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View Full Version : UAL Asset Sale/Breakup


Low & Slow
08-16-2007, 05:34 PM
Drop in United Airlines (UAUA) provides buying opportunity
Posted Aug 16th 2007 12:47PM by Eric Buscemi
Filed under: UAL Corp (UAUA), Bargain stocks, Stocks to Buy

UAL Corporation (NASDAQ: UAUA), the parent of United Airlines, got beat up pretty good along with the rest of the airline group yesterday.

However, investors should not stampede away from this sector, or more specifically, from UAL. As discussed in a Bear Stearns report released yesterday, the airline, which recently emerged from bankruptcy, continues to explore ways to utilize its massive cash hoard of $5 billion to maximize shareholder value, $1 billion of which management believes is excess cash.

Also, UAL is seeking ways to unlock value for its Mileage Plus program, a business that generates $800 million per year in revenue and has a large deferred revenue stream which provides some visibility for future revenue. Aeroplan, the Canadian-based loyalty marketing service business that was spun off from Air Canada's holding company, sells for a 60% premium to its former parent and a 200% premium on an enterprise value/EBITDA basis to the pure airline, Air Canada.

The Bear report places a $65 price target on UAL, with the asset break-up value of the company going as high as $80. Operational turnaround, huge free cash flow generation and the potential to realize value for the mileage plus business are all cited as reasons that could lead to a considerably higher stock price.

*******************************************

To see an analyst talk about breaking the company apart is eye-opening.

No airplanes on order
Nothing from Tilton about the future other than operational status quo (keep the stock/cash flow up)

SFO Maint. Base is for sale
Mileage Plus is for sale

If I were a UAL employee, merger would be the least of my worries.


Bucking Bar
08-16-2007, 05:45 PM
Massive cash hoard? How about giving some of it to the employees who's retirements got robbed? Or repay the amount dumped on the PBGC that all of us taxpayers without retirements get to contribute to?

7576United
08-16-2007, 06:17 PM
Drop in United Airlines (UAUA) provides buying opportunity
Posted Aug 16th 2007 12:47PM by Eric Buscemi
Filed under: UAL Corp (UAUA), Bargain stocks, Stocks to Buy


If I were a UAL employee, merger would be the least of my worries.



But you're not.


Wheels up
08-16-2007, 06:25 PM
Just remember that this stuff has nothing to do with employees or stockholders, but rather how much money the execs can siphon out of a deal. They break up the company and sell it to the devil if they thought they could make a killing.

HSLD
08-16-2007, 06:58 PM
Just remember that this stuff has nothing to do with employees or stockholders, but rather how much money the execs can siphon out of a deal.

That's exactly right, the board's job is to return value to the shareholders. Shareholder value and labor relations are not mutually exclusive.

400Driver
08-16-2007, 07:31 PM
There was a time when directors and executives toiled to ensure the success of the franchise and being the best company on the block was the prime directive.

Alas, we are in an era now where it's all about the payout and concern for the enterprise or those in it's employ are not even in the decision tree.

You all be careful out there.

Lambourne
08-16-2007, 08:15 PM
SFO Maint. Base is for sale
Mileage Plus is for sale

If I were a UAL employee, merger would be the least of my worries.

On the SFO MOC being up for sale, where is your link? If you talk to the UA mechanics in SFO you will hear them saying UA is actually getting good business at the MOC for contract work.

As for mileage plus, what is the drawback in selling that unit? If it is more cost effective then should the company not seek to do so? We do not lose the MP pax just the maintenance of the service if I read the article correctly that discussed this a few weeks ago.

Blowing air to blow air is not a very intelligent way to produce a post. Why not put some work into the facts, make a good argument and then type. Your method is truly lacking information or supporting statements.

On the airplane order issue I am curious about something. What equipment is any carrier buying? The 787 is not flying and if you follow what happened with our 777's you would wait out the first round of a new airplane. Were you even around to remember the problems we had with the -400 when they were new????? The nose gear that would not extend in LAX was a great way to display a new airplane.

In fact if you follow the markets I think UAL is in a very good position compared to some other carriers with the bear market appearing to be warming up for a full fledged downturn.

