United Execs Lose Out in Merger

CHICAGO ( TheStreet) -- In a surprise Tuesday, two of the top three United executives were named as victims of inevitable merger downsizing.

United President John Tague and CFO Kathryn Mikells, both of whom played important roles in United's reinvention as an economically vibrant, merger-seeking carrier, will depart when the merger is completed.
Continental and United

Tague, the son of a former Pan American World Airways executive, joined United in 2003 after two decades in the airline business, though all of it at weak carriers that eventually perished. He was named United president in July 2009. He was viewed as a people person who worked to bridge a long-standing gap between United and its union employees. "Tague has been the good cop at United and he developed a good rapport with frontline employees, putting a kinder face on management," said aviation consultant Bob Mann.

Mikells, a University of Chicago MBA, joined United in 1994 as a financial analyst and worked her way up, becoming CFO in 2008. Like Tague, she played a key role in restructuring the carrier during its three-year bankruptcy and then in enabling the merger that led to her departure.

In a prepared statement, CEO Glenn Tilton, who will become non-executive chairman of the merged carrier, lavishly praised both executives. He said that Tague's "vision for what is possible and his ability to lead consistent performance improvement have changed the way we operate and transformed our competitive position."

As for Mikells, she "has become one of the best CFOs in any industry and has been my partner in the pursuit and negotiation of the deal that delivered the best merger partner, on the best terms, for our company."

The two carriers announced a top management team that includes a mix of executives from each side. Continental's CEO and president Jeff Smisek will retain his title, as well Continental CFO Zane Rowe. Continental execs Mike Bonds, Jim Compton and Nene Foxhall will head human resources, marketing, and communications/government, respectively. Pete McDonald, who joined United in 1969, will be chief operations officer. United's Keith Halbert and Tom Sabatino will be chief information officer and general counsel, respectively, while United's Jeffrey Foland will head the frequent flyer program.

Also departing are Graham Atkinson, who headed United's frequent flyer program, and Rosemary Moore, a Tilton loyalist who followed her boss from ChevronTexaco Corp. to United, where she headed corporate and government affairs.

In a report on Tuesday, Stifel Nicolaus analyst Hunter Keay said the changes "generally skew toward existing Continental management. He said "Mr. Tague or Ms. Mikells could have ably filled the jobs , as United's liquidity turnaround occurred on Ms. Mikells' watch and Mr. Tague is well-respected on Wall Street for United's revenue outperformance and unbundling initiatives.

"However, Continental has been on firmer financial footing on a consistent basis throughout the revenue crisis, reflecting very well on Zane Rowe and his team," Keay wrote. "Ultimately, this decision is about Mr. Smisek's comfort level leading a combined United/Continental, which we view as invaluable."

Every merger produces winners and losers. The impact is felt not only by executives but also by headquarter cities, unions, employees, vendors and various other constituencies. In the case of the 2005 merger between US Airways ( LCC) and America West, the former carrier saw its name preserved. But nearly all of the top management came from America West and stayed in that carrier's Phoenix headquarters.

In the case of the 2008 merger between Delta ( DAL) and Northwest, the name and headquarters of the former carrier were preserved, but top management and the management approach came from Northwest. .

-- Written by Ted Reed in Charlotte, N.C.