Published on March 20th, 2016 | by Jim Lee


Changes at the board of United Continental Holdings, as President and CEO Oscar Munoz returns

On 7th March, United Continental Holdings, Inc., announced that its Board of Directors had appointed three new highly qualified independent directors to the Board: James A.C. Kennedy, Robert A. Milton and James M. Whitehurst. The appointments, effective immediately, would enhance corporate governance at United, according to Henry L. Meyer III, Non-Executive Chairman of the Board. The Board expects to announce a fourth new director in the near term. They will be nominated by the Board for re-election at the 2016 Annual Meeting and certain current directors will step down from the Board, at or in advance of, that meeting.

James Kennedy (62), is the former President and Chief Executive Officer of T. Rowe Price Group, Inc., a global investment management organisation which provides mutual funds, sub-advisory services, and separate account management. He graduated from Princeton University with a BA degree and Stanford University with an MBA. He is a recipient of the Stanford University Graduate School of Business Excellence in Leadership Award. Robert Milton (55), was formerly Chairman and Chief Executive Officer of ACE Aviation Holdings Inc., and was previously Chairman, President and Chief Executive Officer of Air Canada. Mr. Milton was a past director of US Airways, Inc., and was also a past Chairman of the Board of Governors of IATA (The International Air Transport Association). He graduated from the Georgia Institute of Technology with a BS in Industrial Management. James M. Whitehurst (48), President and Chief Executive Officer of Red Hat, Inc., was previously Chief Operating Officer of Delta Air Lines, Inc. Mr. Whitehurst currently serves on the Board of DigitalGlobe, Inc. He is a graduate of Rice University with a BA in Computer Science and has an MBA from Harvard Business School.

Oscar and part of his medical team on Jan. 11: Dr. Allen S. Anderson, Medical Director, Center for Heart Failure, Bluhm Cardiovascular Institute, Northwestern Medicine (at left), and Dr. Duc Pham, Director of the Northwestern Medicine Heart Transplant Program (at right) (PRNewsFoto/United Airlines)

Oscar and part of his medical team on Jan. 11: Dr. Allen S. Anderson, Medical Director, Center for Heart Failure, Bluhm Cardiovascular Institute, Northwestern Medicine (at left), and Dr. Duc Pham, Director of the Northwestern Medicine Heart Transplant Program

The appointments followed the announcement that President and Chief Executive Officer, Oscar Munoz, planned to return to those roles on a full-time basis on 14th March 2016, and resume all of his duties and responsibilities at that time. Since his heart attack on 15th October 2015, Mr. Munoz has been progressing well, initially with the assistance of an implanted medical device. Subsequently, a transplant was considered preferable to a long-term reliance on the implanted device. He had been cleared to return to work and the transplant decision was not the result of a setback in his recovery. From early December, Mr. Munoz had been gradually resuming company-related activities in collaboration with acting CEO, Brett J. Hart, visiting with employees, and participating in meetings at the company’s headquarters. He received the heart transplant on 6th January 2016 and since then he has participated actively in all major corporate decisions and meeting frequently with key stakeholders during his recovery.

Further Board Appointments

On 8th March, United Continental Holdings, Inc. confirmed that it has been informed by hedge funds PAR Capital Management, Inc. and Altimeter Capital Management, L.P. of their intention to nominate six director candidates, for election to the Board of Directors, at the Company’s 2016 Annual Meeting of Shareholders. The nominees include Gordon Bethune, Brad Gerstner, Barney Harford, Rodney O’Neal, Tina Sharkey and Brenda Yester Baty. PAR and Altimeter have previously disclosed that they are acting as a group that collectively owns approximately 7.1% of the Company’s outstanding shares of common stock.

Chairman Mr Meyer, in a comment said, “We are deeply disappointed that after United attempted to engage in a constructive, good-faith dialogue with PAR and Altimeter, repeatedly communicated our willingness to make meaningful changes in our Board, publicly announced our intention to name four new independent directors with deep relevant experience and named three of them yesterday, PAR and Altimeter have unilaterally taken this hostile action with no concern that a proxy fight could distract the Company from executing on Oscar’s strategic plan.”

During United’s discussions with PAR and Altimeter, the Company clearly communicated its interest in negotiating a reasonable settlement and, in a show of good faith, offered to amend its bylaws to extend its 12th March director nomination deadline. Despite the Company’s offer, not only were PAR and Altimeter uninterested in extending the deadline, but they also refused to cooperate in making their nominees available to be interviewed – which would be a necessary step for the Board to recommend any of their candidates – before launching a proxy contest.

