Available online at httpdocslibpurdueedujate

Journal of Aviation Technology and Engineering 12 (2012) 63ndash73DOI 1057031288284314659

Global Outsourcing of Aircraft Maintenance

Michael McFadden

NetJets

D Scott Worrells

Embry-Riddle Aeronautical University Worldwide Campus

Abstract

Before the airlines were deregulated the majority of air carriers conducted their maintenance in-house After deregulation withcompetitive pressures mounting and airlines failing and starting up seemingly simultaneously the outsourcing of maintenance becamemore prevalent Not restricted to US airlines outsourcing maintenance has become a global practice Factors involved in the outsourcingdecision range from a startup not having the capital to develop their own in-house maintenance program to legacy carrierrsquos cost cuttingefforts and all points in between This paper will address specific aspects of the global outsourcing of aircraft maintenance For thepurposes of this paper Maintenance Repair and Overhaul (MRO) and maintenance are used synonymously

Keywords Maintenace Repair Overhaul Outsourcing Maintenance

Global Outsourcing of Aircraft Maintenance

For those who study the airline industry and more specifically aircraft maintenance it is a well-known fact that airlinesare not in the aircraft maintenance business However the importance of quality compliant cost effective maintenancecannot be overstated Estimates for the total cost of aircraft maintenance range from 10 to 15 of an air carrierrsquos budget

About the Authors

Michael McFadden is a professional pilot flying for the fractional ownership provider Netjets Mr McFadden received his graduate degree inAeronautical Science from Embry-Riddle Aeronautical University in 2011

D Scott Worrells is a full time faculty member in Embry-Riddle Aeronautical Universityrsquos Worldwide Campus Dr Worrells holds a doctoral degree inWorkforce Education and Development from Southern Illinois University Carbondale and graduate and undergraduate degrees in Management andTechnology-Avionics from Embry-Riddle Aeronautical University

httpdxdoiorg1057031288284314659

(Al-Kaabi Potter amp Naim 2007) As recently as 2007 theFederal Aviation Administration (FAA) estimated thatlsquolsquooverall major air carriers outsourced an average of 64percent of their maintenance expenses compared to 37percent in 1996rsquorsquo (Department of Transportation 2008p 1) Airlines continually search for ways to reduce thisexpense and it is the primary factor in the decision tooutsource maintenance

Economics of scale has an impact on the decision tooutsource maintenance Each individual airline mustdetermine the point at which there is a positive return onthe investment in maintenance capability Large air carrierswith hundreds of aircraft can justify the investment for amulti-level maintenance capability However an airlinewith a relatively small fleet may not have the capitaldesire or need to establish a multi-level maintenanceprogram This is particularly true for startup air carriers andlow cost carriers (LCC)

Another factor is the tendency to blend maintenancecapability All air carriers outsource some element of theirmaintenance requirement Typically heavy maintenancewhich is labor intensive and requires extraordinary outlayfor facilities and equipment is outsourced For carriers inthe US 71 of heavy maintenance is outsourced withengine maintenance one of the fastest growing segments ofthe maintenance repair and overhaul (MRO) market(Phillips 2008) On the other end of the maintenancespectrum ground handling servicing and organizationallevel maintenance is most frequently not outsourced

Regardless who conducts the maintenance on an airlinersquosaircraft aircraft maintenance is ultimately the responsibilityof the airline (FAA 2008) Accordingly the most criticalpart of the outsourcing process is selecting a reputableMRO provider While high rates of reliability are alwaysexpected many air carriers are looking for more such astotal support solutions

Global MRO Growth and Consolidation

Global MRO revenue in 2002 was between 25 and 30billion dollars (Czepiel 2003) Recent economic conditionshave reduced short term estimates of MRO demandhowever long term growth is forecast at 43 through2018 (Phillips 2009) From 2002 through 2010 averagespending for MRO was $3402 billion (see Figure 1) It isestimated to reach $65 billion by 2020 doubling the 2003$30 billion estimate by Czepiel

Projected MRO growth is lsquolsquoparticularly strong in Indiaand China followed by Asia Europe and North Americawith less growth in North Africa and the Middle Eastrsquorsquo(Phillips 2008 para 9) The North American MRO marketremains largest in dollars spent at $156 billion in 2007lsquolsquofollowed by Western Europe ($104 billion) Asia-Pacific($56 billion) China ($23 billion) the Middle East ($2billion) South America ($2 billion) Africa ($15 billion)

Eastern Europe ($12 billion) and India ($444 million)rsquorsquo(Jackman 2007 para 18)

The global recession has contributed to consolidation inthe MRO industry Lufthansa Technik (LHT) has started ajoint venture with Qantas opening up LHT Sofia tooverhaul short and medium range aircraft and lsquolsquohellipseveralMROs reported forming partnerships with firms in otherregions to offer more competitive costs and convenience tocustomersrsquorsquo (Moody 2009 para 16) Aeroman the largestMRO in Central America sold 80 of the company to AirCanada Technical Services in 2006 and now operates underthe Aveos brand (Tegtmeir 2011)

Outsourced Maintenance

Heavy Maintenance Visits

Heavy maintenance visits (HMV) will grow from $9billion in 2008 to $13 billion in 2017 (Phillips 2008)Industry experts estimate two-thirds of HMV costs arelabor costs (Jackman 2007) With foreign labor costs lessthan 50 of those in the US (see Figure 2) it is easy to seewhy many air carriers have shifted their HMV to overseasproviders (Weaver 2008) with estimated savings at $1million per aircraft each year (Pandit 2007)

Delta TechOps Program Manager Beadle concursstating lsquolsquoLabor costs represent approximately 70 ofHMV costsrsquorsquo (M Beadle personal communicationFebruary 9 2011) In 2008 starting pay at Aeroman wasapproximately $4500 per year with veterans earningapproximate $15000 That compares to the US averageof $52000 (Smith amp Bachman 2008) lsquolsquoDelta Airlinessends the majority of wide-body HMV to facilities in theFar East to take advantage of lower labor costsrsquorsquo (MBeadle personal communication February 9 2011)Narrow body HMV work tends to stay in the WesternHemisphere with MRO providers in Central Americaplaying a significant role lower labor costs and shorterferry flights contribute to cost savings

Figure 1 Estimated world MRO spending Adapted from lsquolsquoAirlinemaintenance costs executive commentaryrsquorsquo 2011 International AirTransport Association p 3

64 McFadden and Worrels Journal of Aviation Technology and Engineering

Another factor in the outsourcing equation is the capitalinvestment in facilities equipment and associated over-head The hangar space required to shelter an aircraft that isvirtually dissembled is considerable In addition the heavyequipment work stands test equipment support equip-ment test benches etc represent a considerable outlay ofcapital And this equipment needs to be maintained andcalibrated on a regular basis as well The cost ofestablishing a heavy maintenance capability can beprohibitive with breakeven return on investment perhaps10 to 15 years down the road Another cost consideration isthe maintenance burden lsquolsquoadministrative and overheadcosts associated with the maintenance function that cannotbe attributed directly to a particular airframe or enginebut allocated on a fairly arbitrary basisrsquorsquo (Wensveen 2007p 305)

Power Plant MRO

Power plant MRO is projected to be the fastest growingsegment of MRO at an estimated annual growth rate of46 (Phillips 2008) Power plant technology has allowedfor greater reliability and on-wing time While it would benatural to assume that this would translate into reducedcosts that is not necessarily the case some estimates showpower plant maintenance spending increasing lsquolsquotwo percentfaster than traffic through 2013rsquorsquo (Canaday 2005 para 30)The reason for this projected increase is mainly due to thehigh cost of repair parts Costs of repair parts fromlsquolsquoGeneral Electric (GE) Pratt and Whitney (PW) and CFMInternational (CFMI) hellip[are] increasing at an average of35 to 45 percent a yearrsquorsquo (Canaday 2005 para 27)

Line Maintenance

Line maintenance is outsourced much less frequentlythan either heavy maintenance or power plant MROhowever the outsourcing of line maintenance is primed forgrowth AeroStrategy principal Stewart states lsquolsquoOuranalysis estimates that for 2008 about 12 percent of linemaintenance is outsourced and by 2017 that could reachas much as 30 percentrsquorsquo (as cited in Seidenman 2008 para4) Line maintenance occupies a very special place in the

operation of an airline due to the direct impact it can haveon operational performance both positive and negativeDelays at the gate can be expensive with estimates from$50 to $100 per minute and an outright cancellation up to$60000 (Certified Aviation Services 2007 para 17)Before an airline will outsource such a critical function itneeds to be assured that a potential vendor would be able tosupply the same level of qualified personnel

Component Repair and Spare Parts Inventory

Component repair The outsourcing of componentrepair and replacement is also undergoing a significantdegree of transformation As in other areas of aircraftmaintenance established airlines once had their own shopsto repair or rebuild components such as landing gearauxiliary power units electrical system componentshydraulic-pneumatic system components and variouspower plant components Some even had their ownavionics shops for the repair of communication andnavigation equipment flight management systems andflight instruments

Airlines look for component support solutions that areflexible with predictable costs For example lsquolsquoAirtranoutsources its component support to several large vendorsmostly manufacturers like Honeywellrsquorsquo (Canaday 2005para 69) Borowski Airtranrsquos vice-president of main-tenance and engineering states lsquolsquoWe pay a rate per flighthour the invoicing is simple there is very little adminis-tration and the costs are predictablersquorsquo (as cited in Canaday2005 para 69)

Spare parts inventory The cost of inventory runs intomillions of dollars and inventory management is laborintensive While these facts have not changed thelandscape has changed dramatically with airlines reducingthe amount of inventory they hold directly outsourcing it tocompanies dedicated to inventory management In 2007inventories were reduced to 61 from 75 of the $48billion spare parts inventory previously stocked and stored(Trebilcock 2007 para 2) One airline executive sayslsquolsquoWe continue to see upward trending with airlineschoosing to get out of the inventory management andrepair businessrsquorsquo (as cited in Moorman 2011 para 3)

Figure 2 Estimated man hour costs in dollars Adapted from lsquolsquoTenets of MRO strategy for airlinesrsquorsquo by P Pandit 2007 p 6

McFadden and Worrels Journal of Aviation Technology and Engineering 65

While the benefits of outsourcing component repair andinventory management can be considerable there are risksAn airline must make sure that it is using a reputablesupplier for not only reliability and timely delivery of therequired items but for quality and legitimacy of approvedparts as well

Production Planning and Control

Airlines have been reluctant to give up control ofproduction planning and control activities making them theleast outsourced That may be changing according toHouse of TIMCO Aviation Services lsquolsquoBut now that airlinesare accustomed to subcontracting to lower labor costproviders many view outsourcing of the back office as thenext cost saving opportunityrsquorsquo (as cited in Seidenman ampSpanovich 2009 para 1)

As with the other areas of outsourcing ultimately avendor must be able to show that while they are able tokeep costs under control they can also effectively managethe contracted work Demeis president and founder ofContinuum Applied Technology believes that the move tooutsource these important functions may be premature

Frankly I donrsquot think that any savings involved withoutsourcing back office support would be great at thistime because at least a portion of the carrierrsquos qualitycontrol department will have to supervise the perfor-mance of the third-party company That means that anysavings related by eliminating an internal IT staffposition will be greatly diminished (as cited inSeidenman amp Spanovich 2009 para 20)

Regulatory Requirements

All air carrier maintenance programs have their roots in theinitial certification of an aircraft Design of maintenanceprograms must be flexible enough to accommodate air carrierspecific requirements and must comply with Federal AviationRegulations (FARs) Most of the worldrsquos airlines andmanufacturers use the AirlineManufacturer MaintenanceProgram Planning Document or Maintenance Steering Group(MSG) in the development of maintenance programs (AirTransport 2003) The Air Transport Association of America(ATA) administers and maintains this document to provideguidance on the development of maintenance procedures fornew aircraft Specifically the ATA states

It is the objective of this document to present a means fordeveloping the scheduled maintenance tasks and inter-vals which will be acceptable to the regulatoryauthorities the operators and the manufacturers Thescheduled maintenance task and interval details will bedeveloped by coordination with specialists from the

operators manufacturers and the Regulatory Authorityof the country of manufacture Specifically thisdocument outlines the general organization and decisionprocesses for determining scheduled maintenancerequirements initially projected for the life of the aircraftandor power plant (2003 p 11)

Once these basic regulatory requirements are met theFAA provides fairly wide latitude on the specific structureof an airlinersquos maintenance operations According to theFAA

Establishing appropriate standards and regulatory require-ments is a risk management process and the underlyinglegal structure provides for more than one level ofacceptable risk Air transportation regulations are all-inclusive and stand alone whereas the regulationsgoverning other air commerce do not Similarly thescope of responsibility for those in air transportation isvery broad and not shared whereas in other air commerceit is relatively narrow and shared The regulations in parts119 121 and 135 relate directly to air carrier maintenanceprograms and reflect the highest possible degree of publicsafety The regulations in parts 43 65 91 and 145 do notnecessarily reflect the highest possible degree of safety inthe public interest (2008 para 8)

The FAA sets the tone for Air Carrier MaintenancePrograms it describes in detail how an air carrier maystructure its maintenance program Advisory Circular (AC)120-16E describes how a maintenance organization can beset up for both a FAR Part 121or a FAR Part 135 operation

The foundation and legal basis for airworthiness andmaintenance of an air carrierrsquos aircraft is found in FAR Part121 As stated in FAR Part 121363

(a) Each certificate holder is primarily responsible for

(1) The airworthiness of its aircraft including air-frames aircraft engines propellers appliancesand parts thereof and

(2) The performance of the maintenance preventivemaintenance and alteration of its aircraftincluding airframes aircraft engines propellersappliances emergency equipment and partsthereof in accordance with its manual and theregulations of this chapter

(b) A certificate holder may make arrangements withanother person for the performance of any main-tenance preventive maintenance or alterationsHowever this does not relieve the certificate holderof the responsibility specified in paragraph (a) of thissection (Responsibility for Airworthiness 1973)

By definition ACs are not mandatory as issued AC 120-16E describes lsquolsquothe scope and content of air carrier aircraft

66 McFadden and Worrels Journal of Aviation Technology and Engineering

maintenance programsrsquorsquo (FAA 2008 p i) This ACdescribes how an air carrierrsquos maintenance programlsquolsquoshould reflect three specific program objectives to providethe highest possible level of safety in air transportationrsquorsquo(FAA 2008 p 2) These objectives are

(a) each of your aircraft released to service is airworthyand has been properly maintained for operations in airtransportation (b) maintenance and alterations that youperform or that other persons perform for you areperformed in accordance with your maintenance manualand (c) competent personnel with adequate facilities andequipment perform maintenance and alterations on youraircraft (FAA 2008 p 2)

Advisory Circular 120-16E describes the 10 elementsrequired of an air carrier maintenance program These 10elements are

1 Airworthiness responsibility2 Air carrier maintenance manual3 Air carrier maintenance organization4 Accomplishment and approval of maintenance and

alterations5 Maintenance schedule6 Required Inspection Items7 Maintenance recordkeeping system8 Contract maintenance9 Personnel training

10 Continuing Analysis and Surveillance System(CASS)

Chapter nine of AC 120-16E describes what is expectedfor contract maintenance The first paragraph of chapternine of this AC clearly spells out this responsibility stating

Consistent with 1211 (b) 1351 (b)(2) and others whenyou use a maintenance provider to accomplish all or partof the maintenance activities on your airplane or itscomponent parts that maintenance provider becomes ineffect part of your maintenance organization and underyour control (FAA 2008 p 33)

The Decision to Outsource

Prior to deregulation most aircraft maintenance wasconducted in-house (vertically integrated) and according toDelta TechOps Program Manager Beadle lsquolsquoyears ago noone really paid much attention to the cost of aircraftmaintenance It was all part of doing businessrsquorsquo (personalcommunication February 9 2011)

Outsourcing as a business model has become anaccepted way for companies to reduce costs and focus oncore competencies Sackett and Sakburanapech statelsquolsquoAlthough outsourcing enables companies to focus on

their core competencies and may reduce costs mostenterprises are cautious about outsourcing business criticalactivitiesrsquorsquo (2006 p 1) Critical outsourcing as shown inFigure 3 is lsquolsquocharacterized by both high importance andfinancial impactrsquorsquo (Sakburanapech 2008 p 28)

