United Airlines Ventures, A New Corporate Venture Fund

United has formed a new corporate venture fund called United Airlines Ventures (UAV) in order to streamline investment in emerging companies that “have the potential to influence the future of travel.”

United Airlines Ventures – What Is it?

United plans to accelerate the growth of small- to medium-sized companies with strong potential to influence air travel through its newly-formed United Airlines Venture company. The move comes in the aftermath of United’s recent partnerships with Archer and Boom Supersonic. The central goal of the new company will be to work toward United’s goal of net zero emissions by 2050 without carbon offsets.

To that end, the new company will focus on three primary areas:

• Sustainability
• Aerospace
• Technology

Investments will target technology which “creates value commercially, for the customer, or throughout United’s expansive operations.” United Airlines Ventures is a wholly-owned subsidiary of United Airlines, Inc.

As United CEO Scott Kirby explained:

“Younger companies today have learned from aviation’s rich history and are combining it with more advanced technology and creative thinking to develop new ideas that give us the ability to revolutionize how airlines operate and in turn, the experience customers have when they fly.

“With United Airlines Ventures, we’re signaling our confidence in these companies and propelling them forward with our expertise and financial support to demonstrate that our commitment to innovation will strengthen our company and improve our customers’ experience more quickly than anyone ever anticipated.”

The program will be run by Michael Leskinen, who is currently United’s Vice President of Corporate Development and Investor Relations. In addition to keeping that role, Leskinen will assume the role of President of United Airlines Ventures.

Why United Airlines Is Suddenly In Investment Mode

In a separate note to employees, Leskinen explained the focus of the new venture:

UAV will serve as a key mechanism for supporting new technologies focused on sustainability and decarbonizing air travel as well as improving the customer experience across the entire passenger journey and the employee experience throughout the operation.

Leskinen then justifies why now is the right time, noting rising costs and a longer-term perspective United is embracing as it emerges from the pandemic.

United is focused on leading the industry not only in the near-term, but for the long-term – from a customer experience perspective to our goal of being 100% green by 2050 to new aerospace developments. In order to realize that vision we need to support innovation, and the longer we wait, the more expensive it will be.  Launching UAV now will help us find the right innovators so we can stay ahead of our competition and drive superior financial results, benefitting our employees, customers, and shareholders.

More information on the new company here.

My Take

While it’s pure conjecture, I believe this is a concept with momentum. Looking at other large businesses like Amazon, fostering growth using an investment vehicle may give United a leg up with a first-mover advantage. Alphabet (Google) was able to implement future effects of known trends (Stripe, Nest, etc.) by first backing those companies through Google Ventures.

United’s shared purpose is connecting the world. Uniting people. But looking beyond the statements in this release, I can see applications for upstart seating companies, new satellite systems for faster wifi in the sky. Even luggage companies that United could develop, foster, and promote that reduce its fuel consumption through lower weight and a better fit onboard.

Software developers could help United improve its efficiency and create a better user experience for both customers and staff members.

Years ago during a fuel price spike, United saved $200MM/year by adding winglets to most of their fleet but stopped short of adding electrically powered front nose gears which would allow the plane to start the engines closer to the taxiway and reduce fuel consumption while waiting in line for take-off. Those seem like great fits from small companies where United could make an impact not just for those companies but also ones that benefit the carrier and its stockholders.

This solution seems so obvious and yet so novel at the same time. Best of all, like Google Ventures who took a stake in Stripe before it was ultimately acquired by Amazon, United could receive a windfall even for companies that they don’t ultimately buy, own, or operate. Looking at that investment alone, Google generated capital as it grew before it was sold. Amazon is happy to save money on credit card processing for its own business but also maintains that business as a standalone product. Given how much United processes on card products today, a similar tie-up could not only save the company millions annually but become a revenue source when other businesses become customers of that product. For those who would suggest that United has no business being in the payment processing industry, this is a clear example that very different business lines could still boost the carrier.

CONCLUSION

The tax advantages and other benefits of setting up a separate company are beyond my expertise. But the new company demonstrates United is offering more than just talk and headlines. While battery-powered helicopters and the next generation of supersonic jets may never actually takeoff, United seems quite serious about its carbon neutrality goal and is thinking outside the box to find win-win solutions that will spur innovation in a sustainable way.