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United Airlines Names Brett J. Hart Acting CEO

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Source: Media Article

Date: Oct 20, 2015

Source: Wall St. Journal
Author: Doug Cameron

United Continental Holdings Inc. said Chief Executive Oscar Munoz is on medical leave indefinitely following a heart attack last week, and it named the company’s general counsel as acting CEO.

The company said late Monday that Brett J. Hart was taking up CEO duties immediately. It was United’s first public statement on leadership plans since Mr. Munoz, 56 years old, suffered a heart attack Thursday. He had been named CEO just 37 days earlier and had pledged to fix operational problems and poor labor relations that had plagued the No. 2 U.S. airline by traffic since its formation in a 2010 merger.

United provided little new information about Mr. Munoz’s health—although it did, for the first time, confirm that Mr. Munoz had suffered a heart attack, which The Wall Street Journal reported on Friday. Two brief prior statements had said only that he was hospitalized. Monday’s statement said that it is currently “too soon to know the course of treatment and timing of recovery.”

Mr. Hart, 46 years old, joined United in 2010 after six years at packaged-food maker Sara Lee, where he rose to become general counsel. He had experience there with the challenge of dealing with a top executive’s illness. In May 2010, Sara Lee said CEO Brenda Barnes was taking a temporary medical leave—without providing details about its likely duration or underlying cause. Some shareholders complained about the thin disclosure. Nearly a month later, the food maker announced Ms. Barnes had suffered a stroke. She soon stepped down.

Before joining Sara Lee, Mr. Hart worked at Chicago law firm Sonnenschein Nath & Rosenthal, now part of Dentons, and before that as a special assistant to the general counsel of the U.S. Treasury.

The hospitalization of United CEO Oscar Munoz again has raised the question of how and when boards should tell shareholders about a leader’s illness. 

Mr. Hart is one of the few members of United’s senior executive team who didn’t have long ties to former Chairman and Chief Executive Jeff Smisek, whose ouster was announced Sept. 8. Mr. Smisek had led Continental Airlines before its merger with United and cleared out much of the former rival’s senior leaders following the merger to make way for Continental executives. Analysts had considered two executives from that group, Chief Revenue Officer Jim Compton and acting Chief Financial Officer Gerry Laderman, as other potential interim CEOs during Mr. Munoz’s illness.

United said Mr. Hart had taken a broader role since becoming general counsel, and in January he was given an operational role for customer service, an area where United had fallen behind rivals.

“Brett has taken on increasing responsibility beyond general counsel over the last few years in the operations and customer facing areas of the company,” said Henry Meyer, who took over as nonexecutive chairman last month following Mr. Smisek’s departure.

The uncertainty over Mr. Munoz’s possible return to United will focus attention on efforts by the board to find a permanent replacement if required. Since the board already passed over existing executives in favor of Mr. Munoz—a longtime board member with no airline operating experience—there remains the possibility they could extend a search outside the industry.

Mr. Meyer is one of four members of the board’s nominating and governance committee alongside Richard Delaney from the machinists’ union, Aspen Institute President Walter Isaacson and Laurence Simmons, president of energy finance specialist SCF Partners.

Mr. Hart, unlike Mr. Compton and Mr. Laderman, is relatively unknown to the investor community. While he has participated in quarterly conference calls, he has had little interaction beyond last month’s one announcing the appointment of Mr. Munoz.

United shares ended trading Monday before its announcement up 1.4% at $56.75, after losing 3.1% on Friday after news of Mr. Munoz’s illness emerged. The stock was down 0.3% at $56.60 in after-hours trading.

In an interview late last month, Mr. Munoz, a former railroad executive and longtime United director, apologized to the airline’s customers and vowed to do better. United is scheduled to report quarterly results on Thursday, and investors are looking for updates on those efforts.

The airline’s performance has lagged that of its big rivals in recent years, and it also has been clouded by a federal corruption probe into the Port Authority of New York and New Jersey that is examining the relationship of a former agency official with United. Mr. Smisek stepped down last month along with two other senior executives as a result of an internal company investigation related to that federal probe, United has said. The company didn’t say what it had found in its investigation. Mr. Smisek hasn’t been accused of wrongdoing.

United earlier on Monday distributed to employees a message that said it was from Mr. Munoz’s family. The message, a copy of which was reviewed by The Journal, thanks employees for their “love, generosity, and gratitude” in the past few days, and says “We continue to read your words of encouragement and know that our spirits remain high as we look forward to a healthy recovery.”

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