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UAL Asset Sale/Breakup

Old 08-22-2007, 08:33 PM
  #31  
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Originally Posted by correcting View Post
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.
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Old 08-22-2007, 08:43 PM
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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.
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Old 08-23-2007, 10:41 AM
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Originally Posted by Lambourne View Post
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/busine...i_tab04_layout

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.

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Old 08-23-2007, 02:35 PM
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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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Old 08-23-2007, 02:43 PM
  #35  
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Originally Posted by 7576United View Post
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 This seems like a complete disregard for contractual scope language. I'm very interested in the details.
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Old 08-23-2007, 03:18 PM
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Originally Posted by REAL Pilot View Post
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.
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Old 08-23-2007, 04:02 PM
  #37  
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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.
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Old 08-23-2007, 05:07 PM
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Originally Posted by HSLD View Post
Are pilots next 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.
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