July 15, 2001

A Critical Review

of a report titled Outsourcing Decisions in Aircraft Maintenance
Prepared by The Transportation Center, Northwestern University
under grant by the Federal Aviation Administration.

By Frank Boksanske AMFA National Safety and Standards Director

The objective of the study was to identify the most common criteria that the airline industry uses to select, monitor and access the performance of their third party maintenance facilities.

Data was collected from seven respondents from United States major, regional and niche airlines, all of which were management executives such as from Quality Audit, etc. Information submitted was biased as a result of the respondents selected but overall the report appeared to be objective and well written.

The number of third-party aircraft maintenance providers (3PMPs) continues to grow as a 1997 General Accounting Office report estimated that one-half of the maintenance performed by United States airlines is actually outsourced to a 3PMP. Cost savings is the initial motivation to outsource but quality of work performed should be a significant consideration in the selection of a 3PMP.

Maintenance, repair and overhaul (MRO) rates, according to a 1994 report, vary from a low of $10 per man-hour in Southeast Asia to $40 in Japan and Germany. The importance of this cost differential is at the heart of the recent 3PMP expansion into China. ( airlines, such as Northwest currently outsource heavy checks to a 3PMP in China)

Considerable savings can also be achieved when inventories are consolidated and administered by 3PMP's or other third parties.

When a task is outsourced, the operator of the aircraft is still responsible for compliance of the 3PMP with respect to the operator's approved policies, procedures and requirements.

Northwest Airlines, having implemented the MSG-3 maintenance program under the carrier's Part 121 certification, will now require the 3PMP performing maintenance on Northwest Aircraft to conform to those requirements. That is a frightening requirement to expect labor with limited qualifications, little knowledge and experience, high turn-over rate and young age be drawn into a maintenance program that requires the task to be accomplished under time constraints, all the while being exposed to a highly manipulated work environment by management.

The respondents from this study claimed that wages, security measures, and employee turnover at the 3PMP were not of importance even though some of these measures are referenced in FAR Part 145.

Data on the quality of work the repair station produces is difficult to obtain as many of the items are measured strictly by the airline and are considered proprietary information by both the airline and the repair station. It is unlikely that this data would be made publicly available or even to the FAA. Fortunately, reports are generated by mechanics that contradict the effectiveness and cost savings that the 3PMP theory supports. Many aircraft come out of heavy check with major discrepancies only found during the months of revenue flying after leaving the 3PMP.

There has been little progress to streamline the FAA regulatory change and review process. Other nations are able to make significant progress in the area of regulatory change while the US moves very slowly with maintenance regulatory action. Political oversight and special action committees have not been effective at changing rules because corporate special interest groups comprise the committees leaving mechanic groups without a voice.