He added, “Underscoring our commitment to good corporate governance, and with the benefit of shareholder input, the Board just appointed three new independent directors with deep relevant experience to the Board, and we plan to appoint a fourth new independent director in the near term. We remain open to engaging in productive conversations with PAR and Altimeter.”

Improving its operations, customer and employee experience

United has been focused on improving its operations and customer and employee experience. Over the past several months, United has experienced significant improvements in on-time arrivals and completion factor. United is proud to have the world’s most comprehensive route network, including U.S. mainland hubs in Chicago, Denver, Houston, Los Angeles, New York/Newark, San Francisco and Washington, D.C. The airline is a founding member of Star Alliance, which provides service to 192 countries via 28 member airlines. Together United Airlines and United Express operate an average of nearly 5,000 flights a day to 342 airports across six continents. In 2015, they operated nearly two million flights carrying 140 million customers.

United has also been upgrading its customer experience with free snacks and premium coffee, providing improved WiFi on-board, and modernising its United Clubs and airport lounges. These and other enhancements are delivering continued improvement in United’s customer satisfaction, employee pride, and financial performance. This employee pride is evident in its approximately 84,000 United employees who reside in every U.S. state and in countries around the world.

United Airlines Boeing 757 (IMG4863 JL)

United Airlines Boeing 757’s operate the transatlantic services from Dublin.

On its transatlantic services to Ireland it offers a three class service; United BusinessFirst which offers a superior business class service. Its BusinessFirst seat reclines 180 degrees into a 6-foot, 4-inch /1.93-m lie-flat bed and features a personal on-demand entertainment system with a 15.4-inch /39-cm touch-screen monitor. BusinessFirst amenities include laptop power, USB ports, noise-reduction headsets, amenity kits featuring Soho House’s Cowshed skin-care products, duvet-style blankets and a multi-course meal with complimentary wines.

United Economy offers complimentary food, soft drinks, juices, beer, wine, tea, coffee and inflight entertainment. Seats feature an adjustable headrest and a personal on-demand entertainment system.

Finally, United Economy Plus offers up to five inches /15.2 cm of extra legroom. Located near the front of the Economy cabin, the seats give the added benefit of allowing a swifter exit from the plane upon arrival.

Fleet enhancements

The airline anticipates taking delivery of 20 new Boeing aircraft, including 737 NGs, 787s and 777s this year, adding to the more than 700 mainline aircraft, that United operates. On 9th March it announced an order to purchase 25 new Boeing 737-700 aircraft. The order is in addition to a previously announced order of 40 737-700s. United will take delivery of the aircraft beginning at the end of 2017. It also announced that the carrier will retire its 747 fleet from scheduled service by the end of 2018. It is also converting existing Boeing 787 ‘Dreamliner’ orders, originally anticipated for delivery in 2020 and beyond, into four Boeing 777-300(ER)s and five Boeing 787-9s beginning in 2017. The aircraft will be used to replace the 22 Boeing 747-400s, which will be phased out two years earlier than previously expected.

“The new 737-700 aircraft are ideal for our fleet as we continue to reduce our reliance on 50-seat aircraft,” said Gerry Laderman, United’s senior vice president of finance and acting chief financial officer. “Retiring the 747 fleet and replacing those aircraft with more customer-pleasing, current generation aircraft creates a more reliable and efficient fleet that provides a better overall experience for our customers traveling on long-haul flights.”

In addition to this announcement, United currently has firm orders for 35 Airbus A350-1000s, 153 aircraft from the Boeing 737 family, 10 Boeing 777-300ERs, and 27 Boeing 787s. The airline also has firm orders for 10 Embraer E175 aircraft that United Express partners will operate.

United’s ongoing commitment to operate sustainably and responsibly

On 12th March, United Airlines made history by becoming the first U.S. airline to begin use of commercial-scale volumes of sustainable aviation biofuel for regularly scheduled flights, with the departure of United Flight 708, from Los Angeles International Airport. The launch marked a significant milestone in the commercial aviation industry by moving beyond demonstration flights and test programs to the use of advanced biofuels for United’s ongoing operations. In 2009, United became the first U.S. carrier to perform a biofuel demonstration flight. In 2011, United became the first U.S. carrier to operate a commercial advanced biofuel flight.

United has agreed to purchase up to 15 million gallons of sustainable biofuel from AltAir Paramount over a three-year period. The airline has begun using the biofuel in its daily operations at LAX, storing and delivering it in the same way as traditional fuel. To highlight this achievement, United will operate flights between Los Angeles and San Francisco with the dedicated use of AltAir Paramount renewable fuel for two weeks, while also integrating this fuel into its regular operations at the airport.

