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CHICAGO (Reuters) - UAL Corp.(NYSE:UAL - news), parent of United Airlines, said on Friday it will shut its business jet unit, Avolar, after finding no viable options for the company in an industry hurt by the Sept. 11 attacks and the weak economy.
UAL said earlier in March it had stopped seeking outside investors for Avolar, which offered part ownership in corporate jets, and planned no further investment of its own.
The No. 2 U.S. carrier formed Avolar in May 2001 to tap corporate America's appetite for business jet travel, but UAL posted an industry record net loss of $2.1 billion last year following the attacks and the weak economy.
UAL decided to look for outside investors for the start-up following the attacks, but a months-long search was called off in early March and Avolar President Stuart Oran stepped down.
In a short statement, UAL Chief Executive Jack Creighton said closing Avolar was ``the most prudent move possible.''
Creighton, who took over as chief executive in October, said closing the unit would protect United from further financial exposure and help it focus on core business.
``The real message here is that you have new management at United,'' industry consultant Michael Boyd said. ``This shows that they are refocusing on the airline industry, on their core business.''
UAL said it has started to notify Avolar customers of the closing and anticipates an orderly shutdown. There is no timetable for closing Avolar, which has 83 employees.
UAL had invested $102 million in Avolar through January, according to regulatory filings with the U.S. Securities and Exchange Commission. It could face a significant write-off if the new strategy fails, UAL said in the March filing.
``I think this is a very positive thing,'' Boyd said. ``It says United Airlines is turning around; actually, it's as good as turned around when you have that kind of management there. It took guts for him to do this because they've got a lot of money tied up in Avolar.''
Avolar offered shares in Beechjets made by Raytheon Co. (NYSE:RTN - news), Learjets by Bombardier Inc.(Toronto:BBDb.TO - news), Gulfstreams by General Dynamics Corp. (NYSE:GD - news) and Falcons by Dassault Aviation.
As someone who was furloghed twice in the last year, I feel for the guys/gals that got the news today. Hang in there - everything happens for a reason and you never know what's just around the corner thats bigger and better.
I wish you all the best of luck in your future endevors.
Looks like this was the rumor, and it became a reality today...I know many have been effected by the furlough bite more than once, and I wish you guys and gals all the best. Lets hope those of you that where furloughed from UAL and then went to Avolar get back to flying at Mainline United real soon. Again, all the best!