Outsourcing of aircraft maintenance is a business criticalactivity with regard to strategic importance and financesWhat makes outsourcing of aircraft maintenance unique isthat lives are potentially at risk if maintenance is not doneproperly

Aircraft maintenance is now viewed as a non-corebusiness However this widely accepted definition does notapply to all areas of outsourced aircraft maintenance atleast one airline Jet Blue considers line maintenance acore competency Ramage vice-president of technicalservices stated lsquolsquoEach airline defines what core businessis differently For Jet Blue line maintenance is a corebusiness heavy maintenance is notrsquorsquo (as cited in Schifrin2007 para 28)

Rapid emergence of LCCs in the US and abroad has hadan impact These air carriers have decided to outsourcemaintenance rather than establish maintenance operationsfrom scratch The maintenance outsourcing trend is wellestablished (see Table 1)

Jet Bluersquos Director of Maintenance states

Our business is to fly people safely from one point to thenext Line maintenance is a requirement You must havethat if you want reliability But when you start talkingabout MRO thatrsquos a whole different business It requiresa lot of overhead and tooling and we leave that to theexperts They can do it a lot more efficiently than wecan Wersquoll stick to our core business We believe thatwill maximize shareholder value (as cited inlsquolsquoMaintenance Outsourcing Emergingrsquorsquo 2009 para 23)

Figure 3 Outsourcing Classifications Adapted from lsquolsquoDevelopment of arelationship management framework and related performance metrics foroutsourced aircraft maintenancersquorsquo by A Sakburanapech 2008 CranfieldUniversity p 11

McFadden and Worrels Journal of Aviation Technology and Engineering 67

Foreign LCCs one of the fastest growing segments ofthe worldwide aviation market feel much the same wayIndicative of this is the view of Jetstar Asiarsquos Head ofEngineering Neo Neo indicates that he wants an MROprovider with lsquolsquothe capability to provide a full suite ofEngineering services including a proven and strong abilityto provide AOG [Aircraft on Ground] recovery fromtechnical breakdownsrsquorsquo (as cited in Moody 2010 para 24)

With the trend towards outsourcing a question arises asto whether an airline should keep the work or send it out

When evaluating the outsourcing decision some air carriersuse a MakeBuy decision model to help them determinewhether or not to outsource Well established as anaccepted course of action in many industries it providesmanagement with a tool for determining where workshould be done According to Smith lsquolsquoit is the maximum ofevery prudent master of the family never attempt to makeat home what it will cost him more to make than to buyrsquorsquo(as cited in Ferreira amp Serra 2010 para 1) Is it more costeffective to have someone else do the required work or is itbetter if it is kept in-house Transaction Cost Economics isone description of the MakeBuy method Transaction CostEconomics is lsquolsquofundamentally concerned with the questionof whether it is advantageous in terms of cost fortransactions to occur within the hierarchy of an organiza-tion or externally in the open marketrsquorsquo (Rieple 2008 para2) According to Program Manager Beadle Delta TechOpsuses a MakeBuy decision for all of Deltarsquos maintenancework and while TechOps might be given a preference ingetting the bid for some work if they are not competitivethe work will in fact be outsourced (personal communica-tion February 9 2011)

The MRO Model

Al-Kaabi et al (2007) describe four levels of MROFully Integrated Partially Outsourced Mostly Outsourcedand Wholly Outsourced as shown in Figure 4 Withinthese levels the entire aircraft maintenance spectrum isaddressed

Table 1Airline Maintenance Outsourcing (as percentage of total expenses)

Airline 2005 2006 2007 (through Q3)

Alaska 92 80 81Hawaiian 80 86 89US Airwaysa 77 81 80Northwest 76 83 81America Westb 76 91 91Continental 69 68 70JetBlue 68 64 65Southwest 68 81 85AirTran 66 93 94Frontier 65 79 80United 63 66 67Delta 48 73 72American 46 49 51ATAc 18 85 87

Note Adapted from lsquolsquoOutsourcing of airline maintenance soursrsquorsquo by W JMcGee 2008 Consumer Reports para 18

aMerged with America West bMerged with US Airways cCeasedoperations

Figure 4 MRO Model Depictions Adapted from lsquolsquoAn outsourcing decision model for airlinesrsquo MRO activitiesrsquorsquo by H Al-Kaabi et al 2007 Journal ofQuality in Maintenance Engineering 13(3) p 220

68 McFadden and Worrels Journal of Aviation Technology and Engineering

Fully Integrated MRO

An airline performs all aircraft maintenance activities in-house In addition it may look to sell excess capacity toother airlines

This practice is well-suited for airlines with large variedfleets and an extensive route structure (Al-Kaabi et al2007)

Partially Outsourced MRO

An airline meets a large portion of its needs in-housewith a minimum of outsourcing This permits a good dealof flexibility and adaptation to seasonable demands and isbest suited for airlines that have just a few different fleettypes

Mostly Outsourced MRO

Most maintenance is outsourced while critical needs arekept in-house (Al-Kaabi et al 2007) lsquolsquoCritical needsrsquorsquo aredefined by individual carriers For example Jet BlueAirlines defines line maintenance as critical to its operationand keeps most of that activity in-house

Wholly Outsourced MRO

All maintenance is outsourced This model is used bystartup airlines that do not have the capital to establish anMRO capability or that choose not to as a part of theirbusiness model

MRO Provider Selection

Perhaps the most important factor to consider is theselection of the MRO provider Many variables come intoplay and each one must be considered carefully Wymanuses a very thorough six-step process that evaluates allaspects of a provider before making a recommendation toan airline These six steps are

1 Define requirements Develop a detailed descriptionof what is to be expected including the volume andtiming of the work required

2 Explore and understand the current marketplaceKnowing who is doing quality and reliable work isextremely important

3 Define outsource strategy and require initial bids forthe work Determine whether or not to bundleunbundle services length of contract and type ofcontract

4 Feedback for bidders Specific details concerningpricing and suggestions on ancillary services arediscussed

5 Face to face negotiations Establish terms andconditions On-site inspection must be a contractprovision Conclude with formal Memorandum ofUnderstanding (MOU)

6 Convert MOU into formal detailed contract (as citedin Canaday 2007 para 5)

It should be noted here that this last step is recommendedby the FAA in AC 120-16E Chapter Nine as an importantfactor in the outsourcing process The Federal AviationAdministration states

When possible you should have a written contract withanyone performing maintenance work for you on acontinuing basis This will help ensure your responsi-bilities are addressed In the case of major operationssuch as engine propeller or airframe overhaul thecontract should include a specification for the work Youshould include or reference that specification in yourmanual system (2008 p 33)

Sakburanapech (2008) describes a process that wasdeveloped by Momme and Hvolby that has three phasesand six activities as shown in Figure 5

The actual selection process varies by airline and isbased on needs and priorities set by managementHowever regulatory requirements must be addressed to

Figure 5 The outsourcing process Adapted from lsquolsquoDevelopment of a relationship management framework and related performance metrics for outsourcedaircraft maintenancersquorsquo by A Sakburanapech 2008 Cranfield University p 15

McFadden and Worrels Journal of Aviation Technology and Engineering 69

the satisfaction of the FAA For example Becher aspokesman for Northwest Airlines stated in 2005

While costs for outsourced maintenance are lower thanfor in-house maintenance quality and safety are notcompromised Northwest selects them because of theirworld class management control systems and technicalability Outside vendors undergo a rigorous reviewbefore being offered a maintenance contract byNorthwest (as cited in lsquolsquoMaintenance Outsourcingrsquorsquo2009 para 14)

Jet Bluersquos vice-president of technical services Ramageuses turnaround times and the quality of service as keyfactors in the selection process He said lsquolsquoThe first thing welook at is the culture of the company And obviously whenI talk about quality it is what the safety culture is and canthey do the job well Quality safety and experience isimportantrsquorsquo (as cited in Arnoult 2010 para 7)

The Oversight Process and its Contribution to Safety

Air Carrier Oversight

The first line of defense in prevention of errors that maylead to improper maintenance is an air carrierrsquos CASSRequired by FAR Part 121373 CASS is one of the 10elements of a maintenance program (Continuing Analysisand Surveillance 1996)

The high level purpose of a CASS is to reduce oreliminate the likelihood of your aircraft being approvedfor return for service when it is not airworthy through thecontinuous system safety-based closed loop cycle ofsurveillance investigation data collection analysiscorrective action monitoring and feedback of aCASS (FAA 2010 p 6)

Four basic activities of CASS are surveillance analysiscorrective action and follow up Encompassed therein areaudit processes data collection processes Root CauseAnalysis (RCA) and performance measurement This risk-based closed loop system verifies performance andeffectiveness of a maintenance program (see Figure 6)(FAA 2010)

FAA Oversight

US repair stations Problems with FAA oversight ofoutsourced maintenance and contract repair stations drewattention from Department of Transportationrsquos (DOTrsquos)Office of Inspector General the public and the USCongress The catalyst for this attention was the crash ofValuJet Flight 592 into the Florida Everglades in May1996 The ValuJet accident was one of three fatal airlineaccidents related to contract maintenance (Adams 2009)The ValuJet accident investigation ultimately laid blame atthe feet of the Sabre-Tech (the contract maintenanceprovider) ValuJet and the FAA (National TransportationSafety Board 1997)

International repair stations The US and selectforeign countries recognize each otherrsquos aviation safetystandards and programs through Bilateral Aviation SafetyAgreements (BASA)

The purposes of this Agreement are to (a) enablereciprocal acceptance of findings of compliance andapprovals issued by the Technical Agents and AviationAuthorities (b) promote a high degree of safety in airtransport and (c) ensure continuation of high levelregulatory cooperation and harmonization between USand EC The scope of cooperation under this Agreementis (a) airworthiness approvals and monitoring of civilaeronautical products (b) environmental testing andapprovals of civil aeronautical products and (c)

Figure 6 Four Basic CASS Activities Adapted from lsquolsquoDeveloping and implementing an air carrier continuing analysis and surveillance systemrsquorsquo 2010FAA AC 120-79A p 15

70 McFadden and Worrels Journal of Aviation Technology and Engineering

approvals and monitoring of maintenance facilities(Council of the European Union 2011)

Certifiednon-certified repair stations Certification ofPart 145 repair stations is subject to regulatory require-ments of the FAA non-certificated stations are not (seeFigure 7)

Air carriers ensure through proper audits and oversightthat contracted facilities perform according to approvedmaintenance programs According to the DOT lsquolsquoNon-certificated facilities performing critical maintenance cre-ates a double standard because certificated repair stationsare required to have designated supervisors inspectorsreturn-to-service personnel and quality control systemsNo such requirements apply to non-certificated facilitiesrsquorsquo(DOT 2005 p 6) A DOT investigation found

hellipas many as 1400 domestic and foreign facilities thatcould perform the same work (eg repairing flightcontrol systems and engine parts) a certificated facilityperforms but are not inspected like certificated facilitiesOf those 1400 facilities we identified 104 foreign non-certificated facilitiesmdashFAA had never inspected any ofthem (2005 p 6)

Conclusion

Contract maintenance is as old as the aviation industryitself Over time and as the aviation industry has evolvedthe airline industry has integrated contract maintenance intoa post-deregulation business model that emphasizes its corebusiness transporting passengerscargo from point to pointwhile marginalizing to the greatest extent possible the costof aircraft maintenance Worldwide MROs have grown inresponse to continuous and increasing demand into a

viable segment of the aviation industry Proliferation ofMRO facilities worldwide should continue althoughgrowth has slowed as a result of current economicstagnation as long as the industry and the regulators meettheir responsibility to ensure aircraft are maintained to thehigh standards required by regulation and good businesspractice

References

Adams C (2009 June 1) Maintenance outsourcing safety debateAviation Today Retrieved from httpwwwaviationtodaycomregionscaMaintenance-Outsourcing-Safety-Debate_32488html

Air Transport Association of America (2003 March) Operatormanufacturer scheduled maintenance development Retrieved fromhttpwwwcastcorgcnweixiufilewxgc8pdf

Arnoult S (2010 October 26) Maintenance special report the MROquandary Airline Business Retrieved from httpwwwflightglobalcomarticles20101026348942maintenance-special-report-the-mro-quandaryhtml

Al-Kaabi H Potter A amp Naim M (2007) An outsourcing decisionmodel for airlinesrsquo MRO activities Journal of Quality in MaintenanceEngineering 13(3) 217ndash227 Retrieved from wwwemeraldinsightcom1355-2511htm doi 10110813552510710780258

Canaday H (2005 October 21) Cost control over time Overhaul andMaintenance Retrieved from httpwwwaviationweekcomawgenericstory_genericjspchannel5omampid5newsom1005cvrxmlampheadline5Cost20Control20Over20Time

Canaday H (2007 October 1) Intelligent outsourcing Overhaul andMaintenance Retrieved from httpwwwaviationweekcomezproxylibproxydberauedusearcharticleQuickSearchdoparameter5displayArticlesampreference5xmlom_xml20071001OM_10_01_2007_p59-01xmlamppubDate5Oct012007ampdatabaseName5omampkeyword5Intelligent+OutsourcingampissueDateWT510012007amppublicationName5omampheadline5Intelligent Outsourcing

Certified Aviation Services (2007 December) Improving the bottom linethrough outsourced line maintnenance [White Paper] Retrieved fromhttpwwwcertfiedaviationcom

Continuing Analysis and Surveillance 14 CFR 1 121373 (1996)Retrieved from the FAA Website httpwwwairwebfaagov

Figure 7 Differences in Requirements for FAA Certificated Repair Stations and Non-Certificated Facilities Adapted from lsquolsquoAir carriersrsquo use of non-certificated repair facilitiesrsquorsquo 2005 Department of Transportation p 12

McFadden and Worrels Journal of Aviation Technology and Engineering 71

(Al-Kaabi Potter amp Naim 2007) As recently as 2007 theFederal Aviation Administration (FAA) estimated thatlsquolsquooverall major air carriers outsourced an average of 64percent of their maintenance expenses compared to 37percent in 1996rsquorsquo (Department of Transportation 2008p 1) Airlines continually search for ways to reduce thisexpense and it is the primary factor in the decision tooutsource maintenance

Economics of scale has an impact on the decision tooutsource maintenance Each individual airline mustdetermine the point at which there is a positive return onthe investment in maintenance capability Large air carrierswith hundreds of aircraft can justify the investment for amulti-level maintenance capability However an airlinewith a relatively small fleet may not have the capitaldesire or need to establish a multi-level maintenanceprogram This is particularly true for startup air carriers andlow cost carriers (LCC)

Another factor is the tendency to blend maintenancecapability All air carriers outsource some element of theirmaintenance requirement Typically heavy maintenancewhich is labor intensive and requires extraordinary outlayfor facilities and equipment is outsourced For carriers inthe US 71 of heavy maintenance is outsourced withengine maintenance one of the fastest growing segments ofthe maintenance repair and overhaul (MRO) market(Phillips 2008) On the other end of the maintenancespectrum ground handling servicing and organizationallevel maintenance is most frequently not outsourced

Regardless who conducts the maintenance on an airlinersquosaircraft aircraft maintenance is ultimately the responsibilityof the airline (FAA 2008) Accordingly the most criticalpart of the outsourcing process is selecting a reputableMRO provider While high rates of reliability are alwaysexpected many air carriers are looking for more such astotal support solutions

Global MRO Growth and Consolidation

Global MRO revenue in 2002 was between 25 and 30billion dollars (Czepiel 2003) Recent economic conditionshave reduced short term estimates of MRO demandhowever long term growth is forecast at 43 through2018 (Phillips 2009) From 2002 through 2010 averagespending for MRO was $3402 billion (see Figure 1) It isestimated to reach $65 billion by 2020 doubling the 2003$30 billion estimate by Czepiel

Projected MRO growth is lsquolsquoparticularly strong in Indiaand China followed by Asia Europe and North Americawith less growth in North Africa and the Middle Eastrsquorsquo(Phillips 2008 para 9) The North American MRO marketremains largest in dollars spent at $156 billion in 2007lsquolsquofollowed by Western Europe ($104 billion) Asia-Pacific($56 billion) China ($23 billion) the Middle East ($2billion) South America ($2 billion) Africa ($15 billion)

