United Airlines CFO to Retire Brace’s Departure Comes As Industry Posts Huge Losses

By Chris Walsh

United Airlines announced Friday that Jake Brace, who helped guide the Chicago-based company through a three-year bankruptcy as its chief financial officer, will retire this fall.

Kathryn Mikells, United’s vice president of investor relations, will move into the CFO spot Nov. 1.

Brace, 50, departs United as the carrier posts huge losses primarily tied to record fuel costs that have sent almost every other carrier deep into the red.

His departure comes on the heels of failed merger talks with several major carriers, including Continental Airlines, US Airways and Delta Air Lines. United, which is the largest airline in Denver, ended up settling for an expanded alliance with Continental that will provide some of the same benefits of a merger without some of the risk.

Brace also oversaw United’s flight through Chapter 11 bankruptcy from late 2002 through early 2006, which ranks as the longest ever for an airline. During that time United slashed $7 billion in annual costs, cut 25,000 jobs and terminated its pension programs, allowing it to win a huge financing package and emerge from Chapter 11. Its relationship with employees, however, soured greatly because of the drastic cuts, and morale still suffers today.

Ray Neidl, an analyst with Calyon Securities in New York, called Brace’s departure surprising.

“I thought he’d be there until they could check out through some kind of merger or a sellout,” Neidl told Bloomberg News on Friday. “What might be going through their minds is, with the state of oil prices, industry mergers aren’t going to happen for a couple of years, and he wanted to move on for that reason.”

Another observer said Brace isn’t to blame for the company’s recent losses, pointing to similar deficits across the industry.

“Essentially, the industry is losing its shirt,” said Dave Swierenga, an economist at aviation consulting firm AeroEcon. “I think everyone is well aware that the big problem is fuel costs. I can’t imagine that United’s losses were precipitated in any way by their CFO. United’s situation is no worse or no better than other carriers’.”

To improve its financial health, United is taking significant measures to eliminate unprofitable flights, ground planes and reduce its work force, among other measures. The company has outlined plans to end several dozen departures in Denver and cut at least 439 positions here this year.

Brace’s replacement has served in various capacities at United since the mid-1990s and previously worked in the corporate finance group of General Electric Co.’s GE Capital unit. Mikells, 42, will oversee numerous areas, including financial planning and analysis, budgets, accounting, internal audit, merger and acquisitions, fleet planning and investor relations.

Originally published by Chris Walsh, Rocky Mountain News.

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