AA's Hopes to Earn $175M by Maintaining Others' Planes

American Airlines says it has saved $500 million in two years by revamping its Tulsa, Okla., maintenance base with the support of the union and aims to raise $175 million in revenue this year by working on other carrier's jets.

The 2007 target includes work that American hopes to attract at Tulsa and maintenance bases in Kansas City, Mo., and Fort Worth, American officials said Thursday.

Two years ago, the nation's largest carrier was considering closing at least one of the bases to save money. Instead it struck a deal with the Transport Workers Union to aim for $500 million in savings by the end of 2006 by improving efficiency at the Tulsa base.

Changes included reducing the time it takes to service a jet and lobbying other carriers to work on their planes. American said it did about $95 million in contract work last year.

Most of the $175 million expected this year will be work for current customers, officials said.

For example, Miami Air started using American to do simple maintenance on its Boeing 737s in Miami, then asked the bigger airline to do airframe overhauls in Tulsa and put fuel-saving winglets on the planes.

American and the union hope to cut costs by more than $600 million over two years at other bases, including an engine-repair joint venture with Rolls-Royce.

Even with improved productivity, American's bases still charge higher hourly rates than maintenance shops in Asia, but Reding said American can get planes back in the air sooner where they can generate revenue for their owners.

"It's a combination of the entire maintenance bill that we think we can be competitive in on the world stage," he said.

The additional work for other airlines led American to add about 200 maintenance jobs last year - a combination of recalling laid-off workers and new hires - Reding said. An airline spokesman said later that among all its bases, the company has rehired 483 employees, including managers and clerical staff, and that 2,075 remain on furlough, some back to 2001.

The program with the Transport Workers Union is a key part of a campaign by Gerard Arpey, chairman and chief executive of parent AMR Corp., to improve American's labor relations. The airline suffered through strikes and sickouts in the 1990s, and employees are looking to recover wage cuts they accepted in 2003.

It was unclear whether cooperation in Tulsa and at other maintenance hubs would make it easier for the company and TWU to agree once contract negotiations begin this fall.

A TWU official, John Conley, said the union had not decided what it will seek in a new contract.

Conley suggested that working together could give mechanics a different perspective than pilots and flight attendants, who have continued to clash with the company over management bonuses.

"We might set greater expectations than those of our colleagues based on ... what we've been able to achieve," he said.


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