Published on October 27th, 2015 | by Jim Lee0
United name acting CEO, new CEO Oscar Munoz on medical leave
The joy and sense of relief at United Continental Holdings, Inc. (United), as Oscar Munoz seamlessly stepped in, following the surprise announcement on 8th September that Jeff Smisek was stepping down from all leadership roles at United, was short lived. Mr. Munoz was widely respected both within the company and within the wider aviation community, so it came as a further shock when United Airlines issued a statement on 16th October, confirming that they had been informed by Mr. Munoz’s family, that he was admitted to the hospital on the previous day. It added that it would “provide further details as appropriate” and stated that in the meantime, it was “continuing to operate normally”.
Three days later on 19th October, a brief statement from Henry L. Meyer III, non-executive Chairman of the Board of United Continental Holdings, said that it anticipated that it would “today conclude the corporate governance process necessitated by the hospitalisation of President and CEO, Oscar Munoz”. This was followed by a longer announcement confirming that Mr. Munoz was “on medical leave following a heart attack he suffered on 15th October”. It added “at this time, it is too soon to know the course of treatment and timing of recovery. The UAL board of directors has named Brett J. Hart, currently United’s executive vice president and general counsel, as acting CEO. This appointment is effective immediately”.
In addition to serving as United’s general counsel, Mr, Hart has been responsible for government and regulatory affairs, corporate real estate, customer experience, corporate security, community affairs, contact centres and food services. Prior to joining United in 2010, he served as executive vice president, general counsel and corporate secretary at Sara Lee, partner at Sonnenschein Nath & Rosenthal, and special assistant to the general counsel at the U.S. Department of Treasury. Mr. Hart has a Bachelor of Arts degree in philosophy and English from the University of Michigan and a juris doctorate degree from the University of Chicago Law School. The statement added that he would “closely with Henry L. Meyer III, non-executive chairman of the board, and United’s experienced executive team to run the company in Mr. Munoz’s absence”.
Mr Meyer added “I am confident in his ability to continue to implement the company’s strategy and Oscar’s mission of bringing United’s people together around the shared purpose of becoming the best airline for our customers and employees.” He went on “Oscar’s agenda is focused on customer service, teamwork and innovation and I, along with the executive team, will continue to move quickly to implement it,” “We believe strongly that we can continue to make steady progress on increasing shareholder value by working together to deliver a great product to our customers” he concluded.
United announces third-quarter profit
In his first major announcement on 22nd October, United’s acting Chief Executive Officer Brett Hart, reported adjusted profit at United Airlines of $1.7 billion (around €1.54 billion) for the third quarter, or $4.53 (€4.11) per diluted share, excluding special items, up 58% from a year earlier thanks to lower fuel costs. Third quarter revenue was $10.3 billion (around €9.35 billion), a decrease of 2.4% year-over-year. In the quarter, the company amended its co-branded credit card marketing services agreement, which led to approximately $100 million (around €90.75 million) of incremental revenue. This was more than offset by the declines in passenger revenue. Total operating expense excluding special items was $8.3 billion (around €7.53 billion) in the third quarter, down 10.7% year-over-year. Including special charges, total operating expense was $8.4 billion (around €7.62 billion), a 10.3% decrease year-over-year. The decrease was driven by lower oil prices and good non-fuel cost performance as a result of a strong U.S. dollar. The strong US dollar has also dented sales to foreign visitors, and the falling price of oil has reduced revenue from energy clients by 35% for United. These results include a nonrecurring $3.2 billion (around €2.9 billion) non-cash gain associated with the reversal of the company’s income tax valuation allowance. United has tried to allay concerns that the changes of its leadership have left an ‘amateur team’ in charge and has promised better service and moderate expansion in 2016 for investors worried about weak demand.
Mr. Hart was quick to point out the continuity of policy at the airline saying: “At its core, this is a team that has been here through the first quarter, which resulted in record results; the second quarter, which resulted in record results; and the third quarter which resulted in record results,” He added that his agenda does not differ “at all” from the one set by Munoz, who met workers to rebuild morale after years of strained relations. Admitting that the he ‘United family’ has had a challenging few weeks, he said that they have “never felt more unified and are committed to making the right investments in our people and providing them the tools they need to deliver excellent service to our customers.” “I are working to push forward the agenda we laid out over the past six weeks by focusing on our employees, improving our processes and investing in our systems to further improve our margins” he concluded
In a statement on 25th October, United announced that it had reached an agreement with the International Brotherhood of Teamsters (IBT) to put a proposed joint collective bargaining agreement out for ratification. The proposed agreement will bring together the airline’s more than 8,600 technicians and related employees under a single contract. United and the union worked with the assistance of the National Mediation Board to reach the agreement.
United has joint collective bargaining agreements covering the majority of its represented employees, including pilots, dispatchers, fleet service, passenger service, reservations and storekeeper workgroups. The company is engaged in mediated negotiations with the Association of Flight Attendants (AFA) and recently entered into discussions with its pilots, represented by the Air Line Pilots Association, to consider an extension of their current collective agreement. The proposed agreement is subject to ratification and covers mechanics and related employees located throughout the United States. In a comment Mr. Hart said “Investing in our people is key to United’s long-term success, so I’m encouraged that we have reached this agreement with such an important part of our workforce.”