The Wall Street Journal
By Nathan Becker,Ted Mann and Doug Cameron
Updated Sept. 8, 2015 6:47 p.m. ET
United Continental Holdings Inc. said Chief Executive Jeff Smisek has left the company amid a continuing federal investigation, and the airline named CSX Chief Operating Officer Oscar Munoz as its next president and CEO.
United Continental said Mr. Smisek’s departure is related to federal and internal investigations associated with the Port Authority of New York and New Jersey.
United executives declined detailed comment on the continuing internal investigation and federal probe. A Port Authority spokesman declined to comment.
The relationship between United and former Port Authority Chairman David Samson has been under investigation by U.S. Attorney Paul Fishman’s office for more than a year. At issue, according to people familiar with the investigators’ inquiries, is whether Mr. Samson used his position as head of the Port Authority’s board to demand favorable treatment or personal benefit from United. The airline is the largest carrier by passenger volume at Newark Liberty International Airport and was seeking to renegotiate its lease agreement at the airport, among other matters, during Mr. Samson’s tenure.
Prosecutors have repeatedly subpoenaed records from the Port Authority, as recently as last month, that would date back to the early days of Mr. Samson’s tenure at the authority and that include correspondence and meeting records related to United’s attempts to negotiate an extension of its lease at Newark, according to people who have seen the subpoenas.
Among the areas of inquiry: a direct flight launched by United to Columbia, S.C., near where Mr. Samson keeps a vacation home. Published reports said the flight was referred to within the Port Authority as “the chairman’s flight.” It was canceled soon after Mr. Samson retired from the Port Authority in 2014.
Mr. Samson has previously declined to comment on the federal inquiry through a spokeswoman. He has defended his tenure and his career in public service, including a stint as Attorney General of New Jersey.
In a February filing, United Continental said some of its executives and employees had received federal grand-jury subpoenas related to people formerly associated with the Port Authority of New York and New Jersey, and that it was cooperating with the government’s investigation.
Mr. Smisek will receive an array of compensation following his departure, including a lump sum severance payment of $4.875 million in cash, according to a regulatory filing. He will also receive outstanding salary and vested benefits such as share awards, alongside continued benefits such as lifetime flight and parking benefits, and the title to his company car.
The former Continental Airlines CEO, who outgunned American Airlines’ CEO Doug Parker to take control of United through a merger agreement in 2010, is subject to a two-year noncompete agreement.
United Continental also said its executive vice president of communications and government affairs and its senior vice president of corporate and government affairs have stepped down, moves related to the investigation.
Mr. Munoz leaves CSX after several years as operating chief. He had held the post since 2012 and was chief financial officer for nearly a decade before that.
Mr. Munoz has served on United Continental’s board since 2010 and on Continental Airlines’ board from 2004 until the merger with United in 2010. He said he expected to spend his first 90 days as chief visiting United locations and employees, and hoped to expedite efforts to secure outstanding labor deals, while continuing to expand capacity below the rate of GDP growth.
After 11 years on the board of United and its predecessor, he pledged to employ lessons learned from his rail-industry experience to continue the airline’s efforts to boost operational and financial performance following a period when it’s been weighed down by technical hitches and unstable labor relations.
He said U.S. airlines had been closely watching what analysts have called the “rail renaissance,” with a greater emphasis on service levels and pricing and cost discipline, and returning profits to shareholders.
“We’re not that unstable,” Mr. Munoz said of recent management changes and continuing problems with its ticketing system, describing the combination of United and Continental as “a rough integration.”
Mr. Munoz had been viewed by analysts as a potential successor to veteran CSX CEO Michael Ward. Mr. Munoz said it was a tough decision to leave the railroad, but United was a bigger company, and his background was in business-to-consumer channels.
Henry Meyer, who was also named the company’s nonexecutive chairman, said: “Oscar’s track record demonstrates that he has the right blend of strategic vision and strong leadership to continue United’s upward trajectory.”
United has seen a turnaround in its financials recently after a bumpy integration of United and Continental. It posted a record $1.1 billion profit last year. In July, the company announced a new $3 billion stock-buyback program and a sharply increased profit of $1.2 billion for its latest quarter.
Still, the company isn’t without glitches. In July, a computer problem temporarily grounded the company’s world-wide fleet. United Continental has also recently wrestled with unhappy unions, poor punctuality and a recent increase in maintenance-related delays and cancellations.
Original article can be found here: http://www.wsj.com
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