May 15, 2003

Members of a union representing Continental Airlines employees are questioning a board member's potential conflict of interest in connection with rival air carriers.

But Continental executives defended David Bonderman, president of Texas Pacific Group, who reportedly has expressed interest in acquiring investment stakes in United Airlines and Air Canada.

The International Brotherhood of Teamsters raised the issue as management issues dominated the airline's annual meeting on Wednesday.

"After nine years, we've seen no evidence of any conflict," Gordon Bethune, chairman and chief executive officer of Continental, said in discussing the financier's tenure on the Continental board.

A group led by Bonderman was instrumental in Houston-based Continental being able to successfully emerge from its second bankruptcy a decade ago.

Bethune noted that Continental's board was scheduled to discuss a conflict-of-interest policy. Later on Wednesday afternoon, Continental issued a statement indicating it has seen "absolutely no legal conflict of interest in dealings with any board members."

Texas Pacific Group, which has offices in Fort Worth and in San Francisco, has a track record of acquiring ownership of struggling airlines and spearheading financial turnarounds.

"A defined formal process is being implemented by the board's corporate governance committee to publicly ensure that there is no conflict of interest between board members and the airline," the Continental statement said.

The Teamsters, which represents Continental mechanics, has concerns about the potential conflicts because of recent corporate scandals, said Carin Zelenko, the union's director of corporate and strategic initiatives.

She told the Houston Chronicle in Thursday's online edition that shareholders of many companies are closely monitoring behavior of corporate directors to ensure their holdings remain secure.

Robert Rasch, a Continental mechanic and shareholder, questioned how a board member of the airline could be aiding other carriers.

"I don't believe saving our competition helps Continental workers or shareholders," said Rasch.

Some concerns expressed Wednesday involved board members having access to privileged business information that should not be shared with competitors.

"I assure you Mr. Bonderman and others understand your concerns," Bethune told the shareholder session.

Bonderman, who attended the shareholder meeting, did not speak publicly. His Texas Pacific Group once had a controlling interest in Continental and now owns a controlling interest in America West Holdings.

Bethune said Bonderman told him that Texas Pacific Group had made no formal offer to Elk Grove Village, Ill.-based United.

"Mr. Bonderman has many varied interests," Bethune said.

A catering company owned by Texas Pacific Group that does millions of dollars in business annually with Continental is one of those interests. Gate Gourmet, the catering company, identified as a concern during the shareholder's meeting, received about $43 million from Continental last year, according to documents filed with the U.S. Securities & Exchange Commission.

Also Wednesday, Ronald Woodard was elected to the airline's board of directors. Woodard, 60, is former president of the Boeing Commercial Airplane Group.
 

The article was reported by The Associated Press on May 15, 2003.