Activist Investor Group Targets United Continental Holdings

Jan 27 2016 | 11:20pm ET

United Continental Holdings has reportedly come into the sights of an activist investor group. 

The airline holding company has been struggling with a range of leadership and corporate issues at the same time as airlines around the world enjoy an extraordinary decline in their largest expense item – the cost of jet fuel. 

Brad Gerstner’s Altimeter Capital Management and Paul Reeder’s PAR Capital Management have amassed a combined 5.5% of UnitedContinental, according to a Bloomberg article citing securities filings, and as such are among the company’s largest shareholders. They are apparently in discussions with management, board and other shareholders about “business, management, capital structure and allocation, corporate governance, board composition, strategic alternatives and direction, and strategies to enhance shareholder value,” according to SEC 13-D filings.

The company is the product of the 2010 merger between United and Continental Airlines, a match that has largely lived up to initial skepticism about the speed of organized labor integration and the ultimate size of expected cost savings. The company is the product of the 2010 merger between United and Continental Airlines, a match that has largely lived up to the skepticism about labor integration and cost savings many airline industry insiders voiced at the time.

More recently, poor relative performance against industry peers and the firm’s belated admission that CEO Oscar Munoz had undergone a heart transplant following a heart attack last year has raised additional concerns.

The airline is remaining tight-lipped about the activist group, at least for the moment. “We actively engage in dialogue with our shareholders, and welcome their constructive suggestions and feedback,” said United spokeswoman Megan McCarthy said in an e-mail quoted by Bloomberg. “United’s board and management are committed to acting in the best interests of our shareholders and are focused on continuing to execute on our plan to create long-term value for all our stakeholders.”

United Continental stock gained around 1% to $47.71 on Wednesday, a day after the firm largely missed fourth quarter 2015 earnings expectations. Nonetheless, quarterly earnings were up substantially over 2014’s comparable period due largely to the lower fuel costs.

PAR Capital management, which manages approximately $4 billion, was founded in 1990 by Reeder, a former airline analyst for Loomis Sayles. Altimeter, meanwhile, was founded in 2008 by Gerstner and manages around $1.4 billion in both public and private equity funds focused on internet, software, travel and consumer sectors as of December 2015.

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