Former United Airlines CEO Oscar Munoz, who ran the airline from 2015 to 2020, and faced a shareholder uprising himself, has some thoughts on the latest shareholder revolt at Southwest Airlines.
Oscar Munoz Faced Battles At United Airlines And Has Some Thoughts on Southwest Airlines, Elliott, And CEO Bob Jordan
In 2016, Munoz faced his own shareholder revolt. He had been out for several months after a heart transplant procedure and it came at an inopportune time in which United’s performance was lagging compared to its peers. Engineered by ex-Continental Airlines CEO Gordon Bethune, investors from Altimeter Capital Management and PAR Capital Management rose up to replace Munoz. He survived and remained at United until months before the pandemic in 2020.
Speaking to Crain’s Chicago Business, Munoz reflected on the lessons he learned and his thoughts on a similar shareholder revolt by Elliott Investment Management against Southwest Airlines and its CEO, Bob Jordan. He sees the threat from Elliott as credible:
“Elliott has a significant stake of 11%. By now there are three, five, maybe 10 others that all have jumped in there, so the voting bloc is going to be much bigger than 11%. So you’re just not going to be able to not do anything.”
Even so, without significant support from the board, this shareholder revolt will fizzle:
“At the end of the day, if you get two board members on, that’s nothing. Two board members are not going to change anything by themselves. Everybody’s out tens of millions of dollars and a lot of wasted time and effort.”
In the case of Munoz, he lost his promotion to chairmanship of the board but remained CEO. Concerning Southwest, he questions removing Jordan:
“I don’t know that changing out the CEO necessarily ever works. The sense of him in the marketplace I hear is he is not the sort of disaster they’re presenting in their document.”
Instead, Munoz believes that Southwest should view the Elliott aggression as a sign that it must adapt and take seriously the opportunity to improve, noting, “Southwest does have to modernize, and they have to change. Period.”
“Keeping the CEO, who’s been there a while and understands it, and giving him the opportunity to make some changes he may not be able to make on his own right now, putting some folks on the board they both can agree to. Somewhere in the middle there’s a better Southwest for the long term than in the current environment that doesn’t have to result in the CEO being ousted and all that drama.”
Southwest lost a tremendous advantage vis-a-vis its competitors when most carriers eliminated change fees during the pandemic and now even budget carriers like Frontier and Spirit have.
CONCLUSION
Munoz can relate to Jordan in many ways and his advice to resist fancy slide deck pitches but take seriously the need to innovate hits the mark. But recognizing the need for innovation and evolution is one thing. Actually doing it…and doing what exactly?…is a whole different matter. There will be no overnight fix at Southwest Airlines.
image: @oscarmunoz / Instagram
Is this the corporate drone who famously attempted to slither out of the Dr. Dao fiasco ?
Yep, he’s famous for using the term “re-accommodate”.
That was Mesa Air under contract to fly regional, but I’m sure you knew that…..
What a nice CEO in the picture above, taking time to help and elderly senile man cross the street. A true hero.
Bethune had no chance of becoming chairman
He utterly had pissed off Frank Lorenzo by writing his book 20 years ago (and was fired shortly after, surprise surprise, not wise to piss off the owner), and Lorenzo publicly came out against Bethune ever regaining a leadership position and made it known he had the shares to stop him.
Except Bethune was CEO of CO.
Lorenzo was forced out of CO when he sold his controlling interest to SAS in the early 1990’s and pretty much was/is “persona non grata” at CO or any airline for that matter. There was a revolving door of CEO’s before Bethune was brought in to save CO around 1994-1995 and his book came out in 1998; Bethune retired in late 2004 but by then Lorenzo had no involvement with CO so not sure I follow the connection.
Is that Joe Biden on his arm ?
I’d forgotten how much I missed having a competent CEO like Oscar who isn’t a soulless bean counter like Kirby. If American had any brains they’d offer him at least the Chairman spot on the BOD if not CEO as well. Oscar turned around a miserable airline once. It certainly seems worthwhile to see if he could do the same in some capacity at American.