United Airlines hopes rail executive can make it fly right
At first glance, Oscar Munoz might seem like an unlikely pick to run one of the world’s largest airlines.
Until his surprise appointment on Tuesday as chief executive of United Airlines, Munoz had been a rising star at the CSX Corp., a railroad company where he was recently promoted as second-in-command and considered the likely successor to Michael Ward, the chief executive.
But in a sudden twist, Munoz, who has no airline management experience, was named at United after the abrupt resignation of Jeff Smisek in the face of a federal corruption investigation involving the Port Authority of New York and New Jersey.
Given the complexity of the airline business, it is virtually unprecedented for a major carrier to pick an outsider as its chief. With his new and highly visible position, Munoz, 56, also becomes one of the most prominent Hispanic executives in the country, leading a company that employs 84,000 people, operates hundreds of flights a day and runs a fleet of 700 airplanes.
Munoz said this week his goal was to focus on customer service and make United the top-performing carrier in the country.
He also pledged to repair relations with employees, which soured under Smisek. Flight attendants, for instance, have been angered by a lack of progress in getting a single contract for United workers.
“I want to talk to as many of you as possible because I want to get to know you and what you think about how things are going. How can we operate better? How can we better serve our customers?” Munoz said in a letter to employees. He also said he would make the airline “flier-friendly.”
It has been a rough period for United. Just before Munoz’s appointment was announced, United’s new website was down for a couple of hours on Tuesday morning, the latest in a series of technological troubles that have angered passengers and given the airline a reputation for poor service. Several times in June and July, for instance, the airline was forced to ground its flights
because of computer problems.
The more immediate concern for Munoz is the investigation into the company’s relationship with the Port Authority of New York and New Jersey. The United States attorney for New Jersey has been investigating whether United agreed to reinstate moneylosing flights to an airport near the weekend home of the Port Authority’s former chairman, David Samson, in return for improvements the airline wanted at Newark Liberty International Airport, where United is the dominant carrier.
Some analysts speculated that the resignation of Smisek and two other top officials at the airline might signal that indictments might be issued soon. Continental merger
United’s recent history is that of a troubled carrier that has faced recurring difficulties following its merger with Houstonbased Continental Airlines in 2010. The Chicagobased company’s financial results have been wildly uneven while customers complain about generally poor service.
While Munoz has no operational experience in the airline business, where executives often like to say that jet fuel runs through their blood, his background does reflect the direction airlines have been taking in recent years, focusing on financial returns, pricing power and capital discipline.
“We believe a leader from a well-established rail company, which is an industry that airline managements aspire to replicate and investors use as a comparison given margins that are twice higher, may be a positive for shares over time given the performance history and the opportunity ahead for United,” Morgan Stanley analysts said.
Others were more skeptical of Munoz’s ability to bring his financial expertise running a large freight organization to a customer-minded business.
Munoz had served as president of CSX since February and chief operating officer since 2012. Until then, he had been the chief financial officer since 2003. Hispanic award
Before joining CSX, Munoz held positions at AT&T, Coca-Cola and PepsiCo. In 2001, he was named one of the “100 Most Influential Hispanics” by Hispanic Business magazine. He received a bachelor’s degree in business administration from the University of Southern California in 1982 and an M.B.A. from Pepperdine University in 1986.
Munoz had also been a board member of Continental since 2004 and a director at United since the merger five years ago.