Investment fund-driven board shake up anticipated at United

Despite the confirmed return of Oscar Munoz to the United helm only two months after undergoing a heart transplant and despite the positive impact he had already made at United in the month prior to his hospitalization after a heart attack, an investor-driven shake-up of the board is looming. The two investment funds who own a combined 7.1% stake in the airline, PAR Capital Management and Altimeter Capital Management, have expressed concern over “poor performance and bad decisions over the last several years.”
In what is seen as a proxy fight by what are today referred to as ‘activist investors’, the two Boston-based asset managers have nominated six new members for the airline’s board, including former Continental Airlines chief executive Gordon Bethune, Altimeter founder Brad Gerstner and former Orbitz CEO Barney Harford. It is anticipated the annual shareholders’ meeting will take place in June, while board nominations have to be received by this Saturday. Don Bilson from research firm Gordon Hasket stated that “This situation is really all about shaking up what Altimeter/PAR thinks is an entrenched and ineffective board.”
Since United merged with Continental Airlines in 2010 to form the second-largest commercial carrier by volume in the US, the airline has been beset with problems, particularly in relation to flight delays, software problems with their ticketing system, low staff morale and the departure of previous CEO, Jeff Smisek, after purported irregularities and an FBI investigation onto the airline’s dealings with the Port Authority of New York and New Jersey.
Despite confirming on Monday of this week that the airline was already adding three independent directors to the board and the offer of an increased stock buyback plan, this has proved insufficient an incentive for PAR Capital Management and Altimeter Capital Management to back down.
While the investment funds have made no mention of his tenure, Munoz has already urged employees to just focus on running the airline rather than become distracted by current events, while United non-executive chairman, Henry Meyer was clear to state on Tuesday that: “PAR and Altimeter have unilaterally taken this hostile action with no concern that a proxy fight could distract the company from executing on Oscar’s strategic plan.”