AAL American Airlines Group Inc

By Doug Cameron and Alison Sider 

United Airlines Holding Inc. on Thursday said Oscar Munoz will step down as chief executive officer next year to become executive chairman, and be replaced by the carrier's president, Scott Kirby.

The move comes three years after Mr. Kirby joined United from American Airlines Group Inc.

Mr. Munoz and Mr. Kirby have helped engineer a turnaround at United, expanding its domestic services to reverse years of market share losses and improving troubled relations with employees. Mr. Kirby said in a video message to employees that he will continue to follow that strategy.

Like other carriers, United faces challenges including tempered economic growth and the global grounding of the Boeing Co. 737 MAX. United had 14 of the jets in its fleet when the aircraft was grounded in March after two crashes, and was due to take delivery of dozens more.

Mr. Munoz lacked deep experience in the airline industry. Mr. Kirby has a reputation among investors and analysts as one of the most detail-orientated airline executives, and had made no secret of his ambition to lead a major airline. Mr. Munoz will serve as executive chairman for a year.

Mr. Kirby, 51 years old, has also made missteps, including a new employee bonus plan at United that was abandoned after staff complained the move to a lottery system was unfair.

Mr. Munoz, 60, was appointed CEO in September 2015. He inherited a troubled airline. United had struggled since its 2010 merger with Continental Airlines. Operations were strained, employees were bitter, and United's reputation with customers was in shambles. His predecessor, Jeff Smisek, had been pushed out by the board during a federal probe of United's dealings with the operator of its Newark, N.J., hub.

Mr. Munoz had served for years on the board of Continental and later of United Continental, but he didn't have any experience running a commercial airline. He had held financial and strategic positions at AT&T Inc., Coca-Cola Co. and PepsiCo Inc. before joining railroad operator CSX Corp.

At the helm of United, Mr. Munoz took swift action to lift workforce morale, make operations more reliable and improve customer service. He also brought in outside executives to bolster United's leadership ranks.

Mr. Munoz spends much of the year on the road visiting employees, including dropping in to chat with ground workers at airports hit by extreme weather like last winter's polar vortex in Chicago. When Mr. Munoz appeared at a party hosted by United in Chicago recently, he could hardly take a few steps without being stopped by employees wanting to shake his hand or pose for a photo.

Less than six weeks after his appointment he suffered a heart attack in Chicago. Three months later he received a heart transplant, returning to work in early 2016.

While he was recovering, two hedge funds started a campaign to win seats on United's board and install former Continental CEO Gordon Bethune as nonexecutive chairman, alleging that the company's board and management was ill-equipped to turn the airline around.

United and the activists struck a deal in April of 2016. United agreed to appoint two directors chosen by the activists to its board along with a third mutually agreed on director. United also elected Robert Milton, a former Air Canada chief executive, as nonexecutive chairman.

A year later, United and Mr. Munoz came under intense scrutiny after a 69-year-old passenger was dragged bloodied and screaming off a United Express flight in Chicago. A video of the incident went viral. Mr. Munoz's initial response -- defending his staff and describing 69-year-old David Dao as disruptive -- touched off the airline's biggest public-relations crisis in years.

Mr. Munoz later apologized repeatedly and profusely for an incident he described as a "failure of epic proportions" and a "breach of public trust."

Some passengers still threatened to boycott the airline and called for him to resign. United's board decided not to give Mr. Munoz the role of chairman as it had planned for him to take alongside his CEO role, and changed its executive compensation incentives to focus more on customer service.

United's current chairman, Jane Garvey, will retire from the board in May. Ted Philip, who joined the board in July 2016, will become lead independent director.

Colin Kellaher contributed to this article.

Write to Doug Cameron at doug.cameron@wsj.com and Alison Sider at alison.sider@wsj.com

(END) Dow Jones Newswires

December 05, 2019 10:28 ET (15:28 GMT)

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