United's Kirby to take over for CEO Oscar Munoz

United Airlines says company president Scott Kirby will succeed CEO Oscar Munoz next May

Three years after being dumped by a rival, Scott Kirby will become the next CEO of United Airlines, where he has played a key role in leading a turnaround of the once-moribund carrier.

United announced Thursday that CEO Oscar Munoz will step down in May and be succeeded by Kirby, currently the airline’s president.

Munoz has led the airline since 2015 during a tumultuous time that included the brutal dragging of a passenger off an overcrowded plane and an aggressive growth plan designed to recapture United’s glory days.

Munoz recruited Kirby days after he was ousted as the No. 2 official at American Airlines, where he was widely considered a future CEO. Kirby has figured prominently in decisions including a refresh of United’s fleet and a bold plan — initially resisted by Wall Street — to aggressively add new routes from its hub airports such as Chicago and San Francisco.

“When he arrived, United was a hot mess,” said travel analyst Henry Harteveldt. “Scott has focused on improving United reliability and productivity, and it’s a much more reliable airline than it used to be.”

Kirby, 52, will lead one of the world’s biggest airlines just as investors wonder whether the historically volatile industry can continue to post strong profits. United faces narrower challenges including a number of union labor contracts coming up for negotiation and the ongoing grounding of its Boeing 737 Max jets, which has caused the airline to cancel thousands of flights since March.

Kirby left American Airlines in mid-2016 in what the company described as part of its long-term succession planning. In effect, Kirby was passed over as the heir apparent to CEO Doug Parker in favor of Robert Isom, then American’s chief operating officer.

Insiders at American never doubted Kirby’s industry knowledge and intelligence — he claims to have been kicked out of casinos 150 times for counting the cards played in blackjack games — but they say his personality could be abrasive at times.

Kirby wasn’t unemployed for long. Munoz, a longtime railroad executive with little experience in the airline business, said at the time that hiring Kirby completed his senior leadership team.

In a statement issued by United on Thursday, Munoz said, “I brought Scott to United three years ago, and I am confident that there is no one in the world better equipped to lead United to even greater heights.”

The choice of Kirby was not a surprise. Wolfe Research analyst Hunter Keay said Kirby's growth-first strategy and focus on operations and costs won't change how investors view United, although his aggressiveness could mean more borrowing.

As for his personality, Kirby sounds more diplomatic in public since "a humbling and unexpected exit" from American, Keay said, but he hasn't changed.

“He doesn't suffer fools, empowers people he trusts, has no tolerance for stupidity or laziness, and wants to win by a million,” Keay said.

Munoz will serve as executive chairman for a year after stepping down as CEO. United's current chairman, Jane Garvey, will retire from the board in May.

Munoz, 60, was on the board at United when he was named CEO in 2015 after Jeffrey Smisek was ousted. Smisek was embroiled in a federal investigation into whether United improperly curried favor with the head of the regional agency that operates airports in the New York City area, including United's hub in Newark, New Jersey.

A month after taking the job, Munoz suffered a heart attack and later underwent a heart transplant.

United at the time lagged its closest competitors, American and Delta, by many financial and operational measures. It has since reduced delays and cancellations and boosted its profit margins. Since early last year, United has grown aggressively by flights between hub airports and smaller cities.

In 2017, video surfaced of airport officers dragging a passenger off a United Express plane in Chicago to make room for an airline employee. Munoz's initial response was disastrous. In standing up for United employees who summoned the security officers, he seemed to blamed the passenger who “defied" the officers.

Munoz later apologized to the passenger, who settled a lawsuit against the airline without disclosing terms, and the CEO announced steps to reduce the number of overbooked planes. Munoz forfeited his bonus that year, saying that he was ultimately accountable.

Since Kirby left American for United, the two airlines have gone in different directions. Since the start of 2018, American's shares have plunged 47% while United's have gained 31%. American struggled this summer with thousands of cancellations and delays that it blamed on grounded Max jets and a work slowdown by mechanics.

American's problems led to speculation that Parker might be replaced as CEO. Kirby was asked at an industry event in October whether he would be interested in the American job. He said he wasn't: “Oscar was big enough to take a chance on me ... and United Airlines is where I'm going to end my career.”

Kirby couldn't be blamed for being pleased how his decision turned out.

“You can't help but sit back and smile and say, 'That will show them,'” Harteveldt said.

Shares of Chicago-based United Airlines Holdings Inc. fell 31 cents to close Thursday at $87.86.

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David Koenig reported from Dallas, Michelle Chapman reported from New York.

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This story has been updated to list the correct stock price, closing at $87.86. An earlier version had the midday price at $104.81.