United Airlines CEO Jeff Smisek steps down amid probe


United Continental Holdings Inc (UAL.N) said on Tuesday Chief Executive Jeff Smisek had stepped down in connection with a federal probe of the airline, and that two other senior executives tied to the investigation would also be leaving.

Oscar Munoz, a United board member and CSX Corp (CSX.N) chief operating officer, was immediately tapped as CEO.

“The departures announced today are 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. The investigations are ongoing and the company continues to cooperate with the government,” UAL said.

United Continental’s executive vice president of communications and government affairs, Irene Foxhall, and its senior vice president of corporate and government affairs, Mark Anderson, also were leaving, according to a person familiar with the matter.

The surprise departures at the world’s second-largest airline come just after its chief financial officer left for the same role at PayPal Holdings Inc (PYPL.O).

“I think some investors are going to be concerned given that degree of management turnover,” said Joseph DeNardi, an analyst with Stifel Nicolaus. “I was surprised by” the news of Smisek’s departure, he added. “I would imagine most people were.”

United Continental’s shares fell 2.8 percent in trading after the bell.

Smisek, who has been the company’s CEO since 2010, will also step down as chairman and president, United Continental said in a statement.

UAL’s general counsel, Brett Hart, declined during a conference call Tuesday to elaborate on the reasons for the departures or the status of a federal investigation into UAL’s relationship with David Samson, a former chairman of the Port Authority of New York and New Jersey.

In February, the carrier had opened an internal investigation into its relationship with Samson, following a government probe.

Media reports have said the government probe focused on whether United added direct flights to Columbia, South Carolina, from Newark to accommodate Samson, who had a home there.

The route was canceled after Samson resigned in early 2014 following news of a federal probe into the potential conflict of interest between his role as port authority chairman and his private law firm.

The investigations are ongoing and United’s internal probe and the related circumstances do not raise any accounting or financial reporting concerns, United Continental said on Tuesday.

“We don’t expect it to impact our operations,” Hart said.

United under Smisek had faced mounting pressure from investors to improve its day-to-day operations and financial performance.

About 75 percent of United’s flights arrived on time during the first half of this year, according to federal data, the worst record among the four largest U.S. airlines. UAL executives told Reuters last month they planned a series of changes to schedules to improve on-time performance.

While the company struggled initially following the United-Continental merger under Smisek, “more recently he’s done a good job,” DeNardi said, pointing to the company’s steadily improving financial performance.

Munoz, 56, has long served on United’s board. He became president and chief operating officer of CSX in February, where he oversaw operations, service, human resources, sales, marketing and information technology. From 2003 to 2013, he served as the rail company’s chief financial officer.

On the call with analysts, Munoz, said he would focus on improving United’s performance with customers.

“We need to reach our customers with a better service product,” Munoz said.

Smisek will receive a separation payment of $4.9 million, payable as a lump sum in cash, the company said in a regulatory filing. The company also said it will give Smisek stock worth nearly $3.5 million.

(Reporting by Sweta Singh in Bengaluru, Alwyn Scott and Lewis Krauskopf in New York and Joseph White in Detroit.; Editing by Savio D’Souza, Bernard Orr)



Please enter your comment!
Please enter your name here