Scandal, Not Service Failure, Does In United's CEO

Last week, United Airlines announced the resignation of their CEO, Jeff Smisek.

Untied's press release stated that Smisek's departure was connected to an "internal investigation related to the federal investigation associated with the Port Authority of New York and New Jersey."

This scandal sounds like it will be a juicy one.

A story that ran in U.S. News and World Report suggested that United may have given preferential treatment to David Samson while he was the chairman of the Port Authority of New York and New Jersey. United opened a direct flight route between Newark, New Jersey and Columbia, South Carolina while it was negotiating over projects at Newark Liberty International Airport. The airport is managed by the Port Authority and Samson has a summer home in Columbia. 

In February, the North Jersey Record described the route as "The Chairman's Flight." The story reported that there was very little passenger demand for the route. United discontinued the route on April 1, 2014, just three days after Samson resigned from the Port Authority.

It's understandable why a scandal like this would lead to resignations. What's curious is that it took a scandal.

Service at United Airlines has been dismal under Smisek. 

He was the CEO of Continental Airlines when United and Continental merged in 2010. Smisek became CEO of the combined airline. Continental's American Customer Satisfaction Index rating plummeted from 71 to 64 during the first year of the merger. The combined airline (United) is now at 60. It's one of the worst ratings in the industry. 

Their operations record is also unimpressive. Here's data from the latest Air Travel Consumer Report from the U.S. Department of Transportation:

  • 9th ranked among U.S. airlines in on-time arrivals. 
  • 5th highest percentage flight cancellations. 
  • 1st highest percentage of delays due to causes within the airline's control.
  • 2nd most consumer complaints.

United's board of directors clearly doesn't prioritize service. If they did, they would have moved to replace Smisek much sooner.

In the end, it took a scandal to force a change. 

Oscar Munoz was appointed as United's new president and CEO. He was previously the president and chief operating officer of CSX Corporation. However, Munoz isn't entirely an outsider since he's been on United's board of directors since 2010.

So, here's the big question now: Will Munoz be able to make an impact on service quality?