Eastern Europe ($12 billion) and India ($444 million)rsquorsquo(Jackman 2007 para 18)

The global recession has contributed to consolidation inthe MRO industry Lufthansa Technik (LHT) has started ajoint venture with Qantas opening up LHT Sofia tooverhaul short and medium range aircraft and lsquolsquohellipseveralMROs reported forming partnerships with firms in otherregions to offer more competitive costs and convenience tocustomersrsquorsquo (Moody 2009 para 16) Aeroman the largestMRO in Central America sold 80 of the company to AirCanada Technical Services in 2006 and now operates underthe Aveos brand (Tegtmeir 2011)

Outsourced Maintenance

Heavy Maintenance Visits

Heavy maintenance visits (HMV) will grow from $9billion in 2008 to $13 billion in 2017 (Phillips 2008)Industry experts estimate two-thirds of HMV costs arelabor costs (Jackman 2007) With foreign labor costs lessthan 50 of those in the US (see Figure 2) it is easy to seewhy many air carriers have shifted their HMV to overseasproviders (Weaver 2008) with estimated savings at $1million per aircraft each year (Pandit 2007)

Delta TechOps Program Manager Beadle concursstating lsquolsquoLabor costs represent approximately 70 ofHMV costsrsquorsquo (M Beadle personal communicationFebruary 9 2011) In 2008 starting pay at Aeroman wasapproximately $4500 per year with veterans earningapproximate $15000 That compares to the US averageof $52000 (Smith amp Bachman 2008) lsquolsquoDelta Airlinessends the majority of wide-body HMV to facilities in theFar East to take advantage of lower labor costsrsquorsquo (MBeadle personal communication February 9 2011)Narrow body HMV work tends to stay in the WesternHemisphere with MRO providers in Central Americaplaying a significant role lower labor costs and shorterferry flights contribute to cost savings

Figure 1 Estimated world MRO spending Adapted from lsquolsquoAirlinemaintenance costs executive commentaryrsquorsquo 2011 International AirTransport Association p 3

64 McFadden and Worrels Journal of Aviation Technology and Engineering

Another factor in the outsourcing equation is the capitalinvestment in facilities equipment and associated over-head The hangar space required to shelter an aircraft that isvirtually dissembled is considerable In addition the heavyequipment work stands test equipment support equip-ment test benches etc represent a considerable outlay ofcapital And this equipment needs to be maintained andcalibrated on a regular basis as well The cost ofestablishing a heavy maintenance capability can beprohibitive with breakeven return on investment perhaps10 to 15 years down the road Another cost consideration isthe maintenance burden lsquolsquoadministrative and overheadcosts associated with the maintenance function that cannotbe attributed directly to a particular airframe or enginebut allocated on a fairly arbitrary basisrsquorsquo (Wensveen 2007p 305)

Power Plant MRO

Power plant MRO is projected to be the fastest growingsegment of MRO at an estimated annual growth rate of46 (Phillips 2008) Power plant technology has allowedfor greater reliability and on-wing time While it would benatural to assume that this would translate into reducedcosts that is not necessarily the case some estimates showpower plant maintenance spending increasing lsquolsquotwo percentfaster than traffic through 2013rsquorsquo (Canaday 2005 para 30)The reason for this projected increase is mainly due to thehigh cost of repair parts Costs of repair parts fromlsquolsquoGeneral Electric (GE) Pratt and Whitney (PW) and CFMInternational (CFMI) hellip[are] increasing at an average of35 to 45 percent a yearrsquorsquo (Canaday 2005 para 27)

Line Maintenance

Line maintenance is outsourced much less frequentlythan either heavy maintenance or power plant MROhowever the outsourcing of line maintenance is primed forgrowth AeroStrategy principal Stewart states lsquolsquoOuranalysis estimates that for 2008 about 12 percent of linemaintenance is outsourced and by 2017 that could reachas much as 30 percentrsquorsquo (as cited in Seidenman 2008 para4) Line maintenance occupies a very special place in the

operation of an airline due to the direct impact it can haveon operational performance both positive and negativeDelays at the gate can be expensive with estimates from$50 to $100 per minute and an outright cancellation up to$60000 (Certified Aviation Services 2007 para 17)Before an airline will outsource such a critical function itneeds to be assured that a potential vendor would be able tosupply the same level of qualified personnel

Component Repair and Spare Parts Inventory

Component repair The outsourcing of componentrepair and replacement is also undergoing a significantdegree of transformation As in other areas of aircraftmaintenance established airlines once had their own shopsto repair or rebuild components such as landing gearauxiliary power units electrical system componentshydraulic-pneumatic system components and variouspower plant components Some even had their ownavionics shops for the repair of communication andnavigation equipment flight management systems andflight instruments

Airlines look for component support solutions that areflexible with predictable costs For example lsquolsquoAirtranoutsources its component support to several large vendorsmostly manufacturers like Honeywellrsquorsquo (Canaday 2005para 69) Borowski Airtranrsquos vice-president of main-tenance and engineering states lsquolsquoWe pay a rate per flighthour the invoicing is simple there is very little adminis-tration and the costs are predictablersquorsquo (as cited in Canaday2005 para 69)

Spare parts inventory The cost of inventory runs intomillions of dollars and inventory management is laborintensive While these facts have not changed thelandscape has changed dramatically with airlines reducingthe amount of inventory they hold directly outsourcing it tocompanies dedicated to inventory management In 2007inventories were reduced to 61 from 75 of the $48billion spare parts inventory previously stocked and stored(Trebilcock 2007 para 2) One airline executive sayslsquolsquoWe continue to see upward trending with airlineschoosing to get out of the inventory management andrepair businessrsquorsquo (as cited in Moorman 2011 para 3)

Figure 2 Estimated man hour costs in dollars Adapted from lsquolsquoTenets of MRO strategy for airlinesrsquorsquo by P Pandit 2007 p 6

McFadden and Worrels Journal of Aviation Technology and Engineering 65

While the benefits of outsourcing component repair andinventory management can be considerable there are risksAn airline must make sure that it is using a reputablesupplier for not only reliability and timely delivery of therequired items but for quality and legitimacy of approvedparts as well

Production Planning and Control

Airlines have been reluctant to give up control ofproduction planning and control activities making them theleast outsourced That may be changing according toHouse of TIMCO Aviation Services lsquolsquoBut now that airlinesare accustomed to subcontracting to lower labor costproviders many view outsourcing of the back office as thenext cost saving opportunityrsquorsquo (as cited in Seidenman ampSpanovich 2009 para 1)

As with the other areas of outsourcing ultimately avendor must be able to show that while they are able tokeep costs under control they can also effectively managethe contracted work Demeis president and founder ofContinuum Applied Technology believes that the move tooutsource these important functions may be premature

Frankly I donrsquot think that any savings involved withoutsourcing back office support would be great at thistime because at least a portion of the carrierrsquos qualitycontrol department will have to supervise the perfor-mance of the third-party company That means that anysavings related by eliminating an internal IT staffposition will be greatly diminished (as cited inSeidenman amp Spanovich 2009 para 20)

Regulatory Requirements

All air carrier maintenance programs have their roots in theinitial certification of an aircraft Design of maintenanceprograms must be flexible enough to accommodate air carrierspecific requirements and must comply with Federal AviationRegulations (FARs) Most of the worldrsquos airlines andmanufacturers use the AirlineManufacturer MaintenanceProgram Planning Document or Maintenance Steering Group(MSG) in the development of maintenance programs (AirTransport 2003) The Air Transport Association of America(ATA) administers and maintains this document to provideguidance on the development of maintenance procedures fornew aircraft Specifically the ATA states

It is the objective of this document to present a means fordeveloping the scheduled maintenance tasks and inter-vals which will be acceptable to the regulatoryauthorities the operators and the manufacturers Thescheduled maintenance task and interval details will bedeveloped by coordination with specialists from the

operators manufacturers and the Regulatory Authorityof the country of manufacture Specifically thisdocument outlines the general organization and decisionprocesses for determining scheduled maintenancerequirements initially projected for the life of the aircraftandor power plant (2003 p 11)

Once these basic regulatory requirements are met theFAA provides fairly wide latitude on the specific structureof an airlinersquos maintenance operations According to theFAA

Establishing appropriate standards and regulatory require-ments is a risk management process and the underlyinglegal structure provides for more than one level ofacceptable risk Air transportation regulations are all-inclusive and stand alone whereas the regulationsgoverning other air commerce do not Similarly thescope of responsibility for those in air transportation isvery broad and not shared whereas in other air commerceit is relatively narrow and shared The regulations in parts119 121 and 135 relate directly to air carrier maintenanceprograms and reflect the highest possible degree of publicsafety The regulations in parts 43 65 91 and 145 do notnecessarily reflect the highest possible degree of safety inthe public interest (2008 para 8)

The FAA sets the tone for Air Carrier MaintenancePrograms it describes in detail how an air carrier maystructure its maintenance program Advisory Circular (AC)120-16E describes how a maintenance organization can beset up for both a FAR Part 121or a FAR Part 135 operation

The foundation and legal basis for airworthiness andmaintenance of an air carrierrsquos aircraft is found in FAR Part121 As stated in FAR Part 121363

(a) Each certificate holder is primarily responsible for

(1) The airworthiness of its aircraft including air-frames aircraft engines propellers appliancesand parts thereof and

(2) The performance of the maintenance preventivemaintenance and alteration of its aircraftincluding airframes aircraft engines propellersappliances emergency equipment and partsthereof in accordance with its manual and theregulations of this chapter

(b) A certificate holder may make arrangements withanother person for the performance of any main-tenance preventive maintenance or alterationsHowever this does not relieve the certificate holderof the responsibility specified in paragraph (a) of thissection (Responsibility for Airworthiness 1973)

By definition ACs are not mandatory as issued AC 120-16E describes lsquolsquothe scope and content of air carrier aircraft

66 McFadden and Worrels Journal of Aviation Technology and Engineering

maintenance programsrsquorsquo (FAA 2008 p i) This ACdescribes how an air carrierrsquos maintenance programlsquolsquoshould reflect three specific program objectives to providethe highest possible level of safety in air transportationrsquorsquo(FAA 2008 p 2) These objectives are

(a) each of your aircraft released to service is airworthyand has been properly maintained for operations in airtransportation (b) maintenance and alterations that youperform or that other persons perform for you areperformed in accordance with your maintenance manualand (c) competent personnel with adequate facilities andequipment perform maintenance and alterations on youraircraft (FAA 2008 p 2)

Advisory Circular 120-16E describes the 10 elementsrequired of an air carrier maintenance program These 10elements are

1 Airworthiness responsibility2 Air carrier maintenance manual3 Air carrier maintenance organization4 Accomplishment and approval of maintenance and

alterations5 Maintenance schedule6 Required Inspection Items7 Maintenance recordkeeping system8 Contract maintenance9 Personnel training

10 Continuing Analysis and Surveillance System(CASS)

Chapter nine of AC 120-16E describes what is expectedfor contract maintenance The first paragraph of chapternine of this AC clearly spells out this responsibility stating

Consistent with 1211 (b) 1351 (b)(2) and others whenyou use a maintenance provider to accomplish all or partof the maintenance activities on your airplane or itscomponent parts that maintenance provider becomes ineffect part of your maintenance organization and underyour control (FAA 2008 p 33)

The Decision to Outsource

Prior to deregulation most aircraft maintenance wasconducted in-house (vertically integrated) and according toDelta TechOps Program Manager Beadle lsquolsquoyears ago noone really paid much attention to the cost of aircraftmaintenance It was all part of doing businessrsquorsquo (personalcommunication February 9 2011)

Outsourcing as a business model has become anaccepted way for companies to reduce costs and focus oncore competencies Sackett and Sakburanapech statelsquolsquoAlthough outsourcing enables companies to focus on

their core competencies and may reduce costs mostenterprises are cautious about outsourcing business criticalactivitiesrsquorsquo (2006 p 1) Critical outsourcing as shown inFigure 3 is lsquolsquocharacterized by both high importance andfinancial impactrsquorsquo (Sakburanapech 2008 p 28)

Outsourcing of aircraft maintenance is a business criticalactivity with regard to strategic importance and financesWhat makes outsourcing of aircraft maintenance unique isthat lives are potentially at risk if maintenance is not doneproperly

Aircraft maintenance is now viewed as a non-corebusiness However this widely accepted definition does notapply to all areas of outsourced aircraft maintenance atleast one airline Jet Blue considers line maintenance acore competency Ramage vice-president of technicalservices stated lsquolsquoEach airline defines what core businessis differently For Jet Blue line maintenance is a corebusiness heavy maintenance is notrsquorsquo (as cited in Schifrin2007 para 28)

Rapid emergence of LCCs in the US and abroad has hadan impact These air carriers have decided to outsourcemaintenance rather than establish maintenance operationsfrom scratch The maintenance outsourcing trend is wellestablished (see Table 1)

Jet Bluersquos Director of Maintenance states

Our business is to fly people safely from one point to thenext Line maintenance is a requirement You must havethat if you want reliability But when you start talkingabout MRO thatrsquos a whole different business It requiresa lot of overhead and tooling and we leave that to theexperts They can do it a lot more efficiently than wecan Wersquoll stick to our core business We believe thatwill maximize shareholder value (as cited inlsquolsquoMaintenance Outsourcing Emergingrsquorsquo 2009 para 23)

Figure 3 Outsourcing Classifications Adapted from lsquolsquoDevelopment of arelationship management framework and related performance metrics foroutsourced aircraft maintenancersquorsquo by A Sakburanapech 2008 CranfieldUniversity p 11

McFadden and Worrels Journal of Aviation Technology and Engineering 67

Foreign LCCs one of the fastest growing segments ofthe worldwide aviation market feel much the same wayIndicative of this is the view of Jetstar Asiarsquos Head ofEngineering Neo Neo indicates that he wants an MROprovider with lsquolsquothe capability to provide a full suite ofEngineering services including a proven and strong abilityto provide AOG [Aircraft on Ground] recovery fromtechnical breakdownsrsquorsquo (as cited in Moody 2010 para 24)

With the trend towards outsourcing a question arises asto whether an airline should keep the work or send it out

When evaluating the outsourcing decision some air carriersuse a MakeBuy decision model to help them determinewhether or not to outsource Well established as anaccepted course of action in many industries it providesmanagement with a tool for determining where workshould be done According to Smith lsquolsquoit is the maximum ofevery prudent master of the family never attempt to makeat home what it will cost him more to make than to buyrsquorsquo(as cited in Ferreira amp Serra 2010 para 1) Is it more costeffective to have someone else do the required work or is itbetter if it is kept in-house Transaction Cost Economics isone description of the MakeBuy method Transaction CostEconomics is lsquolsquofundamentally concerned with the questionof whether it is advantageous in terms of cost fortransactions to occur within the hierarchy of an organiza-tion or externally in the open marketrsquorsquo (Rieple 2008 para2) According to Program Manager Beadle Delta TechOpsuses a MakeBuy decision for all of Deltarsquos maintenancework and while TechOps might be given a preference ingetting the bid for some work if they are not competitivethe work will in fact be outsourced (personal communica-tion February 9 2011)

The MRO Model

Al-Kaabi et al (2007) describe four levels of MROFully Integrated Partially Outsourced Mostly Outsourcedand Wholly Outsourced as shown in Figure 4 Withinthese levels the entire aircraft maintenance spectrum isaddressed

Table 1Airline Maintenance Outsourcing (as percentage of total expenses)

Airline 2005 2006 2007 (through Q3)

Alaska 92 80 81Hawaiian 80 86 89US Airwaysa 77 81 80Northwest 76 83 81America Westb 76 91 91Continental 69 68 70JetBlue 68 64 65Southwest 68 81 85AirTran 66 93 94Frontier 65 79 80United 63 66 67Delta 48 73 72American 46 49 51ATAc 18 85 87

Note Adapted from lsquolsquoOutsourcing of airline maintenance soursrsquorsquo by W JMcGee 2008 Consumer Reports para 18

aMerged with America West bMerged with US Airways cCeasedoperations

Figure 4 MRO Model Depictions Adapted from lsquolsquoAn outsourcing decision model for airlinesrsquo MRO activitiesrsquorsquo by H Al-Kaabi et al 2007 Journal ofQuality in Maintenance Engineering 13(3) p 220

