The Disappointing Tenure Of United’s CEO, Oscar Munoz

In September 2015, United’s former CEO, Jeff Smisek, stepped down. Smisek had been involved in a scandal with the Chairman of the Port Authority of New York and New Jersey, where they had essentially scheduled a flight as a bribe in exchange for favorable terms for the airline. While that was the reason Smisek ultimately stepped down, most employees and customers would agree that this was long overdue.

United under Smisek’s leadership was toxic. The merger between Continental and United had just been completed, employee morale was low, and the airline was trailing competitors with several important metrics.

Oscar Munoz walks in, and we’re all in love

Once Jeff Smisek resigned, Oscar Munoz was immediately announced as United’s new CEO.

Who?

Munoz had been on the United board since 2010, and served as president and COO of CSX, a railroad company.

But my gosh, suddenly we all fell in love. We all liked Munoz and wanted him to succeed. He seemed like such a kind and caring guy who wanted to turn the airline around. Unfortunately just a couple of weeks after being appointed CEO of United he tragically had a heart attack. Fortunately he has made a recovery, and returned to United.

United employees love(d?) Munoz

It’s exceedingly rare for an airline to have a CEO who employees like. That just doesn’t fit into the typical dynamic between management and unions. But suddenly United went from having a CEO that almost all employees hated, to one that they almost all loved. I spoke to so many United employees, and without exception they said things along the lines of “we love Oscar, he’s such a nice guy who really wants to turn things around. He makes me proud to work for United.”

Obviously an airline CEO isn’t doing all the work themselves, and it can be valuable for a CEO to be likable. That goes a long way when it comes to creating goodwill.

But my gosh, Munoz had big promises for the future. Let’s just pick a few:

“Simply put, we haven’t lived up to your expectations… That’s going to change.”

“Our employees and competitors thought we were docile. We want to be defiantly disruptive. I don’t mean necessarily by launching price wars but by being the best at the basics – having the best customer service, the best on-time performance, the best coffee – in a thoughtful, not a testosterone-laced, way.”

“We are dedicated to setting the standard for customer service among U.S. airlines, as we elevate the experience our customers have with us from booking to baggage claim.”

“I was hired to make United better, and that’s what we’ll do.”

“We were like a bunch of nomads wandering through the desert. All with good intentions, but not moving in the same direction,” Munoz said to employees at a recent conference.”

Not only did employees love Munoz, but at first it seemed like United would actually be reinvented under him. In some ways he was lucky regarding when United Polaris was announced. He was able to reveal their new business class concept just months after taking the job, even though the previous management team had been working on it for years prior. Still, understandably some of the goodwill went to him.

But then…

Fast forward to August 2016, when Scott Kirby was appointed as president of United. Kirby was formerly the president of American, and prior to that was at America West, alongside Doug Parker. Bless him on his success, but the guy is best at spreadsheets. He’s not a people or product person, and he has little interest in morale or customer experience, but rather is exclusively focused on the bottom line (and I’m not necessarily saying that’s wrong for the leader of an airline, but it’s different than the vision that Munoz painted for the airline).

Since then, I can’t help but feel like United has been a complete you-know-what-show:

  • United has had terrible press regarding several incidents that happened on their planes, which hasn’t helped the airline at all when it comes to their customer service image
  • The rollout of Polaris has been horrible (from reconfiguring planes to opening to lounges to the amenities), and United hasn’t stuck to the promises they’ve made to their customers
  • United tried to pull a fast one on their employees by introducing a lottery bonus system, which left a lot of people feeling bitter
  • United tried to aggressively roll out basic economy, only to realize that passengers actually do have a choice of airlines
  • Last October Munoz said on an earnings call that the airline had dug themselves into a hole, causing shares to drop by more than 12%

United is annoying their customers, their employees, their shareholders, and the general public, for that matter.

Who is to blame?

Oscar Munoz said that they “were like a bunch of nomads wandering through the desert, not moving in the same direction.” Scott Kirby’s appointment as president contributes to that problem, and doesn’t solve it.

When Munoz started, he said United hadn’t lived up to expectations, and that would change. Has it?

