United Completes Leadership Revamp With a Surprise Pick
The departure 11 months ago of former United Continental Holdings Inc. Chief Executive Officer Jeff Smisek revealed a significant weakness in the carrier’s corporate suite: Its bench had become exceedingly sparse.
With no heir apparent, directors turned to one of their own—a genial executive with a background not in airlines but in railroads. Oscar Munoz was capable but had lots to learn about running an airline. Then, five weeks into his new job, he suffered a heart attack and had to undergo a heart transplant. The board turned to the general counsel as interim CEO.
Back on the job this spring, Munoz, 57, has moved quickly to address several issues that have hobbled the third largest airline, from labor contracts to on-board service to the performance of its network. He is also rapidly building a deeper management team, with a hire announced Monday that even caught Wall Street analysts by surprise.
The hiring of Scott Kirby as president—from the same position at American Airlines Group Inc.—is the latest sign of United’s bench building. Earlier this month, the carrier hired Andrew Levy, a former Allegiant Travel Co. executive, as its new chief financial officer, and Julia Haywood as chief commercial officer. She had been an airline restructuring expert at The Boston Consulting Group, working most recently with United.
“Scott’s appointment is the culmination of the formation of my leadership team,” Munoz wrote yesterday in a memo to employees. “These moves will decisively advance our efforts to become the innovative and agile industry leader that we strive to be.” Morgan Stanley said in a note to investors that Kirby’s arrival “potentially addresses concerns around long-term succession planning associated with health-related issues for the airline’s CEO.”
The revamp of United’s top ranks includes the departure of its long-time revenue chief, James Compton. Compton's retirement later this year was announced with the news about Levy and Haywood. Two other top United executives, Jeff Foland and John Rainey, quit last year for Hertz Global Holdings and PayPal Holdings Inc., respectively.
Kirby’s new job at United may also position him to become an airline chief executive, an outcome that wasn’t likely to materialize anytime soon at American where CEO Doug Parker, 54, is well-liked by directors. The departure of Kirby, 49, from American comes after a review of succession planning by directors there this summer. American said Monday that, as part of the process, “the company concluded it would not be able to retain its existing executive team in their current roles for an extended period.”
Kirby’s new United colleague, Levy, 47, left Allegiant in October 2014 after 13 years when he concluded there was no path toward the top job at the Las Vegas-based company under co-founder and CEO Maurice “Maury” Gallagher Jr.
Earlier this year, United agreed to change its board makeup following pressure from activist investors Altimeter Capital Management and PAR Capital Management. The new chairman, Robert Milton, is the former chief executive at Air Canada, while board member Barney Harford was the former leader at online travel agency Orbitz Worldwide Inc. and Ed Shapiro is a partner at Boston-based PAR Capital. In June, Munoz told shareholders that the prior board had been isolated and not engaged with the airline’s operation.
“The old Board waited far too long to act, in our view, but it has now been significantly transformed with stronger, more independent, and more relevant membership which should better complement United's promising new leadership,” Gimme Credit analyst Vicki Bryan wrote in a client note Monday.
Julie Yates of Credit Suisse also weighed in, saying she was surprised by the Kirby hire. Wall Street will look favorably on him as "one of the best revenue managers" in the airline industry, she wrote, adding: "This further improves the bench strength at United and helps round out the recent wave of management appointments."