CORRECTED-UPDATE 3-Continental CEO Kellner to leave

(Corrects spelling of Wyman in paragraph 5)

* COO Smisek succeeds Kellner Jan 1, 2010

* Kellner to head new private equity firm

* Continental's shares end down 1.8 pct

(Adds analyst comment, bylines)

By Deepa Seetharaman and Paritosh Bansal

NEW YORK, July 16 (Reuters) - Continental Airlines Inc (CAL.N) said on Thursday that 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. Smisek, 54, will become chairman and chief executive officer, effective Jan. 1, 2010.

There is a sweeping effort by carriers to downsize to regain pricing power as the airline industry grapples with the sharp decline in travel due to the global recession.

Analysts said the CEO change would not likely pose problems for Continental shareholders or alter the company's direction dramatically, since both Kellner and Smisek have similar approaches to the business.

Both executives were nurtured by former Continental CEO Gordon Bethune, who headed the carrier from 1994 to 2004, said Andrew Watterson, airlines consultant with Oliver Wyman.

Kellner joined Continental in 1995 as chief financial officer and was named chairman and CEO in December 2004. Smisek joined the airline in 1995 as general counsel.

"Given that it's the same kind of vein of development, you'd expect there would be the same consistency of approach," Watterson said. "I wouldn't expect any change in the direction of the company."

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.

Kellner said in a statement that that approval would allow Continental "to continue as an effective global competitor."

"With DOT approval in place, Smisek has a terrific jumping off board in the next year," said William Swelbar, researcher for the International Center for Air Transportation at the Massachusetts Institute of Technology.

Smisek has already had a slew of responsibilities at the airline including overseeing airline operations, human resources and labor relations.

"Smisek is the one who came through the ranks and has done a number of jobs along the way," Swelbar said.

"I think that provides Continental with a guy who understands that the company needs to change as the industry changes and may be more in tune with the stakeholders that are important to Continental."

Airline consultant Robert Mann noted that Smisek has been instrumental in forging strong relationships between employees and management, ties that helped the company restructure outside of bankruptcy.

"He's part of the great relationship that exists," Mann said. "That's what allowed them to get through 9/11 and consensual restructuring periods."

Kellner described Smisek as a strong leader who could lead Continental through the current difficult operating environment.

"It is the right time for this transition," Kellner said.

Continental's shares closed down 18 cents, or 1.8 percent, at $9.96 on the New York Stock Exchange. (Additional reporting by Kyle Peterson in Chicago and Karen Jacobs in Atlanta)