Can This Odd Trio Learn To Live Together?

When word got out last June that Air Canada would make a play for Continental Airlines Inc., many industry executives scoffed. After all, Air Canada CEO Hollis Harris was ousted from Continental just a year before. Many believed a key figure behind his dismissal was Robert Ferguson III, who replaced Harris. The plot thickened when observers learned that David Bonderman, the Texas investor whose Air Partners LP emerged as Air Canada's bidding partner, was a pal of Ferguson's. In the early '80s, Ferguson was treasurer at Braniff International Corp., and Bonderman was its outside counsel in bankruptcy court.

In this marriage of convenience, Continental gets a cash infusion, Air Canada extends its chances for survival, and Bonderman and his investors can make some money if the airline market turns up. The only question is whether this unlikely trio can form a lasting union.

Ferguson and Harris claim they have no differences. "Bob is very intelligent and astute and has done a good job" at Continental, says Harris. Ferguson calls their relationship "cordial" and says he had nothing to do with Harris' leaving Continental. But not so long ago, they clashed over the carrier's strategy. Harris wanted the airline to grow its way out of its problems. His reluctance to cut costs dismayed Ferguson and the board.

NO CLONE. Onetime banker Ferguson is known more for financial savvy than operational skills. After guiding Braniff through bankruptcy, he was recruited as Frank Lorenzo's chief mergers-and-acquisitions man. When Ferguson became CEO of Continental in 1991, critics expected him to be a Lorenzo clone, dumping assets and alienating labor. Although he did slash 1,500 jobs and cut wages 10%, Ferguson backed the airline's quality efforts and steered it through last summer's fare war.

People close to the airline say Ferguson seems securely in the pilot's seat. They expect Air Partners to ensure that Harris doesn't meddle in Continental's management. Given Air Canada's pressing problems at home, that's not likely. For now, at least, it seems the honeymoon just might last.

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