68 McFadden and Worrels Journal of Aviation Technology and Engineering

Fully Integrated MRO

An airline performs all aircraft maintenance activities in-house In addition it may look to sell excess capacity toother airlines

This practice is well-suited for airlines with large variedfleets and an extensive route structure (Al-Kaabi et al2007)

Partially Outsourced MRO

An airline meets a large portion of its needs in-housewith a minimum of outsourcing This permits a good dealof flexibility and adaptation to seasonable demands and isbest suited for airlines that have just a few different fleettypes

Mostly Outsourced MRO

Most maintenance is outsourced while critical needs arekept in-house (Al-Kaabi et al 2007) lsquolsquoCritical needsrsquorsquo aredefined by individual carriers For example Jet BlueAirlines defines line maintenance as critical to its operationand keeps most of that activity in-house

Wholly Outsourced MRO

All maintenance is outsourced This model is used bystartup airlines that do not have the capital to establish anMRO capability or that choose not to as a part of theirbusiness model

MRO Provider Selection

Perhaps the most important factor to consider is theselection of the MRO provider Many variables come intoplay and each one must be considered carefully Wymanuses a very thorough six-step process that evaluates allaspects of a provider before making a recommendation toan airline These six steps are

1 Define requirements Develop a detailed descriptionof what is to be expected including the volume andtiming of the work required

2 Explore and understand the current marketplaceKnowing who is doing quality and reliable work isextremely important

3 Define outsource strategy and require initial bids forthe work Determine whether or not to bundleunbundle services length of contract and type ofcontract

4 Feedback for bidders Specific details concerningpricing and suggestions on ancillary services arediscussed

5 Face to face negotiations Establish terms andconditions On-site inspection must be a contractprovision Conclude with formal Memorandum ofUnderstanding (MOU)

6 Convert MOU into formal detailed contract (as citedin Canaday 2007 para 5)

It should be noted here that this last step is recommendedby the FAA in AC 120-16E Chapter Nine as an importantfactor in the outsourcing process The Federal AviationAdministration states

When possible you should have a written contract withanyone performing maintenance work for you on acontinuing basis This will help ensure your responsi-bilities are addressed In the case of major operationssuch as engine propeller or airframe overhaul thecontract should include a specification for the work Youshould include or reference that specification in yourmanual system (2008 p 33)

Sakburanapech (2008) describes a process that wasdeveloped by Momme and Hvolby that has three phasesand six activities as shown in Figure 5

The actual selection process varies by airline and isbased on needs and priorities set by managementHowever regulatory requirements must be addressed to

Figure 5 The outsourcing process Adapted from lsquolsquoDevelopment of a relationship management framework and related performance metrics for outsourcedaircraft maintenancersquorsquo by A Sakburanapech 2008 Cranfield University p 15

McFadden and Worrels Journal of Aviation Technology and Engineering 69

the satisfaction of the FAA For example Becher aspokesman for Northwest Airlines stated in 2005

While costs for outsourced maintenance are lower thanfor in-house maintenance quality and safety are notcompromised Northwest selects them because of theirworld class management control systems and technicalability Outside vendors undergo a rigorous reviewbefore being offered a maintenance contract byNorthwest (as cited in lsquolsquoMaintenance Outsourcingrsquorsquo2009 para 14)

Jet Bluersquos vice-president of technical services Ramageuses turnaround times and the quality of service as keyfactors in the selection process He said lsquolsquoThe first thing welook at is the culture of the company And obviously whenI talk about quality it is what the safety culture is and canthey do the job well Quality safety and experience isimportantrsquorsquo (as cited in Arnoult 2010 para 7)

The Oversight Process and its Contribution to Safety

Air Carrier Oversight

The first line of defense in prevention of errors that maylead to improper maintenance is an air carrierrsquos CASSRequired by FAR Part 121373 CASS is one of the 10elements of a maintenance program (Continuing Analysisand Surveillance 1996)

The high level purpose of a CASS is to reduce oreliminate the likelihood of your aircraft being approvedfor return for service when it is not airworthy through thecontinuous system safety-based closed loop cycle ofsurveillance investigation data collection analysiscorrective action monitoring and feedback of aCASS (FAA 2010 p 6)

Four basic activities of CASS are surveillance analysiscorrective action and follow up Encompassed therein areaudit processes data collection processes Root CauseAnalysis (RCA) and performance measurement This risk-based closed loop system verifies performance andeffectiveness of a maintenance program (see Figure 6)(FAA 2010)

FAA Oversight

US repair stations Problems with FAA oversight ofoutsourced maintenance and contract repair stations drewattention from Department of Transportationrsquos (DOTrsquos)Office of Inspector General the public and the USCongress The catalyst for this attention was the crash ofValuJet Flight 592 into the Florida Everglades in May1996 The ValuJet accident was one of three fatal airlineaccidents related to contract maintenance (Adams 2009)The ValuJet accident investigation ultimately laid blame atthe feet of the Sabre-Tech (the contract maintenanceprovider) ValuJet and the FAA (National TransportationSafety Board 1997)

International repair stations The US and selectforeign countries recognize each otherrsquos aviation safetystandards and programs through Bilateral Aviation SafetyAgreements (BASA)

The purposes of this Agreement are to (a) enablereciprocal acceptance of findings of compliance andapprovals issued by the Technical Agents and AviationAuthorities (b) promote a high degree of safety in airtransport and (c) ensure continuation of high levelregulatory cooperation and harmonization between USand EC The scope of cooperation under this Agreementis (a) airworthiness approvals and monitoring of civilaeronautical products (b) environmental testing andapprovals of civil aeronautical products and (c)

Figure 6 Four Basic CASS Activities Adapted from lsquolsquoDeveloping and implementing an air carrier continuing analysis and surveillance systemrsquorsquo 2010FAA AC 120-79A p 15

70 McFadden and Worrels Journal of Aviation Technology and Engineering

approvals and monitoring of maintenance facilities(Council of the European Union 2011)

Certifiednon-certified repair stations Certification ofPart 145 repair stations is subject to regulatory require-ments of the FAA non-certificated stations are not (seeFigure 7)

Air carriers ensure through proper audits and oversightthat contracted facilities perform according to approvedmaintenance programs According to the DOT lsquolsquoNon-certificated facilities performing critical maintenance cre-ates a double standard because certificated repair stationsare required to have designated supervisors inspectorsreturn-to-service personnel and quality control systemsNo such requirements apply to non-certificated facilitiesrsquorsquo(DOT 2005 p 6) A DOT investigation found

hellipas many as 1400 domestic and foreign facilities thatcould perform the same work (eg repairing flightcontrol systems and engine parts) a certificated facilityperforms but are not inspected like certificated facilitiesOf those 1400 facilities we identified 104 foreign non-certificated facilitiesmdashFAA had never inspected any ofthem (2005 p 6)

Conclusion

Contract maintenance is as old as the aviation industryitself Over time and as the aviation industry has evolvedthe airline industry has integrated contract maintenance intoa post-deregulation business model that emphasizes its corebusiness transporting passengerscargo from point to pointwhile marginalizing to the greatest extent possible the costof aircraft maintenance Worldwide MROs have grown inresponse to continuous and increasing demand into a

viable segment of the aviation industry Proliferation ofMRO facilities worldwide should continue althoughgrowth has slowed as a result of current economicstagnation as long as the industry and the regulators meettheir responsibility to ensure aircraft are maintained to thehigh standards required by regulation and good businesspractice

References

Adams C (2009 June 1) Maintenance outsourcing safety debateAviation Today Retrieved from httpwwwaviationtodaycomregionscaMaintenance-Outsourcing-Safety-Debate_32488html

Air Transport Association of America (2003 March) Operatormanufacturer scheduled maintenance development Retrieved fromhttpwwwcastcorgcnweixiufilewxgc8pdf

Arnoult S (2010 October 26) Maintenance special report the MROquandary Airline Business Retrieved from httpwwwflightglobalcomarticles20101026348942maintenance-special-report-the-mro-quandaryhtml

Al-Kaabi H Potter A amp Naim M (2007) An outsourcing decisionmodel for airlinesrsquo MRO activities Journal of Quality in MaintenanceEngineering 13(3) 217ndash227 Retrieved from wwwemeraldinsightcom1355-2511htm doi 10110813552510710780258

Canaday H (2005 October 21) Cost control over time Overhaul andMaintenance Retrieved from httpwwwaviationweekcomawgenericstory_genericjspchannel5omampid5newsom1005cvrxmlampheadline5Cost20Control20Over20Time

Canaday H (2007 October 1) Intelligent outsourcing Overhaul andMaintenance Retrieved from httpwwwaviationweekcomezproxylibproxydberauedusearcharticleQuickSearchdoparameter5displayArticlesampreference5xmlom_xml20071001OM_10_01_2007_p59-01xmlamppubDate5Oct012007ampdatabaseName5omampkeyword5Intelligent+OutsourcingampissueDateWT510012007amppublicationName5omampheadline5Intelligent Outsourcing

Certified Aviation Services (2007 December) Improving the bottom linethrough outsourced line maintnenance [White Paper] Retrieved fromhttpwwwcertfiedaviationcom

Continuing Analysis and Surveillance 14 CFR 1 121373 (1996)Retrieved from the FAA Website httpwwwairwebfaagov

Figure 7 Differences in Requirements for FAA Certificated Repair Stations and Non-Certificated Facilities Adapted from lsquolsquoAir carriersrsquo use of non-certificated repair facilitiesrsquorsquo 2005 Department of Transportation p 12

McFadden and Worrels Journal of Aviation Technology and Engineering 71

Another factor in the outsourcing equation is the capitalinvestment in facilities equipment and associated over-head The hangar space required to shelter an aircraft that isvirtually dissembled is considerable In addition the heavyequipment work stands test equipment support equip-ment test benches etc represent a considerable outlay ofcapital And this equipment needs to be maintained andcalibrated on a regular basis as well The cost ofestablishing a heavy maintenance capability can beprohibitive with breakeven return on investment perhaps10 to 15 years down the road Another cost consideration isthe maintenance burden lsquolsquoadministrative and overheadcosts associated with the maintenance function that cannotbe attributed directly to a particular airframe or enginebut allocated on a fairly arbitrary basisrsquorsquo (Wensveen 2007p 305)

Power Plant MRO

Power plant MRO is projected to be the fastest growingsegment of MRO at an estimated annual growth rate of46 (Phillips 2008) Power plant technology has allowedfor greater reliability and on-wing time While it would benatural to assume that this would translate into reducedcosts that is not necessarily the case some estimates showpower plant maintenance spending increasing lsquolsquotwo percentfaster than traffic through 2013rsquorsquo (Canaday 2005 para 30)The reason for this projected increase is mainly due to thehigh cost of repair parts Costs of repair parts fromlsquolsquoGeneral Electric (GE) Pratt and Whitney (PW) and CFMInternational (CFMI) hellip[are] increasing at an average of35 to 45 percent a yearrsquorsquo (Canaday 2005 para 27)

Line Maintenance

Line maintenance is outsourced much less frequentlythan either heavy maintenance or power plant MROhowever the outsourcing of line maintenance is primed forgrowth AeroStrategy principal Stewart states lsquolsquoOuranalysis estimates that for 2008 about 12 percent of linemaintenance is outsourced and by 2017 that could reachas much as 30 percentrsquorsquo (as cited in Seidenman 2008 para4) Line maintenance occupies a very special place in the

operation of an airline due to the direct impact it can haveon operational performance both positive and negativeDelays at the gate can be expensive with estimates from$50 to $100 per minute and an outright cancellation up to$60000 (Certified Aviation Services 2007 para 17)Before an airline will outsource such a critical function itneeds to be assured that a potential vendor would be able tosupply the same level of qualified personnel

Component Repair and Spare Parts Inventory

Component repair The outsourcing of componentrepair and replacement is also undergoing a significantdegree of transformation As in other areas of aircraftmaintenance established airlines once had their own shopsto repair or rebuild components such as landing gearauxiliary power units electrical system componentshydraulic-pneumatic system components and variouspower plant components Some even had their ownavionics shops for the repair of communication andnavigation equipment flight management systems andflight instruments

Airlines look for component support solutions that areflexible with predictable costs For example lsquolsquoAirtranoutsources its component support to several large vendorsmostly manufacturers like Honeywellrsquorsquo (Canaday 2005para 69) Borowski Airtranrsquos vice-president of main-tenance and engineering states lsquolsquoWe pay a rate per flighthour the invoicing is simple there is very little adminis-tration and the costs are predictablersquorsquo (as cited in Canaday2005 para 69)

Spare parts inventory The cost of inventory runs intomillions of dollars and inventory management is laborintensive While these facts have not changed thelandscape has changed dramatically with airlines reducingthe amount of inventory they hold directly outsourcing it tocompanies dedicated to inventory management In 2007inventories were reduced to 61 from 75 of the $48billion spare parts inventory previously stocked and stored(Trebilcock 2007 para 2) One airline executive sayslsquolsquoWe continue to see upward trending with airlineschoosing to get out of the inventory management andrepair businessrsquorsquo (as cited in Moorman 2011 para 3)

Figure 2 Estimated man hour costs in dollars Adapted from lsquolsquoTenets of MRO strategy for airlinesrsquorsquo by P Pandit 2007 p 6

McFadden and Worrels Journal of Aviation Technology and Engineering 65

While the benefits of outsourcing component repair andinventory management can be considerable there are risksAn airline must make sure that it is using a reputablesupplier for not only reliability and timely delivery of therequired items but for quality and legitimacy of approvedparts as well

Production Planning and Control

Airlines have been reluctant to give up control ofproduction planning and control activities making them theleast outsourced That may be changing according toHouse of TIMCO Aviation Services lsquolsquoBut now that airlinesare accustomed to subcontracting to lower labor costproviders many view outsourcing of the back office as thenext cost saving opportunityrsquorsquo (as cited in Seidenman ampSpanovich 2009 para 1)

As with the other areas of outsourcing ultimately avendor must be able to show that while they are able tokeep costs under control they can also effectively managethe contracted work Demeis president and founder ofContinuum Applied Technology believes that the move tooutsource these important functions may be premature

Frankly I donrsquot think that any savings involved withoutsourcing back office support would be great at thistime because at least a portion of the carrierrsquos qualitycontrol department will have to supervise the perfor-mance of the third-party company That means that anysavings related by eliminating an internal IT staffposition will be greatly diminished (as cited inSeidenman amp Spanovich 2009 para 20)

Regulatory Requirements

All air carrier maintenance programs have their roots in theinitial certification of an aircraft Design of maintenanceprograms must be flexible enough to accommodate air carrierspecific requirements and must comply with Federal AviationRegulations (FARs) Most of the worldrsquos airlines andmanufacturers use the AirlineManufacturer MaintenanceProgram Planning Document or Maintenance Steering Group(MSG) in the development of maintenance programs (AirTransport 2003) The Air Transport Association of America(ATA) administers and maintains this document to provideguidance on the development of maintenance procedures fornew aircraft Specifically the ATA states

It is the objective of this document to present a means fordeveloping the scheduled maintenance tasks and inter-vals which will be acceptable to the regulatoryauthorities the operators and the manufacturers Thescheduled maintenance task and interval details will bedeveloped by coordination with specialists from the

operators manufacturers and the Regulatory Authorityof the country of manufacture Specifically thisdocument outlines the general organization and decisionprocesses for determining scheduled maintenancerequirements initially projected for the life of the aircraftandor power plant (2003 p 11)

Once these basic regulatory requirements are met theFAA provides fairly wide latitude on the specific structureof an airlinersquos maintenance operations According to theFAA

Establishing appropriate standards and regulatory require-ments is a risk management process and the underlyinglegal structure provides for more than one level ofacceptable risk Air transportation regulations are all-inclusive and stand alone whereas the regulationsgoverning other air commerce do not Similarly thescope of responsibility for those in air transportation isvery broad and not shared whereas in other air commerceit is relatively narrow and shared The regulations in parts119 121 and 135 relate directly to air carrier maintenanceprograms and reflect the highest possible degree of publicsafety The regulations in parts 43 65 91 and 145 do notnecessarily reflect the highest possible degree of safety inthe public interest (2008 para 8)

