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In a surprise move, American Airlines President Scott Kirby has left for the same job at United Airlines, where he will work under new CEO Oscar Munoz, who seeks to transform the airline from industry laggard into one of the world’s best-run carriers.
Kirby, respected in the industry for his skill at increasing revenues, had worked with American Airlines CEO Doug Parker for more than two decades, since both joined America West Airlines in 1995. Parker and Kirby rose through the ranks together, helping their small Arizona-based discount airline merge first with US Airways and later with American. Kirby was named US Airways’ President in 2006, and took the same job with American in 2013.
Kirby is the third senior executive Munoz has hired this month, joining new CFO Andrew Levy, the former Allegiant Air president, and new chief commericial officer Julia Haywood, a former Boston Consulting Group partner. But Kirby is a much bigger coup for Munoz, not only because of his background, but because the three major U.S. airlines are so fiercely competitive that senior executives rarely move directly from one to another. Kirby, 49, a financial whiz, had been considered one of American’s strongest assets.
American named COO Robert Isom as president. Isom, who joined US Airways in 2007, will continue to run American’s operations, while also overseeing the airline’s revenue-generating departments.
In a release, American tied Kirby’s departure to succession planning by the airline’s board of directors, which concluded it could not keep all three senior executives — Isom, Kirby and Parker —for an “extended period.” According to a source familiar with the matter, Kirby had been told he would need to leave American, and that Isom would replace him.
“Robert’s promotion and Scott’s departure are the result of our Board of Directors’ succession planning efforts,” Parker said in a note to employees. “Our Board chose to act proactively to establish a team and structure that will best serve American for the longer-term future.”
According to an SEC filing, Kirby’s departure package includes a $3.85 million cash payment, accelerated vesting of 259,097 restricted stock units, and lifetime free flights on American, among other benefits.
At United, Kirby will be in charge of operations, marketing, sales, alliances, network planning and revenue management. Jim Compton, United’s chief revenue officer and a former Continental Airlines executive, had led many of those divisions, but he will leave the company later this year.
“This move will allow me to sharpen my own focus as CEO on the core mission of driving United’s overall strategy, business innovation and financial performance,” United CEO Oscar Munoz said in a note to the airline’s employees, adding he is finished naming his senior leadership team. Munoz said the airline needed to embrace “sensible change.”
The three executive appointments suggest a different direction for United, which until recently had been run by several former Continental Airlines executives appointed by former CEO Jeff Smisek. By year-end, only two of United’s seven highest-ranking executives — Mike Bonds, who leads labor relations, and Greg Hart, the COO — will have come from Continental. Hart recently had his pay cut by $1 million over his role in a special flight United operated for former Port Authority of New York and New Jersey Chairman David Samson.
Some inside the industry had criticized United’s former leadership, saying it took former Continental executives too long to embrace what it meant to operate a truly global airline. Continental had only two international hubs — Houston and Newark —and, while the airline was successful on routes to Europe and Latin America, it did not operate on the same worldwide scale as pre-merger United, which had more hubs and more international routes, flying to cities as far away as Dubai, Singapore, and Ho Chi Minh City.
Kirby will have a tough challenge ahead. In recent years, United has struggled to match its competitors in revenue and profit margin. In a recent report, analyst Hunter Keay of Wolfe Research noted that, as recently as 2011, United has annual operating margin double its peer group average. But last year, Keay said, United unperformed its peer average by more than 2 percentage points. Delta is now the top U.S. revenue-generating airline.
“United is at a crossroads,” Keay said in his May report. “Its margins relative to other similar airlines are unacceptable.”