American Airlines Gets into Maintenance Line

The company hopes its efficiency and expertise will help it attract its rivals as clients for its work.

A little more than year ago, when Carmine Romano wanted to add workers or take them off a line at American Airlines' aircraft maintenance base in Tulsa, he ordered it and it was done. As vice president of the base, those decisions were his alone.

But not anymore.

"I tried to run the business effectively, and he'd come in and chew my butt," Romano said, pointing to union president Dennis Burchette sitting next to him.

Burchette's response? "He'd make a business decision without taking into effect the people and things I was dealing with."

It was the classic management-labor conflict at the world's largest commercial carrier, played out with grievances, complaints and bad feelings simmering on both sides.

That has changed during the last year as management and labor have found a new reason to work together: American Airlines' plan to turn its maintenance facilities into profit centers.

At a time when struggling airlines are laying off mechanics and sending planes to Central America and other far-flung destinations for heavy maintenance--complete disassembly, inspection and reassembly--American Airlines' strategy is a definite departure.

American Chief Executive Gerard Arpey's plan calls for his Ft. Worth-based carrier to save millions by working on its own planes, and also make money by doing maintenance for other airlines.

To make the plan work, management and labor have forged agreements to work cooperatively in ways unprecedented in the airline industry.

Top management and labor leaders in Tulsa now meet regularly, including each Friday for sessions that often take place at the union hall. Disagreements are still fierce, but the ultimate goal is one shared by both sides.

"Now, we sit down, talk about it and say here's where we want to be, what's the best way to get there?" Burchette said, adding that they sometimes change roles. "The union's talking like business people, and they're acting more like union people. That's when you wonder what the hell's happening."

Arpey is betting American's maintenance bases can provide attractive, cost-efficient choices for airlines around the world, including some of American's competitors. Avianca, Miami Air and North American are among the carriers that have had work done by the airline.

For decades major airlines did nearly all their own maintenance. That has changed as pressure has increased to shave costs whenever possible. Heavy maintenance on United Airlines' Boeing 777s was shifted to China's Ameco Beijing last year, while work on the airline's 737s is done in Indianapolis by AAR Corp., a third-party contractor.

United is not alone. Delta Air Lines has some of its maintenance done by Air Canada, while JetBlue Airways sends its aircraft to El Salvador for work.

United still has its maintenance base in San Francisco, where the carrier also does some third-party work, including engine repair. But no airline is embracing maintenance as a potential profit center the way American has.

Moving work to third parties, particularly when maintenance is done offshore, reduces labor costs. If wage rates are the only factor, American cannot compete, Arpey concedes.

"Where we believe we can drive competitive advantage is in the number of hours it takes to do a particular task because of our experience level, our history, our volume, our investment in plant equipment and technology," Arpey said. "And that airplane has to come out on time and operate reliably . If it doesn't, that labor rate advantage goes away in a hurry."

Joint leadership

To make American's maintenance efficient the airline formed joint leadership teams at the airline's three maintenance bases. Union and management leadership work together to set priorities, highlight problems and look for solutions. Consultants hired to repair fractured worker-management relations helped the two sides learn to work together.

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