Of course I hate to throw facts at your emotion and hope to dissuade your mindset.

EDC757
08-16-2007, 10:59 PM
)

If I were a UAL employee, merger would be the least of my worries.

Slow, you make me wonder why you like to beat-up on United. It is interesting that you keep your profile a secret. Humm

captjns
08-17-2007, 01:14 AM
That's exactly right, the board's job is to return value to the shareholders. Shareholder value and labor relations are not mutually exclusive.

However, not when the lining of the pockets of the Board of Directors are at stake... in their twisted world, they come first.

7576United
08-17-2007, 01:44 AM
Funny how quickly a company can go from being on the verge of liquidation, to having too much money lying around.

UAL, from a financial standpoint, is doing well. The employees know this, and want to recover some lost wages. To keep the inmates from rioting, Tilton/Brace float the idea of being broken apart. Inmates retreat. Business as usual.

Thanks for helping out Tilton, monkey boy, we all appreciate it.

captjns
08-17-2007, 03:12 AM
To keep the inmates from rioting, Tilton/Brace float the idea of being broken apart. Inmates retreat. Business as usual.

Pan Am re deaux.

7576United
08-17-2007, 03:43 AM
Pan Am re deaux.


Pan Am? Not even close. Pan Am was sold apart because a LACK of money, United has the exact opposite problem. (For now anyways)

Sonny Crockett
08-17-2007, 05:02 AM
Funny how we find so many that DREAM of a UAL shutdown.

Not gonna happen.

captjns
08-17-2007, 11:22 AM
Funny how we find so many that DREAM of a UAL shutdown.

Not gonna happen.

Funny... that's what they said about Pan Am, and Eastern... except in the case of asset being sold, they were stolen from Eastern.

Lambourne
08-17-2007, 11:42 AM
Funny... that's what they said about Pan Am, and Eastern... except in the case of asset being sold, they were stolen from Eastern.

Can you elaborate on your correlation between UAL and PA and EAL? Please enlighten us with something more than a pot shot with no supporting data.

Too much noise not enough fact...."c"aptain.

captjns
08-17-2007, 02:47 PM
Can you elaborate on your correlation between UAL and PA and EAL? Please enlighten us with something more than a pot shot with no supporting data.

Too much noise not enough fact...."c"aptain.

You're probably too young to remember but, Pan Am sold off assets to stay afloat ranging from a major hotel chain, Hotel Intercontinental, and routes to various airline, including UAL who got the Pacific Routes. I remember when Pan Am boasted it would be the first airline to provide commercial space travel.

The Eastern Airlines which was made of many companies within a company either sold off at lower than market value, or transferred divisions to, I beleive it was Texas Air Corp., ranging from a sophisticated reservations system, and fueling service which were then leased back to EAL at inflated prices. So in that case it was a double whammy if you will.

So tell me Lambourne, put down the Kool Aide and tell me why it can't happen to UAL? What makes you think that the Board of Directors will do the right thing by its shareholders, and employees?

newKnow
08-17-2007, 03:45 PM
Drop in United Airlines (UAUA) provides buying opportunity
Posted Aug 16th 2007 12:47PM by Eric Buscemi
Filed under: UAL Corp (UAUA), Bargain stocks, Stocks to Buy

UAL Corporation (NASDAQ: UAUA), the parent of United Airlines, got beat up pretty good along with the rest of the airline group yesterday.

However, investors should not stampede away from this sector, or more specifically, from UAL. As discussed in a Bear Stearns report released yesterday, the airline, which recently emerged from bankruptcy, continues to explore ways to utilize its massive cash hoard of $5 billion to maximize shareholder value, $1 billion of which management believes is excess cash.

Also, UAL is seeking ways to unlock value for its Mileage Plus program, a business that generates $800 million per year in revenue and has a large deferred revenue stream which provides some visibility for future revenue. Aeroplan, the Canadian-based loyalty marketing service business that was spun off from Air Canada's holding company, sells for a 60% premium to its former parent and a 200% premium on an enterprise value/EBITDA basis to the pure airline, Air Canada.

The Bear report places a $65 price target on UAL, with the asset break-up value of the company going as high as $80. Operational turnaround, huge free cash flow generation and the potential to realize value for the mileage plus business are all cited as reasons that could lead to a considerably higher stock price.

