United’s CEO returns to airline facing big issues

When Oscar Munoz walks into his office at United headquarters Monday, there will be plenty of smiles seeing him return from a heart transplant just two months ago. But he won’t be able to ease back on the job after his major surgery.

Instead, his return is overshadowed by questions about whether he can lift United Airlines to a new level and an ongoing proxy battle over who should be on the board that will directly influence his plans to turn around the carrier.

Early Monday, in a letter to employees, Munoz wrote: “I have many priorities on my first day back, but at the top of my list is my meeting today with our labor leaders. I believe that, together, we can resolve our contract issues so that we can focus on the most important thing: running the greatest airline in the world. I want to reiterate that the best thing we can do to accelerate our path forward is to continue taking care of each other and delivering a world-class customer experience.”

Munoz’s meeting with labor leaders shouldn’t be a surprise given his history as chief operating officer at CSX. Munoz won praise during his tenure at the rail giant for his work with labor unions. His record has already prompted union leaders at United to say they are willing to work with him to overcome issues that have dogged the airline for years.

Last week, when Teamsters from United picketed outside a transportation conference in New York where the airline was giving an update on its business, the comments about Munoz were relatively positive.

“Oscar is saying the right things, we are waiting for the delivery,” said one United employee.

Another added, “He seems like a pretty decent CEO than what we had back in the past.”

Oscar Munoz

Source: Youtube
Oscar Munoz

The fact that United Airlines picked Munoz to replace former CEO Jeff Smisek is encouraging to labor leaders because their relations with Smisek were terrible. But, for activist investors, the selection of Munoz to be CEO prompted a push for them to have more influence on the leadership of airline.

Last week, two hedge funds that own 7.1 percent of United’s stock, Par Capital and Altimeter Capital, said they will put up a slate of six people to become members of the board. They have complained about a lack of leadership and believe United should be performing better in several areas. That’s why they are a pushing for former Continental CEO Gordon Bethune to become chairman of United. Bethune, who was Continental’s CEO until 2004 — six years before the airlines merged — says a change in United’s board could make Munoz a stronger CEO.

“Shareholders are not happy having no airline expertise at the helm. Everyone loves, including me, Oscar. It’s the board that has kind of a country club atmosphere,” Bethune told CNBC last week.

After Bethune’s comments aired on CNBC, Munoz sent a letter to employees urging them to stay focused on their jobs.

He added that the hedge funds are trying to “put their nominees in control of the board and our company’s future.”

For Munoz, who is a member of the United board, the proxy battle over leadership of the airline will likely drag on until the airline’s annual meeting in May. In the meantime, he’s dealing with an airline that has struggled with everything from on-time arrivals to customers relations. So much for easing back into the job.

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