United earnings call shakes Wall Street’s faith in CEO
In the span of a onehour conference call, Wall Street’s confidence in the leadership of United Airlines plummeted.
Analysts pressed Chief Executive Officer Oscar Munoz and President Scott Kirby on how they planned to deal with rising costs and falling pricing power. Would they rein in growth in the face of fare weakness? Provide more detail on revenue initiatives? Revisit financial goals outlined last year?
Munoz asked for “a little bit more patience.” The exchanges turned testy. And what began in the morning as a moderate stock slide after a disappointing earnings report turned into the biggest tumble for United’s stock in eight years, 12 percent down on Thursday. Shares halted the slide Friday, rising less than 1 percent to settle at $59.90.
Analysts said they were fielding questions from investors about whether United needed a management change. That’s adding to pressure on Munoz, who has been under fire this year for fighting a fare war with discounters, bobbling the rollout of a new no-frills product and mishandling the furor when a passenger was dragged off a plane in April.
Before the call, “we had heard rumblings from the investment community about another potential management change at United Continental,” Helane Becker, an analyst at Cowen & Co., said in a note to clients. After the call, “they aren’t rumblings, but full-fledged screams.”
United Continental Holdings declined to comment on analysts’ discussions of any management changes. During the call, Munoz said the current managers need more time after inheriting an industry laggard from previous leaders.
“We have dug ourselves in a hole from a competitive perspective, and the team that we’ve gathered to get out of here is about regaining that competitive advantage,” he told analysts.
Munoz, 58, took over two years ago when his predecessor left amid an internal inquiry into the airline’s ties to the former chairman of the Port Authority of New York & New Jersey. Serious health problems struck: Munoz suffered a heart attack and underwent a heart transplant before returning to work in 2016.
Undeterred, the former railroad executive set about forging labor peace, pushing operational improvements and drawing up turnaround plans. He weathered a proxy fight by Altimeter Capital Management and PAR Capital Management with United replacing its chairman and giving board seats to the hedge funds. Munoz then brought in Kirby, a veteran of American Airlines Group Inc.
United’s reward for last year’s changes: a 27 percent stock gain, the most among major U.S. carriers.