Walter T. Varney: Where It Began

He learned to fly in the Army during World War I, and when Walter T. Varney returned home, he decided his career lay in aviation. In 1925 he founded Varney Air Lines, with routes in Nevada, Washington, and Utah. He mainly carried mail, which is what generated much of the cash flow for carriers in the early days of aviation. Varney sold that airline in 1930 to what later became United Airlines.

But the sky called him back. In 1934 he founded Varney Speed Lines and won a route from Pueblo, Colo., to El Paso, Texas. On July 15, 1934, his pilot, Jess E. Hart, flew that route for the first time, carrying 100 letters and no passengers.

Varney soon had four Lockheed Vega aircraft — each with only four passenger seats because he wanted lots of room for mail! During the next few years, Varney added new destinations such as Raton, N.M., and Trinidad, Colo. Along the way, he brought in lawyer Louis Mueller — who had been his Army flight instructor — to serve as legal counsel and financial adviser. Those are some of the steps that led to the founding of Continental Airlines.

Louis Mueller: The Second in Command

As Varney's interest in his airline waned, he gradually ceded control to Louis Mueller, who served as CEO from 1934 to 1936. Mueller also put his personal wealth on the line in 1937 when he and Bob Six mortgaged their personal residences to raise the cash to buy three new Lockheed Model 12 airplanes to keep the airline in compliance with a government requirement that scheduled airlines fly twin-engine planes.

But the step that made today's Continental possible happened in 1936, when Mueller sold a 40 percent share of Varney Speed Lines to Bob Six for $90,000 in cash and a $20,000 promissory note. Mueller also stepped aside as CEO in favor of Six, and there began the story of Continental Airlines.

Robert F. Six: Setting the Course — With Class

Without Bob Six, there would not be a Continental Airlines. The company's CEO for an incredible 44 years (1936-80), Six was the one who named the airline back in 1937, a time when, despite the boldly ambitious new name, Continental consisted of four airplanes and a handful of short routes, mostly through Denver.

Although Six was a licensed pilot (No. 5772), his genius — and indeed it was genius — expressed itself in colorful marketing and an absolute determination to give passengers a high level of service that would keep them coming back.

A key Six innovation was offering discounted coach fares (called Skycoach when introduced in 1949), a step he took because he was convinced that at the right price, millions of Americans would opt to fly to their next destination. Of course, Six was proven correct, and he hit the same note in 1961 when Continental became the first airline to offer economy fares.

Six also introduced Gold Carpet Service, with passengers literally walking a gold carpet to board a plane whose tail was also painted a brilliant gold. On board, there were gold fixtures in the washrooms, a first-class section, and a club lounge.

"We really move our tail for you," Continental proclaimed in its advertising in the 1960s and '70s. And with Six at the helm, the company lived up to its slogan. No detail escaped Six, who was known for personally — and meticulously — inspecting Continental's airplanes. That was his way, and it was how he built his company from a tiny regional carrier into a global airline.

Frank Lorenzo: The Merger Man

In 1978, President Jimmy Carter signed a bill that deregulated the airline industry. In the fast-moving free-market economy that followed, Frank Lorenzo emerged as a prime mover. Lorenzo served two tenures as Continental's CEO (1982-86 and 1989-90) and ran the airline until the 1990 sale of his personal holdings in the company to SAS, a Danish airline.

Along the way, Lorenzo oversaw a merger of his discount carrier, Texas International, with Continental in 1982. In 1983, Continental entered into bankruptcy, but the airline grew bigger regardless. In 1986, Continental bought People Express, another discount carrier, mainly in order to acquire that airline's Newark, N.J., hub. That move put Continental in a position to become the leader in flights serving the New York City area. In 1987, People Express, several commuter carriers, and New York Air, a discount carrier that Lorenzo controlled, were all merged with Continental, creating the sixth-largest carrier in the world and the third-largest in the United States.

It was a hectic decade under Lorenzo (who served as chairman between his terms as CEO). There were some definite negatives — labor relations hit a low point — but in the end, Lorenzo laid the foundation for a very big airline that could compete globally.

