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Westlake Legal Group > Posts tagged "Dao, David A (1948- )"

United C.E.O. Munoz to Step Down, 5 Years After Leading Turnaround

ImageWestlake Legal Group merlin_129890711_aa573898-3b81-4f64-b437-df733b6041d1-articleLarge United C.E.O. Munoz to Step Down, 5 Years After Leading Turnaround United Continental Holdings Inc United Airlines Munoz, Oscar (1959- ) Dao, David A (1948- ) Appointments and Executive Changes Airlines and Airplanes

Oscar Munoz joined United Airlines as chief executive officer in 2015, when its 2010 merger with Continental Airlines was still causing difficulties.Credit…Mike Cohen for The New York Times

Oscar Munoz, who helped to steady United Airlines after a troubled 2010 merger, but not without the occasional public relations crisis, will step down next year as the airline’s chief executive.

In May, J. Scott Kirby, the airline’s president and a veteran of the industry, will succeed Mr. Munoz, who will move on to the position of executive chairman of the airline’s board for a one-year term.

Analysts said they were unsurprised by the leadership change, which had been predicted since Mr. Kirby was hired in 2016, shortly after Mr. Munoz underwent a heart transplant. Mr. Munoz, a first-generation college student from an immigrant family, had also been expected to assume the role of chairman several years ago, but the promotion was scuttled in 2017 after the airline stumbled in responding to public outrage when security officers dragged a passenger off one of its planes in Chicago.

“While the timing of this transition was always a key topic, this has been largely expected by investors ever since Oscar Munoz hired Scott Kirby in 2016,” Andrew Didora, an airline analyst with Bank of America Merrill Lynch, wrote in a research note. Mr. Didora added that he did not anticipate a change to the airline’s strategy.

Mr. Kirby was president of American Airlines after its 2013 merger with US Airways, where he had held the same title. By comparison, Mr. Munoz was a relative newcomer to the industry when he joined United in 2015 from CSX, the freight railroad where he had been president and chief operating officer. He previously was a director on United’s board and before that on the board of Continental Airlines.

When Mr. Munoz took the helm at United, the airline was struggling to overcome problems associated with its 2010 merger with Continental and a federal corruption investigation involving the company’s dealings with the Port Authority of New York and New Jersey.

Despite his lack of direct industry experience, Mr. Munoz helped turn United around. The airline’s stock has jumped more than 50 percent during his tenure, outpacing the 16 percent increase over the same period for the S&P 500 Airlines Industry Index.

While Mr. Munoz is credited with developing strategy and improving employee relations, Mr. Kirby has driven improvements in operations, said Savi Syth, an airline analyst with Raymond James.

“I think the two are quite complimentary to each other,” she said.

One of Mr. Munoz’s first accomplishments as chief executive was the completion of negotiations for new union contracts with pilots, flight attendants and mechanics. That, Mr. Didora said in his note, paved the way for better on-time performance and profitability.

Ms. Syth said Mr. Kirby had led a domestic strengthening for the airline, which focused on its international strengths during and after the Great Recession.

“Scott has really come in and with his team changed that dynamic, where they’re increasingly a much more important domestic player,” she said.

Ms. Syth and Mr. Didora both said they expected little to change under Mr. Kirby, who has led United’s push to further segment its cabins, introducing extra fees such as those that allow passengers to sit closer to the front of planes. He is also leading a multiyear effort to strengthen United’s hubs, particularly in Chicago, Denver and Houston. He has described that move as critical to growth.

In recent years, the United States airline industry has shrunk through mergers and acquisitions to four large carriers: American, Delta, United and Southwest. That has increased the importance of hub airports, where typically one airline is dominant.

United, which also has a major presence at Newark Liberty International and San Francisco International Airports, has done well financially in recent years. The company reported third-quarter earnings in October that topped analyst expectations.

As a result of its success, United has been able to close in on competitors like Delta, and Mr. Kirby is likely to continue to work toward that goal. “They made great strides, but I think they still have their sights on narrowing” the gap, Ms. Syth said.

Despite the airline’s turnaround, Mr. Munoz’s tenure was marred by several controversies. In April 2017, a passenger, Dr. David Dao, was dragged off a United flight at O’Hare International Airport when he objected to giving up his seat for an airline employee. Video of the incident quickly spread on social media and became the subject of days of news coverage and public commentary.

The airline was harshly criticized for how it handled the crisis, especially an email Mr. Munoz sent to employees that seemed to blame Dr. Dao. “As you will read, this situation was unfortunately compounded when one of the passengers we politely asked to deplane refused and it became necessary to contact Chicago Aviation Security Officers to help,” he wrote.

That only inflamed outrage at the company and Mr. Munoz, who later agreed to drop a clause in his contract under which he would become the company chairman while staying on as chief executive. The next year, a dog died on a United flight after it was stored in an overhead compartment.

Shares in the company rose after the company announced Mr. Kirby would take over from Mr. Munoz but were down 0.35 percent by the close of trading.

As part of the transition, Jane Garvey, the current chairwoman, will retire from the airline’s board of directors in May.

Katie Robertson contributed reporting.

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