Street Gives United Continental Shakeup Two Thumbs Up


Analysts on Wednesday gave the thumbs up to the replacement of United Continental Holdings Inc (NYSE:UAL) Chief Executive Officer Jeff Smisek, who stepped down due to a federal probe of the U.S. airline, and the company's shares were flat.

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Oscar Munoz, a UAL board member, is stepping down from his job as chief operating officer of railroad company CSX Corp (NYSE:CSX). Two other senior UAL executives have also left the company as a result of the probe involving the Port Authority of New York and New Jersey.

UAL stock had fallen as much as 2 percent in extended trading Tuesday after the news and was as low as $56.87 Wednesday morning but was down less than 0.1 percent at $57.48 about an hour after the market opened.

"The appointment of Mr. Munoz may be a blessing in disguise," said CRT Capital Group analyst Michael Derchin. "At CSX, Mr. Munoz helped transform the railroad into an industry leader in customer focus, reliability and financial performance. These are major priorities for UAL, in our opinion, and Mr. Munoz could be the right man at the right time to take the helm at an airline that could improve in these areas."

Analysts were also pleased that the new CEO, a longtime UAL board member, was familiar with the airline carrier.

"We believe Mr. Munoz already knows the inherent potential and key investor concerns regarding the company," said Evercore ISI analyst Duane Pfennigwerth. "Specifically, we were encouraged to hear him speak directly to the integration challenges that United has faced and improving customer service as a priority."

Raymond James' Savanthi Syth said Munoz would appeal to investors as he also brings an outside perspective and experience.

Under Smisek, United had faced mounting pressure from investors to improve its day-to-day operations and financial performance.

In February, the carrier had opened an internal investigation into its relationship with David Samson, a former chairman of the Port Authority of New York and New Jersey, after it learned of the federal probe.

Media reports have said the probe focuses on whether United added direct flights to Columbia, South Carolina, from Newark to accommodate Samson, who had a home there.

The route was canceled after Samson resigned in early 2014 following news of a federal probe into the potential conflict of interest between his role as port authority chairman and his private law firm. (Reporting by Sinead Carew; Editing by Lisa Von Ahn)