United Airlines: Just trying to make a profit

In a NY Times article today, United Airlines execs are criticized by union leaders and a congressman for continuing to invest in a new venture valled Avolar. This criticism is ridiculous, undeserved, and incorrect but not surprising when thousands of the union’s members are facing layoffs. Avolar is United’s entry into the private business jet timeshare market. The company has already invested over $70 million in the venture–what does the union, which owns a majority of United’s shares, want management to do, throw that money away? Who would be helped by that? If Avolar is successful, it will only help United and its employees. Other observers have objected to this move because United is lining up to get government cash and loan guarantees but my answer is (a) they haven’t gotten any of that free money yet (and it won’t be free, the government will get equity) and (b) the losses the government cash is going to cover is for United’s existing passenger and cargo business. If the airline did not put more money in Avolar, would there be fewer layoffs?

Wired Magazine ran in-depth profile of market leader Executive Jets and this marketspace in it’s June 2001 issue: Hey, You’re Worth It (Even Now). Important note: Warren Buffett, widely acknowledged as the foremost investor ever, owns Executive Jets.