United Air seeks investors for maintenance unit stake
United Airlines, the world's second- largest carrier, said it may sell all or part of its maintenance operations to outside investors to raise cash for modernizing and expanding the unit.
"We're looking at the possibility of bringing in third- party investment," Jean Medina, a spokeswoman for the airline's Chicago-based parent, UAL Corp., said in an interview today. She wouldn't specify how large a stake UAL might sell, when the company might act or with whom discussions are being held.
UAL spent a "couple of months" on a strategy review of the unit and "identified some processes and infrastructure issues we need to address," such as streamlining the supply chain and investing in technology, she said. "This is about improving the work we're doing and bringing in investment."
Chief Executive Officer Glenn Tilton said last month management is considering ways to "unlock value in assets," including United's frequent-flier program. United partner Air Canada has been selling off parts of its mileage program since 2005 and agreed in June to sell a 70 percent stake in its maintenance unit to Kohlberg Kravis Roberts & Co. and Sageview Capital LLC.
United does its own aircraft repairs and overhaul work as well as maintenance for 140 other airlines. A sale of the unit may fetch $330 million to $600 million, Bear Stearns & Co. analyst Frank Boroch wrote in a note to investors today.
About 5,600 mechanics work for United, with the main overhaul work done in San Francisco and other line-maintenance bases spread throughout the U.S., said Don Wolsel, president of the Aircraft Mechanics Fraternal Association Local 4 in Chicago. Union leaders met with the company to discuss strategy Aug. 10 and Aug. 21, he said.
"This is being presented as an opportunity to expand," Wolsel said, adding the company hasn't yet presented full details of its plan. "Our best guess is that the maintenance base would be a joint venture."
UAL fell 17 cents to $43.66 at 12:11 p.m. in New York Stock Exchange composite trading, reversing earlier gains.