Majestic Research

Financial Week

Kathryn Mikells to Replace Jake Brace as UAL CFO

By Mark Bruno
Published: August 15, 2008

Wall Street sure has a funny way of showing its appreciation for all the work CFO Jake Brace has done for UAL Corp., the parent of United Airlines. After the company announced earlier today that Mr. Brace—who led its $23 billion restructuring and emergence from bankruptcy in 2006—will be retiring in November, its stock climbed as much as 10%, hovering near its highest levels in several months.

Mr. Brace will be succeeded by Kathryn Mikells, the company’s head of investor relations, who will become executive vice president and CFO. Ms. Mikells, 42, has also served as the company’s vice president of financial planning and analysis and as United’s treasurer.

Yet Mr. Brace, who ranked as Financial Week’s 10th highest paid CFO in 2006, when he earned $10.4 million, probably shouldn’t take the market’s reaction to his departure personally. The jump in UAL’s stock could have a great deal to do with the ongoing slide in oil prices, which hit $111 a barrel today—the lowest level in three months. Other airline companies saw the value of their stock increase as well, with AMR up more than 5% and Delta rising 7.5%, because lower oil prices will ease the fuel and operations costs that have crippled many airlines’ earnings of late.

This does, however, make it an interesting time for UAL to change CFOs, noted Matthew Jacob, an analyst at Majestic Research who covers the company.

With United and other airlines planning to cut flight capacity later this year in response to surging oil prices, Ms. Mikells has an opportunity to implement a “more disciplined growth strategy” for the company, Mr. Jacob said. He explained that many of the airlines are cutting their least profitable routes, which will create less competition for United in many regions.

“The demand is still there for these flights, but the supply will be down,” Mr. Jacob said. “So they can strategically increase fares and revenues where it’s appropriate, and grow by increasing their yield, rather than capacity.”