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 The airline also got a boost on Wednesday after acting Chief
Financial Officer Gerry Laderman said at an investor conference that
United is on track to save $1 billion in annual non-fuel costs by
next year and would complete a $1 billion share buyback nearly two
years ahead of schedule. UAL told investors it would return $4
billion to shareholders by 2017.
Analysts gave a thumbs up to leadership change, and the company's
shares rose, after falling as much as 2 percent in extended trading
Tuesday. UAL shares closed slightly higher as broader indexes fell
by more than 1 percent.
The stock slumped Tuesday after the airline surprised investors with
the announcement that Chief Executive Jeff Smisek
and two other senior executives were leaving the company in
connection with a federal probe involving the Port Authority of New
York and New Jersey.
In February, the carrier said it had opened an internal
investigation into its relationship with David Samson, a former
chairman of the Port Authority of New York and New Jersey, after it
learned of a federal probe.
Media reports have said the probe focuses on whether United added
direct flights to Columbia, South Carolina, from Newark to
accommodate Samson, who has a home near the city. A spokeswoman for
Samson's lawyers declined to comment.
The route was canceled after Samson resigned in early 2014 following
news of a separate federal probe into the potential conflict of
interest between his role as port authority chairman and his private
law firm.
United said Smisek could not be reached for comment. The company's
general counsel Brett Hart declined to discuss the probe during a
call with analysts Tuesday.
The investigation of UAL and Samson is one of many probes stemming
from the so-called "Bridgegate" scandal, in which aides to New
Jersey Gov. Chris Christie were accused of engineering traffic jams
on the busy George Washington Bridge to New York City to punish a
local politician. Christie, now competing in the crowded Republican
presidential field, told CNN Wednesday "the fact is when you have
60,000 people working for you, there are going to be occasions where
someone doesn't hold up that standard. I don't know if this is one
of those instances or not."
OPERATIONAL, LABOR CHALLENGES
The federal probe is only one challenge facing Munoz, 56, who left
CSX Corp as president and chief operating officer to lead UAL.
Under Smisek, United lagged on financial and operational
performance, was dogged by computer outages that stranded passengers
and recently posted the worst on-time record among major U.S.
carriers.
Munoz must now convince shareholders that UAL can make faster
progress to narrow the gap in financial and operating performance
with rivals such as Delta Air Lines Inc. He also faces a unionized
workforce that had difficult relations with management under Smisek.
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Workers protested at shareholders meetings and called for his ouster
over the failure to reach combined labor contracts for flight
attendants and mechanics.
On Wednesday, Munoz told the company's employees in a letter that he
would meet with as many workers as possible and "hear about
operations directly from you."
Sara Nelson, president of the Association of Flight Attendants,
recalled a joint union-management press conference in May. In a
small waiting room before the event, "there was no effort on the
part of Smisek to interact with me or any of the other union
leaders," Nelson recalled.
"We are overjoyed, quite frankly, that the cloud of Smisek's
leadership has been lifted," she said.
David Bourne, director of the airline division of the International
Brotherhood of Teamsters, said Wednesday he was "very, very happy"
with the choice of Munoz because of his rail background. Bourne said
he had a "rocky start" with Smisek when he initially proposed
outsourcing ground service operations at several airports including
Newark.
"We said, 'Do you want a war?'" he said. "We had a talk, we hit it
off, I don't know why. From that point on we were able to get things
done."
Investors and analysts said Munoz's record at CSX was reassuring.
Munoz "helped transform the railroad into an industry leader in
customer focus, reliability and financial performance," said CRT
Capital Group analyst Michael Derchin. "These are major priorities
for UAL, in our opinion."
Analysts were also pleased that the new CEO was familiar with the
airline due to long service on United's board.
"We believe Mr. Munoz already knows the inherent potential and key
investor concerns regarding the company," said Evercore ISI analyst
Duane Pfennigwerth. "We were encouraged to hear him speak directly
to the integration challenges that United has faced and improving
customer service as a priority."
(Additional reporting Nick Carey, Daniel Bases. Writing by Alwyn
Scott; Editing by Lisa Von Ahn, Bernard Orr and Joseph White)
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