Commentary

United Stakeholders Hope For Friendlier Skies Under New Boss

The resignation of United Airlines chairman and CEO Jeff Smisek and two communications and governmental affairs executives Tuesday has passengers, unions and investors alike hopeful that new boss, Oscar Munoz, who had been president and COO of the CSX railway and a member of United’s board, will finally get the $3 billion merger with Continental Airlines on track.

Smisek, who had been CEO of Continental, “prevailed in his bid to lead United after the two airlines merged in 2010. But United’s performance since the merger has lagged rivals’ and angered passengers, as it suffered from delays, a breakdown of its reservation system and other computer problems,” observe Kate Zernike and Jad Mouawad in the New York Times

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There has been agitation for a new management team even before news of an “internal investigation into whether the carrier set up a non-stop flight route to curry favor with the former chairman of the Port Authority” of New York and New Jersey, the politically connected David Samson, broke, as Shawn Boburg writes in the [North Jersey] Record

Boburg and Dave Sheingold pointed out in February that the flight was one of the nation’s “loneliest,” ranking “in the bottom 3% of all commercial passenger routes nationwide based on the share of seats filled.”

“The company hasn’t been able to negotiate combined labor agreements with its 21,000 flight attendants or its 9,000 mechanics,” write Susan Carey and Ted Mann in the Wall Street Journal. “United also has suffered five major computer problems since 2012, when it melded the systems of the former United and Continental, leading to months of problems for fliers, and the combined carrier has struggled with poor punctuality.”

The Association of Flight Attendants-CWA issued a statement welcoming Munoz and “new leadership and a new direction that recognizes the value of frontline workers and the full potential of our airline.” It also points out that it has recently filed for federal mediation because United “is still maintaining separate flight attendant operations and has yet to conclude a flight attendant merged agreement.”

In a conference call with analysts Tuesday afternoon, Munoz “said he plans to focus on innovation, earnings growth and most important an improved customer experience, and cited his consumer-based background as helpful for those changes,” writes  Jensen Werley for the Jacksonville Business Journal. Over the next 90 days, “he plans to travel United's system, to meet with the company's employees and work with management,” she adds.

He’ll have a way to go with customers — present and former. 

“The United merger is a grand example of a consumer sinkhole — a merger that proves to be not just a one-time event but an ongoing disaster for consumers (and shareholders) who suffer for years after,” Tim Wu, a Columbia professor and former avowed United loyalist, wrote in an essay for The New Yorker last November. He concluded: “To paraphrase Ronald Reagan, I didn’t actually leave United Airlines: the airline left me.”

Munoz has served in senior financial and strategic capacities at consumer brands including AT&T, Coca-Cola and Pepsico, according to United, which also named Henry L. Meyer III, the company’s lead independent director, to serve as non-executive chairman of the board of directors.

Nene Foxhall, United’s EVP of communications and government affairs, and Mark Anderson, an SVP in government affairs, also resigned “in connection with the company’s previously disclosed internal investigation related to the federal investigation associated with the Port Authority of New York and New Jersey,” as the United statement announcing the changes puts it without explicitly naming either executive.

“The resignations were linked to an investigation exploring whether the air carrier launched a money-losing flight from Newark to Columbia, S.C., to benefit the influential then-chairman of the Port Authority of New York and New Jersey, who owned a vacation home near Columbia,” write Drew Harwell and Katie Zezima in the Washington Post.

“The route, which became known as the ‘chairman’s flight,’ became a bargaining chip in the thorny relationship between the then-struggling airline and Newark Liberty International Airport, one of its key profit centers.”

Federal investigators first got wind of the arrangement — allegedly hatched between Samson and Smisek following a dinner in Manhattan and cancelled three days after he stepped down in March 2014 — while investigating the George Washington Bridge lane-closing scandals that have proved nettlesome to Gov. Chris Christie’s presidential aspirations although he has not been implicated in the scandal.

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