United’s new CEO faces labor talks and the possible return of the 737 Max
United Airlines‘ next CEO helped orchestrate a stunning turnaround of the one-time industry laggard. His challenge: keeping it up.
Scott Kirby, United’s current president who left American Airlines as president in 2016 and quickly took the same role at rival United, on Thursday was named CEO Oscar Munoz’s successor, a shift that’s set to take effect in May.
Industry members describe Kirby as a gifted and no-nonsense airline executive. His brainchild was United’s aggressive plan to grow as much as 6% a year from 2018 through 2020, which was met with resounding disappointment on Wall Street when Munoz unveiled it in January of last year. Instead Kirby’s plan paid off, and United has increased revenue and profits. The company’s shares are up 87% since Kirby became president of United.
“He doesn’t suffer fools, empowers people he trusts, has no tolerance for stupidity or laziness, and wants to win by a million,” wrote Hunter Keay, a Wolfe Research airline analyst, in a note. “This aggressiveness will only infiltrate UAL’s ranks at a more rapid pace with him as CEO, for better or for worse. Kirby showed investors and competitors alike that capacity discipline in the low fuel era, at least, is for losers.”
A high-ranking employee described Kirby, who rose up the ranks, starting with America West, during several airline mergers, as an action-taker. Munoz is more analytical and takes more time making decisions.
United declined to make Kirby available for comment, but in a video to employees, he said, “As we look forward in the next few years, we’ll continue the growth.
“We have an incredibly strong position and an incredibly bright future ahead,” he added. “And personally, I’m excited to spend even more time out with all of you, listening to you, sharing your enthusiasm for the future and together, building the best airline in the history of aviation.”
One of Kirby’s biggest challenges will be ironing out labor contracts. United’s more than 12,500 pilots are in the midst of contract negotiations. The Air Line Pilots Association, the pilots’ labor union, expects to get a contract done under Munoz’s tenure as CEO, which ends in May, its president, Capt. Todd Insler, told CNBC, but talks may still drag on. Among their demands, pilots want better health benefits and are looking to protect mainline flying from outsourcing to smaller regional carriers.
“With the United Pilot Agreement nearly one year past the amendable date, we fully expect completing pilot negotiations will be his primary goal,” Insler said in a statement. “By doing so, ALPA and the Company can once again dedicate our collective efforts to beating our global competitors and growing United Airlines.”
United’s more than 23,000 flight attendants have a contract that’s amendable starting next August.
Munoz, who will transition to executive chairman next year for a one-year term, enjoyed relatively strong relations with the company labor unions as he was able to get contracts done with pilots and flight attendants, their first since the thorny 2010 merger with Continental Airlines.
It was just one of a litany of challenges Munoz overcame since he took the top job in September 2015. A month into his tenure he had a heart attack, and three months later a heart transplant. There was a proxy battle and high-profile public relations disasters including the violent dragging of a passenger off a regional jet in April 2017, a viral video of which circulated worldwide prompting calls on social media for a boycott of the airline, and additional training for employees.
After his heart transplant, Insler, said he asked Munoz over the phone why he wasn’t retiring “to a beach somewhere?” and that Munoz replied that he would return because United employees were his family.
Despite relatively warm relations under Munoz and Kirby, there were tensions.
Under Munoz and Kirby’s time, executives shelved a controversial change of an employee bonus program to a lottery system after outrage from staff. Flight attendants last year picketed at some of the country’s largest airports to protest United’s decision to cut cabin crew staffing in order to save money.
“Oscar’s efforts to put in place talent like Scott Kirby, who is without a doubt the best network man in the industry, is also paying off,” said Ken Diaz, president of the United chapter of the Association of Flight Attendants, in a statement. “It is critical that the entire executive team works together with labor and addresses concerns raised from the frontline as we work diligently to keep everyone safe, with proper staffing that also allows us to care for the people on our planes.”
Capt. Dennis Tajer, spokesman for the Allied Pilots Association, which represents some 15,000 pilots at Kirby’s former employer, American, called Kirby talented and a “stern negotiator.”
Kirby, who studied computer science at the U.S. Air Force Academy and earned a master’s degree in operations research at George Washington University, will have to prove that he can maintain good relationships with employees, whose interests are often at odds with investors’. At the helm, Kirby will also have to prove he can manage a crisis.
“He’s always been the details guy operating in the background,” said Seth Kaplan, an airline analyst. “Next time something goes wrong — and something will go wrong, this is the airline industry — is there a softer side to Scott?”
Another challenge for Kirby will be the Boeing 737 Max, which has been grounded since mid-March after a fatal crash in Indonesia and another in Ethiopia within a span of five months. United had 14 of the jets in its fleet and has taken the plane out of its schedule until March, although it isn’t yet clear when regulators will allow the jets to fly again. If they do sign off, the start of Kirby’s role as CEO could include the reintroduction of the planes to the public.