HOUSTON, SEPT. 22 -- Continental Airlines Chairman Frank Lorenzo, backed up by Gladys Knight and the Pips, pledged today to turn around the airline's reputation for poor service and to transform Continental into "the best airline for our times."

Lorenzo spoke to several thousand Continental employes gathered at the Albert Thomas Convention Center here for what was billed as "the first worldwide performance celebration" -- an extravaganza put on twice today for employes in Houston, the airline's headquarters, and simultaneously beamed to employes gathered at the airline's other major operations centers.

Continental rated worst in terms of consumer complaints per 100,000 passengers during the first seven months of the year, according to the Department of Transportation. In August it improved to second-worst as consumer complaints against Continental decreased 28 percent and Northwest Airlines headed the list.

Lorenzo and other officials of the Texas Air Corp. subsidiary made it clear today that they intend to be as aggressive in changing image as Texas Air has been in building the nation's largest airline company.

"We'll do whatever is necessary to reach our goal," Lorenzo told the cheering audience. "We listened to our customers' complaints, we fixed the worst of our problems and we're now well on our way to delivering on our commitment -- becoming the best airline for our time."

Continental officials spoke frankly of the problems that have occurred since February, when People Express, New York Air and Frontier were merged into Continental. That consolidation produced major operational difficulties for the airline.

"There were plenty of growing pains. There were delays and cancellations and lost baggage," Lorenzo said, "but that's changing."

Frequent business travelers were often "frustrated" with Continental's service, he said. "We're going to win them back, and they'll be satisfied customers," said Lorenzo, who noted the airline makes more money from a business traveler paying full coach fare than from other passengers.

"This is a much better airline than we've been perceived," said Clark Onstad, senior vice president for external affairs for the airline.

Consumer service has increasingly become the battleground on which airlines are competing -- each promising in its advertising to provide a larger measure of relief from the headaches of flying. Continental yesterday unveiled a new advertising campaign designed to reassure the flying public about its service.

"Once people called us The Proud Bird," begins one such ad. "Lately they've been calling us other names." The ad goes on in a more upbeat way to talk about improvements in service, including what Continental said is a 100 percent improvement in the past six months in delivering baggage at the same time and to the same airport as the travelers who checked the baggage.

Continental faces other problems beyond its public image, however. It is the target of an organizing campaign by the Air Line Pilots Association, and labor relations at its sister airline, Eastern, are suffering.

The stock of Texas Air Corp., which owns both airlines, has dropped in recent weeks, both because of concerns about labor unrest and because of reduced earnings projections by industry analysts who said they initially underestimated how difficult it would be to merge four airlines into one.

Lorenzo said that the company would show an improvement in third-quarter earnings.

The "performance celebration" opened with scenes designed to suggest superb performance flashing on nine video screens in the front of the auditorium. Then, with scenes of Olympic athletes, surgeons, singer Paul Simon, the Statue of Liberty and Continental operations flashing in the background, Gladys Knight sang:

"We know who we are,

We know where we've been,

Best of all we know where

We're going again. ...

We are Continental Airlines,

Oh yeah,

We are Continental people,

Oh yeah. ...