United, We Fall

Things are looking pretty bad for United Continental (the parent company of United Airlines, which recently completed a merger with Continental Airways) as CEO Jeff Smisek has suddenly quit his job.  The reason?  The Feds are closing in on Smisek as evidence grows of a bribery scheme where the airline created flights specifically to keep the now former head of the Port Authority of NY/NJ happy.

Jeff Smisek’s sudden exit as United Continental Holdings Inc.’s chief executive officer deepens questions about whether he was more than simply a victim of pressure by Port Authority officials who made demands during business negotiations with the carrier in 2011. 

Prosecutors are looking into whether United’s creation of the so-called
chairman’s flight amounted to a bribe by the airline or a shakedown by then-Port Authority Chairman David Samson, according to people familiar with the matter. They said the U.S. Attorney’s Office in New Jersey is investigating United’s decision to launch twice-weekly flights between Newark Liberty International Airport and Columbia, South Carolina, near Samson’s weekend home after Samson pressed United to do so. At the time, United was seeking millions of dollars in investments from the authority. 

Samson first mentioned his interest in the flights a year before they began, at a September 2011 dinner in Manhattan attended by Smisek and two other United executives who also resigned Tuesday, Bloomberg News reported in April, citing people familiar with the event.

United said the resignations were tied to an ongoing internal inquiry “related to the federal investigation associated with the Port Authority of New York & New Jersey.”
U.S. Attorney Paul Fishman, who is leading the probe in Newark, is probably weeks from deciding whether to charge anyone from the airline, according to a person familiar with the case who isn’t authorized to discuss it publicly. 

“The easiest knee-jerk reaction is he stepped down because criminal charges are imminent,” said Michael Koenig, a former federal prosecutor now with Hinckley, Allen & Snyder LLP who isn’t involved in the case. But Smisek and the two others may have violated a company policy, or it may be a situation where “the very existence of an investigation brings unnecessary publicity on the company -- and someone has to pay the price.”

One hell of a bribe, eh?  Getting an airline to create a twice-weekly flight to your hometown from work?  That's nice if you can get it, especially since oil prices (and jet fuel prices) are a lot lower, and airlines are still charging passengers fees for everything from carry-ons to peanuts.  The airline industry looks like it'll have their best year ever in 2015 too, with $30 billion in profits alone as taxpayers are expected to pay for airport improvements and subsidize the airlines as they continue to cut flights and pack in as many people like sardines in cans.

But hey, if you're in charge of an airport, airlines will like you.  A lot.