Third CEO in two months for United Airlines

United Continental Holdings

By Arionne Nettles

United  Airlines has its third leader in less than two months, but analysts are still positive about the company’s financial outlook.

United CEO Oscar Munoz suffered a heart attack Oct. 15, after just a month in his new position. Former CEO Jeff Smisek resigned in September amid a federal corruption investigation, causing United’s board of directors to appoint Munoz, the former chief operating officer of CSX Corp.

Four days after Munoz’s attack, the company announced that executive vice president and general counsel Brett Hart will serve as acting CEO until Munoz returns.

That announcement was highly anticipated after news of Munoz’s hospitalization broke last Friday, sending shares of the company down nearly 4 percent.

“Mr. Munoz’s sudden and seriously incapacitating illness just a month into the job will likely delay if not stall United’s progress on hold, perhaps into next year,” Gimme Credit analyst Vicki Bryan said in a note.

The U.S. Securities and Exchange Commission does not specifically mandate that companies provide information about leadership illnesses, but does require the reporting of “material corporate events.”

The board’s inclination to hire an executive without significant operating or financial experience may indicate that Munoz is expected to return fairly quickly.

“This could indicate that the board still assumes Mr. Munoz can fully recover at some reasonable point and return to duty—good news—or if not then the board may be pursuing a full blown executive search for a more suitable external candidate—also good news,” Bryan said.

Hart becomes acting CEO just as the airline is working to repair employee relations. Federal mediation began Tuesday with the United Airlines Flight Attendants, represented by the Association of Flight Attendants, to end years of contract negotiations. United is unable to close its 2010 merger with Continental until negotiations are ended.

“Munoz made it clear concluding contract negotiations is a priority and we hope to see that reflected at the table this week,” the Association of Flight Attendants said in a press release.

Hart, who has previously served in legal positions at Sara Lee Corp. and at the U.S. Department of Treasury, does not have any direct airline or financial experience, but has worked in a number of areas such as customer experience, and will work closely with nonexecutive board chairman Henry Meyer III.

Meyer, who previously served as chairman of the coard and chief executive officer for KeyCorp, has confidence in Hart.

“Brett has taken on increasing responsibility beyond general counsel over the last few years in the operations and customer facing areas of the company,” Meyer said in a press release. “I am confident in his ability to continue to implement the company’s strategy and Oscar’s mission of bringing United’s people together around the shared purpose of becoming the best airline for our customers and employees.”

Despite changes, Wall Street’s outlook for the company remains positive. Thursday, United released its earnings for the quarter ending Sept. 30. Excluding special items, including the amendment of its co-branded credit card marketing services agreement, the company posted net earnings of $1.7 billion, or $4.53 per share, slightly less than the consensus estimate of $4.55 cents.

Analysts raised the fourth quarter consensus estimate to $2.24 per share, a 7.4 percent bump over the past four weeks.

“The last several weeks have been very eventful for United, with news of Oscar’s heart attack hitting many of us hard,” Hart said in Thursday’s earnings call. “However, I want to assure you that the United team has never been more unified and committed to the goal of making United great again.”

United’s stock closed at $56.05 Thursday, up 2.75 percent.

Photo at top: Jeff Smisek (left) resigned Sept. 9 amid a federal corruption investigation and United’s board of directors appointed Oscar Munoz (center) as CEO. After Munoz suffered a heart attack Oct. 15, Brett Hart (right) was appointed as  acting CEO.