American Airlines Maintenance Services Sets Goal of Obtaining $175 Million in Customer Revenue By End of 2007
American Airlines Maintenance Services, the marketing arm of American's maintenance organization, and the Transport Workers Union (TWU), representing the airline's maintenance workers, have set an aggressive goal of obtaining $175 million in customer revenue in 2007.
For the past three years, American and the TWU have been working together as business partners to transform the airline's maintenance organization from a cost center to a profit center. Using the principles of Continuous Improvement, the maintenance team has increased productivity and efficiencies, reduced costs, and significantly optimized operations. Thus, American has been able to successfully compete for customers' maintenance requirements.
The maintenance organization's transition to becoming "Best in Class" in all maintenance, repair and overhaul processes at its line and base maintenance facilities has created opportunities for American to competitively bid for a wide variety of maintenance and engineering services for other airlines, aircraft leasing companies, and individual aircraft owners. By doing so, American is using its maintenance operation to generate substantial customer revenue. In 2006, American generated almost $95 million in customer revenue and expects that to grow in 2007 to $175 million, not including the $225 million of engine overhaul work for customer airlines by Texas Aero Engine Services Limited (TAESL), a joint venture between American and Rolls- Royce.
"American's long-term vision is to transform its maintenance organization into a world-class Maintenance, Overhaul and Repair (MRO) business that offers our customers a one-stop shop for most of their maintenance requirements, be it airframe, component, engine overhaul, engineering services or line maintenance," said Bob Reding, American's Senior Vice President - Technical Operations. "We will continue this momentum by investing in technology, process improvements, and increasing our productivity while continuing to reduce overall costs for our customers. The Continuous Improvement processes embraced by our entire M&E organization will allow us to offer a comprehensive array of competitive technical services to continue growing our customer contracts."
Obtaining $175 million in customer revenue in 2007 will be achieved by more overhaul work at American's three maintenance bases in Fort Worth, Texas; Kansas City, Mo.; and Tulsa, Okla., along with additional routine and "on- call" maintenance work performed by the airline's line maintenance organization.
Each of these organizations created Breakthrough Goals that were designed to reduce costs and generate revenue, while at the same time encouraging employees to find innovative ways to streamline operations.
"We offer what other vendors can't -- comprehensive on-site service and an extremely talented and driven workforce. We can repair most parts on-site," said John Conley, AA System Coordinator and International Representative, TWU. "Given the immense knowledge of our team, American can reduce out-of-service times, returning the aircraft, engine or component to the customer quicker, allowing them to either start producing revenue earlier with the aircraft or reducing the cost of inventory for engines or components. In any case, doing business with American Airlines Maintenance Services means competitive prices at the highest quality with the best turn times in the industry."
Tulsa Breakthrough Goal
In March 2005, a joint labor/management team at American's largest maintenance facility in Tulsa announced a "Breakthrough Goal" to generate $500 million in value creation -- a combination of cost reductions and revenue that would turn the base from what has traditionally been a cost center into a ground-breaking profit center.
Tulsa surpassed its aggressive breakthrough goal by reaching more than $501 million. This was achieved through the use of joint management and union representation on teams that focused on areas such as technology, marketing and turn-time reductions.
"It truly took a joint effort to achieve this goal, but we always knew we would reach it because we made the decision not to let others decide our future," said Dennis Burchette, President of TWU Local 514. "This is only the first step. We must continue down the path we are on and keep working to improve our future."
Tulsa recently obtained a four-year, $30 million contract with Allegiant Air to provide engineering, planning, technical and reliability services, certain component and landing gear repair and overhauls, as well as airframe overhauls, known as "Heavy C" checks, for Allegiant's current fleet of 24 MD80 series aircraft, plus any additional MD80 series aircraft as Allegiant grows.
In addition, thanks to the $22.3 million American received from the Tulsa Vision 2025 sales tax program approved by voters in September 2003, the airline has made vast improvements that have helped secure customer contracts. Funding has been invested to improve working conditions on the shop floor, upgrade IT systems, and improve the base's wastewater treatment plant, among other improvements.
"By making an investment in American Airlines, Tulsa made a huge investment in itself," said Carmine Romano, American's Vice President - Tulsa Maintenance and Engineering Base. "The Vision 2025 funds have allowed us to keep work in-house, and help make us competitive enough to secure lucrative customer work. The progress we have made in Tulsa would not have been possible without the Vision 2025 funds."
Kansas City Breakthrough Goal
On Feb. 9, 2006, a joint team of management and labor leaders from the Kansas City maintenance and engineering base announced a Breakthrough Goal to generate $150 million in value creation and also turn the base into a profit center.
Their goal of transforming the base -- which employs about 900 people -- will be achieved through American's successful Continuous Improvement Process that is designed to reduce costs and generate new customer maintenance, contract-driven revenues.
As of December 2006, Kansas City was at $24.7 million toward meeting their goal. In addition, the base has begun upgrades on its facilities, which will help make it more attractive for customers. The first phase of the renovation project includes upgrading the narrow-body hangar. Repairs will include two passenger elevators, a freight elevator, upgrading the roof, and a hangar door.
The second phase of the project will involve the "superhangers," which are used for widebody aircraft. The renovations will include updating the hangars and its shops. This work will start in 2007.
Fort Worth Alliance Base Breakthrough Goal
A team of management and Transport Workers Union Local 567 members employed at American's Alliance maintenance base in Fort Worth, including TAESL, set a breakthrough goal on May 11, 2006, to obtain $400 million in value creation by the end of 2008.
As of December 2006, the Alliance base had achieved $67.4 million toward its Breakthrough Goal. A prime example of American's ability to provide competitive maintenance work to third parties is its joint venture with Rolls- Royce. TAESL was formed in April 1998 to repair and overhaul the RB211 engine, which American has on its Boeing 757 fleet, and the Trent 800 engine, which is on American's Boeing 777 aircraft. The TAESL joint venture has generated more than 200 additional jobs specifically tied to the growth of engine maintenance work performed for new customers.
Line Maintenance Breakthrough Goal
In August 2006, a joint team of management and TWU represented members from American's line maintenance bases set a breakthrough goal to obtain $95 million in recurring savings for the airline by the end of 2008. More than 65 TWU and management leaders met to identify maintenance opportunities and challenges with regard to enhancing the company's competitiveness.
The goal will be reached through cost reductions, additional customer work, improved dependability through reducing delay hours, and reducing the amount of spare aircraft for maintenance needs. The group chartered several teams on topics that are critical to achieving the goal of $95 million by the end of 2008.
American Maintenance Services offers a full line of airframe, engine and component, and line maintenance services, customizing those services to meet the specific needs of the client. American's MRO business has 62 different customers located in North and South America. Services are provided by all three of American's overhaul bases in Tulsa, Okla.; Fort Worth, Texas; Kansas City, Mo.; and at line maintenance locations in Dallas/Fort Worth, St. Louis, San Francisco, Los Angeles and other cities in the central and western United States, plus Latin America and Europe.
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SOURCE: American Airlines, Inc.
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