UPDATE 2-Continental CEO Kellner to leave, COO to succeed

* COO Smisek succeeds Kellner Jan. 1, 2010

* Kellner to head new private equity firm

* Continental's shares end down 1.8 pct (Adds background)

NEW YORK, July 16 (Reuters) - Continental Airlines Inc (CAL.N) said on Thursday Chairman and Chief Executive Larry Kellner is leaving after 14 years at the airline and named Chief Operating Officer Jeff Smisek as its new head.

Kellner, 50, is leaving at year-end to head Emerald Creek Group, a new private investment firm based in Houston.

"I have worked closely with Jeff throughout my tenure, and he is a strong and effective leader," said Kellner, who led the airline for the last five years. "I am confident Jeff will maintain Continental's unique culture and successfully lead the Continental team through these challenging times."

The airline industry, long battered by overcapacity, is in the midst of a sweeping effort by carriers to downsize.

Smisek, 54, will become chairman and chief executive, effective January 1, 2010.

Smisek, who joined the airline in 1995 as general counsel, already had a range of responsibilities at the airline, overseeing airline operations, human resources and labor relations.

Kellner joined Continental in 1995 as chief financial officer and was named chairman and chief executive in December 2004.

Before joining Continental, Kellner was chief financial officer of American Savings Bank, owned by The Robert M. Bass Group.

Last week, Continental and UAL Corp's (UAUA.O) United Airlines won limited immunity from the U.S. Transportation Department allowing Continental to join United in the global Star Alliance.

Continental's shares closed down 18 cents, or 1.8 percent, at $9.96 on the New York Stock Exchange. (Reporting by Paritosh Bansal; Editing by Steve Orlofsky)