When Munoz started he said that he wanted United to set the standard for customer service in the US airline industry. Does anyone think that has happened?

Here’s the thing — I’m not necessarily so quick to blame Munoz here. I get that airline CEOs make promises they can’t keep (like Jeff Smisek promising that they’d make changes that we like under his leadership), and that they’re perpetually aspirational. Most leaders at big companies are like that.

I think the problem is that many of us assumed Munoz was different, that he wasn’t like “the other guys.” Actually, I think his ability to create that impression is exactly why he was hired, and what set him apart.

But as time passes, it’s clear United’s vision has changed. It’s clear that when Kirby was appointed as president, it was with the intention of eventually replacing Munoz. By doing that, I think United’s BOD is also offsetting any goodwill that Munoz created.

We all wanted to like Munoz. Fixing United was a tall order. Even though his intentions may have been good, I can’t help but feel like this “vision” of a new United has been a failure. I don’t think it’s fully his fault. Even if he wanted United to “sail in one direction,” United’s BOD undid that when they appointed Kirby as president. Kirby doesn’t care if the airline lives up to peoples’ expectations, as long as it’s profitable. Kirby doesn’t want to be “disruptive.” Kirby doesn’t care about making anything but United’s bottom line better.

All of that is totally fine (at least within the context of typical corporate laziness and greed), but that eliminates anything that Munoz has worked towards, or may have wanted to work towards.

What do you think — has Munoz’s tenure as CEO been a success or failure? At this point is it too late for him to turn things around?

We all know Kirby is next in line, and Munoz doesn’t have much to show for his vision, unfortunately. If I were a betting man, I’d guess that Munoz will step down within a year, and Kirby will be at the helm, and the old America West gang will be running two of the “big three” US carriers.

Comments

  1. And are you saying that the frat brothers will then talk about merging their kingdoms (United + American)?

  2. Scott Kirby belongs on Wall Street, not on the front end of ANY customer service facing company. I do not fly UA so I rally don’t care what he does, doesn’t do but following the industry and seeing one man completely disregard customers and employees everywhere he goes yet looked at as successful is shameful to me. Yes it is all about the bottom line, but what about VALUES and getting results the right way for long term consistency and building a brand America and the world loves. Its hard to watch people like him at work. Munoz is a weak leader, was not strong enough to keep Kirby out is my guess.

  3. @Ryan +1, +1, +1.

    Kirby is making his “success” on the mistreatment of customers, and he should go to Hell.

  4. I’ve been saying this a lot recently, but with all the PR fiasco’s United has had and continue to have, I’m AMAZED Munoz is still gainfully employed. He really ought to be fired and replaced.

  5. If United came out against guns, a lot of people (myself included) would like them better. At least they would be doing one thing to better the world. Somebody get Kirby a spreadsheet that shows that going against guns would be good for their bottom line.

  6. Munoz has to be the most disappointing CEO in my recent memories.
    I also had high hopes for him but man I was wrong.
    It’s not even funny what UA is doing with the Polaris rollout that will take another decade to finish.

  7. I have said it to a few people recently, Trump must wake up in the mornings and think “at least I’m not running as big of a dumpster fire as Oscar Munoz.”

    I also realized of late as a United Gold member that jokes about “flying the friendly skies” are unfair. The promise is lived up to. The skies are friendly; United never claimed anything about INSIDE their planes while they are in those skies 😉

  8. CEO’s job is to increase stockholder equity. Since August 1, UAL stock has gained 30.5%. It has matched the Dow. 2017 profit was the same as 2016 profit. Balance sheet is positive. 1 year analyst target is $82.56 (it is at $68.48 /share now).

    The BOD and stockholders might disagree with your disappointment. I don’t disagree, but it is really all about perspective.

  9. I dont know. I find UA still quite ok when flying out of EWR or IAH but dont consider flying through ORD or IAD anymore unless it´s really by far the fastest, cheapest, whatever choice. In general I´d rank UA still ahead of AA, even though a distant 2nd behind DL of all the legacy carriers. The United part in the United/Continental merger needs fixing from what I can tell.