The FAA sets the tone for Air Carrier MaintenancePrograms it describes in detail how an air carrier maystructure its maintenance program Advisory Circular (AC)120-16E describes how a maintenance organization can beset up for both a FAR Part 121or a FAR Part 135 operation

The foundation and legal basis for airworthiness andmaintenance of an air carrierrsquos aircraft is found in FAR Part121 As stated in FAR Part 121363

(a) Each certificate holder is primarily responsible for

(1) The airworthiness of its aircraft including air-frames aircraft engines propellers appliancesand parts thereof and

(2) The performance of the maintenance preventivemaintenance and alteration of its aircraftincluding airframes aircraft engines propellersappliances emergency equipment and partsthereof in accordance with its manual and theregulations of this chapter

(b) A certificate holder may make arrangements withanother person for the performance of any main-tenance preventive maintenance or alterationsHowever this does not relieve the certificate holderof the responsibility specified in paragraph (a) of thissection (Responsibility for Airworthiness 1973)

By definition ACs are not mandatory as issued AC 120-16E describes lsquolsquothe scope and content of air carrier aircraft

66 McFadden and Worrels Journal of Aviation Technology and Engineering

maintenance programsrsquorsquo (FAA 2008 p i) This ACdescribes how an air carrierrsquos maintenance programlsquolsquoshould reflect three specific program objectives to providethe highest possible level of safety in air transportationrsquorsquo(FAA 2008 p 2) These objectives are

(a) each of your aircraft released to service is airworthyand has been properly maintained for operations in airtransportation (b) maintenance and alterations that youperform or that other persons perform for you areperformed in accordance with your maintenance manualand (c) competent personnel with adequate facilities andequipment perform maintenance and alterations on youraircraft (FAA 2008 p 2)

Advisory Circular 120-16E describes the 10 elementsrequired of an air carrier maintenance program These 10elements are

1 Airworthiness responsibility2 Air carrier maintenance manual3 Air carrier maintenance organization4 Accomplishment and approval of maintenance and

alterations5 Maintenance schedule6 Required Inspection Items7 Maintenance recordkeeping system8 Contract maintenance9 Personnel training

10 Continuing Analysis and Surveillance System(CASS)

Chapter nine of AC 120-16E describes what is expectedfor contract maintenance The first paragraph of chapternine of this AC clearly spells out this responsibility stating

Consistent with 1211 (b) 1351 (b)(2) and others whenyou use a maintenance provider to accomplish all or partof the maintenance activities on your airplane or itscomponent parts that maintenance provider becomes ineffect part of your maintenance organization and underyour control (FAA 2008 p 33)

The Decision to Outsource

Prior to deregulation most aircraft maintenance wasconducted in-house (vertically integrated) and according toDelta TechOps Program Manager Beadle lsquolsquoyears ago noone really paid much attention to the cost of aircraftmaintenance It was all part of doing businessrsquorsquo (personalcommunication February 9 2011)

Outsourcing as a business model has become anaccepted way for companies to reduce costs and focus oncore competencies Sackett and Sakburanapech statelsquolsquoAlthough outsourcing enables companies to focus on

their core competencies and may reduce costs mostenterprises are cautious about outsourcing business criticalactivitiesrsquorsquo (2006 p 1) Critical outsourcing as shown inFigure 3 is lsquolsquocharacterized by both high importance andfinancial impactrsquorsquo (Sakburanapech 2008 p 28)

Outsourcing of aircraft maintenance is a business criticalactivity with regard to strategic importance and financesWhat makes outsourcing of aircraft maintenance unique isthat lives are potentially at risk if maintenance is not doneproperly

Aircraft maintenance is now viewed as a non-corebusiness However this widely accepted definition does notapply to all areas of outsourced aircraft maintenance atleast one airline Jet Blue considers line maintenance acore competency Ramage vice-president of technicalservices stated lsquolsquoEach airline defines what core businessis differently For Jet Blue line maintenance is a corebusiness heavy maintenance is notrsquorsquo (as cited in Schifrin2007 para 28)

Rapid emergence of LCCs in the US and abroad has hadan impact These air carriers have decided to outsourcemaintenance rather than establish maintenance operationsfrom scratch The maintenance outsourcing trend is wellestablished (see Table 1)

Jet Bluersquos Director of Maintenance states

Our business is to fly people safely from one point to thenext Line maintenance is a requirement You must havethat if you want reliability But when you start talkingabout MRO thatrsquos a whole different business It requiresa lot of overhead and tooling and we leave that to theexperts They can do it a lot more efficiently than wecan Wersquoll stick to our core business We believe thatwill maximize shareholder value (as cited inlsquolsquoMaintenance Outsourcing Emergingrsquorsquo 2009 para 23)

Figure 3 Outsourcing Classifications Adapted from lsquolsquoDevelopment of arelationship management framework and related performance metrics foroutsourced aircraft maintenancersquorsquo by A Sakburanapech 2008 CranfieldUniversity p 11

McFadden and Worrels Journal of Aviation Technology and Engineering 67

Foreign LCCs one of the fastest growing segments ofthe worldwide aviation market feel much the same wayIndicative of this is the view of Jetstar Asiarsquos Head ofEngineering Neo Neo indicates that he wants an MROprovider with lsquolsquothe capability to provide a full suite ofEngineering services including a proven and strong abilityto provide AOG [Aircraft on Ground] recovery fromtechnical breakdownsrsquorsquo (as cited in Moody 2010 para 24)

With the trend towards outsourcing a question arises asto whether an airline should keep the work or send it out

When evaluating the outsourcing decision some air carriersuse a MakeBuy decision model to help them determinewhether or not to outsource Well established as anaccepted course of action in many industries it providesmanagement with a tool for determining where workshould be done According to Smith lsquolsquoit is the maximum ofevery prudent master of the family never attempt to makeat home what it will cost him more to make than to buyrsquorsquo(as cited in Ferreira amp Serra 2010 para 1) Is it more costeffective to have someone else do the required work or is itbetter if it is kept in-house Transaction Cost Economics isone description of the MakeBuy method Transaction CostEconomics is lsquolsquofundamentally concerned with the questionof whether it is advantageous in terms of cost fortransactions to occur within the hierarchy of an organiza-tion or externally in the open marketrsquorsquo (Rieple 2008 para2) According to Program Manager Beadle Delta TechOpsuses a MakeBuy decision for all of Deltarsquos maintenancework and while TechOps might be given a preference ingetting the bid for some work if they are not competitivethe work will in fact be outsourced (personal communica-tion February 9 2011)

The MRO Model

Al-Kaabi et al (2007) describe four levels of MROFully Integrated Partially Outsourced Mostly Outsourcedand Wholly Outsourced as shown in Figure 4 Withinthese levels the entire aircraft maintenance spectrum isaddressed

Table 1Airline Maintenance Outsourcing (as percentage of total expenses)

Airline 2005 2006 2007 (through Q3)

Alaska 92 80 81Hawaiian 80 86 89US Airwaysa 77 81 80Northwest 76 83 81America Westb 76 91 91Continental 69 68 70JetBlue 68 64 65Southwest 68 81 85AirTran 66 93 94Frontier 65 79 80United 63 66 67Delta 48 73 72American 46 49 51ATAc 18 85 87

Note Adapted from lsquolsquoOutsourcing of airline maintenance soursrsquorsquo by W JMcGee 2008 Consumer Reports para 18

aMerged with America West bMerged with US Airways cCeasedoperations

Figure 4 MRO Model Depictions Adapted from lsquolsquoAn outsourcing decision model for airlinesrsquo MRO activitiesrsquorsquo by H Al-Kaabi et al 2007 Journal ofQuality in Maintenance Engineering 13(3) p 220

68 McFadden and Worrels Journal of Aviation Technology and Engineering

Fully Integrated MRO

An airline performs all aircraft maintenance activities in-house In addition it may look to sell excess capacity toother airlines

This practice is well-suited for airlines with large variedfleets and an extensive route structure (Al-Kaabi et al2007)

Partially Outsourced MRO

An airline meets a large portion of its needs in-housewith a minimum of outsourcing This permits a good dealof flexibility and adaptation to seasonable demands and isbest suited for airlines that have just a few different fleettypes

Mostly Outsourced MRO

Most maintenance is outsourced while critical needs arekept in-house (Al-Kaabi et al 2007) lsquolsquoCritical needsrsquorsquo aredefined by individual carriers For example Jet BlueAirlines defines line maintenance as critical to its operationand keeps most of that activity in-house

Wholly Outsourced MRO

All maintenance is outsourced This model is used bystartup airlines that do not have the capital to establish anMRO capability or that choose not to as a part of theirbusiness model

MRO Provider Selection

Perhaps the most important factor to consider is theselection of the MRO provider Many variables come intoplay and each one must be considered carefully Wymanuses a very thorough six-step process that evaluates allaspects of a provider before making a recommendation toan airline These six steps are

1 Define requirements Develop a detailed descriptionof what is to be expected including the volume andtiming of the work required

2 Explore and understand the current marketplaceKnowing who is doing quality and reliable work isextremely important

3 Define outsource strategy and require initial bids forthe work Determine whether or not to bundleunbundle services length of contract and type ofcontract

4 Feedback for bidders Specific details concerningpricing and suggestions on ancillary services arediscussed

5 Face to face negotiations Establish terms andconditions On-site inspection must be a contractprovision Conclude with formal Memorandum ofUnderstanding (MOU)

6 Convert MOU into formal detailed contract (as citedin Canaday 2007 para 5)

It should be noted here that this last step is recommendedby the FAA in AC 120-16E Chapter Nine as an importantfactor in the outsourcing process The Federal AviationAdministration states

When possible you should have a written contract withanyone performing maintenance work for you on acontinuing basis This will help ensure your responsi-bilities are addressed In the case of major operationssuch as engine propeller or airframe overhaul thecontract should include a specification for the work Youshould include or reference that specification in yourmanual system (2008 p 33)

Sakburanapech (2008) describes a process that wasdeveloped by Momme and Hvolby that has three phasesand six activities as shown in Figure 5

The actual selection process varies by airline and isbased on needs and priorities set by managementHowever regulatory requirements must be addressed to

Figure 5 The outsourcing process Adapted from lsquolsquoDevelopment of a relationship management framework and related performance metrics for outsourcedaircraft maintenancersquorsquo by A Sakburanapech 2008 Cranfield University p 15

McFadden and Worrels Journal of Aviation Technology and Engineering 69

the satisfaction of the FAA For example Becher aspokesman for Northwest Airlines stated in 2005

While costs for outsourced maintenance are lower thanfor in-house maintenance quality and safety are notcompromised Northwest selects them because of theirworld class management control systems and technicalability Outside vendors undergo a rigorous reviewbefore being offered a maintenance contract byNorthwest (as cited in lsquolsquoMaintenance Outsourcingrsquorsquo2009 para 14)

Jet Bluersquos vice-president of technical services Ramageuses turnaround times and the quality of service as keyfactors in the selection process He said lsquolsquoThe first thing welook at is the culture of the company And obviously whenI talk about quality it is what the safety culture is and canthey do the job well Quality safety and experience isimportantrsquorsquo (as cited in Arnoult 2010 para 7)

The Oversight Process and its Contribution to Safety

Air Carrier Oversight

The first line of defense in prevention of errors that maylead to improper maintenance is an air carrierrsquos CASSRequired by FAR Part 121373 CASS is one of the 10elements of a maintenance program (Continuing Analysisand Surveillance 1996)

The high level purpose of a CASS is to reduce oreliminate the likelihood of your aircraft being approvedfor return for service when it is not airworthy through thecontinuous system safety-based closed loop cycle ofsurveillance investigation data collection analysiscorrective action monitoring and feedback of aCASS (FAA 2010 p 6)

Four basic activities of CASS are surveillance analysiscorrective action and follow up Encompassed therein areaudit processes data collection processes Root CauseAnalysis (RCA) and performance measurement This risk-based closed loop system verifies performance andeffectiveness of a maintenance program (see Figure 6)(FAA 2010)

FAA Oversight

US repair stations Problems with FAA oversight ofoutsourced maintenance and contract repair stations drewattention from Department of Transportationrsquos (DOTrsquos)Office of Inspector General the public and the USCongress The catalyst for this attention was the crash ofValuJet Flight 592 into the Florida Everglades in May1996 The ValuJet accident was one of three fatal airlineaccidents related to contract maintenance (Adams 2009)The ValuJet accident investigation ultimately laid blame atthe feet of the Sabre-Tech (the contract maintenanceprovider) ValuJet and the FAA (National TransportationSafety Board 1997)

International repair stations The US and selectforeign countries recognize each otherrsquos aviation safetystandards and programs through Bilateral Aviation SafetyAgreements (BASA)

The purposes of this Agreement are to (a) enablereciprocal acceptance of findings of compliance andapprovals issued by the Technical Agents and AviationAuthorities (b) promote a high degree of safety in airtransport and (c) ensure continuation of high levelregulatory cooperation and harmonization between USand EC The scope of cooperation under this Agreementis (a) airworthiness approvals and monitoring of civilaeronautical products (b) environmental testing andapprovals of civil aeronautical products and (c)

Figure 6 Four Basic CASS Activities Adapted from lsquolsquoDeveloping and implementing an air carrier continuing analysis and surveillance systemrsquorsquo 2010FAA AC 120-79A p 15

70 McFadden and Worrels Journal of Aviation Technology and Engineering

approvals and monitoring of maintenance facilities(Council of the European Union 2011)

Certifiednon-certified repair stations Certification ofPart 145 repair stations is subject to regulatory require-ments of the FAA non-certificated stations are not (seeFigure 7)

Air carriers ensure through proper audits and oversightthat contracted facilities perform according to approvedmaintenance programs According to the DOT lsquolsquoNon-certificated facilities performing critical maintenance cre-ates a double standard because certificated repair stationsare required to have designated supervisors inspectorsreturn-to-service personnel and quality control systemsNo such requirements apply to non-certificated facilitiesrsquorsquo(DOT 2005 p 6) A DOT investigation found

hellipas many as 1400 domestic and foreign facilities thatcould perform the same work (eg repairing flightcontrol systems and engine parts) a certificated facilityperforms but are not inspected like certificated facilitiesOf those 1400 facilities we identified 104 foreign non-certificated facilitiesmdashFAA had never inspected any ofthem (2005 p 6)

Conclusion

Contract maintenance is as old as the aviation industryitself Over time and as the aviation industry has evolvedthe airline industry has integrated contract maintenance intoa post-deregulation business model that emphasizes its corebusiness transporting passengerscargo from point to pointwhile marginalizing to the greatest extent possible the costof aircraft maintenance Worldwide MROs have grown inresponse to continuous and increasing demand into a

viable segment of the aviation industry Proliferation ofMRO facilities worldwide should continue althoughgrowth has slowed as a result of current economicstagnation as long as the industry and the regulators meettheir responsibility to ensure aircraft are maintained to thehigh standards required by regulation and good businesspractice

References

Adams C (2009 June 1) Maintenance outsourcing safety debateAviation Today Retrieved from httpwwwaviationtodaycomregionscaMaintenance-Outsourcing-Safety-Debate_32488html

Air Transport Association of America (2003 March) Operatormanufacturer scheduled maintenance development Retrieved fromhttpwwwcastcorgcnweixiufilewxgc8pdf

Arnoult S (2010 October 26) Maintenance special report the MROquandary Airline Business Retrieved from httpwwwflightglobalcomarticles20101026348942maintenance-special-report-the-mro-quandaryhtml

Al-Kaabi H Potter A amp Naim M (2007) An outsourcing decisionmodel for airlinesrsquo MRO activities Journal of Quality in MaintenanceEngineering 13(3) 217ndash227 Retrieved from wwwemeraldinsightcom1355-2511htm doi 10110813552510710780258

Canaday H (2005 October 21) Cost control over time Overhaul andMaintenance Retrieved from httpwwwaviationweekcomawgenericstory_genericjspchannel5omampid5newsom1005cvrxmlampheadline5Cost20Control20Over20Time