United’s Dispatchers vote to ratify contract extension

United’s more than 420 dispatchers, represented by the Professional Airline Flight Control Association, have voted by a 91% margin to ratify a tentative agreement that will extend their current contract through the end of 2021.

“This contract recognizes the essential role our dispatchers play toward fulfilling United’s shared purpose, and I thank the negotiating teams from both PAFCA and United for swiftly reaching a deal that works for our company and our employees,” said United

United has joint collective bargaining agreements covering the majority of its represented work groups, including pilots, ramp and passenger-service agents, storekeepers, load planners, maintenance and fleet technical instructors, and dispatchers. Recently, United’s pilots voted to ratify a contract extension more than a year ahead of their contract’s amendable date, following an expedited negotiations process with ALPA. The company recently opened contract negotiations early for the work groups represented by the International Association of Machinists & Aerospace Workers, including ramp and passenger-service agents, storekeepers, load planners, and maintenance and fleet technical instructors. The airline is also engaged in mediated negotiations with the Association of Flight Attendants and the International Brotherhood of Teamsters.

United’s earnings were one of the best in the Company’s history

United’s 2015 earnings were one of the best in the Company’s history, and United made progress shrinking the margin gap with its closest competitors, strengthening its balance sheet, and returning substantial cash to shareholders.

Full-year net income was $4.5 billion (around €3.99 billion), or $11.88 (€10.54) per diluted share, excluding special items. Including special items, UAL reported full-year net income of $7.3 billion (around €6.48 billion). These results include a non-recurring $3.1 billion (around €2.75 billion) non-cash benefit associated with the reversal of the company’s income tax valuation allowance.

For the full year, consolidated unit cost (CASM) excluding special charges, third-party business expenses, fuel and profit sharing decreased 0.7% year-over-year. This strong cost performance was largely the result of improved efficiency as part of the company’s Project Quality and up gauging initiatives and better completion as a result of improved operational performance. Consolidated CASM including those items decreased 11.9% compared to full-year 2014.

The company repurchased approximately $1.2 billion (around €1.07 billion) worth of shares and earned a 21% return on invested capital for the 12 months ended 31st December 2015.

United’s employees earned a record $698 million (around €619.4 million) in profit sharing for full-year 2015.

Commenting on the figures, acting CEO Mr. Hart said; “We have improved our operational performance, continued to invest in our products and services and achieved record financial performance,” He added “We have great momentum as we head into 2016 and are committed to continuously earning the trust of our customers and employees. I’m proud of what we accomplished together, running a reliable airline and making the right investments to deliver shareholder value”.

United adding additional Dublin services

United Airlines Boeing 757 take offUnited Airlines currently operates the Dublin – Newark route (UA022/3), on a daily basis, supplemented by a Dublin – Washington route (UA126/7), which operates six times per week. It also operates a Shannon – Newark route (UA024/5), six times per week and a four times per week Belfast – Newark route (UA076/7). All of United’s services are operated by Boeing 757-200 aircraft with a total of 169 seats, 16 flat-bed seats in United BusinessFirst and 153 in United Economy, including 45 Economy Plus seats with added legroom and increased personal space.

A second nonstop service from Dublin to Newark, previously summer only, will operate year-round effective 26th May 2016. The additional service, UA131/130, will operate daily until 22nd November 2016 and 13 per week thereafter; an increase on the previous winter schedule, when it operated daily over the winter.

In a comment, Pat Reede, United Sales Manager in Ireland said; “We’re pleased to offer our Irish customers even more choice by making this second nonstop flight to New York a year-round service,” “The Big Apple remains the most popular destination for transatlantic travellers and our Newark Liberty hub is not only the best gateway to the city but also offers easy connections to hundreds of other destinations across the United States and beyond” he added.

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About the Author

Jim has had a life-long interest in military matters and aviation. Initially, he fused both of these interests together with a passion for military aviation, initially as a photographer. He has travelled extensively over the years and has been the guest of many European air forces, plus the air forces of the United States, Russia and others throughout the world. His first introduction to journalism coincided with an interest in the civil aviation industry was when he initially wrote for and later edited, ‘Aviation Ireland’, the club magazine of the Aviation Society of Ireland. Jim was a contributor to Flying in Ireland since its inception over 10 years ago and is now a key contributor to this site. He has also contributed items for a number of other aviation magazines and has produced a number of detailed contributions to Government policy documents, most recently the Irish Government’s White Paper on Defence. He is also deeply involved in the local community and voluntary sector and has worked both in local government and central government.

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