*******************************************

To see an analyst talk about breaking the company apart is eye-opening.

No airplanes on order
Nothing from Tilton about the future other than operational status quo (keep the stock/cash flow up)

SFO Maint. Base is for sale
Mileage Plus is for sale

If I were a UAL employee, merger would be the least of my worries.

I find it amusing when people get on these boards and tell others how they shoud feel and what they should think. Especially when they "mark for dead" some of the very pilot groups that were responsible for huge gains for the pilot profession in the past.

You don't know what is going to happen in this industry, life or world. No one here has a crystal ball. No one here can give any advice on what airline to apply to.

When I was applying the rule of thumb was to apply to all airlines and just stay with the first one that hires you.

Back then United was the place to go. I think they were putting new hires in the -400 and they had the quickest upgrade time to the left seat.

Things suck now but things could turn around. So please get off your high horse looking down on everyone and telling them what to do.

All this reminds me of a second officer I flew with who got on with American in the 1960's. He was in class with them when he got the call from Braniff. He left for Braniff and 30+ years later he was a 727 s/o at NWA.

You don't know if you made the right career choice until you are collecting your pension. (after 3 years) :cool:

Lambourne
08-17-2007, 04:38 PM
You're probably too young to remember but, Pan Am sold off assets to stay afloat ranging from a major hotel chain, Hotel Intercontinental, and routes to various airline, including UAL who got the Pacific Routes. I remember when Pan Am boasted it would be the first airline to provide commercial space travel.

The Eastern Airlines which was made of many companies within a company either sold off at lower than market value, or transferred divisions to, I beleive it was Texas Air Corp., ranging from a sophisticated reservations system, and fueling service which were then leased back to EAL at inflated prices. So in that case it was a double whammy if you will.

So tell me Lambourne, put down the Kool Aide and tell me why it can't happen to UAL? What makes you think that the Board of Directors will do the right thing by its shareholders, and employees?

OK "c"aptain I am very versed in the history of the airlines. However, what you posted is in no way a reflection of what has occured at UAL. If you want talk about the EAL reservation system versus mileage plus please do so with a knowledge of what you are speaking. MP and Amadeus (the EAL reservation system) are two completely different animals. Where do you get the parallel that they are equal? Also UAL has not SOLD any system to this date.

In your diatribe about PanAm (remember you compared us to PA in the earlier post, re deaux is what you called it, remember....) so where is the similarity to PA? What theater of operations have we sold off? Just went through BK and kept the route intact, have billions in the bank, yet you say we are just like PA? Doesn't really seem like sound logic for such a big airplane pilot that likes to call himself "c"aptain.

As to your question. Is UAL immune from a change in the path of the company? Absolutely NO. However, to preach gloom and doom as you do while shooting from the hip with no data to support your claims is hugely irresponsible. You can not formulate an argument.

Why not try to compose something substantial rather than just sniping all the time?


Tilton may sell it to the devil, Tilton may run it as a stand alone. I have more insight than you from your position on the sidelines and I do like our chances for the long term. I am sorry that you were passed over but you need to move on with your "existence" and enjoy your personalized "hvyirn" or "capn" plates and catchy "jetguy" email.

I am sure your company that survives on the spoils of the ACMI world will never see a downturn........

captjns
08-18-2007, 02:27 AM
Tilton may sell it to the devil, Tilton may run it as a stand alone. I have more insight than you from your position on the sidelines and I do like our chances for the long term.

As I recall so did the boys at Pan Am... with the same intention as a smaller stand alone.

I am sure your company that survives on the spoils of the ACMI world will never see a downturn........

Pretty sure of your self Sparky.... Who do I fly for? I know you'll come up with a real adult response like I'm C-150 heavy driver or something like that. I fly planes because I hate working for a living. Never wanted to put the old career thing in one basket and worry about the neanderthal malevolent malcontent types in management controlling my destiny as far as income, benefits, retirement and quality of life.

Lambourne
08-18-2007, 06:44 AM
I fly planes because I hate working for a living.

Heard that from some of the pilots that have significant DOH's here at UAL! So you like to cross picket lines? Nice, at least we now know what we are dealing with when it comes to you.

