United CEO Jeff Smisek steps down amid federal investigation

AP Photo/Manuel Balce Ceneta

United Airlines has abruptly replaced its CEO as federal officials continue to investigate the airline’s ties to the former chairman of the agency that operates New York-area airports, including Newark, a key hub for the carrier.

United Continental Holdings Inc. said Tuesday that Jeffery Smisek and two other senior executives had resigned. Oscar Munoz, a railroad executive and head of United’s audit committee, was named CEO and president.

Munoz’s appointment was so sudden that no pay package had been worked out.

United disclosed earlier this year that the company and some of its executives had received subpoenas from a federal grand jury for information about its dealings with the Port Authority of New York and New Jersey. United said it was cooperating with the government probe and conducting its own internal investigation.

Former Port Authority chairman David Samson’s activities have been 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, South Carolina, near where Samson has a vacation home.

United began an about twice-weekly direct flight from Newark to Columbia that began after Samson became chairman and was canceled days after he resigned last year.

United said in a statement Tuesday that the executive departures were related to its internal investigation, but on a late afternoon conference call airline executives declined to say what the investigation found and what prompted the shake-up.

Smisek was chairman and CEO of Continental Airlines before it merged with United in 2010. He has been under pressure for several years as United was slower than Delta Air Lines to return to profitability and suffered several embarrassing computer outages, the latest in June and July, that led to hundreds of delayed and canceled flights.

There was turmoil in the executive ranks too. The chief financial officer quit to join PayPal, and now the CEO is out.

On a call with analysts, the new United CEO insisted, “We’re really not that unstable.”

“Clearly there have been organizational changes, operational-systems issues and all that,” Munoz said, “but we’ve made significant progress.”

The airline’s financial performance has improved. It earned $1.7 billion in the first half of 2015, a nearly 10-fold increase over the first half of 2014 as jet fuel costs tumbled by about one-third.

Munoz, 56, has served as president and chief operating officer of CSX Corp. since February and as a CSX executive since 2003. He joined the United Continental board in 2010. Terms of his compensation have not been made final.

In a regulatory filing, United said Smisek’s would get a severance payment of $4.9 million and be eligible for a bonus. Smisek, 61, will have health insurance until he is eligible for Medicare and keep flight benefits and parking privileges for the rest of his life. He gets to keep his company car.

Smisek agreed to cooperate fully with United “in the defense, prosecution or conduct of any claims or investigations which relate to events or occurrences that transpired” while he was employed.

Samson, a former state attorney general in New Jersey, headed Gov. Chris Christie’s transition team and was appointed chairman of the Port Authority by Christie in in 2011. He resigned in March 2014, several months after the scandal surrounding politically motivated lane closures at the George Washington Bridge the previous September.

Samson has not been charged with any criminal wrongdoing, nor have any United executives.

In a letter to United’s 84,000 employees, Munoz said that executive vice president Nene Foxhall and senior vice president Mark Anderson also stepped down. Both oversaw government affairs at the Chicago-based airline.

Munoz said the company had an “incredible opportunity” to increase earnings and improve the flying experience.

Another United director, Henry L. Meyer III, was named non-executive chairman.

Airlines Writer Scott Mayerowitz in New York and reporter David Porter in Newark, N.J., contributed to this report.

Source:: ap.org

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