UAL Places Orders for Unit Readying Fractional-Jet Plan
June 18, 2001
By Anne Marie Squeo
Staff Reporter of The Wall Street Journal
PARIS -- UAL Corp. placed orders that could total $3.75 billion over time with Dassault Aviation SA and Gulfstream Aerospace Corp. to buy new business jets that will help launch the airlines' new recently announced fractional-jet ownership plan.
United BizJets Holdings Inc., a unit of UAL, Chicago, ordered 40 Falcon jets from Dassault, based here, with options to purchase 60 more, in a total package valued at about $2.5 billion. The UAL division also ordered 12 Gulfstream jets, with options to buy 23 more. That transaction, which also includes a long-term maintenance agreement to support the planes, totals about $1.25 billion, say officials at Gulfstream, a division of General Dynamics Corp.
The orders are the first official move by the new UAL unit to snatch a share of the fast-growing market to sell theoretical fractions of a jet to those who are reluctant to own one. Companies such as Berkshire Hathaway Inc.'s Executive Jets pioneered this plan and have attracted a number of imitators since. By establishing its own fractional-jet ownership plan, UAL's United Airlines is hoping to win back the business travelers it has been losing in recent years amid numerous labor slowdowns, airport delays and other problems.
"We concluded that commercial airlines only provide a portion of the air-travel needs that these customers have," said Stuart Oran, president of United BizJets. The company aims to have its first aircraft operating by the second quarter of next year and have as many as 200 business jets in its fleet within five years.
The orders will give the new business a mix of high-end and lower-end business jets. Prices can vary depending on optional equipment and bargaining tactics, but Gulfstream planes typically cost more than most other business jets. United is set to take delivery of its first Gulfstream in May 2002, with the rest of the deliveries extending to 2006. The first Falcons will beginning arriving from Dassault later that same year, company officials said.
United's choice of Dassault is good news for jet-engine maker Pratt & Whitney, a unit of United Technologies Corp., which has had difficulty winning new orders for its engines. Pratt & Whitney makes engines for Dassault's Falcon. Separately, Pratt & Whitney received a maintenance contract valued at more than $400 million from United, covering some of the airline's existing commercial jetliners. |
