Board standoff at United ends in deal with big investors

AP News
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Posted: Apr 20, 2016 6:08 PM
Board standoff at United ends in deal with big investors

DALLAS (AP) — United Airlines will make changes to its board, putting behind it — at least for now — a contentious fight with two big shareholders.

The airline announced Wednesday that it will name two new directors picked by PAR Capital Management and Altimeter Capital Management, which together own about 7 percent of United's shares.

A third new board member, mutually agreed on by both sides, will be added within six months.

Robert Milton, a former Air Canada CEO, will become chairman of the nation's No. 3 airline. Current Chairman Henry Meyer and two other directors will step down at the company's annual meeting.

PAR and Altimeter launched a challenge to the current board last month, nominating six candidates. Two of those nominees will wind up on the board, PAR managing partner Edward Shapiro and former Orbitz CEO Barney Harford.

The funds had argued that United's board lacked airline-industry experience and was complacent for years while the carrier fell behind in reliability, customer service, profitability and stock performance.

CEO Oscar Munoz, who returned after a heart transplant only to find his board under siege, is expected to become chairman in 2018, rather than in 2017 as previously planned. Munoz said Wednesday that he would work with the new board to improve the airline's operations, financial performance and customer experience.

"It's done, it's behind us, we're moving forward," Munoz told The Associated Press. The new board has airline-industry experience and the perspective of financial investors to complement the previous board, he said.

The 2010 merger of United and Continental has been among the rockiest in the airline industry. Computer problems after the two systems were merged have created massive flight delays, but United has struggled even without technical glitches.

More than one-fifth of its flights arrived late last year, worst among the nation's four dominant airlines.

The Chicago company faces multiple government investigations, from price collusion to influence-buying.

The workforce of the two airlines has yet to be completely knitted together, and United was slower to return to profitability than rivals Delta and American.

United added three directors to its board in early March, including Milton, but that didn't prevent a fight with PAR and Altimeter, two longtime airline investors.

In the last five years, United's stock price has gained 169 percent, while shares of Delta, Southwest, JetBlue, Alaska and Allegiant have soared by between 288 percent and 446 percent. The current American Airlines started trading in December 2013; its shares have outperformed United since then.

S&P Global Market Intelligence upgraded United to "strong buy" from "buy." Analyst Jim Corridore said new, experienced directors and avoiding a proxy fight would give United renewed focus on closing the financial gap with competitors.

Cowen and Co. analyst Helane Becker said the settlement would let United management focus on keeping more planes on time and canceling fewer flights.

Shares of United Continental Holdings Inc. rose 55 cents to close at $58.60.

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Follow David Koenig at http://twitter.com/airlinewriter