United Continental scored a big win by hiring American Airlines President J. Scott Kirby. He’s a smart industry player— some say a star — who will give United (ticker: UAL ) a close-up look at a rival’s play book, and possibly be a strong heir apparent for CEO Oscar Munoz.
Kirby’s hiring, announced Monday, is the latest in a string of top executive hires at United that is looking to improve its operations and financials, which lag other U.S. carriers.
Wall Street cheered the news. United’s stock price jumped 8.6% Tuesday to $50.99. This morning Raymond James analyst Savanthi Syth upgraded United Continental to Outperform from Market Perform with a price target of $65. Other analysts declared that American Airlines’ ( AAL ) loss was United’s gain.
However, we don’t think there are any “losers” in this scenario. Granted, American Airlines has lost a talented executive and under peculiar conditions. Kirby, 49, was let go Monday with a $13 million in severance after “conversations regarding career expectations” led the airline’s board to conclude that “it would not be able to retain its existing executive team in their current roles.”
Still, American Airlines has something to gain as well. Kirby’s successor, Robert Isom, the current COO, is an undervalued talent, and some say a better fit with CEO Doug Parker. Plus, many hope Kirby’s departure will bring an end to an unpopular pricing strategy blamed for hurting industry profits.
After declining in early trading, American stock closed 2.4% higher Tuesday to $37.03.
“It seems foolish to call this a win-win but there is a scenario where both companies benefit from a fresh set of thinking,” says Wolfe Research analyst Hunter Keay.
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