United Continental Shareholders to Launch Fight for Six Board Seats

United continental shareholders PAR Capital Management and Altimeter Capital Management are nominating six directors, including a former chief executive of Continental Airlines. ENLARGE
United continental shareholders PAR Capital Management and Altimeter Capital Management are nominating six directors, including a former chief executive of Continental Airlines. Photo: Associated Press

Two shareholders of United Continental Holdings Inc. are launching a public fight to reshape the airline’s board of directors, adding more pressure to the nation’s third-largest carrier by traffic.

PAR Capital Management Inc. and Altimeter Capital Management LP, which together own 7.1% of the company’s stock, are nominating six directors, including a former chief executive of Continental Airlines, setting the stage for a shareholder vote at the carrier’s annual meeting this spring, according to a letter reviewed by The Wall Street Journal.

The fight comes the week before the Chicago company’s new chief executive, Oscar Munoz, is set to return to full-time duties after a January heart transplant and the day after the company apparently looked to head off just such a public spat by adding three new directors on its own.

PAR and Altimeter are longtime airline and transportation investors, not the typical activist shareholders who launch such campaigns for change. But the duo has grown increasingly frustrated following months of talks with United, the letter said. They blasted United’s stock performance as the worst among the big airlines and laid that at the feet of the current 12-member board, now augmented by three.

In the letter, they called the board’s move to add new directors amid their discussions a “desperate” and “cynical” attempt to keep power.

A United spokesman couldn’t immediately be reached for comment.

The shareholders’ nominees are led by Gordon M. Bethune, the former CEO at Continental, the letter said. Private talks to avoid a fight broke down between the parties over the role of Mr. Bethune, whom the shareholders wanted named chairman, according to a person familiar with the matter.

United is the product of a 2010 merger between the old United Airlines and Houston-based Continental Airlines. Unlike some other large airline mergers in recent years, the union has been plagued by problems.

United shares hit a high of $ 70.31 a year ago, helped by improving earnings and falling fuel prices. But the stock fell to as low as $ 42.17 in January of this year, in part due to uncertainties about Mr. Munoz’s health. It closed at $ 57.61 on Monday.

United already has faced months of leadership upheaval, starting last September when Jeff Smisek was abruptly ousted as CEO after an internal investigation related to a federal probe at the Port Authority of New York and New Jersey, which operates the airline’s hub airport in Newark. United hasn’t provided the reasons behind Mr. Smisek’s departure.

The board quickly zeroed in on Mr. Munoz, a railroad executive and board member at Continental since 2004 who moved to the new United board after the merger. Mr. Munoz pledged to get United back on the right track by focusing on customer service, reliable flights and improved labor relations.

Six weeks later, he suffered a heart attack and was put on medical leave, with the company’s general counsel named acting CEO. In January, Mr. Munoz, 57, underwent a heart transplant, and the company said Sunday he would return to his duties full-time on March 14.

He will walk right into a campaign for shareholder support, a task advisers say typically takes up significant time and energy for chief executives.

On Monday, the United board moved to add new blood on its own, a step it said came after shareholder talks. It named three new directors, including two former airline executives, and said it expected to nominate a fourth new member soon, highlighting their experience. The company said it had been searching for new directors “for some time.”

The changes came days ahead of an internal United deadline for investors to nominate directors, and PAR and Altimeter brushed off the additions in putting forward their own slate.

Mr. Bethune, who retired from Continental after engineering a dramatic turnaround of that carrier in the mid-1990s, recruited Mr. Munoz to his board and was responsible for hiring many of the Continental executives who now occupy top positions at the combined carrier.

Henry Meyer, a retired banker who hails from the old Continental board, took over as nonexecutive chairman at United in September. He is supposed to stand down in that role by United’s 2017 annual meeting, ceding that post to Mr. Munoz, according to the new CEO’s employment contract.

Brad Gerstner, the head of Altimeter, is also a nominee as is Barney Harford, the former CEO of online travel company Orbitz Worldwide Inc.

Both sides will now begin canvassing shareholders for support ahead of the annual meeting, typically held in June. Activists have proven successful in recent years at winning such fights, securing board seats in 127 campaigns last year, blowing past the 2014 record of 107.

Write to David Benoit at [email protected] and Susan Carey at [email protected]


WSJ.com: US Business

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