With Smisek Forced Out, United’s New CEO Oscar Munoz Has a Unique Opportunity

I didn’t expect it to happen like this. Over the last few years, people have called for now-former United President, Chairman, and CEO Jeff Smisek’s head for a variety of reasons. There have been merger integration problems, lagging financial performance, operational issues… you name it. Yet it was a little old bribery scandal that, in the end, cost Smisek (and two other execs, Nene Foxhall and Mark Anderson) his job. Now, a United board member and industry outsider named Oscar Munoz is taking the reins. He has a unique opportunity to do great things. No pressure…

The news about Smisek’s firing was surprising. Yes, United had said it was announcing an investigation into the scandal, but I didn’t expect it would result in Smisek’s ouster. Which scandal was this? It involved dealings between the airline and the Port Authority of New York and New Jersey (PANYNJ). Which scandal involving the PANYNJ? Good question (though it’s pathetic that it has to be asked). In short, the chair of the PANYNJ, David Samson, had a place near Columbia, SC. He was angry he couldn’t fly there from Newark nonstop, so he leaned on Smisek and friends to bring that flight back, offering to fast track (or, uh, not block) some of their projects at Newark in exchange. Voila! Soon enough there was a flight to bring him down on Thursday and back on Monday. If you want full details, I’d suggest this Bloomberg article.

The PANYNJ has been under a great deal of scrutiny, and Samson himself resigned last year in the aftermath of the scandal where lanes were closed on the George Washington Bridge into New York as part of a political game. So I figured this whole thing would be heaped on Samson. The narrative could have shown that it was a pure shakedown. He blocked projects that would be good for Newark travelers, and United had no choice but to bow down to him. It would still have been illegal, but you’d think Smisek could have kept his job. Either the sordid details tell a very different story, or the board found this to be a good excuse to kick Smisek to the curb. Either way, we’ll know more in the coming months. But beyond a tabloid-y sense of curiosity, this doesn’t interest me all that much. Smisek is gone. What’s most interesting is what happens next.

United could have gone with someone inside the airline, or it could have found someone at another carrier, but clearly neither of those options worked for the board. Instead, they nominated themselves to take on the challenge. One of the board members, Henry Meyer will become the non-executive Chairman. Another board member, Oscar Munoz, will become President and CEO. All I could think of was this…

This sounds like something we’ve seen many times before. Someone from the board steps in on an interim basis until a long term solution is found. But I’m told this is no temporary move. Oscar, as he signed his letter to the troops, is the person to lead this airline into the future. (Just assume that if he does a bad job, the airline will backtrack and say he was always meant to be interim.)

Oscar has been on the board since 2004 (well, back then it was Continental’s board), but he hasn’t worked in the airline industry. He’s spent the last dozen years working at CSX, the railroad company. Just this year he became President, but the allure of United was enough to have him walk away from that. Though he’s on United’s board, he doesn’t know all the details of how an airline works. He doesn’t even know the details of how United works. When someone asked on the conference call yesterday whether this would impact the slot deal with Delta at JFK, he stumbled and didn’t seem to be familiar with it.

That shouldn’t really be a concern. It is a handicap in that it means there’s a greater ramp-up time, but that’s ok if he builds his executive team properly. For that reason, what he does in the first few months will matter a great deal.

One thing that’s been blindingly clear over the last few years is that United has a culture problem. I wrote about the “Continental vs United” issue a year ago and received a strong response from employees who agreed completely. Smisek was never a people-person. He only wanted to be out there as much as he had to, and that is not what United needed. Oscar appears to be different.

Oscar said he was planning on spending his first 90 days doing “direct and personal” outreach. He’s going to travel the system and learn the problems first-hand from the front line. This isn’t the first time he’s done it. He did this at CSX as well. It might sound like an old campaign trick, but you know what? It’s what United needs. Oscar may not know the airline business as well as others who have worked in it for years, but that has nothing to do with his ability to fix relationships and start repairing the culture.

After all, he did have labor relations under him at CSX, and railroads operate under the same strange labor laws that govern the airlines. Apparently he did it well. Even United pilots MEC chairman Jay Heppner said in a press release that Oscar has “a track record of working with labor on many levels.” Combine that with what you’d hope is a natural ability to connect with people (if not, they should stop giving him opportunities to do it) and you have something United has desperately lacked for years. I believe the last time United had a top exec who really had a good rapport with people was when Jerry Greenwald ran the show. He left in 1999. (Continental, of course, was a different story.)

In his first message to the troops, which you can read in its entirety here, Oscar certainly struck a different tone than what you’d expect to see from United in the past. He seems more conversational, more relatable, and really, more interested in being relatable. He talked about the importance of focusing on customers, teamwork, and innovation. This, of course, is all just talk, but at least he’s saying the right things. Now he just needs to show that he’s a man of action.

The employees of United have had a long and painful few years. Oscar may be someone who can help end that streak, but he can’t magically fix the airline overnight. He needs to surround himself with the right people who can actually run the business. I’m going to be watching closely to see what kind of moves are made at the top, since it’s the composition of his executive team that will make or break his tenure at United. I’d hope that in the first few months, we’ll see some big changes.

I’m naturally skeptical, but I want to be optimistic. Can this guy really come in from outside the industry and transform the airline? Good luck, buddy. But after so many years of things not going right, United employees, customers, and Wall St are ready and willing to be led in a new direction. It doesn’t happen often that all stakeholders are on the same page, so hopefully Oscar can taken advantage of this very unique situation and do some good.

[Original wienermobile photo by Cory Doctorow from London, UK [CC BY-SA 2.0], via Wikimedia Commons]


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Muscat,  Oman
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