United Continental Holdings faces a battle with disgruntled shareholders over the direction of the company just as its CEO returns from a five-month absence during which he received a heart transplant.
In a surprise move Tuesday morning, Altimeter Capital Management and PAR Capital Management made a public pitch to add six of their own nominees to the board. The two investment firms own a combined 7 percent stake in United Continental, the parent of United Airlines.
Brad Gerstner, CEO of Altimeter Capital, said in a statement that investors are "greatly disappointed with United's poor performance and bad decisions over the last several years." The most prominent of the investors' nominees is Gordon Bethune, who served as CEO of Continental Airlines from 1994 through 2004. Bethune is largely seen as turning that troubled airline into one of the country's leading carriers.
United merged with Continental in 2010 and has struggled ever since. Unions fought the integration, customer service declined, flights were delayed and computer problems persisted. All of that caused United to lose revenue and market share to peers such as Delta Air Lines and American Airlines, despite having one of the best route networks. United is profitable but lagging behind its competition in ticket prices.
One quarter of all United flights last year left late, according to the Bureau of Transportation statistics, with those that were late averaging 65 minutes in delays. By comparison, only 19 percent of American flights and 15 percent of Delta flights were late. And when late, the delays were not as severe, with American averaging 54 minutes and Delta 57 minutes.
The battle over the board comes just as United CEO Oscar Munoz returns from medical leave. Munoz became CEO in October after United dismissed Jeff Smisek amid a federal investigation into the airline's dealings with the government agency running one of its most important airports.
Munoz quickly brought some fresh air to the company, taking responsibility for the troubled integration and promising to make immediate changes to make employees and passengers happier. However, he suffered a heart attack on Oct. 15 and had a heart transplant In January. He is scheduled to just get back to work full-time Monday.
The investment firms' announcement comes one day after United increased its existing board by three members to 15, a move Altimeter's Gerstner called "a cynical attempt to preserve power by this entrenched board."
Bethune told CNBC that his support for the investors has nothing to do with Munoz. "This is about governance... and having somebody who understands the airline business on the board," Bethune said.
He added that investors are dissatisfied because of United's performance compared to its peers.
"If you're in a horse race and in fourth place, you aren't winning," Bethune said.
Wall Street had a somewhat negative reaction to the developments, sending United Continental shares down $1.27, or 2.2 percent, to $56.34. Still, some analysts were looking forward to Munoz's return.
Vicki Bryan, an analyst at research firm Gimme Credit, said in a note Monday that Munoz has "managed already to introduce an encouraging new, more collegial tone, a vital signal given worsening, near toxic labor relations over the previous five years."
The fear now is that Munoz will be distracted from fixing United by a bitter battle over the board.
In an email Tuesday, Munoz warned employees that Altimeter and PAR want to put their nominees "in control of the board and our company's future."
Sara Nelson, president of the airline's flight attendant union, also came out in support of the current leaders.
"Oscar Munoz has presented a vision for United Airlines that passengers and employees can believe in," Nelson said in a statement. "Our union has worked with a lot of management teams over seven decades and we have rarely experienced a CEO as engaged or committed to the success of an airline."
Besides Bethune, the other people Altimeter and PAR want to add to the board include Gerstner, former Orbitz Worldwide CEO Barney Harford, former Delphi Automotive CEO Rodney O'Neal, SherpaFoundry CEO Tina Sharkey and the head of strategic initiatives at homebuilder Lennar Corp., Brenda Yester Baty.