  10. Munoz is an idiot and truly needs to go…like now. There is nothing loving about him. Moron.

  11. Mr Munoz’s biggest mistake was hiring Scott Kirby. United’s issues mentioned in this post happened after Kirby came onboard. Kirby, along with his former boss Doug Parker, make Jeff Smisek look like a genius.

  12. That makes a lot of sense. I didn’t realize that America West had invaded United as well. That old gang seems to be on a path of destruction. I think UA had a chance to reinvent itself. But these days, that’s gone. AA — so sad what happened to a once good company. Heck even US Airways was chopped down to the bone under the ownership of America West.

    So sad.

  13. Ben I admire your restraint in not mentioning anything about Untied becoming America’s #1 killers of dogs in the unfriendly skies.

    And Polaris quickly became a long-standing joke, death by a thousand cuts.

  14. Wrt Mark F’s point about the stock price being the sole driver of the board and investors’ view on Kirby (since Munoz is very clearly a figurehead/lame duck since Kirby’s hiring), the news isn’t great for fliers and employees hoping for improvements.

    Since the hiring of Kirby on Aug 29 2016, United stock is up 46% not including dividends. American is unsurprisingly almost exactly the same at 45%, since UA and AA share the same type of pinky brains at the top. And they just copy Delta, which also unsurprisingly leads them both with a 55% return over the same period. These returns crush the S&P 500 at 26%. Even Buffett the past airline skeptic is tempted to buy Southwest. So Kirby isn’t gonna change, nor go anywhere. Even firing Smisek took years of stock and operational underperformance and a bribery scandal before he was ushered out with a generous severance package.

    Almost all these gains happened in the 3 months after the 2016 election. It has been a generally rising tide for US airlines, with Southwest up 60% and JetBlue up 33% in the same timeframe. The only laggard? Alaska with a 5% drop. The Virgin America acquisition is viewed as not great synergy, pretty expensive and an operational negative. Their management is the one at risk, unfortunately.

  15. I can’t help but compare Oscar to Richard Anderson at Delta. Anderson had his work cut out for him with the NW and DL merger. But he defined a plan for the company and made sure he had the right people in place from both companies to see that plan to fruition. Anderson also told Wall Street that he had more pressing issues to address than to make short term investors happy. Whether you support Richard or not it’s hard to argue with the results. Excellent operations, a more or less content workforce, record profits, and an investment grade credit rating. All in all a very well run, and very profitable company.

    The United BOD needs to let Oscar fulfill his vision for the company along with the tools, money, and people to do so, or let him go. This is really a BOD issue, not one of Oscar vs. Scott.

  16. Munoz is nothing but an empty shill and a public face at this point. Disregard that, since the last year. His health issues, while certainly not at all his fault, have done nothing to help him build credibility as the true leader at United.

  17. Hey Ray – as we learned from the Austin bomber, Fed-Ex kills. We need a ban on Fed-Ex, UPS, USPS, and Uber Eats and other ways to deliver bombs. And don’t forget to ban piano wire, string and fishing line that can be used for trip wires, too. And then we have to ban your smartphone, garage door opener and TV remote that can trigger a bomb. Heck, I’ll double my flights with United if they go on record for cell phone control, especially banning cell phones for all people under 21. As an old Divemaster and CPR trainer I support the new laws in many states that will require schools to train students in cardiopulmonary resuscitation (CPR) before high school graduation. Rick Santorum should be applauded for bringing the CPR subject up as CPR would definitely result in saved lives.

  18. I fly United all the time, in both First and Economy, and all my experiences have either been just fine or very good, usually because of a friendly flight attendant. Have they fulfilled all their Polaris promises? Not yet. Are there pr and probably so e cultural issues? Clearly. But their schedules all align with my needs, when I’m in First the food is usually good, I enjoy the entertainment, and I can’t remember the last time I was severely delayed. Operational performance has gotten a lot better under Munoz than under Smisek. Is it perfect? No. But it works for me and I don’t get the need for such venom as shown in some posts herein.

