United Airlines CEO Jeff Smisek steps down amid federal investigation
Jeff Smisek speaks at the National Press Club in Washington on May 15.
United Continental Holdings Inc., parent of United Airlines, on Tuesday replaced Chief Executive Jeff Smisek and two other top executives, saying the departures are linked to internal and federal investigations associated with the Port Authority of New York and New Jersey.
United officials wouldn’t elaborate except to say the investigations are ongoing and the company will cooperate with the government. It also said the probes “do not raise any accounting or financial reporting concerns” about United.
Oscar Munoz, 56, president at railroad company CSX and longtime United board member, will take over as president and CEO, succeeding Smisek, a former Continental executive who has headed United since its 2010 merger with Continental.
United, headquartered in Chicago’s Willis Tower, said this year that the company and some of its executives received subpoenas from a federal grand jury for information about dealings with the Port Authority of New York and New Jersey. United said at the time that in response it was conducting its own internal investigation.
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The Port Authority of New York and New Jersey, a joint venture between the two states since 1921, manages bridges, tunnels, airports and transit activities in New York City and northern New Jersey.
Former Port Authority Chairman David Samson’s activities have been the subject of document requests from the U.S. attorney’s office in New Jersey, including Samson’s votes on United Airlines projects at Newark Airport at the same time United was restarting flights from Newark to Columbia, S.C., near where Samson has a vacation home.
United began direct flights from Newark to Columbia, reportedly called the “chairman’s flight,” after Samson became chairman. The carrier canceled the flights days after he resigned last year.
Also stepping down in connection with that investigation were the airline’s executive vice president of communications and government affairs, Nene Foxhall, and its senior vice president of corporate and government affairs, Mark Anderson.
All changes were effective immediately, United said.
Regulatory filings show a separation agreement with Smisek dated Tuesday will pay him nearly $4.9 million in cash, as well as prorated portions of other payments based on whether the company hits certain performance targets this year. He also leaves with nearly 61,000 shares of stock, which at Tuesday’s closing price would be worth about $3.5 million.
Smisek will also receive flight benefits from United and parking privileges for life, and he will keep his company car.
The ouster comes at a time when United is making record profits but is struggling with late flights and complaints about customer service.
Munoz said during a conference call with industry analysts late Tuesday that he will work on those areas.
Munoz, who will continue to serve on United’s board of directors, most recently served as president and chief operating officer at CSX.
United said in a statement that Munoz “brings to this role deep and broad experience in the transportation industry and large consumer brands, including AT&T, Pepsico and the Coca-Cola Co.”
Although news of the shake-up was a surprise in the airline industry, it could be good for United, said Henry Harteveldt, a travel industry analyst with Atmosphere Research Group.
The federal investigation aside, United lags behind Delta and American on a number of issues, including investing in itself, he said.
“Even though [Munoz is] not an airline guy, he understands the business and he understands the company,” Harteveldt said. “Hopefully, he will be the guy who can bring the airline together, from the standpoint of culture, investing in its product and pushing the airline to improve its on-time performance.”
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