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United CEO Makes Good On Goal To Become 'Less Predictable' With Announcement Of New President

United Continental Holdings Inc UAL 8.64% hired Scott Kirby as the new President, a role he previously held at American Airlines Group Inc AAL 2.38%. Cowen, which maintained its Outperform rating on both stocks, believes the move is a major positive for United and neutral for American Airlines.

Terming the move as "somewhat shocking," Cowens said the appointment of Kirby completes a total revamp of United's management. On the other hand, American announced their succession plan, promoting Robert Isom to President from COO.

"We believe United achieved their goal of attracting high quality c-level talent and American remains comfortable with their current succession plan, which may have favored Mr. Isom over Mr. Kirby," analyst Helane Becker wrote in a note.

Becker said United CEO Oscar Munoz earlier conveyed that the airline's goal is to become less predictable from a competitive standpoint. The latest appointment of Kirby is a sign that the airline is on the right track.

For Kirby, the move makes sense as he was unlikely to succeed Doug Parker (current CEO of American) any time soon. In fact, he could become the CEO of United.

"Given concerns over Mr. Munoz's health, the potential for Mr. Kirby to eventually be his successor is a real one. To say the investor day later this year is a must attend is clearly an understatement, as expectations will now be elevated given the overhaul of management," Becker highlighted.

For American, the analyst said it's unlikely for airline to dramatically change their near-term plans, and continue to believe American will show unit revenue improvement in the near-term.

"We expect American to look to back fill their revenue department, as Mr. Isom historically focused more on the operational side of the business," Becker added.

On the news, shares of United rose 7.82 percent to $50.62 and American advanced 1.74 percent to $36.80. Becker has price target of $60 on United and $43 on American.

DateFirmActionFromTo
Aug 2016Raymond JamesUpgradesMarket PerformOutperform
Aug 2016Imperial CapitalInitiates Coverage onOutperform
Jul 2016JP MorganMaintainsOverweight

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