United Airlines' investors pleased with CEO's resignation

A day after United Airlines' CEO stepped down amid a federal investigation into the airline's dealings with the Port Authority of New York and New Jersey, analysts and investors welcomed the management shakeup.

Investment firms, including Cowen and Co., Barclays, and Deutsche Bank, issued positive reports Wednesday on the long-term effects of Oscar Munoz, president of CSX Corp., replacing Jeffrey Smisek, who resigned as CEO on Tuesday along with two other senior executives due to the ongoing federal investigation of former Port Authority Chairman David Samson.

Smisek is in line for a multimillion-dollar severance, but it's contingent on his cooperation in the probe. He has not been accused of any criminal wrongdoings.

"We have been highly critical of Smisek and Co. for numerous management missteps and squandered opportunities over the past several years, which largely are responsible for United's ugly descent to dead-last among its largest peers in just about every measure of customer service and operating performance," Gimme Credit Bond Analyst Vicki Bryan said in an investor note.

For example, since its merger with Continental Airlines in 2010, United has had recurring computer problems causing flights to be grounded and delayed.

United, whose stock closed up 16 cents Wednesday to $57.67 a share, said that Smisek's departure came in connection with "the federal investigation associated with the Port Authority."

The Port Authority, which operates three New York-area airports including in Newark, where United has a hub, also owns and oversees the George Washington Bridge.

The bridge became the focus of a 2013 scandal, when allies of Gov. Christie's allegedly closed some bridge lanes, snarling traffic as retribution against a local mayor who wouldn't support Christie's reelection campaign.

The federal inquiry is also looking at whether Samson, a Christie appointee, convinced United in exchange for favorable treatment at Newark airport to begin twice- weekly flights between Newark and Columbia, South Carolina. Samson had a vacation home in nearby Aiken, South Carolina. The United flights left Newark on Thursday nights and returned Monday mornings.

U.S. prosecutors have subpoenaed some of the airline's emails and are looking at whether the flights - which United canceled a few days after Samson left the agency in 2014 - were a quid pro quo for lower rates, facility improvements, or other concessions at the Newark airport.

The government also may be looking at the Port Authority's role in bringing new flights to Atlantic City. The Port Authority took over Atlantic City International Airport in July 2013, seeking to bring new flights to the seaside city and business to the faltering casinos.

In November 2013, Smisek joined Christie to announce that United would start daily nonstop service in April 2014 from Atlantic City to its hubs in Chicago and Houston.

Six months later, United canceled the 50-seat jet service effective Dec. 3, saying the routes were not profitable.

The Chicago-based carrier has 18 daily flights out of Philadelphia International Airport, which accounts for only 3.5 percent of the market share.

According to a United Securities and Exchange Commission filing, Smisek will receive $4.9 million as a cash separation payment, 60,746 shares of airline stock worth $3 million, free flights, the title to his company car, and free parking privileges for life, as well as health insurance until he is eligible to receive Medicare at age 65.

Also, Smisek, 61, stands to get $19.5 million more in performance-based awards, as well as a prorated portion of his annual cash incentive award, which last year was $2.34 million, Bloomberg News reported.

His exit agreement requires him to cooperate with the company's defense, prosecution, or any claims relating to events during his employment. If he is convicted, or pleads guilty or no contest to any crimes, he must repay "certain severance payments and benefits," according to United's SEC filing.

"The appointment of Mr. Munoz may be a blessing in disguise," CRT Capital Group analyst Michael Derchin said in an investor note. "At CSX, Mr. Munoz helped transform the railroad into an industry leader in customer focus, reliability, and financial performance."