I awoke Thursday morning to a flurry of emails about the personnel changes at the top being announced at United. One from a United spokesperson included the press release and said simply, “call me when you can.”
Before making the call, I made sure to read through the release in detail. In May 2020, current Board Chair Jane Garvey will retire. Current CEO Oscar Munoz will step up to be the Executive Chair of the Board, and that means current President Scott Kirby will become the CEO. Upon reading the release, I could think about just how unsurprising it was. Then I picked up the phone.
Though the discussion was mostly for me to ask questions, I was struck by one thing I was told. “This is how well-run companies work,” she said. Only in this industry would that concept need to be explained. It is absolutely true. A well-run company has a leadership succession strategy that, when implemented, shouldn’t be a surprise. This happened when Ed Bastian stepped into Richard Anderson’s shoes at Delta, but it’s been more the exception than the norm over the history of the airline industry.
After hanging up, my mind remained stuck on that sentence. Had United really changed so much in less than three years? Had it gone from a botched merger, bribery scandal, and passenger dragging to… a well-run company? To quote the Magic 8-ball, all signs point to yes.
When Oscar took over in 2015, United was in turmoil. It was more than five years into its merger with Continental, and the airline was floundering. CEO Jeff Smisek had lost the employees, and had made questionable decisions during his tenure. Many expected him to go, but few probably figured it would be a bribery scandal that would take him down.
The board was a mess, faced with trying to find someone to take over. They turned to one of their own, a railroad man and airline novice named Oscar Munoz. When Oscar took over, I wrote this:
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.
This may sound like I’m psychic, but let’s remember that things did not start off well for him at all. Oscar seemed uncomfortable and didn’t appear to have a good grasp on how things worked in the airline industry. Then, a month after taking over, he had a heart attack followed by a heart transplant. That thrust the airline back into uncertainty while everyone waited to see if he could make a return. A mere five months later he was working again, but I and many others wondered if he had it in him to lead the airline for long.
With Oscar back in the saddle, I kept close watch as promised to see what happened at the executive level. It did not start off well. He brought on Jim Olson to run communications in early 2016 (gone in January 2018). Andrew Levy (gone in May 2018) came on as Chief Financial Officer and Julia Haywood (gone in five short months) as Chief Commercial Officer in August. Two weeks later, that strategy was effectively thrown out the window. Scott Kirby was pushed out at American, and United tapped him to be the airline’s new President.
By early 2017, the airline had It looked like the worst of the turbulence had passed. Scott had started to make his mark, pushing Julia out in January and bringing long-time colleague Andrew Nocella in from American in February. Then the airline fell flat on its face.
Dr. David Dao was forcibly dragged off a United Express flight by Chicago police in April 2017. The airline’s response was badly bungled, and Oscar took the blame. The board had originally promised that Oscar would take over as Board Chair in 2018. After the Dr. Dao incident, that guarantee was eliminated. Jane Garvey was elevated to be chair in 2018, and she remained in that role despite having reached the airline’s mandatory retirement age. By the middle of 2017, you couldn’t have been faulted for wondering how much longer Oscar would stick around.
Somehow, instead of following a time-honored tradition at United and failing to perform, the airline’s management rose to the occasion. The airline put out a 10-point plan on steps it would take to avoid a Dr. Dao-like incident in the future. Oscar apologized profusely. Then they all put their heads down and got to work.
Scott and Andrew began to further implement their strategy. Though he has long been known as a whiz with numbers and a pricing/revenue savant, Scott began to show that he could grow into a larger role with this new management team surrounding him. Oscar undoubtedly played a key role in helping Scott grow into that role. Scott rolled out growth plans, and Wall Street balked. Eventually, however, United was able to properly set expectations and earn the trust of others. The airline sped up its Polaris roll-out. Then it got creative with things like the CRJ-550 and most recently the A321XLR order (which I’ll be writing about soon.)
Now the airline has turned general opinion on its head. It’s hard to believe that a short 2.5 years ago, United was reeling. Now it’s running on all cylinders, and both Oscar Munoz and Scott Kirby deserve a great deal of credit. It was a rough start to be sure, but once the pieces started fitting together, it was like lightning in a bottle.
Now, they will all be rewarded by moving further up the ladder. Jane Garvey will finally be able to retire, and the board must feel confident that there is actually bench strength being generated throughout the airline. Remember my call with the spokesperson? She was very clear in pointing out that Scott would only be CEO. What will happen to the President title? It’s unclear, but Andrew Nocella has to be in the running. When it’s working right, that escalator just keeps moving upward.
