Maintenance specialist Standard Aero is planning legal action against Kelley Aviation Center (KAC) after the Lockheed Martin-led joint venture announced it will in-source engine overhaul work now performed by the company.

The subcontract to overhaul Rolls-Royce T56 turboprops for the US military inside the KAC facility in San Antonio, Texas accounted for 36% of Standard Aero’s revenues in 2004, and 31% in the first nine months of 2005.

KAC, a joint venture between Lockheed, General Electric and Rolls-Royce, plans to consolidate contracts to overhaul the T56 and the GE TF39 turbofan beginning in February 2007 because of declining workload on the engines. This will save more than $120 million over the rest of the contract, says KAC, which plans to offer jobs to most of the 650 Standard Aero employees working on the T56 line.

The T56 and TF39 work is being performed under a $10.1 billion contract awarded in 1999 to a team led by Lockheed and the US Air Force’s Oklahoma City Air Logistics Center. The contract was for seven “base” years, plus eight “option” years, with the base period ending in February 2007.

Standard Aero says that, although KAC has been awarded contract extensions to February 2009, it has been told these will not be extended to the subcontractor.

“We believe they are contractually obligated to extend all extensions to the team”, says Standard Aero president Paul Soubry.

Lockheed says: “Our contract with Standard Aero expires in February 2007. We have told them we will not renew.”

Source: Flight International