Continental notched a number of other firsts in the 1960s. In 1963, flight attendants wore a stylish black dress accessorized with a string of pearls (suggestions attributed to television star Audrey Meadows, the wife of Bob Six). A 1963 move of the airline's headquarters from Denver to Los Angeles underlined Continental's western and Pacific orientation. In 1964, movies were shown on the Chicago-Los Angeles route. And the following year, Continental introduced a computerized reservation system. A footnote to the 1960s: by 1964 Continental felt it had built enough of a history to celebrate, and in July of that year, on the airline's 30th anniversary, the company put a refurbished antique Lockheed Vega on a tour of the airline's route system. As the official history puts it, "The tiny Vega, in contrast to the airline's fleet of new jets, was a symbol of how far Continental had come."

Tom Plaskett: For Frequent Flyers

He came from American Airlines, where he had been senior vice president in charge of marketing and was instrumental in crafting that airline's successful and industry-leading frequent-flyer loyalty program. And as Continental's CEO from 1986 to 1987, Tom Plaskett called on employees to evidence the entrepreneurialism that had built the business in its early years.

Plaskett's most lasting contribution was probably the creation of the OnePass rewards program for frequent flyers. Other crucial changes during his tenure were the addition of Cleveland as a hub and signing a 25-year lease on Newark Airport's Terminal C.

Also during that decade, Continental adopted a new slogan, "We Really Move Our Tail for You" — and in the distant 1970s that line resonated with passengers. The airline kept expanding as well. Notably, in 1977, Continental won a new route from Los Angeles to New Zealand and Australia.

But then, everything changed, literally with the scrawl of a pen. In 1978, President Jimmy Carter signed the Airline Deregulation Act, which effectively ended the regulatory role of the CAB and thrust airlines into a free-for-all. In 1979, Continental's long stretch of profitability — extending back to 1937, with only one loss year (1958) — snapped as the airline recorded a $13.2 million loss. A new day had dawned for airlines, and suddenly, it was about survival of the fittest.

Gordon Bethune: Getting to Firm Ground

Gordon Bethune admits that when he arrived at Continental from Boeing, things were so bad he seriously thought about leaving. But he wound up serving as CEO from 1994 to 2004 (and chairman from 1996 to 2004) and helped to build a strong foundation for the company. That meant strengthening labor relations, regaining customers' trust, and getting the company's finances in order.

Bethune took over an airline known for poor customer service — it often ranked dead last in surveys, and many frequent travelers did whatever they could to avoid flying Continental. By the time Bethune retired, Continental had won bushels of customer satisfaction awards, including several J.D. Power awards.

Importantly, Bethune understood that it takes a satisfied employee to make a satisfied customer. Under his leadership, Continental became a regular top finisher in "best places to work" listings. It also became solidly profitable, as Bethune insisted that the company had to be built on a strong foundation of service, skills, and realistic finances.

The title of Bethune's book captures the depth of his contribution to Continental: From Worst to First.

Larry Kellner: Taking the Team Ahead

Current chairman and CEO Larry Kellner always credits his co-workers throughout the company for the success they've achieved together. Fortune magazine has named Continental the No. 1 Most Admired Global Airline five times since he assumed the job upon Gordon Bethune's retirement in late 2004.

Under Kellner, continued growth has been the watchword, as Continental has expanded into new markets, such as China and India. Along the way, Continental also further developed its hubs and modernized its fleet.

Importantly, under Kellner, Continental has continued to win more honors — from such organizations as Zagat and Condé Nast Traveler — as the leading business-class carrier. Continental has also earned recognition for its OnePass frequent-flyer program and a robust, user-friendly Web site at continental.com.

Kellner stays focused on keeping the lines of communication open with the 43,000 people working at Continental today. He makes it a point to take input from all directions as he reaches decisions, and puts a priority on fostering Continental's unique company culture. — R. M.

---

Photographs: Guy Gillette/Time & Life Pictures/Getty Images (Six); Pam Francis/Getty Images (Bethune); Mark Green (Kellner)