As the US majors race wholesale towards maintenance outsourcing, there is one carrier determined to retain its huge servicing capability. “They all made a mistake by getting rid of their maintenance businesses,” asserts Carmine Romano, vice-president of one of American’s main service bases in Tulsa. “Time will tell. But their maintenance suppliers do not have the infrastructure I have. These suppliers will need to rely on a lot of offload shops not conveniently situated relative to the network.”

Critics of American’s decision say the carrier’s high cost base, plus a tough market, will make the move a struggle. Romano is unrepentant. He believes that by a combination of stringent cost-efficiency and productivity gains, coupled with a dash to win more third-party work, it can pull it off. “I’m so enthused about what we’ve been able to do in the past six to eight months. We should have been doing this years ago.”

One of the greatest changes is a cultural one, with American starting a process of hands on employee involvement in the radical reshaping of the stricken company. In maintenance, Romano, a former line mechanic himself, sat down with the local union president and laid the options on the line. The bottom line was that outsourcing and thousands of job losses was inevitable unless there was radical change. “We’re fighting for our lives,” he says.

“The idea is to get unions and the airline in a room to work as business partners and on how to go forward,” he says. “We are adopting lean production techniques and continuous improvement.” The goal is to reduce unit costs by 55% and to cut the turn time of heavy aircraft checks in half. For example, its seven lines in Tulsa use to take 18-23 days to service a Boeing MD-80. This is already down to 13-15 days, with a target of 12 days.

The goal is to add $500 million of value per year to the maintenance operation by the end of 2006. Of this, the target is for $350 million to come from productivity and cost gains, with the rest from a doubling in third-party revenues.

Source: Airline Business