Canaday H (2007 October 1) Intelligent outsourcing Overhaul andMaintenance Retrieved from httpwwwaviationweekcomezproxylibproxydberauedusearcharticleQuickSearchdoparameter5displayArticlesampreference5xmlom_xml20071001OM_10_01_2007_p59-01xmlamppubDate5Oct012007ampdatabaseName5omampkeyword5Intelligent+OutsourcingampissueDateWT510012007amppublicationName5omampheadline5Intelligent Outsourcing

Certified Aviation Services (2007 December) Improving the bottom linethrough outsourced line maintnenance [White Paper] Retrieved fromhttpwwwcertfiedaviationcom

Continuing Analysis and Surveillance 14 CFR 1 121373 (1996)Retrieved from the FAA Website httpwwwairwebfaagov

Figure 7 Differences in Requirements for FAA Certificated Repair Stations and Non-Certificated Facilities Adapted from lsquolsquoAir carriersrsquo use of non-certificated repair facilitiesrsquorsquo 2005 Department of Transportation p 12

McFadden and Worrels Journal of Aviation Technology and Engineering 71

While the benefits of outsourcing component repair andinventory management can be considerable there are risksAn airline must make sure that it is using a reputablesupplier for not only reliability and timely delivery of therequired items but for quality and legitimacy of approvedparts as well

Production Planning and Control

Airlines have been reluctant to give up control ofproduction planning and control activities making them theleast outsourced That may be changing according toHouse of TIMCO Aviation Services lsquolsquoBut now that airlinesare accustomed to subcontracting to lower labor costproviders many view outsourcing of the back office as thenext cost saving opportunityrsquorsquo (as cited in Seidenman ampSpanovich 2009 para 1)

As with the other areas of outsourcing ultimately avendor must be able to show that while they are able tokeep costs under control they can also effectively managethe contracted work Demeis president and founder ofContinuum Applied Technology believes that the move tooutsource these important functions may be premature

Frankly I donrsquot think that any savings involved withoutsourcing back office support would be great at thistime because at least a portion of the carrierrsquos qualitycontrol department will have to supervise the perfor-mance of the third-party company That means that anysavings related by eliminating an internal IT staffposition will be greatly diminished (as cited inSeidenman amp Spanovich 2009 para 20)

Regulatory Requirements

All air carrier maintenance programs have their roots in theinitial certification of an aircraft Design of maintenanceprograms must be flexible enough to accommodate air carrierspecific requirements and must comply with Federal AviationRegulations (FARs) Most of the worldrsquos airlines andmanufacturers use the AirlineManufacturer MaintenanceProgram Planning Document or Maintenance Steering Group(MSG) in the development of maintenance programs (AirTransport 2003) The Air Transport Association of America(ATA) administers and maintains this document to provideguidance on the development of maintenance procedures fornew aircraft Specifically the ATA states

It is the objective of this document to present a means fordeveloping the scheduled maintenance tasks and inter-vals which will be acceptable to the regulatoryauthorities the operators and the manufacturers Thescheduled maintenance task and interval details will bedeveloped by coordination with specialists from the

operators manufacturers and the Regulatory Authorityof the country of manufacture Specifically thisdocument outlines the general organization and decisionprocesses for determining scheduled maintenancerequirements initially projected for the life of the aircraftandor power plant (2003 p 11)

Once these basic regulatory requirements are met theFAA provides fairly wide latitude on the specific structureof an airlinersquos maintenance operations According to theFAA

Establishing appropriate standards and regulatory require-ments is a risk management process and the underlyinglegal structure provides for more than one level ofacceptable risk Air transportation regulations are all-inclusive and stand alone whereas the regulationsgoverning other air commerce do not Similarly thescope of responsibility for those in air transportation isvery broad and not shared whereas in other air commerceit is relatively narrow and shared The regulations in parts119 121 and 135 relate directly to air carrier maintenanceprograms and reflect the highest possible degree of publicsafety The regulations in parts 43 65 91 and 145 do notnecessarily reflect the highest possible degree of safety inthe public interest (2008 para 8)

The FAA sets the tone for Air Carrier MaintenancePrograms it describes in detail how an air carrier maystructure its maintenance program Advisory Circular (AC)120-16E describes how a maintenance organization can beset up for both a FAR Part 121or a FAR Part 135 operation

The foundation and legal basis for airworthiness andmaintenance of an air carrierrsquos aircraft is found in FAR Part121 As stated in FAR Part 121363

(a) Each certificate holder is primarily responsible for

(1) The airworthiness of its aircraft including air-frames aircraft engines propellers appliancesand parts thereof and

(2) The performance of the maintenance preventivemaintenance and alteration of its aircraftincluding airframes aircraft engines propellersappliances emergency equipment and partsthereof in accordance with its manual and theregulations of this chapter

(b) A certificate holder may make arrangements withanother person for the performance of any main-tenance preventive maintenance or alterationsHowever this does not relieve the certificate holderof the responsibility specified in paragraph (a) of thissection (Responsibility for Airworthiness 1973)

By definition ACs are not mandatory as issued AC 120-16E describes lsquolsquothe scope and content of air carrier aircraft

66 McFadden and Worrels Journal of Aviation Technology and Engineering

maintenance programsrsquorsquo (FAA 2008 p i) This ACdescribes how an air carrierrsquos maintenance programlsquolsquoshould reflect three specific program objectives to providethe highest possible level of safety in air transportationrsquorsquo(FAA 2008 p 2) These objectives are

(a) each of your aircraft released to service is airworthyand has been properly maintained for operations in airtransportation (b) maintenance and alterations that youperform or that other persons perform for you areperformed in accordance with your maintenance manualand (c) competent personnel with adequate facilities andequipment perform maintenance and alterations on youraircraft (FAA 2008 p 2)

Advisory Circular 120-16E describes the 10 elementsrequired of an air carrier maintenance program These 10elements are

1 Airworthiness responsibility2 Air carrier maintenance manual3 Air carrier maintenance organization4 Accomplishment and approval of maintenance and

alterations5 Maintenance schedule6 Required Inspection Items7 Maintenance recordkeeping system8 Contract maintenance9 Personnel training

10 Continuing Analysis and Surveillance System(CASS)

Chapter nine of AC 120-16E describes what is expectedfor contract maintenance The first paragraph of chapternine of this AC clearly spells out this responsibility stating

Consistent with 1211 (b) 1351 (b)(2) and others whenyou use a maintenance provider to accomplish all or partof the maintenance activities on your airplane or itscomponent parts that maintenance provider becomes ineffect part of your maintenance organization and underyour control (FAA 2008 p 33)

The Decision to Outsource

Prior to deregulation most aircraft maintenance wasconducted in-house (vertically integrated) and according toDelta TechOps Program Manager Beadle lsquolsquoyears ago noone really paid much attention to the cost of aircraftmaintenance It was all part of doing businessrsquorsquo (personalcommunication February 9 2011)

Outsourcing as a business model has become anaccepted way for companies to reduce costs and focus oncore competencies Sackett and Sakburanapech statelsquolsquoAlthough outsourcing enables companies to focus on

their core competencies and may reduce costs mostenterprises are cautious about outsourcing business criticalactivitiesrsquorsquo (2006 p 1) Critical outsourcing as shown inFigure 3 is lsquolsquocharacterized by both high importance andfinancial impactrsquorsquo (Sakburanapech 2008 p 28)

Outsourcing of aircraft maintenance is a business criticalactivity with regard to strategic importance and financesWhat makes outsourcing of aircraft maintenance unique isthat lives are potentially at risk if maintenance is not doneproperly

Aircraft maintenance is now viewed as a non-corebusiness However this widely accepted definition does notapply to all areas of outsourced aircraft maintenance atleast one airline Jet Blue considers line maintenance acore competency Ramage vice-president of technicalservices stated lsquolsquoEach airline defines what core businessis differently For Jet Blue line maintenance is a corebusiness heavy maintenance is notrsquorsquo (as cited in Schifrin2007 para 28)

Rapid emergence of LCCs in the US and abroad has hadan impact These air carriers have decided to outsourcemaintenance rather than establish maintenance operationsfrom scratch The maintenance outsourcing trend is wellestablished (see Table 1)

Jet Bluersquos Director of Maintenance states

Our business is to fly people safely from one point to thenext Line maintenance is a requirement You must havethat if you want reliability But when you start talkingabout MRO thatrsquos a whole different business It requiresa lot of overhead and tooling and we leave that to theexperts They can do it a lot more efficiently than wecan Wersquoll stick to our core business We believe thatwill maximize shareholder value (as cited inlsquolsquoMaintenance Outsourcing Emergingrsquorsquo 2009 para 23)

Figure 3 Outsourcing Classifications Adapted from lsquolsquoDevelopment of arelationship management framework and related performance metrics foroutsourced aircraft maintenancersquorsquo by A Sakburanapech 2008 CranfieldUniversity p 11

McFadden and Worrels Journal of Aviation Technology and Engineering 67

Foreign LCCs one of the fastest growing segments ofthe worldwide aviation market feel much the same wayIndicative of this is the view of Jetstar Asiarsquos Head ofEngineering Neo Neo indicates that he wants an MROprovider with lsquolsquothe capability to provide a full suite ofEngineering services including a proven and strong abilityto provide AOG [Aircraft on Ground] recovery fromtechnical breakdownsrsquorsquo (as cited in Moody 2010 para 24)

With the trend towards outsourcing a question arises asto whether an airline should keep the work or send it out

When evaluating the outsourcing decision some air carriersuse a MakeBuy decision model to help them determinewhether or not to outsource Well established as anaccepted course of action in many industries it providesmanagement with a tool for determining where workshould be done According to Smith lsquolsquoit is the maximum ofevery prudent master of the family never attempt to makeat home what it will cost him more to make than to buyrsquorsquo(as cited in Ferreira amp Serra 2010 para 1) Is it more costeffective to have someone else do the required work or is itbetter if it is kept in-house Transaction Cost Economics isone description of the MakeBuy method Transaction CostEconomics is lsquolsquofundamentally concerned with the questionof whether it is advantageous in terms of cost fortransactions to occur within the hierarchy of an organiza-tion or externally in the open marketrsquorsquo (Rieple 2008 para2) According to Program Manager Beadle Delta TechOpsuses a MakeBuy decision for all of Deltarsquos maintenancework and while TechOps might be given a preference ingetting the bid for some work if they are not competitivethe work will in fact be outsourced (personal communica-tion February 9 2011)

The MRO Model

Al-Kaabi et al (2007) describe four levels of MROFully Integrated Partially Outsourced Mostly Outsourcedand Wholly Outsourced as shown in Figure 4 Withinthese levels the entire aircraft maintenance spectrum isaddressed

Table 1Airline Maintenance Outsourcing (as percentage of total expenses)

Airline 2005 2006 2007 (through Q3)

Alaska 92 80 81Hawaiian 80 86 89US Airwaysa 77 81 80Northwest 76 83 81America Westb 76 91 91Continental 69 68 70JetBlue 68 64 65Southwest 68 81 85AirTran 66 93 94Frontier 65 79 80United 63 66 67Delta 48 73 72American 46 49 51ATAc 18 85 87

Note Adapted from lsquolsquoOutsourcing of airline maintenance soursrsquorsquo by W JMcGee 2008 Consumer Reports para 18

aMerged with America West bMerged with US Airways cCeasedoperations

Figure 4 MRO Model Depictions Adapted from lsquolsquoAn outsourcing decision model for airlinesrsquo MRO activitiesrsquorsquo by H Al-Kaabi et al 2007 Journal ofQuality in Maintenance Engineering 13(3) p 220

68 McFadden and Worrels Journal of Aviation Technology and Engineering

Fully Integrated MRO

An airline performs all aircraft maintenance activities in-house In addition it may look to sell excess capacity toother airlines

This practice is well-suited for airlines with large variedfleets and an extensive route structure (Al-Kaabi et al2007)

Partially Outsourced MRO

An airline meets a large portion of its needs in-housewith a minimum of outsourcing This permits a good dealof flexibility and adaptation to seasonable demands and isbest suited for airlines that have just a few different fleettypes

Mostly Outsourced MRO

Most maintenance is outsourced while critical needs arekept in-house (Al-Kaabi et al 2007) lsquolsquoCritical needsrsquorsquo aredefined by individual carriers For example Jet BlueAirlines defines line maintenance as critical to its operationand keeps most of that activity in-house

Wholly Outsourced MRO

All maintenance is outsourced This model is used bystartup airlines that do not have the capital to establish anMRO capability or that choose not to as a part of theirbusiness model

MRO Provider Selection

Perhaps the most important factor to consider is theselection of the MRO provider Many variables come intoplay and each one must be considered carefully Wymanuses a very thorough six-step process that evaluates allaspects of a provider before making a recommendation toan airline These six steps are

1 Define requirements Develop a detailed descriptionof what is to be expected including the volume andtiming of the work required

2 Explore and understand the current marketplaceKnowing who is doing quality and reliable work isextremely important

3 Define outsource strategy and require initial bids forthe work Determine whether or not to bundleunbundle services length of contract and type ofcontract

4 Feedback for bidders Specific details concerningpricing and suggestions on ancillary services arediscussed

5 Face to face negotiations Establish terms andconditions On-site inspection must be a contractprovision Conclude with formal Memorandum ofUnderstanding (MOU)

6 Convert MOU into formal detailed contract (as citedin Canaday 2007 para 5)

It should be noted here that this last step is recommendedby the FAA in AC 120-16E Chapter Nine as an importantfactor in the outsourcing process The Federal AviationAdministration states

When possible you should have a written contract withanyone performing maintenance work for you on acontinuing basis This will help ensure your responsi-bilities are addressed In the case of major operationssuch as engine propeller or airframe overhaul thecontract should include a specification for the work Youshould include or reference that specification in yourmanual system (2008 p 33)

Sakburanapech (2008) describes a process that wasdeveloped by Momme and Hvolby that has three phasesand six activities as shown in Figure 5

The actual selection process varies by airline and isbased on needs and priorities set by managementHowever regulatory requirements must be addressed to

Figure 5 The outsourcing process Adapted from lsquolsquoDevelopment of a relationship management framework and related performance metrics for outsourcedaircraft maintenancersquorsquo by A Sakburanapech 2008 Cranfield University p 15

McFadden and Worrels Journal of Aviation Technology and Engineering 69

the satisfaction of the FAA For example Becher aspokesman for Northwest Airlines stated in 2005

While costs for outsourced maintenance are lower thanfor in-house maintenance quality and safety are notcompromised Northwest selects them because of theirworld class management control systems and technicalability Outside vendors undergo a rigorous reviewbefore being offered a maintenance contract byNorthwest (as cited in lsquolsquoMaintenance Outsourcingrsquorsquo2009 para 14)

Jet Bluersquos vice-president of technical services Ramageuses turnaround times and the quality of service as keyfactors in the selection process He said lsquolsquoThe first thing welook at is the culture of the company And obviously whenI talk about quality it is what the safety culture is and canthey do the job well Quality safety and experience isimportantrsquorsquo (as cited in Arnoult 2010 para 7)

The Oversight Process and its Contribution to Safety

Air Carrier Oversight

The first line of defense in prevention of errors that maylead to improper maintenance is an air carrierrsquos CASSRequired by FAR Part 121373 CASS is one of the 10elements of a maintenance program (Continuing Analysisand Surveillance 1996)

The high level purpose of a CASS is to reduce oreliminate the likelihood of your aircraft being approvedfor return for service when it is not airworthy through thecontinuous system safety-based closed loop cycle ofsurveillance investigation data collection analysiscorrective action monitoring and feedback of aCASS (FAA 2010 p 6)

Four basic activities of CASS are surveillance analysiscorrective action and follow up Encompassed therein areaudit processes data collection processes Root CauseAnalysis (RCA) and performance measurement This risk-based closed loop system verifies performance andeffectiveness of a maintenance program (see Figure 6)(FAA 2010)

FAA Oversight

US repair stations Problems with FAA oversight ofoutsourced maintenance and contract repair stations drewattention from Department of Transportationrsquos (DOTrsquos)Office of Inspector General the public and the USCongress The catalyst for this attention was the crash ofValuJet Flight 592 into the Florida Everglades in May1996 The ValuJet accident was one of three fatal airlineaccidents related to contract maintenance (Adams 2009)The ValuJet accident investigation ultimately laid blame atthe feet of the Sabre-Tech (the contract maintenanceprovider) ValuJet and the FAA (National TransportationSafety Board 1997)

