In what could be the culmination of years of growing customer dissatisfaction following the United-Continental merger in 2010, United’s CEO and two of his top lieutenants abruptly left the company on Tuesday , with an outside director of the company appointed to the top executive post.
Jeff Smisek has resigned as United Continental Holdings’ chairman, president and CEO, and also from the company’s board. Also leaving the airline were its executive vp of communications and government affairs, as well as its senior vp of corporate and government affairs. Smisek has been replaced as CEO by Oscar Munoz, a company director and former president of CSX Corp., a leading freight transportation company.
United said that the departure of Smisek’s two government affairs executives was “in connection with the company’s previously disclosed internal investigation related to the federal investigation associated with the Port Authority of New York and New Jersey.” Those investigations are ongoing, United noted. It did not explicitly link Smisek’s departure to the investigations.
According to reports earlier this year, the federal government is investigating whether United acted improperly by reviving a money-losing route between Newark and Columbia, S.C. at the request of David Sampson, chairman of the New York-New Jersey Port Authority, who has a weekend home in South Carolina and who had depended on the route to travel back and forth. Sampson reportedly made the request directly to Smisek at a dinner that included New Jersey Governor Chris Christie.
Have investigators uncovered some new evidence indicating a quid-pro-quo between Smisek and Sampson? If so, that could be the reason for the United CEO’s abrupt and unexpected resignation. Or the United board might have seen the probe as a convenient excuse to clean house in the C suite, given the airline’s other problems.
Smisek walks away from United with $5 million, health insurance, flight benefits, and a company car.
United’s frequent travelers might welcome a change at the top for any reason, in the belief that any shakeup has to mean some improvement in the airline’s dismal customer service reputation compared to competitors like Delta.
United ranked lowest among major U.S. airlines — in fact, lower than almost all U.S. airlines — in this year’s Airline Quality Rating report, which consolidates a variety of customer service statistics. It was hit on two separate occasion earlier this year by major computer problems that led to the grounding or widespread delay of most of its flights, generating lots of negative publicity.
United’s problems have been persistent — some would say growing — since its merger with Continental. Besides difficulties integrating the two airlines’ computer systems, there have also been problems in integrating the workforces of the two companies, which had very different cultures.
Perhaps the nadir for United’s reputation came last fall, when the New Yorker Magazine published a much-discussed essay titled “Why I Left United Airlines” by writer Tim Wu, a longtime United loyalist. In it, he summarized the dissatisfaction of many MileagePlus elites with the way things were going at the airline.
“The United merger is a grand example of a consumer sinkhole—a merger that proves to be not just a onetime event but an ongoing disaster for consumers (and shareholders) who suffer for years after,” Wu wrote.
In any case, it will be up to United’s new management to turn things around now.
Do you think a shake up like this could help turn the tide for United? Please leave your comments below.