  19. Well, United, along with any other major airline, is not A “CSX” type company and I think Oscar learned this very early through a bunch of blunders and mistakes. I think he came in not knowing the differences between the media and the emphasis put on customer service between the two industries. Seems like he has learned a little so that’s a good thing, and the job is probably an absolute nightmare, but he still seems to have his head in the clouds when talking about most issues…

  20. I don’t think the evidence @lucky relies on is very persuasive in suggesting that United is really in trouble. @Lucky’s post is almost entirely focused on bad press United has gotten for various incidents. While it’s true that they’ve had a lot of bad press days, that’s not really very informative. The question is, do those bad press hurt the value of the company.

    The answer seems to be. The airline’s actual operational and financial metrics have all been record setting under Munoz’s tenure. United actually beat Delta in on time performance in the latest reporting period, and as others note, the financial performance has been strong. United basic economy was poorly handled, but from all accounts, that was Kirby, not Munoz— and after they learned their lesson and slowed down the rollout, there was no lingering effect or bad will. Bookings recovered to pre-basic economy levels.

    I would note that some of the incidents @lucky lists are of no substance whatsoever outside the narrow community of miles geeks. I have not seen any mainstream press coverage of United deciding to make certain Polaris features available only to those who specifically ask for them — I don’t think anyone cares about that. At the end of the day, I think an assessment of the CEO’s performance by the board will be much more data-driven. They’re not just going to obsess over a couple of PR problems — let alone the fact that people now have to ask for mimosas, rather than being proactively offered one (the horror!).

  21. Lucky, I don’t know why you’re surprised. Wasn’t it Munoz that came up with at least four different versions of the Dr. Dao story?

  22. Lucky,

    I thought you were trying to fly more Delta. When it comes to domestic airlines, you still spend 90% of your time whining and moaning about United and American instead of doing a deeper dive on Delta. I’d love to see you write more on Delta as I’ve switched over some of my business travel to them recently

  23. Agree with your analysis, especially on bringing in Kirby. One (important) thing the current management team rarely gets credit for is how much United has improved operationally – things were rough post-merger. I do think a lot of that is the result of better employee morale.

  24. Munoz has been a disappointment in moving from a glowing concept of UA to a realization of that concept. One thing is certain, however: he will not be penalized for it because, despite the bad publicity, United flights to most destinations are full and the company is making money…just like Kirby likes it.

  25. What’s up with you CDN lately? The intro image for this article and the one about basic economy fares on Chase are both not displaying.

  26. @John says:
    March 26, 2018 at 8:38 pm

    Damn genius comment…one of the few I typically read in most posts. And that’s why I own United stock.

  27. Omg, this post is too long. Don’t waste so much time talking about a junk company. Yes, sometimes I don’t have choices but to fly United, but, it’s junk for sure.

  28. @ Christopher — We don’t know, it’s an issue with the hosting that is super irritating. Have a ticket in, but hands a bit tied in the interim.

  29. @john

    Your commentary is perfect. Lucky’s post lacks substance is a selfish outcry basically. I love my United stock.

  30. How much of this is Oscar’s vs Kirby’s fault? I’m unclear what is under the president’s purview vs the CEO’s purview.

    The other commenters pointing out United’s financial performance have a good point, much as I’m loathe to admit it. We’re again in a race for profits and they are sacrificing the quality of service for their most profitable customers (paid J class). I think in the long-term, that will come back to bit them.

    I booked a paid business ticket to Argentina for this fall, and I’m going with Delta over United due to United’s crappy hard product on the routing I was looking at. No Polaris seats of course, but also the 2-4-2 config and no way I’m paying thousands for that — booked on a 767 in a 1-2-2 config via ATL instead.

  31. Two things:
    1) United was always a disappointment…Even if they make a lot of changes,it is still gonna be the same…..
    2) Y’all should expect more from airlines like JetBlue… if you still fly the US3 airlines….switch to JetBlue!

  32. Disappointing for whom? Certainly not for oscar himself.

    I don’t need to see his golden parachute to know he will not be disappointed with it.

    As we have known for quite sometime, incompetence at cxx level in this country pays lavishly.

  33. Munoz is a huge failure but worst then him is UA Board for keeping him employed. Problem is Munoz does not care. If he is fired tomorrow he will leave with more money he can spend. That is why he couldn’t care less. UA is the Greyhound of the air.