International repair stations The US and selectforeign countries recognize each otherrsquos aviation safetystandards and programs through Bilateral Aviation SafetyAgreements (BASA)

The purposes of this Agreement are to (a) enablereciprocal acceptance of findings of compliance andapprovals issued by the Technical Agents and AviationAuthorities (b) promote a high degree of safety in airtransport and (c) ensure continuation of high levelregulatory cooperation and harmonization between USand EC The scope of cooperation under this Agreementis (a) airworthiness approvals and monitoring of civilaeronautical products (b) environmental testing andapprovals of civil aeronautical products and (c)

Figure 6 Four Basic CASS Activities Adapted from lsquolsquoDeveloping and implementing an air carrier continuing analysis and surveillance systemrsquorsquo 2010FAA AC 120-79A p 15

70 McFadden and Worrels Journal of Aviation Technology and Engineering

approvals and monitoring of maintenance facilities(Council of the European Union 2011)

Certifiednon-certified repair stations Certification ofPart 145 repair stations is subject to regulatory require-ments of the FAA non-certificated stations are not (seeFigure 7)

Air carriers ensure through proper audits and oversightthat contracted facilities perform according to approvedmaintenance programs According to the DOT lsquolsquoNon-certificated facilities performing critical maintenance cre-ates a double standard because certificated repair stationsare required to have designated supervisors inspectorsreturn-to-service personnel and quality control systemsNo such requirements apply to non-certificated facilitiesrsquorsquo(DOT 2005 p 6) A DOT investigation found

hellipas many as 1400 domestic and foreign facilities thatcould perform the same work (eg repairing flightcontrol systems and engine parts) a certificated facilityperforms but are not inspected like certificated facilitiesOf those 1400 facilities we identified 104 foreign non-certificated facilitiesmdashFAA had never inspected any ofthem (2005 p 6)

Conclusion

Contract maintenance is as old as the aviation industryitself Over time and as the aviation industry has evolvedthe airline industry has integrated contract maintenance intoa post-deregulation business model that emphasizes its corebusiness transporting passengerscargo from point to pointwhile marginalizing to the greatest extent possible the costof aircraft maintenance Worldwide MROs have grown inresponse to continuous and increasing demand into a

viable segment of the aviation industry Proliferation ofMRO facilities worldwide should continue althoughgrowth has slowed as a result of current economicstagnation as long as the industry and the regulators meettheir responsibility to ensure aircraft are maintained to thehigh standards required by regulation and good businesspractice

References

Adams C (2009 June 1) Maintenance outsourcing safety debateAviation Today Retrieved from httpwwwaviationtodaycomregionscaMaintenance-Outsourcing-Safety-Debate_32488html

Air Transport Association of America (2003 March) Operatormanufacturer scheduled maintenance development Retrieved fromhttpwwwcastcorgcnweixiufilewxgc8pdf

Arnoult S (2010 October 26) Maintenance special report the MROquandary Airline Business Retrieved from httpwwwflightglobalcomarticles20101026348942maintenance-special-report-the-mro-quandaryhtml

Al-Kaabi H Potter A amp Naim M (2007) An outsourcing decisionmodel for airlinesrsquo MRO activities Journal of Quality in MaintenanceEngineering 13(3) 217ndash227 Retrieved from wwwemeraldinsightcom1355-2511htm doi 10110813552510710780258

Canaday H (2005 October 21) Cost control over time Overhaul andMaintenance Retrieved from httpwwwaviationweekcomawgenericstory_genericjspchannel5omampid5newsom1005cvrxmlampheadline5Cost20Control20Over20Time

Canaday H (2007 October 1) Intelligent outsourcing Overhaul andMaintenance Retrieved from httpwwwaviationweekcomezproxylibproxydberauedusearcharticleQuickSearchdoparameter5displayArticlesampreference5xmlom_xml20071001OM_10_01_2007_p59-01xmlamppubDate5Oct012007ampdatabaseName5omampkeyword5Intelligent+OutsourcingampissueDateWT510012007amppublicationName5omampheadline5Intelligent Outsourcing

Certified Aviation Services (2007 December) Improving the bottom linethrough outsourced line maintnenance [White Paper] Retrieved fromhttpwwwcertfiedaviationcom

Continuing Analysis and Surveillance 14 CFR 1 121373 (1996)Retrieved from the FAA Website httpwwwairwebfaagov

Figure 7 Differences in Requirements for FAA Certificated Repair Stations and Non-Certificated Facilities Adapted from lsquolsquoAir carriersrsquo use of non-certificated repair facilitiesrsquorsquo 2005 Department of Transportation p 12

McFadden and Worrels Journal of Aviation Technology and Engineering 71

maintenance programsrsquorsquo (FAA 2008 p i) This ACdescribes how an air carrierrsquos maintenance programlsquolsquoshould reflect three specific program objectives to providethe highest possible level of safety in air transportationrsquorsquo(FAA 2008 p 2) These objectives are

(a) each of your aircraft released to service is airworthyand has been properly maintained for operations in airtransportation (b) maintenance and alterations that youperform or that other persons perform for you areperformed in accordance with your maintenance manualand (c) competent personnel with adequate facilities andequipment perform maintenance and alterations on youraircraft (FAA 2008 p 2)

Advisory Circular 120-16E describes the 10 elementsrequired of an air carrier maintenance program These 10elements are

1 Airworthiness responsibility2 Air carrier maintenance manual3 Air carrier maintenance organization4 Accomplishment and approval of maintenance and

alterations5 Maintenance schedule6 Required Inspection Items7 Maintenance recordkeeping system8 Contract maintenance9 Personnel training

10 Continuing Analysis and Surveillance System(CASS)

Chapter nine of AC 120-16E describes what is expectedfor contract maintenance The first paragraph of chapternine of this AC clearly spells out this responsibility stating

Consistent with 1211 (b) 1351 (b)(2) and others whenyou use a maintenance provider to accomplish all or partof the maintenance activities on your airplane or itscomponent parts that maintenance provider becomes ineffect part of your maintenance organization and underyour control (FAA 2008 p 33)

The Decision to Outsource

Prior to deregulation most aircraft maintenance wasconducted in-house (vertically integrated) and according toDelta TechOps Program Manager Beadle lsquolsquoyears ago noone really paid much attention to the cost of aircraftmaintenance It was all part of doing businessrsquorsquo (personalcommunication February 9 2011)

Outsourcing as a business model has become anaccepted way for companies to reduce costs and focus oncore competencies Sackett and Sakburanapech statelsquolsquoAlthough outsourcing enables companies to focus on

their core competencies and may reduce costs mostenterprises are cautious about outsourcing business criticalactivitiesrsquorsquo (2006 p 1) Critical outsourcing as shown inFigure 3 is lsquolsquocharacterized by both high importance andfinancial impactrsquorsquo (Sakburanapech 2008 p 28)

Outsourcing of aircraft maintenance is a business criticalactivity with regard to strategic importance and financesWhat makes outsourcing of aircraft maintenance unique isthat lives are potentially at risk if maintenance is not doneproperly

Aircraft maintenance is now viewed as a non-corebusiness However this widely accepted definition does notapply to all areas of outsourced aircraft maintenance atleast one airline Jet Blue considers line maintenance acore competency Ramage vice-president of technicalservices stated lsquolsquoEach airline defines what core businessis differently For Jet Blue line maintenance is a corebusiness heavy maintenance is notrsquorsquo (as cited in Schifrin2007 para 28)

Rapid emergence of LCCs in the US and abroad has hadan impact These air carriers have decided to outsourcemaintenance rather than establish maintenance operationsfrom scratch The maintenance outsourcing trend is wellestablished (see Table 1)

Jet Bluersquos Director of Maintenance states

Our business is to fly people safely from one point to thenext Line maintenance is a requirement You must havethat if you want reliability But when you start talkingabout MRO thatrsquos a whole different business It requiresa lot of overhead and tooling and we leave that to theexperts They can do it a lot more efficiently than wecan Wersquoll stick to our core business We believe thatwill maximize shareholder value (as cited inlsquolsquoMaintenance Outsourcing Emergingrsquorsquo 2009 para 23)

Figure 3 Outsourcing Classifications Adapted from lsquolsquoDevelopment of arelationship management framework and related performance metrics foroutsourced aircraft maintenancersquorsquo by A Sakburanapech 2008 CranfieldUniversity p 11

McFadden and Worrels Journal of Aviation Technology and Engineering 67

Foreign LCCs one of the fastest growing segments ofthe worldwide aviation market feel much the same wayIndicative of this is the view of Jetstar Asiarsquos Head ofEngineering Neo Neo indicates that he wants an MROprovider with lsquolsquothe capability to provide a full suite ofEngineering services including a proven and strong abilityto provide AOG [Aircraft on Ground] recovery fromtechnical breakdownsrsquorsquo (as cited in Moody 2010 para 24)

With the trend towards outsourcing a question arises asto whether an airline should keep the work or send it out

When evaluating the outsourcing decision some air carriersuse a MakeBuy decision model to help them determinewhether or not to outsource Well established as anaccepted course of action in many industries it providesmanagement with a tool for determining where workshould be done According to Smith lsquolsquoit is the maximum ofevery prudent master of the family never attempt to makeat home what it will cost him more to make than to buyrsquorsquo(as cited in Ferreira amp Serra 2010 para 1) Is it more costeffective to have someone else do the required work or is itbetter if it is kept in-house Transaction Cost Economics isone description of the MakeBuy method Transaction CostEconomics is lsquolsquofundamentally concerned with the questionof whether it is advantageous in terms of cost fortransactions to occur within the hierarchy of an organiza-tion or externally in the open marketrsquorsquo (Rieple 2008 para2) According to Program Manager Beadle Delta TechOpsuses a MakeBuy decision for all of Deltarsquos maintenancework and while TechOps might be given a preference ingetting the bid for some work if they are not competitivethe work will in fact be outsourced (personal communica-tion February 9 2011)

The MRO Model

Al-Kaabi et al (2007) describe four levels of MROFully Integrated Partially Outsourced Mostly Outsourcedand Wholly Outsourced as shown in Figure 4 Withinthese levels the entire aircraft maintenance spectrum isaddressed

Table 1Airline Maintenance Outsourcing (as percentage of total expenses)

Airline 2005 2006 2007 (through Q3)

Alaska 92 80 81Hawaiian 80 86 89US Airwaysa 77 81 80Northwest 76 83 81America Westb 76 91 91Continental 69 68 70JetBlue 68 64 65Southwest 68 81 85AirTran 66 93 94Frontier 65 79 80United 63 66 67Delta 48 73 72American 46 49 51ATAc 18 85 87

Note Adapted from lsquolsquoOutsourcing of airline maintenance soursrsquorsquo by W JMcGee 2008 Consumer Reports para 18

aMerged with America West bMerged with US Airways cCeasedoperations

Figure 4 MRO Model Depictions Adapted from lsquolsquoAn outsourcing decision model for airlinesrsquo MRO activitiesrsquorsquo by H Al-Kaabi et al 2007 Journal ofQuality in Maintenance Engineering 13(3) p 220

68 McFadden and Worrels Journal of Aviation Technology and Engineering

Fully Integrated MRO

An airline performs all aircraft maintenance activities in-house In addition it may look to sell excess capacity toother airlines

This practice is well-suited for airlines with large variedfleets and an extensive route structure (Al-Kaabi et al2007)

Partially Outsourced MRO

An airline meets a large portion of its needs in-housewith a minimum of outsourcing This permits a good dealof flexibility and adaptation to seasonable demands and isbest suited for airlines that have just a few different fleettypes

Mostly Outsourced MRO

Most maintenance is outsourced while critical needs arekept in-house (Al-Kaabi et al 2007) lsquolsquoCritical needsrsquorsquo aredefined by individual carriers For example Jet BlueAirlines defines line maintenance as critical to its operationand keeps most of that activity in-house

Wholly Outsourced MRO

All maintenance is outsourced This model is used bystartup airlines that do not have the capital to establish anMRO capability or that choose not to as a part of theirbusiness model

MRO Provider Selection

Perhaps the most important factor to consider is theselection of the MRO provider Many variables come intoplay and each one must be considered carefully Wymanuses a very thorough six-step process that evaluates allaspects of a provider before making a recommendation toan airline These six steps are

1 Define requirements Develop a detailed descriptionof what is to be expected including the volume andtiming of the work required

2 Explore and understand the current marketplaceKnowing who is doing quality and reliable work isextremely important

3 Define outsource strategy and require initial bids forthe work Determine whether or not to bundleunbundle services length of contract and type ofcontract

4 Feedback for bidders Specific details concerningpricing and suggestions on ancillary services arediscussed

5 Face to face negotiations Establish terms andconditions On-site inspection must be a contractprovision Conclude with formal Memorandum ofUnderstanding (MOU)

6 Convert MOU into formal detailed contract (as citedin Canaday 2007 para 5)

It should be noted here that this last step is recommendedby the FAA in AC 120-16E Chapter Nine as an importantfactor in the outsourcing process The Federal AviationAdministration states

When possible you should have a written contract withanyone performing maintenance work for you on acontinuing basis This will help ensure your responsi-bilities are addressed In the case of major operationssuch as engine propeller or airframe overhaul thecontract should include a specification for the work Youshould include or reference that specification in yourmanual system (2008 p 33)

Sakburanapech (2008) describes a process that wasdeveloped by Momme and Hvolby that has three phasesand six activities as shown in Figure 5

The actual selection process varies by airline and isbased on needs and priorities set by managementHowever regulatory requirements must be addressed to

Figure 5 The outsourcing process Adapted from lsquolsquoDevelopment of a relationship management framework and related performance metrics for outsourcedaircraft maintenancersquorsquo by A Sakburanapech 2008 Cranfield University p 15

McFadden and Worrels Journal of Aviation Technology and Engineering 69

the satisfaction of the FAA For example Becher aspokesman for Northwest Airlines stated in 2005

While costs for outsourced maintenance are lower thanfor in-house maintenance quality and safety are notcompromised Northwest selects them because of theirworld class management control systems and technicalability Outside vendors undergo a rigorous reviewbefore being offered a maintenance contract byNorthwest (as cited in lsquolsquoMaintenance Outsourcingrsquorsquo2009 para 14)

Jet Bluersquos vice-president of technical services Ramageuses turnaround times and the quality of service as keyfactors in the selection process He said lsquolsquoThe first thing welook at is the culture of the company And obviously whenI talk about quality it is what the safety culture is and canthey do the job well Quality safety and experience isimportantrsquorsquo (as cited in Arnoult 2010 para 7)

The Oversight Process and its Contribution to Safety

Air Carrier Oversight

The first line of defense in prevention of errors that maylead to improper maintenance is an air carrierrsquos CASSRequired by FAR Part 121373 CASS is one of the 10elements of a maintenance program (Continuing Analysisand Surveillance 1996)

The high level purpose of a CASS is to reduce oreliminate the likelihood of your aircraft being approvedfor return for service when it is not airworthy through thecontinuous system safety-based closed loop cycle ofsurveillance investigation data collection analysiscorrective action monitoring and feedback of aCASS (FAA 2010 p 6)

Four basic activities of CASS are surveillance analysiscorrective action and follow up Encompassed therein areaudit processes data collection processes Root CauseAnalysis (RCA) and performance measurement This risk-based closed loop system verifies performance andeffectiveness of a maintenance program (see Figure 6)(FAA 2010)

FAA Oversight

US repair stations Problems with FAA oversight ofoutsourced maintenance and contract repair stations drewattention from Department of Transportationrsquos (DOTrsquos)Office of Inspector General the public and the USCongress The catalyst for this attention was the crash ofValuJet Flight 592 into the Florida Everglades in May1996 The ValuJet accident was one of three fatal airlineaccidents related to contract maintenance (Adams 2009)The ValuJet accident investigation ultimately laid blame atthe feet of the Sabre-Tech (the contract maintenanceprovider) ValuJet and the FAA (National TransportationSafety Board 1997)

