U.S. airlines flock to foreign repair shops
Southwest Airlines planned to begin flying planes to this small Central American nation this year -- but not with passengers aboard. The carrier wanted to outsource some of its maintenance to a Salvadoran repair shop called Aeroman.
Aeroman already services jetliners operated by U.S. carriers JetBlue and America West. The airlines fly empty planes hundreds of miles from the United States to have them refurbished, repaired and inspected. It’s like driving across town for a cheaper mechanic -- except that airlines can save millions of dollars over the life of their rides.
They aren’t alone. Many air travelers don’t know it, but the U.S. airline industry outsources more than half of its aircraft maintenance to contractors in the United States or abroad.
In fact, the only thing unusual about Southwest is that it changed its mind after the Federal Aviation Administration last month said it would seek a $10.2-million fine against the Dallas-based carrier for safety lapses. Southwest Executive Chairman Herb Kelleher told a congressional committee this month that the decision to back out of the deal was no reflection on Aeroman. The repair firm has a solid reputation in the industry, and it wasn’t involved in Southwest’s failure to carry out the required safety inspections on its planes, provoking the record fine.
Aeroman, though, isn’t worrying about the half-built hangar it was preparing for Southwest. On the contrary, it’s rushing to finish the building. Chief Executive Ernesto Ruiz said two U.S. carriers had contacted him about grabbing Southwest’s spot in El Salvador, where they can cut their maintenance bills by 30% or more.
“When [the facility] opens in August, it will be filled,” said Ruiz, who declined to name the interested carriers. “Other airlines saw an opportunity.”
Industry experts say maintenance outsourcing will only increase as airlines grapple with post-9/11 security costs and sharply higher fuel prices. Already a $41-billion business, so-called MRO (for maintenance, repair and overhaul) outsourcing is expected to reach nearly $60 billion within a decade, said Kevin Michaels, a co-founder of AeroStrategy, a Michigan-based aviation consulting firm.
Major U.S. carriers that might pay $70 an hour in wages and benefits to an in-house union mechanic could save 25% with a private aircraft maintenance contractor in the U.S. and even more in a developing country.
Labor is the single largest controllable cost airlines have, according to the Washington-based Air Transport Assn. of America.
“The industry has changed. The business model has changed,” Michaels said. “Given the brutal competition in the industry, airlines will be compelled to find the best value solution. . . . Outsourcing is going to continue.”
Most FAA-approved contract facilities -- nearly 4,200 of them -- are in the U.S. But the fastest-growing segment of the business is overseas.
The agency has certified more than 700 repair stations in nearly 70 countries. It inspects them at least once a year, FAA spokesman Les Dorr said. Many of these shops fix only small privately owned planes and business jets. Some specialize in cosmetic jobs such as painting. Others perform general maintenance or focus on niches, such as overhauling engines.
Most of the largest stations are in industrialized nations such as Britain, Germany and Japan, but developing countries -- including China and Dubai -- are gaining fast.
Aeroman performs a variety of maintenance tasks, including sprucing up cabins, upgrading electronic systems and performing the rigorous “nose-to-tail” checks required for all commercial aircraft by the FAA, typically every 12 to 18 months. The company serviced about 120 aircraft last year.
Located in a modern facility at El Salvador International Airport, about 30 miles south of the capital, San Salvador, Aeroman employs 1,300 workers.
Entry-level trainees earn about $350 a month. An experienced mechanic can make more than $1,000 a month plus $120 monthly in bonuses -- good pay in a nation where the minimum wage for service workers is about $175 a month. Benefits include free bus transportation to work and subsidized lunches. Ruiz said turnover is low.
All mechanics speak at least some English, the language in which they must complete all paperwork and documentation for the FAA and other regulators. They are subject to random drug and alcohol tests and annual criminal checks. They must agree to undergo a polygraph examination before being hired.
On a recent afternoon, perspiring workers in identical short-sleeved navy polo shirts swarmed the cabin of an Airbus jetliner that had new carpet, spotless seats and freshly painted overhead bins.
“It’s interesting work,” said Luis Barrera, a 35-year-old mechanic. “And it’s a big responsibility.”
Aeroman has a clean record with the FAA for the last two years, said Dorr, who added that it was as far back as he could access data quickly in response to a Times request.
He described the Salvadoran operation as “an absolutely first-class facility.” Customers agree. Mitch Sine, a maintenance representative for JetBlue, was in El Salvador recently checking one of his company’s planes. He said Aeroman beats U.S.-based maintenance contractors, not just on price but on performance and on-time delivery.
“I can’t buy this kind of quality in the United States,” he said. “These people really have pride in their work.”
But critics say employees of foreign repair companies don’t have to meet the same standards as those in the U.S. Unionized mechanics, in particular, are steamed. Their leaders say the U.S. is losing good jobs while potentially putting passengers at risk.
For example, supervisors and inspectors who sign off on work in a foreign repair station do not have to hold an FAA “repairman” or “airframe and/or power plant” certificate, as their U.S. counterparts do.
“We’ve been trying for years to get the FAA to pay attention to how dangerous it is to outsource maintenance overseas,” Teamsters General President Jim Hoffa said. Unionized mechanics at United Airlines voted this month to leave the Aircraft Mechanics Fraternal Organization and join the Teamsters, largely on promises by Hoffa to try to stem outsourcing.
Dorr said FAA requirements for a “license to operate” are identical for foreign and domestic repair stations, meaning that the maintenance is performed to a single standard, though some requirements for employees might differ.
By most measures, the U.S. is in a period of unprecedented airline safety. The only major air tragedy in the last seven years was a 2006 Comair crash in Kentucky that killed 49; federal investigators concluded that it was caused by pilot error. Worldwide, aviation fatalities have been falling even as outsourcing has been rising, the Aeronautical Repair Station Assn. in Alexandria, Va., says.
None of the inspection issues that grounded hundreds of American Airlines flights and other planes this month were linked to foreign maintenance shops. But Kevin Mitchell, chairman of the Pennsylvania-based Business Travel Coalition, a consumer advocacy group, said the recent events are a wake-up call that the FAA doesn’t have a good handle on safety oversight domestically, much less at far-flung facilities.
He said his group would press Congress to adopt uniform standards for all FAA-certified repair facilities, regardless of their location.
Andres Garcia, commercial director for Aeroman, said that was fine with him. He said Aeroman was inspected 47 times last year -- four times by the FAA and the rest by the agency’s counterparts in Latin America and Europe, as well as by customers, airplane manufacturers and the International Organization for Standardization, among others.
“We are used to being constantly under surveillance,” Garcia said. Far from resenting it, he said it was his best sales tool.
Founded in 1983 as a subsidiary of San Salvador-based Taca Airlines, Aeroman has one of the longest track records in the maintenance, repair and overhaul business. It’s now owned by ACTS, a Montreal-based airline maintenance company. U.S. private equity firms Sageview Capital and KKR Private Equity Investors own a 70% interest in ACTS. Ace Aviation Holdings Inc., the parent of Air Canada, owns a minority stake.
Garcia said Aeroman’s 600 mechanics are rigorously trained and hold Salvadoran licenses recognized by the European Aviation Safety Agency. He said about 100 hold FAA certificates.
More would get them if the U.S. would let them take the exam in El Salvador. But the nearest FAA testing facilities are in the United States. Garcia said several employees have had trouble getting visas to travel to the U.S., a common complaint since the 2001 terrorist attacks in the U.S.
Barrera, the mechanic, said he understood the public’s concerns about airline safety.
“We always try to do things in the best way,” he said. “Our families fly too.”