Never wanted to put the old career thing in one basket and worry about the neanderthal malevolent malcontent types in management controlling my destiny as far as income, benefits, retirement and quality of life

Sure. If this was the case you would not be here grinding your gears over not being employed at UAL. You missed your chance and now are determined to ruin the party for anyone else. As to who you fly for? I have my suspicions and based on the fact you show a picture of a 747, but list a guppy as your a/c type you most likely work for one of the companies that is starting to feel the pinch of operating cost now that fuel hedges are expiring. You have airplane envy and even no matter how good you think you have it at your "luv"ley employer you feel a need to bash the company that you really wanted to work for all along.

You have still failed to properly align UAL with your EAL and PA analogy. So far the pilots have not enacted a sympathy strike for the IAM ala EAL. UAL has not sold the company in pieces to other leaving nothing. If you remember PA did not have a true us hub presence. Whereas UAL has significant hubs in the US and Japan.

Again I am not saying it will never happen. I just believe that your knowledge of what is "UAL" is limited to the excrement filtered glasses you wear.

Albief15
08-18-2007, 06:58 AM
UAL has done a lot for airline safety. UAL-ALPA has done more to raise the bar on wages and benefits that just about any other group. The ESOP turned into a disaster, but it was a cutting edge idea to tie both management and the company employees to the same ship.

There have been mistakes on both sides (summer of love--and about every management idea outside of running an airline they ever tried). However, a solid United has proven to be a good thing for unionized pilots everywhere.

Good luck guys...turn it around and make it good.

newKnow
08-18-2007, 08:21 AM
UAL has done a lot for airline safety. UAL-ALPA has done more to raise the bar on wages and benefits that just about any other group. The ESOP turned into a disaster, but it was a cutting edge idea to tie both management and the company employees to the same ship.

There have been mistakes on both sides (summer of love--and about every management idea outside of running an airline they ever tried). However, a solid United has proven to be a good thing for unionized pilots everywhere.

Good luck guys...turn it around and make it good.


Great post Albief

Gunter
08-18-2007, 09:02 AM
Funny how quickly a company can go from being on the verge of liquidation, to having too much money lying around.

UAL, from a financial standpoint, is doing well. The employees know this, and want to recover some lost wages. To keep the inmates from rioting, Tilton/Brace float the idea of being broken apart. Inmates retreat. Business as usual.




This is the most logical explanation. Company is doing great financially.

USAirways is doing great too. Those that want to think UAL and USAir are still struggling are living in the past.

Tilton is such a scumbag. He has been talking about merging/selling UAL for some time with, what appears to be, little thought about UAL's strategic UAL's future. He appears to just want to cash in and check out.

No plane orders? What?

Gunter
08-18-2007, 09:21 AM
UAL is like Pan Am or Eastern?

Study of History is important and there are similarities. But there are key differences too. I have had just as hard of time digesting these differences as the next guy. In the last couple of years we have seen THE turnaround for UAL and USAirways, like it or not. I predict the factors that have resulted in this success to continue to generate profit and, eventually, growth. Wages? Don't know about that. Just like the problems that almost liquidated these companies took a long time to play out, the positive factors will also play out before someone else can "catch up". This is barring any unforseen changes. And there are always unforseen changes.

Nothing is certain, but those that have had the best careers in recent memory are those that get hired relatively young at relatively strong, growing airlines.

Who will be the best growers (best chance at mid-high seniority CA in 10-15 years) going forward? Maybe not SWA or JetBlue anymore. Probably Delta, USAirways, UAL, NWA, AA or CAL. Probably more than just one. Most likely not all.

g-code
08-18-2007, 10:07 AM
You're probably too young to remember but, Pan Am sold off assets to stay afloat ranging from a major hotel chain, Hotel Intercontinental, and routes to various airline, including UAL who got the Pacific Routes. I remember when Pan Am boasted it would be the first airline to provide commercial space travel.

The Eastern Airlines which was made of many companies within a company either sold off at lower than market value, or transferred divisions to, I beleive it was Texas Air Corp., ranging from a sophisticated reservations system, and fueling service which were then leased back to EAL at inflated prices. So in that case it was a double whammy if you will.

