United Airlines bows to activists, adds directors
Reuters
Published Apr 20, 2016 12:43PM ET
United Airlines bows to activists, adds directors
By Jeffrey Dastin and Greg Roumeliotis
(Reuters) - United Continental Holdings Inc (N:UAL) will reshuffle its board in a settlement with activist investors, the airline said on Wednesday, averting a long and distracting fight over governance.
The move frees United to focus on flying more planes on time and shrinking the gap between its profit margin and those of larger rivals Delta Air Lines Inc (N:DAL) and American Airlines Group Inc (O:AAL).
The No. 3 U.S. airline by traffic, United said former Air Canada (TO:AC) Chief Executive Officer Robert Milton would become non-executive chairman at its June annual meeting. Milton joined United's board in March along with former Delta Chief Operating Officer James Whitehurst.
Activists PAR Capital Management Inc and Altimeter Capital Management LP, which together own 7.1 percent of United, had said more airline expertise on the board was necessary to guide CEO Oscar Munoz.
The settlement "clears the way (for United) to control their own destiny and improve the operation," said Janus Capital Group analyst Kristopher Kelley.
Munoz, who took the top job in September after being president of railroad operator CSX Corp (O:CSX), has agreed to postpone his own appointment as chairman by one year to 2018, United said.
As part of the settlement, PAR managing partner Edward Shapiro and Barney Harford, former CEO of online travel services company Orbitz Worldwide Inc
Only Harford was on the original slate of six directors that the hedge funds had asked shareholders to approve. However, United said it would make another appointment this year, meaning eight of its 15 directors will have joined no earlier than March.
Current Chairman Henry Meyer and two other directors will not stand for re-election in June.
The industry veterans new to United's board "can answer the easy or the hard questions that Oscar might have," Kelley said. "We just did not have that before with Henry Meyer."
United shares edged up less than 1 percent, which Kelley attributed to investors' reluctance to buy before the airline reports first-quarter results later on Wednesday.
Munoz has the challenging task of turning around industry-lagging passenger satisfaction scores and a stock price that has fallen 7 percent in the past year.
A heart attack in October forced Munoz to take a medical leave of absence for nearly five months. Yet in his short time on the job, he has secured new contracts that increase workers' pay and improved labor relations.
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Pilots, who had opposed the activists, look forward to the new board fulfilling its obligation to improve the company, union Chairman Todd Insler said in a statement.
Written By: Reuters
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