In the maintenance, repair and overhaul sector worldwide the strongest growth is increasingly in emerging economy nations. For airlines the attractions of the new players are clear - lower man-hour costs, a determination to please the customer, flexible working practices, and frequently a highlevel of investment.
But outsourcing to anywhere, let alone these exotic locations, can be a fraught affair as several carriers have already discovered. Unions at home can unsurprisingly be less than enthusiastic and have frequentlybeen willing to play the safety card in an effort to drag public opinion behind them.
 |
|---|
All of that comes on top of what is already the delicate and painstaking operation of placing aircraft with an unproven maintenance provider, a task which is typically handled with considerable caution.
Jonas Butautis, chief executive of aspiring Lithuanian maintenance house FL Technics, says: "We are just starting. We haven't established ourselves at all. We have to earn the trust of these major players and we have a long way to go. Building the relationship is quite a long business. You establish the relationship and the best you can hope for is to get one or two aircraft to try out and then after that you start building on trust. With British Airways it is two years work at least."
But others are further along and finding that the constraint on their growth is often the presentational difficulties that their potential customers face in their own countries. All of this can be overcome, however, as Southwest has managed to prove even at a time when the alleged exporting of maintenance jobs is a hot US political issue.The airline saw maintenance expenditure jump markedly in 2008.
Southwest says quality and turn-times on the lead aircraft of a new line of Boeing 737s serviced by El Salvador-based Aeroman are thoroughly justifying the airline's decision to move work south of the US border. "The fact that aircraft are coming back in the condition they are, the span and the labour plan, has done nothing but support our position in the first place," says Gregg Brown, manager of airfield frame services for Southwest.
Aeroman started performing Y checks in a single maintenance line for Southwest inJuly and the third Boeing 737-300 is close to completion. Y checks are performed every two years. Brown says the carrier plans to have four lines in place by the end of 2010, the maximum allowed by its contract with the Aircraft Mechanics Fraternal Association, the union which represents Southwest mechanics. He says four lines at Aeroman will represent about 20% of Southwest's outsourced maintenance.
Moving the work to Aeroman, though beneficial from a labour cost standpoint, was a contentious issue with mechanics. Louie Key, national director of AMFA, says the carrier first approached the union two years ago and proposed that some "customarily performed" work be included in the "non-customarily performed" work proposed for Aeroman in order to maximize efficiency. The union contract at the time permitted only non-customarily performed work to be outsourced. "We were not excited about giving consent to that," says Key. The discussion also revealedwhat Key calls a "gross misunderstanding" of the definition of the two types of work between the union and Southwest. Finally Southwest signed a contract with Aeroman in the first quarter of 2008, says Brown.
The carrier was then engulfed by a storm over issues of compliance with US Federal Aviation Administration-required inspections in March 2008, overshadowing the outsourcing plans and leading Southwest to put the whole plan on hold. But a new contract with the union signed in January this year, which included significant pay raises, opened the door for up to four lines to be outsourced.
LOGISTICAL LEARNING
Brown says quality of the work has been "outstanding" on the two 737s that have been completed so far. Though the span on the first aircraft was "a few days late" compared with the expected 30-day turn time, Brown says the second aircraft was on time and the third is tracking early. "Actual man-hours being applied to the aircraft are very favourable," he says. "Labour is a bit less expensive."
Lessons learned include accounting for extra time in shipping materials back and forth to Aeroman. "At a domestic provider, you can put it on an aircraft and have it there for the next day," says Brown. "Here it takes a few days, and a dedicated cargo-carrier has to be used for hazardous materials." Logistics have notbeen a problem with one line, but could become an issue when four lines are operating, says Brown, adding that documentation needed to get parts through US customs has been a challenge.
Key continues to maintain that the work "should be done here, by our technicians", adding that the next four years will be a trial period with union interests guarded by an AMFA representative embedded with Southwest in the maintenance planning process to "make sure they're compliant with all the work they can or can't send to vendors".Referring to the latest union contract, Key adds: "This consent has a lifespan. Four years from now, if it doesn't get reapproved, the work will have to be taken from there."
