For someone running an airline that recently posted a fourth-quarter loss of $206 million (€160 million) and who warned a few weeks ago about a pending cash crisis, Mr Larry Kellner seems a tranquil figure.

Maybe it's the slow south Carolina drawl, but one gets the impression that he does not get jittery too easily.

Speaking from a skyscraper close to the old Enron building in Houston, Mr Kellner knows how quickly businesses can fail, especially in the US aviation sector. The leading US carriers are expected to report combined losses of $5 billion for 2004 over the next few weeks.

He is running the world's sixth-largest airline (Continental has more than 3,000 daily departures throughout the Americas, Europe and Asia).

The sheer scale of US carriers often proves their undoing. But there is probably a good reason why Mr Kellner is not overwrought - he has been here before, and so has the airline.

When he joined Continental in 1995 the airline was on the verge of bankruptcy, was more than $500 million in debt and was in danger of defaulting on its $2.7 billion in loan and lease obligations.

Mr Kellner, as chief financial officer, helped to turn things around, and since then he has been described as a leading turnaround specialist.

While Continental needs to make major savings in the next few weeks, some of its US competitors are in worse shape, and Mr Kellner is sanguine about the next few months. He certainly doesn't share the bleak "bloodbath" analysis spoken of so often by Ryanair's Michael O'Leary.

There may be a bloodbath in the short term, he says, but certainly not in the long term.

"The world is clearly going more global; there is no way to move among continents except for air transportation. There is no Star Trek transporter," he says. "People say 'but, hey, communication is so much better now with satellite, Blackberrys, pagers and email and cellphones, that you will cut down the need for travel'. No, no, all business in the world is built on relationships, and relationships are built over dinner, in hallways, in casual conversations," says Mr Kellner.

"Relationships are always going to drive the world. I think there is going to be a lot of demand for what we do."

But in the short term, he admits, the airline industry certainly has some "issues".

Some carriers have responded to these "issues" by buying the new Airbus 380 'superjumbo'. But Mr Kellner is sticking with Boeing and its new fuel-efficient 7E7. "We are not fans of the 380. We are not into big. We are very much fans of the 7E7," he says.

"We have ordered 10 of them. The 380 is a great airplane, but remember, when you have a bigger airplane it takes a lot more in baggage systems, a lot more in ground handlers, and it takes a lot longer to turn the airplane around.

"You have to fill that airplane once you decide to go. So that means the last 200 customers are not the 200 customers paying the highest fare, they are the customers paying the lowest fare.

"There are a few markets in the world where it will clearly work in, but we don't see a lot of them. We'll be surprised if it is a huge success, but we're watching. I think it's hard to deliver good customer service to 600 people on the same airplane."

In response to last year's downturn - most of it triggered by rising oil prices - the airline has been under financial pressure. With significant debt levels, costs have simply had to come down.

While he is anxious to praise the staff's contribution to the airline, Mr Kellner admits that sometimes the same staff have to bear their portion of the pain. "That makes it doubly tough to ask for pay cuts.

"So we went out and found and identified $1.1 billion in other savings first. We went back to our suppliers, went back to every place we could look at without sacrificing the quality of what we do. So we did that before we asked our employees.

"But we need to get $500 million by February 28th, because, if you look at where the price of oil is - and we burn a lot of it - if you look at the fare environment, the revenue environment, it's a very tough environment. We need to stay ahead of the curve and avoid getting in a crisis like so many of our competitors."

The picture he paints is gloomy, but justifiably so. For example, United is in bankruptcy and American and Delta have threatened to follow it.

But could Continental's debt-laden balance sheet hold the company back if a fares war begins?

"I think all carriers have a lot of debt today. A lot of our debt is related to our fleet. Our fleet is more fuel-efficient, which is actually a good trade for us. I'd rather be paying aircraft rent than be paying higher fuel bills. But one shows up on your balance sheet as debt and the other doesn't."

He realises that a lot of the problems are sectoral. "It's a very tough environment. There are too many seats in the marketplace chasing too few high-paying customers."

On the transatlantic route, Continental is the main rival to Aer Lingus. It flies a daily service from Dublin, and in summer has two services - one from Dublin and one from Shannon. A new service from Belfast will start later this year.

Mr Kellner says that while low fares have helped to make a success of the transatlantic route (at least in economy seats), the real key to Continental's success into Europe has been its hub operation at Newark.

"We have a little bit of a different strategy to our competitors. We have a hub in New York at Newark, and we have the right fleet."

Even with Aer Lingus and other airlines driving down fares, Continental's strong US base has given it an advantage in flying to Ireland and other European destinations. "Other carriers didn't miss this. You have to go back to our New York hub. Kennedy is an international airport, La Guardia is the local airport on the Long Island side. Via Newark we have both domestic and international capabilities.

"So what happens is we can pick up 10 people from Houston, five people from Detroit, three from Minneapolis, five from Pittsburgh and fly them all to Dublin. And it's a single bounce over Newark, and boom, you're there.

"And you don't have to go to Heathrow and then connect back. So what's worked for us is recognising what we have in Newark and then saying how can we optimise it," he says.

"Out of Kennedy, you cannot run a strong domestic network because all the slots are reserved for international carriers. We already had a big domestic hub at Newark, and, unlike La Guardia, we had runways that we could get out of and get to Europe."

While he is reluctant to comment on recent events at Aer Lingus, he believes the Continental package on the Dublin-Newark route stands up to any competition. "We have a superior product across the Atlantic in Business First. It is extremely highly rated. It's not just the food, it's really the services, the way we deliver it - it's kinda all the pieces put together. You combine that product with our hub, with having the right fleet, and a strategy that says 'right, let's grow this'."

Asked if a new airline or a slightly remodelled Aer Lingus could drive transatlantic fares down further, Mr Kellner says fares are already low, particularly in the economy cabin.

As for putting a new low-fares operation on the transatlantic route, Kellner says that will never work without a first-rate business offering. "There are not many companies who say 'you are going to Europe for two days but you've got to ride in the back'.

"The percentage of seats in first class is bigger on international flights, the length of flights is different, it's just a different experience. Virgin understood that perfectly. So people talk about it, but once you get over six or seven hours it's difficult for a low-cost competitor to be effective."

Asked about yields on the transatlantic route, Mr Kellner says there is good and bad news, depending on the airport you are talking about. "There is a lot of service being added. But as the world evolves to become more global, what will drive yields will be demand growing faster than supply or supply growing faster than demand.

"I think yields may be under pressure in the big city connecting airports. Heathrow may feel some yield pressure over time. Take our Bristol service, for instance. Why drive two hours to Heathrow if you can get in non-stop to New York out of Bristol?"

Asked will he be adding extra services or capacity to Dublin, he replies: "We'll keep looking at it. We'll look at size of aircraft as well, and the frequency."