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Global repairs: Domestic airlines outsource and in-source maintenance work all over world
Wednesday, June 02, 2004

Northwest Airlines is gutting two hangars at Minneapolis-St. Paul International Airport because the standard work of overhauling the airline's 747 fleet has moved to Asia. Air China, meanwhile, is sending its planes to San Francisco for high-tech engine work by United Airlines mechanics.

U.S. carriers have outsourced thousands of maintenance jobs, but at the same time, some also have stepped up efforts to bring maintenance work into their shops. The major carriers are "in-sourcing" work from domestic low-cost carriers that don't have their own maintenance crews and from airlines based in China, South Korea, Canada and elsewhere.

The aircraft maintenance industry is "a classic manifestation of globalization," said Martin Baily, senior fellow at the Institute for International Economics. "Labor-intensive, somewhat less technically sophisticated stuff goes overseas, but more high-tech, leading-edge stuff would remain in the U.S. Maybe the U.S. even has a comparative advantage."

Delta Air Lines' in-sourcing includes repair work on engines for Atlantic Southeast Airlines and Comair at Delta's hub in Atlanta. Its revenue from such work has increased, to $200 million last year from $40 million in 1999. American Airlines recently signed a contract giving it the option to repair Rolls-Royce aircraft engines for other airlines, while United does maintenance work for Air China, Korean Air, Air Canada and the U.S. military.

"We make a high profit margin on engine overhauls and landing gear," said Joseph Prisco, president of Local 9 of the Aircraft Mechanics Fraternal Association, which represents mechanics at United Airlines. "Air China sends a lot of their engine overhaul work to us. The costs are probably more expensive per head, but we do a faster job and better job than they can get done in their own country."

Globally, the business of repairing or overhauling airplanes is expected to grow to more than $50 billion by 2013, from $35 billion today. The in-sourcing helps keep some airline employees busy and modestly bolsters the carriers' bottom line. "Through the bankruptcy process, one of the things we are trying to do is become more efficient -- to look at what we can do profitably and what we can't," spokesman Jeff Green said of United Airlines, which is restructuring under Chapter 11.

But the global trends haven't blunted the pain felt by the mechanics on the losing end of outsourcing. Since the 9/11 attacks, the U.S. aviation industry has slumped, forcing carriers to reduce costs and lay off tends of thousands of workers. Airlines have shut down huge maintenance facilities in cities such as Oakland and Indianapolis and reconfigured hangars at Minneapolis-St. Paul. Employees who managed to keep their jobs were forced to take pay cuts -- in some cases, several times.

Airlines such as Northwest and Continental and the delivery companies FedEx Corp. and United Parcel Service Inc. outsource so-called heavy checks, which are required when planes reach a certain age, to Asia. The heavy checks are more labor-intensive because they require an entire strip-down of the aircraft and repair or replacement of major components, such as the fuselage. Lower pay in Asia makes the work more affordable.

"They have no intentions of bringing that heavy work back in," said Jim Atkinson, president of AMFA Local 33 at Northwest Airlines in Minneapolis. "It's very disturbing for me that hundreds of millions of dollars are supporting China and Singapore's economy."

US Airways mechanics also are challenging their company's decision to send maintenance work on 10 Airbus jets to a firm in Alabama, where Chairman David Bronner lives and works as head of a state pension fund that owns a controlling stake in the airline. US Airways insists it had to shift the work there because neither of its main maintenance centers, in Pittsburgh or Charlotte, N.C., were capable of performing the work.

More than half of all maintenance work for U.S. airlines is now performed by contractors -- foreign and domestic -- and that figure is projected to grow to 60 percent by 2008, according to aviation analysis firm Back Aviation Solutions.

Just how much of that work is contracted to firms overseas is difficult to quantify because the Federal Aviation Administration doesn't track such numbers, and the companies that conduct the repairs are reluctant, for competitive reasons, to reveal their customers. Unions also could not provide figures of exactly how many jobs have gone overseas.

American, United, US Airways and Delta said they sent no maintenance work overseas except for quick overnight repairs. Those carriers are restricted by new pay-slashing contracts from sending jobs overseas.

Union officials claim that the United States has less oversight over foreign workers and that planes could be exposed to sloppy work or sabotage overseas. For example, airline maintenance workers elsewhere don't have to undergo mandatory drug and alcohol testing or criminal background checks as they do in the United States.

First published on June 2, 2004 at 12:00 am