United Continental Holdings is close to announcing new board appointments on Wednesday in a settlement with activist investors, averting a long fight over governance at the No.3 U.S. airline by traffic, people familiar with the matter said.
The move is aimed at placating a key complaint of activists PAR Capital Management and Altimeter Capital Management that it does not have enough board directors with expertise in airlines. The two hedge funds own 7.1% of United (UAL).
Separately, Robert Milton, Air Canada’s former chief executive who was one of three people to join United’s board last month, will be appointed non-executive chairman at the company’s annual meeting in June, the people said. He would replace retired financial services executive Henry Meyer, the people added.
The settlement stops short of the slate of six that the two hedge funds had asked shareholders to vote onto the board in June, including former Continental Airlines chief Gordon Bethune, the people said.
Barney Harford, former CEO of online travel services company Orbitz Worldwide Inc, and Edward Shapiro, a partner at PAR, will join United’s board immediately as part of the settlement, the people said on Tuesday.
Another director, mutually agreed between United and the funds, would be appointed to the board in the next six months, added the people.
The sources cautioned the deal’s terms were still being finalized and asked not to be identified as they were not yet public. United declined to comment. A spokesman for PAR and Altimeter could not immediately be reached for comment.
In the funds’ view, the board needed to have industry veterans in charge to help guide United’s new chief executive Oscar Munoz, who took on the top job in September after being president of railroad operator CSX Corp. A heart attack in October forced Munoz to take a medical leave of absence for nearly five months.
Munoz has the challenging task of turning around United’s industry-lagging satisfaction scores and stock, down 7% in the past year. He so far has made a point of improving labor relations and secured new contracts that increase workers’ pay.
The funds had opposed United’s plan to make Munoz non-executive chairman by 2017, citing corporate governance experts that say independent board oversight is necessary to keep management in check.
Munoz has now agreed to postpone the appointment by one year to 2018, the people said.