United Airlines Could Sell Maintenance Stake
Aug. 24, 2007
United Airlines parent UAL Corp. is considering selling a stake in the division that maintains aircraft for its planes and those of other carriers, as the company continues to tweak its operating structure after exiting bankruptcy last year.
The unit, called United Services, employs about 6,900 people, with the largest concentration of technicians, engineers and support staff in the San Francisco area.
"We are contemplating bringing in third parties who can invest in the maintenance, repair and overhaul business," United spokeswoman Jean Medina said via e-mail on August 24.
She said an outside investment could help the airline operator improve maintenance materials costs, streamline its supply chain and improve its infrastructure.
UAL has been working with consultants McKinsey & Co. on finding ways to improve the maintenance division. And it has been culling low-margin clients from its roster, a strategy that weighed on the company's second-quarter revenue.
United Services maintains, overhauls and repairs aircraft for more than 130 commercial and military customers globally, including Air China and Korean Air.
Any moves to unwind the division could meet with resistance from its union, which is already smarting from job cuts while the operator worked through a bankruptcy reorganization.
In the wake of UAL's exit from bankruptcy in February 2006, Wall Street analysts have been looking for ways the carrier could raise money by selling off some of its assets.
United's frequent flyer program has garnered some interest for its potential value as a stand-alone company. Recently, Bear Stearns analyst Frank Boroch said "now is an appropriate time to explore a frequent flier spin-off" of the division, which makes about US$800 million in annual sales.