Carrier Could Raise Millions, Reduce Union's Power
Before it declared bankruptcy in 2002, United Airlines had one
of the largest and best-equipped maintenance departments around. It
was housed in an $800 million, state-of-the-art maintenance center
in Indianapolis, and employed more than 15,000 mechanics.
That facility was shuttered in 2003. Now, the carrier is looking
at spinning off its entire maintenance division -- including
United's repair base at San Francisco International Airport,
according to the Chicago Tribune.
Such a move would affect some 2,800 United mechanics, most of
them based in the Bay Area, sources say. Line maintenance workers
in San Francisco, O'Hare or elsewhere -- those who perform routine,
overnight repairs -- wouldn't be affected.
The carrier hired McKinsey and Co. to develop strategy options
for its repair, overhaul and maintenance operations that handles
not only its own routine repair work, but also that of about 150
other carriers -- the division also employs about 5,500
workers.
"We are contemplating bringing in third parties who can invest
in the maintenance, repair and overhaul business," said United
spokesperson 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."
There is another
side-benefit for United to hand off its maintenance operation, as
well. Any move impacting the SFO maintenance base stands to
potentially lessen the power held by the Aircraft Mechanics
Fraternal Association -- which earlier this year slammed United for allegedly
outsourcing more maintenance work to third-party
vendors than is allowed under its current contract with
mechanics.
Company executives want a joint venture of sorts, that would
allow United keep a minority stake in maintenance operations while
giving control to an outside investor such as a third-party
contractor, another carrier, or perhaps a hedge fund, the Tribune
reported.
Such a deal could help United raise a bit of cash -- hundreds of
millions of dollars, actually -- from outside investors. It would
also help the company avoid spending more money to the keep its
1950s-era maintenance facility going.
Industry insiders say the move is an apparent end to United's
attempt to turn the maintenance division, United Services, into a
moneymaker. United Services generated $280 million in revenue in
2006. About 75 percent of that was from maintenance and
repairs.
The division could be valued at as much as $600 million,
according to investment bank Bear Stearns & Co. The firm's July
17 research report said recent deals in its sector indicated it to
be worth around $330 million.
That same report also estimated United could generate billions
of dollars -- plus just about double its stock price -- by
getting rid of some non-essentials such as real estate, a few
international routes, and the airline's frequent-flier program.
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