  34. I am platinum on United (no 1K here) yet reside in AA’s backyard (DFW). United has been heads and tails above AA in every aspect IMO! From booking price points, redeeming miles, upgrades, lounges, and the basics of it all getting from point A to point B on time. Granted status helps.
    For my personal use business or leisure United has done everything right for me. I get upgraded more than 60% of my flights (3-4 hour flights mostly e-170 and 319/737) and I enjoy the lounges for the few hours I am there
    Is it perfect NO! But dollar for dollar I feel I am getting my monies worth.
    Your mileage will vary.
    Just grabbed 2 saver business class flights to Europe on Lufthansa and Swiss on the days I want. So it’s working for me.

  35. CEOs are judged by the BOD and shareholders not by a small group of unprofitable customers who take advantage of loyalty programs designed to attract actual customers.

  36. ben, you’re still holding a grudge against united because they caught you jamming the headphone jack for free miles?

  37. Maybe he promised too much too soon?

    Also, can we get more trip reports? I realize they might not be the biggest draw for some people, but they are for me.

  38. Not saying there have not been misssteps, but to say almost nothing has gone right overlooks impressive improvements in on time performance. Consistently placing first or second in D0 in spite of hubs that are subjected to ATC delay programs more than those of other airlines.

    The dramatic improvement in on time performance (one of the top priorities for travelers) is a result of significant investment in the operation, in operational planning, resources, and the ability to recover quickly from significant weather events.

  39. Munoz is like Obama. Great talk but can’t deliver.

    But We love people that are nice, friendly, bring donuts. Stupid wusses.

    When is the gift registry going to open up again?

  40. @Mark F – Most stocks all over the world have gained 30% since Aug 2016. This has little to do with Munoz or UAL management.

  41. All these types of stories on all blogs are bunch of baloney. The reason being that no one wants to call out the elephant in the room, ie, the oligopolistic situation airlines operate under in the USA.
    What with airports being carved up by airline, no one in the USA really has a choice of carrier on many routes.
    Just going on and on about service cuts, (which you should be OFFENDED BY as you fly business more than economy), isnt really going to do much. 5 years down the line, youll be doing the same, as will they. But hey., its all about engagement.
    Now that Ive engaged on this article, would you please put up the SQ suites TR, instead of leaving gaps of 8 days between updates while putting fluff like this out?

  42. Only one comment.
    For those of you touting the share price as proof of success or concept or anything, all it means is that some have made money, a lot of money.
    There are plenty of ex-CEO’s who got hundreds of millions in bonuses by cost cutting only to leave future shareholders, employees and customers holding a bag of …nothing.

  43. The CEO’s job is to raise the stock prices for the share holders, that’s really his primary concern. He has done that, they at United most likely see him as a success. He isn’t going anywhere soon, well not till stock prices fall…

    @BR while most stocks have gained, not all have (though of course if you go by S&P indexes, the stocks should be rising constantly and all gaining). So again, it’s still a success even if he is just doing what he should be doing..

    IDK why so many people think that United really cares about its customers. I am near Newark and it’s hard to get on any other flight than United without paying a crazy amount. It’s the problem we have here in the States. But personally I have started driving to airports out of my way just to fly more on Southwest, Frontier and Spirit … because yes, even the last two are better than United IMO.

  44. The bottom line and customer value are directly related. If you’re not delivering enough value, your customers will stop giving you money (unless it’s a monopoly, of course). Apparently, United hasn’t hurt its customers enough yet for it to have any real effect on their turnover and profits. So the only way to turn this around is when people stop flying United to the extend where it’ll hurt them. And I’m not sure many people are willing to do that.

  45. Same ole story with UAL (yawn)… nothing ever changes for the good there. I saw the handwriting on the wall years ago when I worked for them and glad I found another career when I did! Now I avoid flying them at all costs.

  46. One thing to note lacking in these comments: Munoz didn’t just have a heart attack.
    The man was so gravely ill that he underwent a heart transplant and was back to work when he probably should have retired.
    I’m not justifying the events that occurred subsequently, but let’s not kick him into a corner when likely most of the blame comes from United’s Board.

