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UAL jumps into biz jets
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June 18, 2001: 9:38 a.m. ET
Carrier buys 135 jets for $3.75B; first major airline offering private jet shares
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NEW YORK (CNNfn) - United Airlines parent UAL Corp. made its first plunge into the business jet market over the weekend, announcing $3.75 billion in orders for 135 corporate jets at the Paris Air Show.
The airline's new unit will spend $2.5 billion to buy 100 Falcon jets from France's Dassault-Aviation, and $1.25 million to buy 35 jets from Gulfstream Aerospace Corp., a unit of General Dynamics Corp. (GD: up $0.51 to $74.86, Research, Estimates)
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UAL Corp. has placed an order for 40 of Dassault Aviation's Falcon jets, and options for 60 more as it moves into the private jet business. | |
The agreement with Dassault is for 40 firm orders and options for 60 more jets, while the agreement with Gulfstream is for 12 firm orders and 23 options.
The first jets from each company are due to be delivered in 2002. The purchase makes United the first major airline to move into the growing private jet market.
Executives of UAL (UAL: up $0.36 to $32.64, Research, Estimates) said in May it would go ahead with plans to enter the market, known as fractional jet leasing. Clients pay a small percent of a jet's initial cost up front, and then reserve a guaranteed number of flight hours on the plane or a similar one and pay additional fees to cover maintenance and flight time.
During the last month, UAL has appointed a number of executives at the new unit, known as United BizJet Holdings. On Friday it named Noell Michaels as senior vice president of sales. He formerly was sales director at Gulfstream Aerospace.
UAL officials insist the new unit will allow it to cement links to its key business customers.
"The business aviation industry has seen dramatic growth over the last 10 years, reflecting the needs of the market and particularly, the needs of our corporate customers," UAL CEO James Goodwin said in announcing creation of the unit.
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But some analysts have questioned the wisdom of the effort. Jim Higgins, analyst at Credit Suisse First Boston, said in March, when the plans for the private jet unit surfaced, that he worried that the effort will skim revenue from the airline's most profitable business travel and risk labor unrest with union employees at the employee-owned airline.
UAL officials say the new unit will be operated completely separately from United. 
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