JetBlue Airways has also become an Aeroman customer, but from a markedly different starting point and without having to deal with the legacy labour relations issues of its older competitors. Director of aircraft maintenance Frank Buratti says that cost is not the deciding factor for JetBlue when it seeks vendors to maintain its fleet of Airbus A320s and Embraer 190s. In fact, cost "is one of the last things we look at", he declares.
Known for its strong corporate culture JetBlue looks for similar traits in its maintenance providers. It will "ask to see the cafeteria, the break room and the locker-room and that tells us quite a lot", says Buratti, adding: "We're under the impression that, if you treat people right, you get what you're looking for."
CULTURAL COMPATABILITY
JetBlue's attraction to people-conscious maintenance firms might sound like a public relations gimmick, but the company insists that it is not. "Obviously [cost] plays a role, but we've awarded work to the lowest and the highest bidders," says Buratti. Talent, experience and a solid safety record are also crucial factors in JetBlue's selection process. "We don't like being guinea pigs, so if you've never maintained that type of aircraft before, we're not fond of being first," he says.
Earlier this year JetBlue issued a request for proposals to roughly half-a-dozen vendors for five-year contracts covering maintenance on its 110-strong Airbus fleet. Long-time JetBlue vendor Aeroman was selected but the carrier's other A320 maintenance provider, Empire Aero Center in New York state, was not. Instead, JetBlue picked Pemco's Tampa, Florida facility as its second provider.
"The contract we have for A320 maintenance is pretty much split between Aeroman and Pemco," confirms Buratti. Explaining the airline's decision to stay with Aeroman, Buratti says: "Here [in the USA], if you lose a job at an maintenance firm, there are others to work at, but there, it's either TACA or Aeroman. People strive to do well in the company and they're usually there a very long time. Aeroman's turnover rate is nearly nil; they take a lot of pride in what they do, and they are very good at what they do."
Pemco is new to A320 maintenance in Tampa, although it has experience on the type at its other location in Alabama. The JetBlue executive says: "What we've done, since Pemco is fairly new with us, is we've given Aeroman our heavier, more detailed checks, which usually last anywhere from 12 to 25 days. It makes sense because they have more experience on our aircraft."
Most of JetBlue's 41 Embraer 190s are maintained by Embraer Nashville, which "had their challenges in the beginning but they've come a long way [and] they are doing well", says Buratti. Exeltech of Montreal, however, conducted some lighter Embraer 190 checks this year for JetBlue and is now in discussions with the carrier about securing work in 2010.
JetBlue would like to see more Embraer 190 maintenance providers in the marketplace. "We don't like putting all our eggs in one basket," says Buratti. But one thing is clear. The carrier is definitely not interested in conducting its heavy maintenance checks in-house.
Says Buratti: "This is the way we have worked things at JetBlue. MRO is a whole other business. Our business is to fly people safely from one point to the next. Line maintenance is a requirement. You must have that if you want reliability. But when you start talking about MRO, that's a whole different business. It requires a lot of overhead and tooling and we leave that to the experts. They can do it a lot more efficiently than we can. We'll stick to our core business. We believe that will maximise the increase in shareholder value."
BACK TO BASE
In Australia, Qantas Airways has endured a bruising time in relation to its maintenance operation and seen its much-vaunted safety record battered in the media and parliament as the safety and labour relations agendas have become intertwined.
The flag-carrier had been outsourcing maintenance work but after a management change and some high profile incidents, it is now bringing a substantial amount of the work in-house. It was having Airbus A330 heavy maintenance checks performed by Lufthansa Technik Philippines but more controversially was also planning to outsource Boeing 747 heavy maintenance to Malaysia Airlines in a joint-venture.