  47. I frequently fly United from Europe to the states so my view is perhaps different than most of the blog geeks. I do see some some improvement in the Polaris and I do see (but this is not a scientific measurement) more availability of GPU upgradable seats to C at various routes, particularly the last year. I am still puzzled whether this is a direction from top or just a random observational thing. Nonetheless, the fact that as *A we cannot get into United clubs when flying domestic in the states and the renovation of United lounges that takes forever, there is much much more to improve.

  48. First a few facts…Munoz was hired first and promised a different direction. in 2016, BOD FORCED the Kirby hire on Munoz who had no option but to like it. Kirby, with the backing of the BOD immediately starts ramrodding his usual cost-cutting and in the process has shown to pax and employees alike that they are expendable.

    And now you guys are hating on Oscar? The dude is only pro-forma in charge! Like the Queen of England, he does the statesman stuff…but on a day to day basis, there is only one guy whose brainchildren keep tripping up UA…Kirby. His first really highly touted brainchild? Basic Economy. Rollout a disaster and they admitted they made a mistake that costs untold millions in lost revenue. Then the second brainchild not too long ago? The now infamous bonus lottery.

    If there is one person that should be axed, it’s Kirby.

  49. Ditto @John when you say: I don’t think the evidence @lucky relies on is very persuasive in suggesting that United is really in trouble. @Lucky’s post is almost entirely focused on bad press United has gotten for various incidents. While it’s true that they’ve had a lot of bad press days, that’s not really very informative. The question is, do those bad press hurt the value of the company.

    The answer seems to be. The airline’s actual operational and financial metrics have all been record setting under Munoz’s tenure. United actually beat Delta in on time performance in the latest reporting period, and as others note, the financial performance has been strong. United basic economy was poorly handled, but from all accounts, that was Kirby, not Munoz— and after they learned their lesson and slowed down the rollout, there was no lingering effect or bad will. Bookings recovered to pre-basic economy levels.

    I would note that some of the incidents @lucky lists are of no substance whatsoever outside the narrow community of miles geeks. I have not seen any mainstream press coverage of United deciding to make certain Polaris features available only to those who specifically ask for them — I don’t think anyone cares about that. At the end of the day, I think an assessment of the CEO’s performance by the board will be much more data-driven. They’re not just going to obsess over a couple of PR problems — let alone the fact that people now have to ask for mimosas, rather than being proactively offered one (the horror!).

    It is clear Lucky does not own shares of UA.

  50. As a former UA Employee, I must wholeheartedly agree with AAexplat’s comment: Kirby is the next generation of toxic to UA. Munoz will be gone by year end – sooner than later.

  51. As a Premier 1K member for years, as IAH is my hub and is overwhelmingly/regrettably UA territory, the day Kirby takes over is the day; I quit flying this declining albatross of an airline. Yes I wholeheartedly agree that Munoz was a horrible choice, running CSX freight railroad and being on the board does not qualify you but Kirby is an absolute idiot that long standing customers as well as most employees think of as a money grabbing buffoon (Smisek 2.0)

    Wake up United, otherwise you will win up going the route of Eastern/Pan-Am/TWA and others…

    I so badly MISS Continental OR WISH everyday to see Alaska open up more routes from IAH.

  52. I, like many, was no fan of Smisek . I recall quite a few people over at FlyerTalk actually did a celebration party when Smisek left UA. As for Munoz, I think many of us really hopped he’d do well.

    He’s only been on board for 2 years. It’s going to take a decade to fix the mess that’s UA…and that’s assuming you’re trying hard to get there. This would mean pulling a Delta — to hell with the short-term stock gains and instead focus on long-term loyalty through customer service and improved reliability, which have led to even greater stock gains.

    JetBlue/Delta loyalist here for domestic. Although, JetBlue as really gone down from where it used to be. They used to be innovative, new, fresh. Other than Mint, they’ve become another legacy carrier. The real problem in the USA is lack of competition. Why does it cost more to fly domestically than to Singapore? It’s not just economies of scale here — it’s greed. As the old adage goes, “Bears make money, bulls make money, pigs get slaughtered.”

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