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UAL may seek investors to expand maintenance unit
August 23, 2007 / 7:49 PM / 10 years ago

UAL may seek investors to expand maintenance unit

CHICAGO (Reuters) - UAL Corp UAUA.O, 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.

<p>A United Airlines flight originating from London's Heathrow airport stands on the runway at Logan International Airport in Boston, Massachusetts, after being diverted while en route to Washington, D.C. August 16, 2006. UAL Corp &lt;UAUA.O&gt;, 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. REUTERS/Jessica Rinaldi</p>

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, 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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