Tuesday, October 20, 2015

United’s Acting CEO Has Tough Task Ahead • Well-tested but lacking operational experience, Brett Hart must try to end years of strained relations with workers

The Wall Street Journal
By Doug Cameron And Joann S. Lublin
Updated Oct. 20, 2015 6:34 p.m. ET

Brett Hart, United Continental Holdings Inc. ’s newest leader, is a high-achieving lawyer who has impressed top executives at two major companies but lacks operational experience that may be important for steering the company to better performance, analysts and acquaintances said.

The airline late Monday announced Mr. Hart’s promotion to acting chief executive from general counsel. He stepped in for Oscar Munoz, who is on indefinite medical leave after suffering a heart attack last week, just over a month into his tenure as CEO.

The 46-year-old Mr. Hart now must take up, at least temporarily, the challenges Mr. Munoz had embraced—including trying to end years of strained relations with its workers. Five years after it was formed by a merger, United still needs to secure new joint labor deals with its flight attendants and mechanics, contracts that have been portrayed by both management and labor as crucial to the airline’s ability to improve an operational performance that has lagged behind peers.

Mr. Hart joined United as general counsel in 2010. His role was expanded in January to include invigorating United’s customer service. Former colleagues said he has demonstrated abilities to engage with stakeholders and make tough decisions.

“There is no one who is more levelheaded than he is,” former Sara Lee Corp. CEO Brenda Barnes said in an interview. Ms. Barnes elevated Mr. Hart, a former Chicago corporate lawyer, to become the food company’s general counsel several years after he joined. Ms. Barnes said he had the “intellectual capacity” to run United temporarily or longer term.

However, she said she hasn’t ever seen Mr. Hart in an operational role, and that he didn’t aspire to such duties during their Sara Lee days. Ms. Barnes stepped down at age 56 in August 2010, several months after suffering a stroke. Mr. Hart left that December.

Christopher John “CJ” Fraleigh, former head of Sara Lee’s North American business, said Mr. Hart is calm in a crisis but also decisive. “He’s not afraid to act,” Mr. Fraleigh said. “There is nobody who is better in an intense situation.”

Mr. Munoz, a longtime United board member, had no experience running an airline when he was tapped as CEO last month. But his pedigree included leading an operations turnaround at railroad operator CSX Corp., where he served as president and chief operating officer, as well as spells at PepsiCo Inc. and Coca-Cola Co.

“Mr. Hart has limited experience in finance, operations or customer service, the areas that [United] is most in need of improving,” said Jim Corridore at S&P Capital IQ, who cut his recommendation on the stock on concerns that the turnaround pursued by Mr. Munoz could slow.

Others viewed the choice as providing more stability for the airline at a time when its management ranks remain depleted following Jeff Smisek’s recent departure as CEO alongside two other executives.

“We suspect Mr. Hart was named Acting CEO so the three other [United] executives that were rumored to be considered for the role can focus on their day-to-day responsibilities, and that’s probably the correct decision,” said Hunter Keay at Wolfe Research.

United shares had the biggest decline among U.S. airline stocks Tuesday, closing 1.8% lower at $55.75.

Mr. Hart’s ascension from top lawyer to top executive isn’t unique in the airline industry. Mr. Smisek, who was ousted last month, and Delta Air Lines Inc. CEO Richard Anderson both ascended to the top job after stints in the general counsel’s office.

Mr. Hart is one of the few senior executives at United, though, whose relationship with Mr. Smisek doesn’t go back to Continental Airlines, which Mr. Smisek led before the 2010 merger with United. In selecting Mr. Hart, United’s board passed over several other senior executives who had worked longer with Mr. Smisek.

Mr. Smisek stepped down last month as a result of an internal United investigation, which was prompted by a federal corruption probe into the Port Authority of New York and New Jersey that is examining the relationship of a former agency official with United. The company didn’t say what its investigation found. Mr. Smisek hasn’t been accused of wrongdoing.

Mr. Hart, as general counsel, likely would have been deeply involved in that internal investigation. United declined to comment about the probe on Tuesday.

Mr. Munoz had highlighted repairing labor relations as his first priority, but had just begun the effort, in part through accelerated talks and by traveling across the United network to meet employees and source ideas.

United’s flight attendants were due to start talks with management and mediators Tuesday, having last week made progress as staff from the former Continental Airlines have been included in profit-sharing, a key union demand. However, efforts to secure a new deal with mechanics stalled this month, though talks resumed Tuesday.

Union leaders on Tuesday pledged to work with Mr. Hart, though their statements seemed to lack the level of enthusiasm afforded to Mr. Munoz, who was viewed as a fresh start after years of stalemate in trying to forge new deals.

“Flight Attendants are eager to see positive, tangible results from the leadership of United Airlines,” Sara Nelson, international president of the main flight attendants union, said in a statement. 

 - Source: http://www.wsj.com

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