United`s boss steps down - Star Alliance presidents have also quit - Air Transport World

Smisek’s stunning news

Sep 8, 2015by Karen Walker in ATW Editor's Blog

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Today’s announcement that United Airlines’ chairman, president and CEO Jeff Smisek has stepped down is stunning.

There was no public sign of this coming, but the departure is immediate and a new president and CEO already named – former CSX Corp. president and COO Oscar Munoz.

So what to make of Smisek’s departure (along with those of two other United execs)? Here’s what the airline statement says: “The departures announced today are 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. The investigations are ongoing and the company continues to cooperate with the government.

“The company’s internal investigation and the related circumstances do not raise any accounting or financial reporting concerns.”

No question, then, that the departures were deemed a necessary action directly related to an ongoing federal investigation.

The investigation concerned, though not detailed, appears to be that of former New York and New Jersey Port Authority chairman David Samson and regular United Express flights he took between United’s Newark, N.J. hub and Columbia, South Carolina.

Smisek became United’s chief in 2010 after it was merged with Continental Airlines, where he was also chairman, president and CEO. He joined Continental in 1995 (and was hired by former Continental CEO Gordon Bethune who remarked on CNN today of the dangers of getting “too close to those New Jersey sleazebags” ). He is an executive with considerable industry knowledge and expertise who ran one of the world’s largest airlines.

Which makes today’s news even more surprising. On the one hand, it’s difficult to believe that a man of this knowledge and caliber would cross any legal lines; on the other, why such a sudden departure?

Smisek was in New York in August as the guest speaker at the Wings Club. He addressed two topics – first the need for airlines to be able to conduct business like any other for-profit, privatized company; and second on the dispute over the Gulf carriers and government subsidies.

On the second subject, Smisek has been one of three airline CEO leaders that have led the campaign, along with American Airlines’ Doug Parker and Delta Air Lines’ Richard Anderson, to reassess the US government’s Open Skies agreements with the UAE and Qatar.

On the first subject, Smisek was essentially having a public dig at lawmakers and regulators who treat airlines differently than they do other companies. The US Department of Justice (DOJ) and Department of Transportation (DOT) began investigations this summer into what they say might be cases of unlawful behavior by the airlines. DOJ is investigating alleged collusion by the US majors to fix capacity so that they could charge higher fares, while DOT is looking at whether the US majors, Southwest Airlines and JetBlue inflated air fares in the US northeast market after a serious and fatal Amtrak crash shut down key rail routes in that region.

Ahead of the lunch speech, I asked Smisek for his thoughts on those DOT/DOJ investigations and his response was pretty ripe (and not for quotation). But to sum up, he made a strong and very credible case as to why he and his peers at the other airlines would never be involved in unlawful behavior (and he was clearly very angry that Washington regulators would even suggest so).

The DOJ/DOT investigations have nothing to do with the federal investigation that prompted Smisek’s departure, but it strikes me as odd to believe he would knowingly cross any legal lines here, any more than in the alleged collusion cases.

The CEO who addressed the Wings Club just a few weeks ago showed no sign of leaving. It was a very energetic speech that strongly defended the right of airlines to behave as proper businesses and which proudly touted some of United’s achievements now that it is profitable – investing in new aircraft, having an over-funded pension scheme and being able to pre-pay debt and de-risk its business. That Smisek looked and sounded like someone who was looking forward to running an airline with those hard-won assets established, while taking on industry issues that he sees as wrong.

As a side note, Smisek’s stepping down is the sixth in recent months in a line of Star Alliance CEO departures: Air India, Avianca, Egyptair, LOT and South African have all seen changes at the top. New United CEO Munoz may be new to the airline industry, but he won’t be the only relatively new face at the next Star board meeting.