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Hedge fund, PE firm makes move on troubled United Airlines with new slate

HARDLY back at work after five months in hospital, with first a heart attack and then a heart transplant, United Airlines CEO Oscar Munoz, 57, now faces that looks like a palace coup, reports Bloomberg.

The former CSX Corp executive was named CEO in September, only to be hospitalised a month later with many doubting he would ever return to the troubled airline, rated as one of the worst performing in the US.

Behind the scenes, the activists were pressuring United for sweeping changes. Long-term United stockholders Altimeter Capital Management and PAR Capital Management announced their intention to encourage United stockholders to elect a new board.

Calling the current board "under qualified" they proposed a new team led by Gordon Bethune, 74, an industry icon credited with turning Continental Airlines around after bankruptcy.

Talks broke down after PAR and Altimeter issued an ultimatum that the company place all its nominees on the board slate and make Mr Bethune chairman, according to two people familiar with the discussions.

Also, the aggressive investors declined to let United's board interview the proposed candidates and extend the nominating deadline to vet their suitability, United non-executive chairman Henry Meyer III said in a release.

Then United announced it had placed three new independent directors on its board and would soon announce a fourth. The three announced so far are a former chief executive of T Rowe Price Group Inc and two former airline executives.

"When exactly did you determine that the board was so inadequate as to need four new directors, all at once, and without an annual meeting or a stockholder vote," the insurgent investors wrote to Mr Meyer.

The activists were adamant that Mr Bethune join as chairman, according to the people familiar with discussions. Mr Bethune told Bloomberg that he would accept no other post.

Said Mr Bethune of Mr Munoz: "He's a wonderful man, but he's never run a company before, never run an airline. I told him: 'Oscar, you need help.' Step one is go out and meet every employee because they've been neglected for years."

PAR and Altimeter now are likely to contact other United investors to build support for their slate, said Mo Garfinkle an airline consultant who has advised investors.

"It's going to be Republican Party-ish," said Mr Garfinkle .

Said Vicki Bryan, a debt analyst with Gimme Credit. "A shake-up was overdue. United needs a leader the world can identify with. Oscar Munoz might be that guy, but Gordon Bethune is that guy."