So tell me Lambourne, put down the Kool Aide and tell me why it can't happen to UAL? What makes you think that the Board of Directors will do the right thing by its shareholders, and employees?

Pan Am and Eastern didn't have a cool 5 BILLION in the bank, nor were they posting a profit in-line with everyone else.

If UA is going to be broken up, why are they investing over 100 million dollars to upgrade international business and first (which blows everyone else out of the water BTW)?

Further, perhaps if you have read some of the reports from the annual share-holder meetings you MIGHT know that UA has flat out said that that they are holding off on new aircraft orders until they pay down debt in order to obtain better interest rates on the aircraft.

UA has one of the best pilot groups in this industry. They struck the B-scale, fought for an industry-leading contract, and are generally a cut above the average guy.

I have had one UA bus captain buy me a buy-on-board meal on a red-eye transcon because I was broke. When I asked how I could repay him, he told me he would take the money only if he "saw me on the line" one day.

I have seen another bus captain tell a gate agent to do his [email protected] job and to get the ****** off of his plane when the gate agent was too lazy to re-tag a NRSA's bag and would have caused the SA to mis his connection in Denver.

Why you have it out for this company, I don't know. Perhaps you were turned down at an interview or they lost your mother's bags last Christmas. Either way, you need to get with the times and get the facts before you spew such drivel.

OscartheGrouch
08-21-2007, 03:24 PM
Heard that from some of the pilots that have significant DOH's here at UAL! So you like to cross picket lines? Nice, at least we now know what we are dealing with when it comes to you.



Sure. If this was the case you would not be here grinding your gears over not being employed at UAL. You missed your chance and now are determined to ruin the party for anyone else. As to who you fly for? I have my suspicions and based on the fact you show a picture of a 747, but list a guppy as your a/c type you most likely work for one of the companies that is starting to feel the pinch of operating cost now that fuel hedges are expiring. You have airplane envy and even no matter how good you think you have it at your "luv"ley employer you feel a need to bash the company that you really wanted to work for all along.

You have still failed to properly align UAL with your EAL and PA analogy. So far the pilots have not enacted a sympathy strike for the IAM ala EAL. UAL has not sold the company in pieces to other leaving nothing. If you remember PA did not have a true us hub presence. Whereas UAL has significant hubs in the US and Japan.

Again I am not saying it will never happen. I just believe that your knowledge of what is "UAL" is limited to the excrement filtered glasses you wear.

LB,
Perhaps you can enlighten us as to how you decided/determined that Captjn's works for SWA. Your comments about fuel hedging options running out are entertaining because I certainly am not worried as one of those LUVley employees you mentioned. What keeps you up a night? Perhaps your career should be in better shape than it is? Oh! and please help me understand what "aircraft envy" is because I certainly have not had that problem since being employed by the airlines. I have however watched as the "legacies" have imploded and now stink pay/benifit wise as compared to FEDEX/UPS and others. I also don't see the income necessary to justify huge increases for any pilot's pay at the legacy airlines.:cool:

REAL Pilot
08-21-2007, 03:36 PM
Perhaps instead of trashing a proud legacy, you might focus on raising the bar instead of riding the wake from others sacrifice- for once.

Carpe Diem

727C47
08-21-2007, 04:01 PM
put me in the corner with the united guys and girls, they have a history they can be justifiably proud of when it comes to both labor,and safety. i wish them only the best.

correcting
08-22-2007, 05:49 PM
As a corporate pilot that flies on all the major airlines a lot, I can say that United's service level is so bad that it would not surprise me in the least if management just threw in the towel, started selling assets, and took the money and ran.

The problems seem too big to fix. The flight crews I've met have all been great. Unfortunately, they have the least control in fixing the situation. They can't fix the joke in India that passes for the customer service center. They can't fix the disaster that is the baggage handling in O'Hare (in April, it took 5 days for United to get my bags from San Diego to Richmond. Another time, we sat at the gate for an hour because the baggage handlers forgot to load the bags on the plane). They can't fix the fact that when I check in for a flight in IAD or ORD, there are huge lines at the ticket counters and only 5 customer service agents working while there are 30 electronic kiosks sitting unused because nobody can check bags at them or because they aren't turned on/out of order.

