United Airlines is considering selling a stake in or perhaps spinning off its entire maintenance division, which includes the sprawling facility at San Francisco International Airport where nearly 3,000 people are employed, a spokeswoman for the airline said Thursday.
The potential sale would be to a third party "who can invest in maintenance, repair and overhaul operations," said United Airlines spokeswoman Jean Medina, with the aim of "working to improve our efficiency and be more productive."
United, with the McKinsey and Co. consulting group, is considering several strategies post-bankruptcy, and shedding a large part or all of its maintenance operation is reasonable, analysts said.
"Airlines are generally getting out of the heavy maintenance business but are continuing to do line maintenance" at airports, said Ray Neidl, an airline industry analyst at Calyon Securities in New York, adding that American Airlines is the major exception.
There also is considerable consolidation going on in the maintenance, repair and overhaul area in the industry, said Joseph Prisco, president of the Aircraft Mechanics Fraternal Association Local 9, which represents the United Airlines maintenance workers at SFO. He said the major companies in that business are Lufthansa Technik, SR Technics and Singapore Technologies Aerospace, which maintain commercial aircraft around the world.
Medina would not confirm whether United is talking with those or similar companies, or with an outside investor such as a hedge fund. She would only describe the exploratory work being done as complex.
"We are looking for a partner who can bring ... an integrated supply chain, so we can get parts where and when we need them, and for a partner who can give us access to new markets," Medina said from Chicago.
She added that management is keeping the company's labor unions, as well as all other employees, informed as strategic decisions are considered.
At SFO, United Airlines conducts heavy maintenance not only on its own fleet of airplanes but on those of at least 140 other airlines. The base dates to the 1950s.
Prisco, the Local 9 president, said he had met with United Airlines officials this month and was briefed on the options under consideration. However, he said, he had agreed not to talk about specifics.
"There is no earth-shattering news coming out of those talks," Prisco said. According to the contract the union has with United Airlines, its local membership would have to authorize a sale of the facility, he said, and it has not been presented with a proposal.
Medina said she is unfamiliar with the claim that the union has control over a sale, and said she could not otherwise comment.
Prisco added that Local 9 members are anxious in part because they see consolidation and rapid change elsewhere in the airline industry.
"Everybody is on the edge of their seats, to see what United may or may not do," he said. United has "been out of bankruptcy for two years now, and people just wonder, 'When does it stop?' Our security seems to be at risk."
United Airlines mechanics were represented by the International Association of Machinists and Aerospace Workers from 1945 until July 2003, when they quit the union to align with the smaller Aircraft Mechanics Fraternal Association.
Prisco said that if sale of the maintenance base is formally proposed, "We will not stand for any kind of deal that does not address our membership 100 percent. We are not in bankruptcy, and we do not have to lay down for the company now. We have a contract, and our members are protected by the contract."
Before 9/11, when terrorist attacks pushed the airline industry into a downward economic spiral, there were about 15,000 union-represented maintenance workers at United, Prisco said. Today, he said, his union represents about 6,700.
Analysts expect that if the base is spun off, its mission will be unchanged.
Henry Harteveldt, an airline industry analyst at Forrester Research in San Francisco, said it is not surprising that United is exploring the sale of maintenance operations. The airline also is considering a deal involving its frequent-flier program, Mileage Plus, Harteveldt said.
When it emerged from bankruptcy protection in early 2006, United made a point that it would control costs, Harteveldt added, so it may be that "operating costs of the division may not be quite what they need for the division to be a viable business where they can bring maintenance work for other airlines."
At the same time, American Airlines and Delta Air Lines have turned maintenance facilities into revenue generators, he said.
On Thursday, United Airlines' parent, UAL Corp., closed down 12 cents to $43.71 per share on the Nasdaq Stock Market.
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United Airlines by the numbers
-- Employees at the maintenance base at SFO: About 3,000
-- Airlines serviced, in addition to United: 140
-- United mechanics represented by Aircraft Mechanics Fraternal Association: 6,700
-- United mechanics represented before the fallout of Sept. 11: 15,000