The view in the company was that it was cheaper to have maintenance work done overseas, particularly in Asia, and that the Australian workforce was inflexible. But following the departure of chief executive, Geoff Dixon, and Qantas Engineering executive general manager, David Cox, the plan has changed.
LEADERSHIP REVAMP
Under Dixon, the airline's strategy was to treat maintenance as a separate stand-alone business with its own profit and loss statement. But Alan Joyce, who succeeded Dixon a year ago has adopted a strategy of treating the maintenance business as integral to the airline - whether outsourced or in-house.
In April this year Qantas announced that, effective February 2010, the A330 heavy checks, would be done at Qantas' Brisbane, Australia facility rather than continuing to be done at Lufthansa Technik Philippines. But executive general manager of operations Lyell Strambi says that even though the A330 heavy maintenance work is coming in-house, the Boeing 767s already being worked on at Brisbane will be outsourced in future.
"We look at MRO as a total operation - some onshore and some offshore," says Strambi, adding that "we have our own facilities and it is important to keep a consistent activity." He adds that "you want a consistent fleet type coming through so the maintenance teams get efficient" otherwise "you will end up with broken lines of maintenance". Outsourcing is the technique used to counter the "broken line" issue.
Strambi, who was previously chief operating officer of Virgin Atlantic Airways, is also new to Qantas' management. He joined in December after the airline's reputational battering following a series ofincidents last year.
In the space of a few months a Qantas Boeing 747-400 had to make an emergency landing in Manila due to a fuselage rupture; another 747-400 lost electrical power while on descent into Bangkok; and a 767-300 had to turn back to Sydney because of a suspected hydraulic system problem. In addition, the carrier grounded six Boeing 737-400s as a precaution while it investigated anomalies in the aircraft's maintenance records.
Some trade unionists leapt on the opportnity to blame the safety incidents on Qantas' move to outsource work overseas. It was later discovered that some of these aircraft were in fact worked on in Australia and Strambi explains that the problems had nothing to do with maintenance. But the all-important public perception was that Qantas' safety standards were suffering and that this was due in part to Qantas' cost-cutting and moves to outsource maintenance work.
Another factor that may have helped in the decision to bring A330 heavy maintenance to Australiawas the Australian Defence Force's decision to award Qantas Defence Services a contract to convert A330s to military tankers and to maintain these A330s in years to come. Strambi says Qantas would have won the contract even if Qantas had continued to have its own A330s maintained in the Philippines. But he concedes there are synergies having the ADF A330s and Qantas A330s maintained at the same Brisbane facility.
Australian Licensed Aircraft Engineers Association federal secretary Steve Purvinas says one of the benefits for airlines of doing heavy maintenance checks in-house is that theairline can generate extra money by doing third-party work. Having in-house teams means the airline also has greater control over quality standards and can "ensure an ongoing supply of experienced engineers in the local market", says Purvinas.
Day-to-day flight operations can improve too if heavy maintenance checks are done in-house. "While the aircraft is in a dismantled state during a heavy check, there are available spare parts that can be transferred to an aircraft on the tarmac that needs a spare part," says Purvinas. Other benefits are the money saved on ferrying aircraft and the predictability of costs, he says.
BEYOND THE BRIEF
Purvinasadds: "If maintenance is done in-house, you can do additional work that sits outside of the contract. If outsourced, it is often a set price for a bare essential check required. You have scope in the contract for additional work but it comes at a cost and once you add up all the additional bits, it can be expensive."
Strambi at Qantas agrees the engineering staff often find things outside of the original scope of work. But he insists that if an airline "outsources to a quality shop there is no difference between the two".
There is also a benefit of outsourcing to a maintenance firm that works for many airlines, because the maintenance company may be aware of issues that your airline has not yet encountered, he notes. And he concedes that "with on-shore there is a bit of a benefit in terms of reputation - although that is more perception than reality."
But as Qantas discovered last year the hard way, public perception can be everything.
Source: Airline Business