I hate to even think about an icon like United going away. It's bad for pilots in general. But, I've been flying 30k miles/year on United for the last 4 years, and I have seen nothing but declines in all aspects of their operations.

newKnow
08-22-2007, 06:51 PM
As a corporate pilot that flies on all the major airlines a lot, I can say that United's service level is so bad that it would not surprise me in the least if management just threw in the towel, started selling assets, and took the money and ran.

The problems seem too big to fix. The flight crews I've met have all been great. Unfortunately, they have the least control in fixing the situation. They can't fix the joke in India that passes for the customer service center. They can't fix the disaster that is the baggage handling in O'Hare (in April, it took 5 days for United to get my bags from San Diego to Richmond. Another time, we sat at the gate for an hour because the baggage handlers forgot to load the bags on the plane). They can't fix the fact that when I check in for a flight in IAD or ORD, there are huge lines at the ticket counters and only 5 customer service agents working while there are 30 electronic kiosks sitting unused because nobody can check bags at them or because they aren't turned on/out of order.

I hate to even think about an icon like United going away. It's bad for pilots in general. But, I've been flying 30k miles/year on United for the last 4 years, and I have seen nothing but declines in all aspects of their operations.

All of these would be valid points if the new airline business was about customer service.

Today the airline business is about making money for the executives to steal and hide in their retirement accounts.

United, along with the rest of the airlines is doing a good job at this.

7576United
08-22-2007, 08:33 PM
As a corporate pilot that flies on all the major airlines a lot, I can say that United's service level is so bad that it would not surprise me in the least if management just threw in the towel, started selling assets, and took the money and ran.

The problems seem too big to fix. The flight crews I've met have all been great. Unfortunately, they have the least control in fixing the situation. They can't fix the joke in India that passes for the customer service center. They can't fix the disaster that is the baggage handling in O'Hare (in April, it took 5 days for United to get my bags from San Diego to Richmond. Another time, we sat at the gate for an hour because the baggage handlers forgot to load the bags on the plane). They can't fix the fact that when I check in for a flight in IAD or ORD, there are huge lines at the ticket counters and only 5 customer service agents working while there are 30 electronic kiosks sitting unused because nobody can check bags at them or because they aren't turned on/out of order.

I hate to even think about an icon like United going away. It's bad for pilots in general. But, I've been flying 30k miles/year on United for the last 4 years, and I have seen nothing but declines in all aspects of their operations.

Sorry, but as some who commutes, I can safely say that it's no different at any other airline. They're all using the same business model.

coyote
08-22-2007, 08:43 PM
I disagree; in my 40,000 miles of revenue travel so far this year, CAL and Alaska/Horizon clearly have an edge in providing at least somewhat civilized service.

Low & Slow
08-23-2007, 10:41 AM
On the SFO MOC being up for sale, where is your link? If you talk to the UA mechanics in SFO you will hear them saying UA is actually getting good business at the MOC for contract work.

...Of course I hate to throw facts at your emotion and hope to dissuade your mindset.

Sorry for the delay in getting back to you, here's the link for the Maint. Base sale: http://www.chicagotribune.com/business/chi-thu_unitedaug23,0,3679316.story?coll=chi_tab04_lay out

And the story:

chicagotribune.com
TRIBUNE EXCLUSIVE
United may shed repair unit
Could raise millions in potential spin-off

By Julie Johnsson

Tribune staff reporter

August 23, 2007


United Airlines is exploring spinning off much of its maintenance division, including its massive repair base at San Francisco International Airport.

Chicago-based United earlier this year hired McKinsey and Co. to draw up strategic options for its maintenance, repair and overhaul operations, which employ about 5,500 mechanics and handle much of the airline's routine repair work as well as maintenance for about 150 other carriers.

"We are contemplating bringing in third parties who can invest in the maintenance, repair and overhaul business," said United spokeswoman Jean Medina. "This will enable us to continue to provide the highest quality maintenance to United and our customers. We are working cooperatively with our labor groups to ensure that any arrangement would be for the long term with a partner that creates value for our customers, investors and employees."

