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Business
Travel Executive
November 2007
By Kevin Mitchell
Outsourcing Aircraft Maintenance to Foreign Repair Stations Problematic
For a variety of reasons, the collective national market share of the
low cost carriers (LCCs) in the U.S. has been growing rapidly, and along
the way, the once-feared major network carriers have been painfully
punished. With the LCC share leaping from 19% in 2000 to 33% today, the
network carriers have been forced to restructure, cut costs and
significantly reduce long-term obligations wherever they can. Since
2000, 8 airlines have gone through bankruptcy.
Still, even now in 2007, many of these larger carriers have weak balance
sheets and remain at a 25% to 30% cost disadvantage vis-à-vis the LCCs.
Unfortunately, in a race-to-the-bottom on costs, many carriers have
increasingly implemented programs that outsource maintenance to foreign
countries with uneven safety and security standards and inadequate
oversight from the Federal Aviation Administration (FAA). Outsourced
maintenance includes landing gear, airframe inspections, engine rebuilds
and the total overhaul of aircraft.
For the 10 years ending 2006, U.S. airlines increased overall
outsourcing of maintenance to 64% from 37%. This includes work
outsourced to U.S. and foreign repair facilities. While the FAA does not
maintain records pertaining to amount of outsourced maintenance
conducted outside the U.S., the number of foreign FAA-certified repair
facilities has grown to 698 in 2007 from 344 in 1994.
A Matter of Standards
An important issue is that foreign repair stations are exempt from
requirements that the FAA imposes on domestic U.S. maintenance
facilities. For example, U.S. firms are required to have a drug and
alcohol testing program; foreign operators do not. In the U.S.,
return-to-service and supervisory personnel must be FAA-certified. Not
overseas. U.S. repair stations alone are subject to security program
requirements. Finally, foreign repair stations do not have to employ
FAA-certified mechanics, a requirement in the U.S.
Up to fifty unlicensed mechanics in a foreign country can perform
maintenance on a U.S. aircraft if the work is signed-off on by a single
mechanic licensed by the country’s aviation authority. Notably, the
depth and reliability of employee background checks is uneven across
countries and terrorist groups, including al Qaeda, operate freely in
many of the countries U.S. airlines outsource work to.
A Matter of Resources and Focus
FAA budgets for inspectors and travel have been reduced in recent years,
just as the geographic challenges and sheer number of facilities have
dramatically increased. According to June 2007
testimony by the U.S. Department of Transportation, Inspector General
(DOT IG) before the Senate Commerce Committee, FAA inspectors’ focus is
too heavily on airlines’ in-house maintenance operations and not enough
on outsourced operations. For example, at one airline that outsourced
nearly 50% of its maintenance during one recent year, FAA completed 400
inspections of in-house operations and just 7 of repair stations where
work had been outsourced to. Likewise, during that same period, 138
repair stations in Europe had not been inspected at all. However, the
problem is greater than an outdated FAA staffing and inspection model.
FAA inspectors wanting to visit a repair facility in China, for example,
are required to apply at the highest levels of the State Department for
visa approval, a process that can take up to 6 months. When inspectors
finally arrive at a facility in China, all the workers are lined up
outside the facility in smocks and baseball caps with wide smiles to
greet the Americans. Of course, with so much advance notice, everything
is spit-shined and paperwork is in order. This, of course, is a sham and
FAA inspectors will tell you that off-the-record. What’s more, the
deadly toxic waste from heavy maintenance is dumped in the ground versus
the expensive and careful disposal process requirements found in the
U.S.
Justification
Supporters of outsourced maintenance to foreign countries point to
comprehensive safety data that to them demonstrate that U.S. carriers
have the best safety record in the world. The problem with this
“rearview mirror” justification is that the rules have changed and the
data can provide a false sense of comfort. We have moved from an
environment of high standards and frequent FAA inspections to one where
the standards are considerably lower and the resources and oversight
model are inadequate. It can take a few years of increasing outsourcing
for circumstances to deteriorate to a point where problems can be
expected. Those data are capable of blinding us to a real safety and
security threat on the immediate horizon.
Importantly, as a regulator of safety, the FAA should not be looking
back and pointing to its safety record, but should be looking forward
and always trying to improve its processes.
Potential Legislative Remedies
There was a House Transportation Committee hearing this spring, and
hopefully, the Senate will conduct an inquiry in the near future after
the DOT IG concludes its review of the type and quantity of overall
outsourcing. From a cost competitiveness standpoint, if all critical
maintenance were required to be done in the U.S., no one U.S. airline
would be at a competitive cost disadvantage on this line item compared
with its competitors.
With this in mind, BTC developed the following recommendations and
language for the consideration of Congress.
All heavy maintenance on U.S. airlines’ aircraft shall be performed in
the U.S. until and unless all the following conditions are met:
a)
the country in which maintenance is performed shall have a bilateral,
reciprocal agreement with the U.S. that allows FAA inspectors to
show up to a repair facility unannounced;
b)
the FAA shall provide Congress with a detailed plan to increase the
frequency and depth of inspections of foreign repair stations as well as
a comprehensive plan for twice-yearly, full audits to reflect the lower
standards of mechanics’ training and certification and the uneven
culture-of-safety across different countries;
c)
the airlines shall agree to pay for the fully-burdened costs to send FAA
inspectors overseas including for twice-yearly, full audits of all
foreign repair stations;
d)
the airlines shall contractually require repair facilities to perform
background checks in accordance with standards established by TSA, and
said background check results shall be transmitted to the TSA for the
purpose of cross checking against terrorist watch lists prior to an
employment offer being extended; and
e)
the airlines shall agree to contractually require foreign repair
facilities to meet U.S. standards for environmental protection, which
shall be part of the FAA twice-yearly auditing process.
This foreign maintenance issue underscores the need for a national air
transportation policy that identifies objectives and priorities. For
example, do we as a country really want $50.00 Newark-to-Oakland fares
at a cost of lower safety standards? |