United Airlines bows to activists, adds directors

[April 20, 2016]  By Jeffrey Dastin and Greg Roumeliotis

(Reuters) - United Continental Holdings Inc said on Wednesday it had added two new board members in a settlement with activist investors, averting a long fight over governance at the No.3 U.S. airline by traffic.

The move is aimed at placating a complaint by activists PAR Capital Management Inc and Altimeter Capital Management LP that the company does not have enough directors with expertise in airlines. The hedge funds own a combined 7.1 percent of United.

Barney Harford, former chief executive of online travel services company Orbitz Worldwide Inc <OWW.N>, and Edward Shapiro, a partner at PAR, will join United's board immediately, the company said.

Another director, mutually agreed between United and the funds, would be appointed in the next six months.

The two hedge funds had initially asked shareholders to consider six new directors, including former Continental Airlines CEO Gordon Bethune.

Robert Milton, Air Canada's former chief executive who was one of three people to join United's board last month, will be appointed non-executive chairman at the company's annual meeting in June, United said.

Milton will replace retired financial services executive Henry Meyer, who along with two other directors will not stand for re-election at the annual meeting.

In the funds' view, the board needed to have industry veterans in charge to help new Chief Executive Oscar Munoz, who took on the top job in September after being president of railroad operator CSX Corp.

A heart attack in October forced Munoz to take a medical leave of absence for nearly five months.

Munoz has the task of turning around United's industry-lagging satisfaction scores and stock, which has fallen 7 percent in the past year.

He so far has made a point of improving labor relations and secured new contracts that increase workers' pay.

The funds had opposed United's plan to make Munoz non-executive chairman by 2017, citing corporate governance experts who say that independent board oversight is necessary to keep management in check.

Munoz has now agreed to postpone the appointment by one year to 2018, United said.

(Reporting by Jeffrey Dastin and Greg Roumeliotis in New York; additional reporting by Ankit Ajmera; Editing by Stephen Coates, Jacqueline Wong and Anil D'Silva)

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