United Continental Shareholders, Bid For 6 Board Seats

© AP Photo/Pablo Martinez Monsivais, File

Investors push for board shakeup at United Continental - Saying they are fed up with poor performance at United Continental Holdings, two investment firms want to shake up the airline's board of directors and give a prominent role to the ex-CEO credited with saving Continental Airlines more than a decade ago.

In a surprise move Tuesday morning, Altimeter Capital Management and PAR Capital Management made a public pitch to add six of its own nominees to the board. The two investment firms own a combined 7.1 percent stake of United Continental Holdings Inc.

Brad Gerstner, CEO of Altimeter Capital, said in a statement that investors are "greatly disappointed with United's poor performance and bad decisions over the last several years." The firms' announcement comes one day after United increased its existing board by three members to 15, a move Gerstner called "a cynical attempt to preserve power by this entrenched board."

The most prominent nominee is Gordon Bethune, who served as CEO of Continental Airlines from 1994 to 2004. Bethune is largely seen as turning that troubled airline into one of the country's leading carriers.

United merged with Continental in 2010 and has struggled ever since. Unions fought the integration, customer service declined, flights were delayed and computer problems persisted. All of that caused United to lose revenue and market share compared to peers such as Delta and American, despite having one of the best route networks.

United is profitable but not showing the same blockbuster results that other U.S. carriers are posting in this time of low fuel prices.

United has also experienced turmoil in its executive ranks. In September, the company ousted CEO Jeff Smisek amid a federal investigation into the airline's dealings with the government agency running one of its most important airports.

New CEO Oscar Munoz quickly brought some fresh air to the company, taking responsibility for the troubled integration and promising to make immediate changes to make employees and passengers happier. However, Munoz suffered a heart attack on Oct. 15 and eventually needed a heart transplant. He is scheduled to just get back to work full-time Monday, a move welcomed by Wall Street.

Vicki Bryan, an analyst at research firm Gimme Credit, said in a note Monday that Munoz has "managed already to introduce an encouraging new, more collegial tone, a vital signal given worsening, near toxic labor relations over the previous five years as the once promising airline blundered through its storied merger and lost critical competitive momentum against increasingly formidable rivals Delta Air Lines and American Airlines."

Appearing Tuesday on CNBC, Bethune said that the current board has a "country club atmosphere" and that the move has nothing to do with Munoz.

"I love the guy," Bethune said, calling him "a very likable, good person."

"This is not about Mr. Munoz. This is about governance... and having somebody who understands the airline business on the board," Bethune said.

He added that it has much more do with the airline's performance compared to its peers.

"If you're in a horse race and in fourth place, you aren't winning," Bethune said.

The fear now is that Munoz will be distracted from fixing United by a bitter battle over the board.

Henry L. Meyer III, non-executive chairman of United's board, said in a statement that the investor "have unilaterally taken this hostile action with no concern that a proxy fight could distract the company from executing on Oscar's strategic plan."

Besides Bethune, the other people Altimeter and PAR want to add to the board include Gerstner, former Orbitz Worldwide CEO Barney Harford, former Delphi Automotive CEO Rodney O'Neal, SherpaFoundry CEO Tina Sharkey and the head of strategic initiatives at homebuilder Lennar Corp., Brenda Yester Baty.