers on both sides of the route system. I think that carriers that have postponed travel to China have made a mistake," Smisek said.
BE THERE OR BE SQUARE
China's Civil Aviation Administration had said earlier this year that air travel growth fell into single digits for the first time in five years as a slowing economy hit demand. It has not published any statistics for 2009 yet. According to IATA, the Asia-Pacific region as a whole is improving faster than others around the world, with a 2.1 percent improvement in passenger demand in September.
Smisek, who has been with Continental for 14 years, said the carrier plans to fly to additional cities in China to take advantage of market liberalisation and a Star Alliance tie-up that allows passenger transfers from or to partner airlines.
Continental last week left SkyTeam to join Star Alliance, becoming the 25th member of the network of global carriers. The switch marks the first time a major airline has changed alliances.
The nearly two dozen members of the Star Alliance include US Airways (LCC.N), Lufthansa (LHAG.DE), Air Canada (ACa.TO) (ACb.TO), Air China (601111.SS) and Thai Airways THAI.BK.
"Even in the middle of this massive recession, China is drawing significantly," Smisek said.
"China is a growing market with a growing local traffic base as well, and we want to be there for that growth, and the earlier you are there, the better off you are."
China's economic growth accelerated to 8.9 percent in the third quarter, from 7.9 percent in the April-June quarter, well ahead of economies in North America or western Europe.
Smisek also confirmed that Continental currently expects to grow organically via Star Alliance and cost savings rather than launching another merger attempt following unsuccessful talks with United Airlines last year.
"Historically, mergers have not worked particularly well in the airline business because it is a very complex business," he said, adding that while he could not rule out merger plans for the future, the company currently preferred staying on its own.
(Reporting by Maria Sheahan)
((maria.sheahan@thomsonreuters.com; +49 69 7565 1286; Reuters Messaging: maria.sheahan.thomsonreuters.com@thomsonreuters.net)) Keywords: CONTINENTALAIR/ =2
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