United executives are said to favor pursuing a joint venture that would allow the airline to retain a minority stake in the maintenance operations while handing over control to an outside investor such as a hedge fund, third-party contractor or even another airline.

Any such change in ownership structure would require union approval, sources said.

Entering into such a joint venture could help United raise hundreds of millions of dollars from outside investors and avoid costly infrastructure investments needed to keep its San Francisco operations current, sources say. The San Francisco maintenance facility dates to the 1950s.

Since emerging from bankruptcy in early 2006, United has continued to trim costs and explore new ways to wring more money out of its franchise. The moves are intended to strengthen United's finances as a slowing economy threatens the recovery of the airline industry, and to improve its standing with investors.

Off-loading the airline's largest maintenance base, where more than 3,000 mechanics work, could also potentially lessen the clout held by a labor group that has not shied from confrontation in the past.

United officials, including Chief Operating Officer Peter McDonald, notified the mechanics union of the strategic shift at a meeting Aug. 10. The two sides are discussing the details of the strategy and its implications in San Francisco this week.

While the mechanics contract is not due to be revisited until early 2010, the two sides are embroiled in a dispute over the degree to which United has shipped maintenance work to third-party vendors. The Aircraft Mechanics Fraternal Association said this year that the carrier had greatly exceeded its contractual limits on outsourcing, a charge the airline denied. An arbitrator is set to review the matter next month.

A spinoff would affect about 2,800 United employees, most of them based in the Bay Area, sources say. It would not affect workers in San Francisco, O'Hare or elsewhere who perform line maintenance, the term for overnight tweaks and repairs needed to keep jetliners airworthy.

However, some of United's approximately 700 mechanics at O'Hare International Airport could lose their jobs as a consequence. Union rules allow senior workers whose base is shuttered to assume jobs held by junior workers in other cities.

About 200 of the 1,200 United mechanics working in Indianapolis took jobs in other cities when the carrier closed that maintenance center in 2003.

United's maneuver apparently ends its recent strategy of trying to turn its maintenance unit, branded United Services, into a profit center. And it signals that United CEO Glenn Tilton will continue to pursue smaller deals while advocating for broader industry consolidation.

United Services generated $280 million in revenue last year, about 75 percent of which came through maintenance and repairs. Investment bank Bear Stearns & Co., in a July 17 research report, estimated that the division could have an equity value of anywhere from $60 million to $600 million and noted that recent deals in its sector pointed to a valuation of about $330 million.

The report estimated that United could generate billions of dollars, and nearly double its stock price, by unloading such assets as its frequent-flier program, real estate and some international routes.

Before its descent into bankruptcy in 2002, United boasted one of the largest and best-equipped maintenance forces in the business. The carrier built an $800 million, state-of-the-art maintenance center in Indianapolis in the 1990s and employed more than 15,000 mechanics at its turn-of-the-century peak. United jettisoned the Indianapolis facility in 2003.

----------

[email protected]

7576United
08-23-2007, 02:35 PM
UAL may seek investors to expand maintenance unit

Thu Aug 23, 2007 3:45PM EDT
CHICAGO, Aug 23 (Reuters) - UAL Corp (UAUA.O: Quote, Profile, Research), parent of United Airlines, on Thursday said it may seek third-party investors to expand its maintenance business into new markets and help cut costs.

A spokeswoman for the No. 2 U.S. airline said she could not say whether a third-party investment could mean spinning off part or all of the maintenance, repair and overhaul (MRO) business. Any investment would have to be long term, she said.

"Working with a partner, we believe we can reduce our material supply costs, and get access to new markets not available to us today," Jean Medina told Reuters in an email statement. "The MRO sector is growing, and we want to be a part of that growth."

One analyst said UAL may be interested in performing more maintenance for other airlines as its rival AMR Corp (AMR.N: Quote, Profile, Research), parent of American Airlines, does.

"It's probably a pretty good business for them to be in," airline consultant Darryl Jenkins said.

U.S. airlines increasingly are outsourcing their aircraft maintenance to third parties, who often can do the work cheaper than unionize in-house employees. Studies have shown that about one-half of all U.S. aircraft maintenance is done by third-party vendors.

