In its renewed search to cut costs, Delta Air Lines has reversed its long-standing policy and will contract out almost half its major airliner maintenance and overhaul work

Delta joins the dominant industry trend with this outsourcing move, which elsewhere has fuelled labour objections. Delta's TechOps unit, though, is not unionised. It had become a profit centre by gaining contracts from other carriers, but will see as many as 2,000 of its 10,000 staff lose their jobs in the move.

The change could save Delta $240 million a year and cut its heavy maintenance costs by 34% over five years, the airline said. Delta's pilot union was the single largest source of its nearly $1 billion in savings last year, but rising fuel prices have forced it to intensify cost cutting.

The contracts will give Delta's 136 Boeing MD-88/90s to Miami-based Avborne for overhauls and give the work on its 208 Boeing 757/767s to Air Canada Technical Services. The Air Canada Enterprises unit said its contract, worth $300 million, is one of the largest outsourcing deals awarded in the maintenance field. Delta, however, will keep the maintenance of its Pratt & Whitney JT8D-series engines in its Atlanta Hartsfield airport shop, which will also gain some routine work.

Airline maintenance outsourcing has grown to cover 51% of the US fleet, up from 37% in 1996, according to the Transportation Department's inspector general. Delta executives stressed that "safety, quality, and compliance must remain our first priority".

At Northwest Airlines, a machinist union has mounted an aggressive campaign to draw public attention to the airline's outsourcing, which has exceeded a cap in their contracts, they say, while at US Airways, machinists sued to block contract maintenance. The Northwest machinists union has persuaded the Minnesota state legislature to examine the issue and is trying to spark a congressional probe. This has complicated the airlines' quest for labour savings, notes UBS analyst Robert Ashcroft, who says "negotiations are already fractious, with its mechanics union leader publicly accusing Northwest of actions jeopardising safety".

An exception to the trend is American Airlines, which recently agreed on new rules and rates with its union to attract more servicing work to its massive Tulsa maintenance operation. American will however trim some jobs at a Kansas City facility it inherited when it bought TWA in 2001.

And Delta TechOps itself is still bringing in work, having signed long-term contracts for work on the 11 Boeing 767s of Danish cargo carrier Star Air and with Miami Air International for work on the five Boeing 737-800s.


Source: Airline Business