United’s 3rd CEO in 45 Days Leads To More Questions Than Answers

United Airlines announced late yesterday that Brett Hart, their general counsel, would step in as acting CEO following the heart attack that Oscar Munoz suffered late last week.  Munoz is on indefinite medical leave.  Quoting from the press release:

United Continental Holdings, Inc. (NYSE: UAL) today announced that its president and CEO, Oscar Munoz, is on medical leave following a heart attack he suffered on Oct. 15, 2015. At this time, it is too soon to know the course of treatment and timing of recovery. The UAL board of directors has named Brett J. Hart, currently United’s executive vice president and general counsel, as acting CEO. This appointment is effective immediately.

Brett Hart becomes the 3rd CEO in 45 days after Oscar Munoz took over for Jeff Smisek when he was fired resigned due to improper dealings with government officials.

Brett appears to have well-rounded experience with other companies, but his resume seems to include mostly legal experience.  This WSJ article has a quote from United’s chairman about an increase in Hart’s operational responsibilities recently:

United said Mr. Hart had taken a broader role since becoming general counsel, and in January he was given an operational role for customer service, an area where United had fallen behind rivals.

“Brett has taken on increasing responsibility beyond general counsel over the last few years in the operations and customer facing areas of the company,” said Henry Meyer, who took over as nonexecutive chairman last month following Mr. Smisek’s departure.

That seems an odd match, taking someone from the legal shop and giving them an operational role in customer service.  This was theoretically done under Smisek’s watch, and customer service was certainly an area that needed focus back then (and still does now).

The full text of the press release has two quotes from the chairman that specifically reference Oscar’s agenda.  45 days isn’t a long time in the CEO chair, but it’s long enough to have come up with a detailed plan.  And, United is going out of their way to emphasize those plans are still the direction of the company.  Here are some potential scenarios based on the information we have so far:

Munoz’s heart attack wasn’t that bad and he’ll be back soon

This was where I was hedging my bets yesterday, but now I’m not quite as sure.  There are no comments about Munoz resting comfortably or the current chairman and/or new CEO speaking with him about carrying out his vision.

And, then there’s the last sentence of the press release:

The board of directors remains actively engaged in preparing for all potential outcomes regarding the company’s leadership structure.

The lack of public statements of contact with Oscar coupled with this last line reduce the likelihood that this is a minor medical incident (not that any heart attack is really “minor”).

Munoz is in really bad shape but the board has no idea who the successor will be

This scenario certainly carries more weight based now based on the time elapsed between the initial rumors of Munoz’s heart attack and the lack of clear statements that help define a timeline, or even the whisper of contact with Munoz.

I can understand that after replacing Smisek with Munoz the board was focused on how to move the airline forward, and that there likely wasn’t much time spent on succession.  The appointment of a “safe choice” for interim CEO from within the company screams that this is not a permanent appointment.

Munoz is in really bad shape and the board has quietly already reached out to replacements

You’d think there would be no way to have private conversations with potential CEO candidates at such a high level without someone finding out.  But, the types of people United would likely want to run their company are probably running another publicly held company.  All parties would have a strong vested interest in keeping those discussions quiet, especially where there was no job offer, but an attempt to “gauge interest” if the position should open up.

The stock market appears to be reacting rationally, with the stock down about 5% since the rumors started late last week.  United is due to report their quarterly earnings today, so the 1% drop today could solely be from performance metrics.  I think we’ll know more once we actually have the financial results.

Bottom Line

It seems the board of United Airlines is trying to tap dance on pins right now.  It’s unlikely they did much succession planning the last month or so.  I still believe there’s a reasonable chance Oscar Munoz will continue to be the CEO of United Airlines, but those beliefs are dampened by the tenor of the press release as well as the timeline.

It’s certainly a setback for United at a time when they can ill afford one.  Oscar Munoz seemed to be saying and doing all the right things early on to position United for improvements.  45 days isn’t enough time to turn an aircraft carrier around, but it is enough time to get the ship turning.  The responsibility to execute the next part of that turn now falls to Brett Hart.

In the interim, we’re left to read the tea leaves and wait for more public statements that might give us further clues which way the ship is turning.

Get well, Oscar.  Your airline needs you.

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