United performs most of its own maintenance, and services planes for other airlines. Maintenance accounted for 5 percent of UAL's 2006 operating expenses.

UAL currently employs about 5,500 mechanics and related personnel, according to its Web site.

Those workers are represented by the Aircraft Mechanics Fraternal Association, which said in April that United had violated a key clause of its labor agreement by exceeding the contractual limit of outsourcing by 50 percent.

A union spokesman was not immediately available for comment. (Reporting by Kyle Peterson, editing by Jeffrey Benkoe)
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HSLD
08-23-2007, 02:43 PM
U.S. airlines increasingly are outsourcing their aircraft maintenance to third parties, who often can do the work cheaper than unionize in-house employees.

UAL currently employs about 5,500 mechanics and related personnel, according to its Web site.

Those workers are represented by the Aircraft Mechanics Fraternal Association, which said in April that United had violated a key clause of its labor agreement by exceeding the contractual limit of outsourcing by 50 percent.


Are pilots next :eek: This seems like a complete disregard for contractual scope language. I'm very interested in the details.

OscartheGrouch
08-23-2007, 03:18 PM
Perhaps instead of trashing a proud legacy, you might focus on raising the bar instead of riding the wake from others sacrifice- for once.

Carpe Diem

RP,

First of all I have never ridden anyones's wake to be where I am today! If you want to raise the bar do it for yourself and all your fellow employees at your airline or wherever you are employed. I will be raising the bar for all the employees at SWA and not my particular pilot group alone. I have hundreds of friends at SWA who have families that are asking for their fair share of the benefit pie and I am not going to shove a contract down the throats of our management because up until now they have been fair when dealing with us.

When I came to SWA most of my pilot friends couldn't understand why I didn't want to work for a legacy. Well fortunately for myself and my family I seem to have made a good decision. According to one of the UAL pilots who posts on this forum I have a "life sentence" on the 737. This inmate is currently blessed by the Lord with never having to work on a holiday, weekend, fly a red-eye, or work what we here at SWA call a PM, unless I choose to. Quite the prison cell I have fallen in to. Unless something drastic like a merger/buyout or raising the bar too far happens I can pretty much count on things staying the same in my jail cell. As far as Lambourne determing that someone has "aircraft envy" at SWA I am sure there a few but most have resigned themselves to their pitiful life sentence on the old guppy.

I had a jumpseater stick his head in the cockpit and mention something about us raising the bar for them in our current contract negotiations. Well after he left I looked over at my FO and said I'll be raising the bar for SWA and he may benefit from the old "trickle down" theory. :cool:

OscartheGrouch
08-23-2007, 04:02 PM
BTW I certainly have sympathy for all the legacy guys and gals who have gone through life changing experiences (furloughs, bankruptcies, stolen pensions, etc.). All I am trying to say is that SWA is a different animal in many different ways. Will things stay the same? Probably not and I hope our culture doesn't suffer too much from growth. I will tell you that it already has changed and our challenges are to evolve into a company that remains fiscally smart and plans for when times will be bad as they inevitably will be for all airlines again.

As far as bashing the legacies I simply pointed out the current state of their benefit packages. Will they improve? I hope so for the sake of all their employees/retirees. I just don't see the cash and profits necessary to justify all these big boasts about "getting it all back" and plus some. Who knows even SWA's profits have been minimal lately and if it wasn't for the genius of Gary Kelly and his Fuel hedging program our salaries might have suffered. Time will tell and as I said in my previous post I will continue to count my blessings.:)

7576United
08-23-2007, 05:07 PM
Are pilots next :eek: This seems like a complete disregard for contractual scope language. I'm very interested in the details.

It IS a complete disregard for scope language.

AMFA is currently taking action against UAL for the amount of maintenance outsourcing UAL is doing. For the San Francisco facility to be sold and the mechanics to be let go, AMFA would have to give it's blessing....which obviously isn't going to happen. From what I've heard, and as the story partially points out, UAL's plan B is to have someone like United Technology (Pratt and Whitney) take a minority stake in the maintenance base, retain the mechanics, update the facility, and grow the base.

As far as pilots are concerned, we also have scope language to protect us.....but then again, we used to have a No Furlough clause in the contract.:eek:



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