Although United Airlines has faced a turbulent week with the
sudden ouster of president and CEO Jeff Smisek, analysts said his departure
could be positive for the carrier, whose profit has lagged that of its
competitors.
Smisek, who had served as United’s CEO from the time of its
merger with Continental in 2010, stepped
down alongside two other United executives amid a federal investigation
involving The Port Authority of New York and New Jersey. Oscar Munoz, COO of
rail transportation company CSX and a United board member, took over the CEO
role at United.
Among the allegations is that United revived a direct Newark-to-Columbia,
S.C., flight at the behest of David Samson, who was then chairman of the Port
Authority, on a quid pro quo basis. Regardless of the findings, the flight indicates
a deeper problem at the carrier, Stone Fox Capital wrote in a research note: “Clearly,
the decision to implement a single flight to a city like Columbia can’t be
positive for margins. Whether or not this was done to obtain political favor,
it could indicate a culture that isn’t primarily focused on the best operations
and shareholder returns.”
Wolfe Research analyst Hunter Keay called Smisek’s departure
a “slight positive,” noting that United “needed a management and culture
shakeup.” Munoz, himself an industry outsider, now can handpick United’s new
CFO, considering John Rainey left United last month for PayPal, according to
Cowen & Co. “United has lagged the airlines in terms of multiple expansion
and earnings power, despite significant potential,” the firm wrote. “The new
management could un-tap United’s potential, given United’s hub structure and
size.”
Munoz remains an unknown. Credit Suisse analysts Julie Yates
and Parker Kim wrote that his 11 years on United/Continental’s board gave him
“a solid base of airline industry knowledge and a front-row seat during the
merger [and] subsequent struggles” and that he could bring a “fresh CEO
perspective from the rail industry, where pricing and capital discipline are evident.”
Keay, however, added that United also needs operational improvements
and possible network revamping in order to achieve that pricing. “[United]
needs to take a hard look at which hubs work and which hubs don’t as a primary
driver to close its potentially structural margin gap to peers. That’s not
really something Mr. Munoz is qualified to do, in our view. At least not
immediately.”
The ongoing investigation on Smisek, meanwhile, seems
unlikely to affect United’s operations, he added. “The termination of the CEO,
an [executive vice president] and a [senior vice president] feels like
self-imposed sanctions to us, and perhaps that alleviates some of the potential
penalties that federal investigators may be considering.”