United Launches Ground-Handling Business

United Airlines has launched a subsidiary to handle checked bags and perform other services for its regional unit, United Express, a move in line with industry peers aimed at improving its operations.

United Ground Express (UGE) will take over customer and cargo service later this year at a number of airports where parent United currently uses third parties.

United declined to say which of about 150 US airports where it has outsourced work would be affected but said UGE would serve United Express's new flights from Kalamazoo airport in Michigan beginning December 9.

The move comes six months after United reached a union deal to outsource 1,150 positions at 16 airports across the country. It had said layoffs could result if affected workers declined offers to transfer to other airports.

United spokesman Charles Hobart declined to say if the launch of UGE was related to the airline's earlier outsourcing plan. However, he said furloughed and former United employees could apply to work for UGE.

The shuffle has helped United lower costs significantly. Then chief financial officer John Rainey said last month that United saved USD$350 million in non-fuel costs so far this year, and was on track to reach USD$1 billion in annual non-fuel cost savings by the end of 2016, a year ahead of its initial expectations.

Hobart said UGE "will provide cost-effective operations at traditionally outsourced locations."

The airline will continue to rely on third parties for ground-handling where it makes financial and logistical sense, he said.

Rivals Delta and American launched similar services years ago. American formed AMR Services in 1983 and sold the business in 1999. Delta still owns subsidiary DAL Global Services.

Aviation industry consultant Robert Mann said the move could help United address conflicts of interest inherent in outsourcing, in which a third party might offer privileged service to its parent company or largest customer rather than United Express.

The ground-handling business, he added, "can be very profitable, but you have to run it efficiently and somewhat ruthlessly."