International repair stations The US and selectforeign countries recognize each otherrsquos aviation safetystandards and programs through Bilateral Aviation SafetyAgreements (BASA)

The purposes of this Agreement are to (a) enablereciprocal acceptance of findings of compliance andapprovals issued by the Technical Agents and AviationAuthorities (b) promote a high degree of safety in airtransport and (c) ensure continuation of high levelregulatory cooperation and harmonization between USand EC The scope of cooperation under this Agreementis (a) airworthiness approvals and monitoring of civilaeronautical products (b) environmental testing andapprovals of civil aeronautical products and (c)

Figure 6 Four Basic CASS Activities Adapted from lsquolsquoDeveloping and implementing an air carrier continuing analysis and surveillance systemrsquorsquo 2010FAA AC 120-79A p 15

70 McFadden and Worrels Journal of Aviation Technology and Engineering

approvals and monitoring of maintenance facilities(Council of the European Union 2011)

Certifiednon-certified repair stations Certification ofPart 145 repair stations is subject to regulatory require-ments of the FAA non-certificated stations are not (seeFigure 7)

Air carriers ensure through proper audits and oversightthat contracted facilities perform according to approvedmaintenance programs According to the DOT lsquolsquoNon-certificated facilities performing critical maintenance cre-ates a double standard because certificated repair stationsare required to have designated supervisors inspectorsreturn-to-service personnel and quality control systemsNo such requirements apply to non-certificated facilitiesrsquorsquo(DOT 2005 p 6) A DOT investigation found

hellipas many as 1400 domestic and foreign facilities thatcould perform the same work (eg repairing flightcontrol systems and engine parts) a certificated facilityperforms but are not inspected like certificated facilitiesOf those 1400 facilities we identified 104 foreign non-certificated facilitiesmdashFAA had never inspected any ofthem (2005 p 6)

Conclusion

Contract maintenance is as old as the aviation industryitself Over time and as the aviation industry has evolvedthe airline industry has integrated contract maintenance intoa post-deregulation business model that emphasizes its corebusiness transporting passengerscargo from point to pointwhile marginalizing to the greatest extent possible the costof aircraft maintenance Worldwide MROs have grown inresponse to continuous and increasing demand into a

viable segment of the aviation industry Proliferation ofMRO facilities worldwide should continue althoughgrowth has slowed as a result of current economicstagnation as long as the industry and the regulators meettheir responsibility to ensure aircraft are maintained to thehigh standards required by regulation and good businesspractice

References

Adams C (2009 June 1) Maintenance outsourcing safety debateAviation Today Retrieved from httpwwwaviationtodaycomregionscaMaintenance-Outsourcing-Safety-Debate_32488html

Air Transport Association of America (2003 March) Operatormanufacturer scheduled maintenance development Retrieved fromhttpwwwcastcorgcnweixiufilewxgc8pdf

Arnoult S (2010 October 26) Maintenance special report the MROquandary Airline Business Retrieved from httpwwwflightglobalcomarticles20101026348942maintenance-special-report-the-mro-quandaryhtml

Al-Kaabi H Potter A amp Naim M (2007) An outsourcing decisionmodel for airlinesrsquo MRO activities Journal of Quality in MaintenanceEngineering 13(3) 217ndash227 Retrieved from wwwemeraldinsightcom1355-2511htm doi 10110813552510710780258

Canaday H (2005 October 21) Cost control over time Overhaul andMaintenance Retrieved from httpwwwaviationweekcomawgenericstory_genericjspchannel5omampid5newsom1005cvrxmlampheadline5Cost20Control20Over20Time

Canaday H (2007 October 1) Intelligent outsourcing Overhaul andMaintenance Retrieved from httpwwwaviationweekcomezproxylibproxydberauedusearcharticleQuickSearchdoparameter5displayArticlesampreference5xmlom_xml20071001OM_10_01_2007_p59-01xmlamppubDate5Oct012007ampdatabaseName5omampkeyword5Intelligent+OutsourcingampissueDateWT510012007amppublicationName5omampheadline5Intelligent Outsourcing

Certified Aviation Services (2007 December) Improving the bottom linethrough outsourced line maintnenance [White Paper] Retrieved fromhttpwwwcertfiedaviationcom

Continuing Analysis and Surveillance 14 CFR 1 121373 (1996)Retrieved from the FAA Website httpwwwairwebfaagov

Figure 7 Differences in Requirements for FAA Certificated Repair Stations and Non-Certificated Facilities Adapted from lsquolsquoAir carriersrsquo use of non-certificated repair facilitiesrsquorsquo 2005 Department of Transportation p 12

McFadden and Worrels Journal of Aviation Technology and Engineering 71

Foreign LCCs one of the fastest growing segments ofthe worldwide aviation market feel much the same wayIndicative of this is the view of Jetstar Asiarsquos Head ofEngineering Neo Neo indicates that he wants an MROprovider with lsquolsquothe capability to provide a full suite ofEngineering services including a proven and strong abilityto provide AOG [Aircraft on Ground] recovery fromtechnical breakdownsrsquorsquo (as cited in Moody 2010 para 24)

With the trend towards outsourcing a question arises asto whether an airline should keep the work or send it out

When evaluating the outsourcing decision some air carriersuse a MakeBuy decision model to help them determinewhether or not to outsource Well established as anaccepted course of action in many industries it providesmanagement with a tool for determining where workshould be done According to Smith lsquolsquoit is the maximum ofevery prudent master of the family never attempt to makeat home what it will cost him more to make than to buyrsquorsquo(as cited in Ferreira amp Serra 2010 para 1) Is it more costeffective to have someone else do the required work or is itbetter if it is kept in-house Transaction Cost Economics isone description of the MakeBuy method Transaction CostEconomics is lsquolsquofundamentally concerned with the questionof whether it is advantageous in terms of cost fortransactions to occur within the hierarchy of an organiza-tion or externally in the open marketrsquorsquo (Rieple 2008 para2) According to Program Manager Beadle Delta TechOpsuses a MakeBuy decision for all of Deltarsquos maintenancework and while TechOps might be given a preference ingetting the bid for some work if they are not competitivethe work will in fact be outsourced (personal communica-tion February 9 2011)

The MRO Model

Al-Kaabi et al (2007) describe four levels of MROFully Integrated Partially Outsourced Mostly Outsourcedand Wholly Outsourced as shown in Figure 4 Withinthese levels the entire aircraft maintenance spectrum isaddressed

Table 1Airline Maintenance Outsourcing (as percentage of total expenses)

Airline 2005 2006 2007 (through Q3)

Alaska 92 80 81Hawaiian 80 86 89US Airwaysa 77 81 80Northwest 76 83 81America Westb 76 91 91Continental 69 68 70JetBlue 68 64 65Southwest 68 81 85AirTran 66 93 94Frontier 65 79 80United 63 66 67Delta 48 73 72American 46 49 51ATAc 18 85 87

Note Adapted from lsquolsquoOutsourcing of airline maintenance soursrsquorsquo by W JMcGee 2008 Consumer Reports para 18

aMerged with America West bMerged with US Airways cCeasedoperations

Figure 4 MRO Model Depictions Adapted from lsquolsquoAn outsourcing decision model for airlinesrsquo MRO activitiesrsquorsquo by H Al-Kaabi et al 2007 Journal ofQuality in Maintenance Engineering 13(3) p 220

68 McFadden and Worrels Journal of Aviation Technology and Engineering

Fully Integrated MRO

An airline performs all aircraft maintenance activities in-house In addition it may look to sell excess capacity toother airlines

This practice is well-suited for airlines with large variedfleets and an extensive route structure (Al-Kaabi et al2007)

Partially Outsourced MRO

An airline meets a large portion of its needs in-housewith a minimum of outsourcing This permits a good dealof flexibility and adaptation to seasonable demands and isbest suited for airlines that have just a few different fleettypes

Mostly Outsourced MRO

Most maintenance is outsourced while critical needs arekept in-house (Al-Kaabi et al 2007) lsquolsquoCritical needsrsquorsquo aredefined by individual carriers For example Jet BlueAirlines defines line maintenance as critical to its operationand keeps most of that activity in-house

Wholly Outsourced MRO

All maintenance is outsourced This model is used bystartup airlines that do not have the capital to establish anMRO capability or that choose not to as a part of theirbusiness model

MRO Provider Selection

Perhaps the most important factor to consider is theselection of the MRO provider Many variables come intoplay and each one must be considered carefully Wymanuses a very thorough six-step process that evaluates allaspects of a provider before making a recommendation toan airline These six steps are

1 Define requirements Develop a detailed descriptionof what is to be expected including the volume andtiming of the work required

2 Explore and understand the current marketplaceKnowing who is doing quality and reliable work isextremely important

3 Define outsource strategy and require initial bids forthe work Determine whether or not to bundleunbundle services length of contract and type ofcontract

4 Feedback for bidders Specific details concerningpricing and suggestions on ancillary services arediscussed

5 Face to face negotiations Establish terms andconditions On-site inspection must be a contractprovision Conclude with formal Memorandum ofUnderstanding (MOU)

6 Convert MOU into formal detailed contract (as citedin Canaday 2007 para 5)

It should be noted here that this last step is recommendedby the FAA in AC 120-16E Chapter Nine as an importantfactor in the outsourcing process The Federal AviationAdministration states

When possible you should have a written contract withanyone performing maintenance work for you on acontinuing basis This will help ensure your responsi-bilities are addressed In the case of major operationssuch as engine propeller or airframe overhaul thecontract should include a specification for the work Youshould include or reference that specification in yourmanual system (2008 p 33)

Sakburanapech (2008) describes a process that wasdeveloped by Momme and Hvolby that has three phasesand six activities as shown in Figure 5

The actual selection process varies by airline and isbased on needs and priorities set by managementHowever regulatory requirements must be addressed to

Figure 5 The outsourcing process Adapted from lsquolsquoDevelopment of a relationship management framework and related performance metrics for outsourcedaircraft maintenancersquorsquo by A Sakburanapech 2008 Cranfield University p 15

McFadden and Worrels Journal of Aviation Technology and Engineering 69

the satisfaction of the FAA For example Becher aspokesman for Northwest Airlines stated in 2005

While costs for outsourced maintenance are lower thanfor in-house maintenance quality and safety are notcompromised Northwest selects them because of theirworld class management control systems and technicalability Outside vendors undergo a rigorous reviewbefore being offered a maintenance contract byNorthwest (as cited in lsquolsquoMaintenance Outsourcingrsquorsquo2009 para 14)

Jet Bluersquos vice-president of technical services Ramageuses turnaround times and the quality of service as keyfactors in the selection process He said lsquolsquoThe first thing welook at is the culture of the company And obviously whenI talk about quality it is what the safety culture is and canthey do the job well Quality safety and experience isimportantrsquorsquo (as cited in Arnoult 2010 para 7)

The Oversight Process and its Contribution to Safety

Air Carrier Oversight

The first line of defense in prevention of errors that maylead to improper maintenance is an air carrierrsquos CASSRequired by FAR Part 121373 CASS is one of the 10elements of a maintenance program (Continuing Analysisand Surveillance 1996)

The high level purpose of a CASS is to reduce oreliminate the likelihood of your aircraft being approvedfor return for service when it is not airworthy through thecontinuous system safety-based closed loop cycle ofsurveillance investigation data collection analysiscorrective action monitoring and feedback of aCASS (FAA 2010 p 6)

Four basic activities of CASS are surveillance analysiscorrective action and follow up Encompassed therein areaudit processes data collection processes Root CauseAnalysis (RCA) and performance measurement This risk-based closed loop system verifies performance andeffectiveness of a maintenance program (see Figure 6)(FAA 2010)

FAA Oversight

US repair stations Problems with FAA oversight ofoutsourced maintenance and contract repair stations drewattention from Department of Transportationrsquos (DOTrsquos)Office of Inspector General the public and the USCongress The catalyst for this attention was the crash ofValuJet Flight 592 into the Florida Everglades in May1996 The ValuJet accident was one of three fatal airlineaccidents related to contract maintenance (Adams 2009)The ValuJet accident investigation ultimately laid blame atthe feet of the Sabre-Tech (the contract maintenanceprovider) ValuJet and the FAA (National TransportationSafety Board 1997)

International repair stations The US and selectforeign countries recognize each otherrsquos aviation safetystandards and programs through Bilateral Aviation SafetyAgreements (BASA)

The purposes of this Agreement are to (a) enablereciprocal acceptance of findings of compliance andapprovals issued by the Technical Agents and AviationAuthorities (b) promote a high degree of safety in airtransport and (c) ensure continuation of high levelregulatory cooperation and harmonization between USand EC The scope of cooperation under this Agreementis (a) airworthiness approvals and monitoring of civilaeronautical products (b) environmental testing andapprovals of civil aeronautical products and (c)

Figure 6 Four Basic CASS Activities Adapted from lsquolsquoDeveloping and implementing an air carrier continuing analysis and surveillance systemrsquorsquo 2010FAA AC 120-79A p 15

70 McFadden and Worrels Journal of Aviation Technology and Engineering

approvals and monitoring of maintenance facilities(Council of the European Union 2011)

Certifiednon-certified repair stations Certification ofPart 145 repair stations is subject to regulatory require-ments of the FAA non-certificated stations are not (seeFigure 7)

Air carriers ensure through proper audits and oversightthat contracted facilities perform according to approvedmaintenance programs According to the DOT lsquolsquoNon-certificated facilities performing critical maintenance cre-ates a double standard because certificated repair stationsare required to have designated supervisors inspectorsreturn-to-service personnel and quality control systemsNo such requirements apply to non-certificated facilitiesrsquorsquo(DOT 2005 p 6) A DOT investigation found

hellipas many as 1400 domestic and foreign facilities thatcould perform the same work (eg repairing flightcontrol systems and engine parts) a certificated facilityperforms but are not inspected like certificated facilitiesOf those 1400 facilities we identified 104 foreign non-certificated facilitiesmdashFAA had never inspected any ofthem (2005 p 6)

Conclusion

Contract maintenance is as old as the aviation industryitself Over time and as the aviation industry has evolvedthe airline industry has integrated contract maintenance intoa post-deregulation business model that emphasizes its corebusiness transporting passengerscargo from point to pointwhile marginalizing to the greatest extent possible the costof aircraft maintenance Worldwide MROs have grown inresponse to continuous and increasing demand into a

viable segment of the aviation industry Proliferation ofMRO facilities worldwide should continue althoughgrowth has slowed as a result of current economicstagnation as long as the industry and the regulators meettheir responsibility to ensure aircraft are maintained to thehigh standards required by regulation and good businesspractice

References

Adams C (2009 June 1) Maintenance outsourcing safety debateAviation Today Retrieved from httpwwwaviationtodaycomregionscaMaintenance-Outsourcing-Safety-Debate_32488html

Air Transport Association of America (2003 March) Operatormanufacturer scheduled maintenance development Retrieved fromhttpwwwcastcorgcnweixiufilewxgc8pdf

Arnoult S (2010 October 26) Maintenance special report the MROquandary Airline Business Retrieved from httpwwwflightglobalcomarticles20101026348942maintenance-special-report-the-mro-quandaryhtml

Al-Kaabi H Potter A amp Naim M (2007) An outsourcing decisionmodel for airlinesrsquo MRO activities Journal of Quality in MaintenanceEngineering 13(3) 217ndash227 Retrieved from wwwemeraldinsightcom1355-2511htm doi 10110813552510710780258

Canaday H (2005 October 21) Cost control over time Overhaul andMaintenance Retrieved from httpwwwaviationweekcomawgenericstory_genericjspchannel5omampid5newsom1005cvrxmlampheadline5Cost20Control20Over20Time

Canaday H (2007 October 1) Intelligent outsourcing Overhaul andMaintenance Retrieved from httpwwwaviationweekcomezproxylibproxydberauedusearcharticleQuickSearchdoparameter5displayArticlesampreference5xmlom_xml20071001OM_10_01_2007_p59-01xmlamppubDate5Oct012007ampdatabaseName5omampkeyword5Intelligent+OutsourcingampissueDateWT510012007amppublicationName5omampheadline5Intelligent Outsourcing

Certified Aviation Services (2007 December) Improving the bottom linethrough outsourced line maintnenance [White Paper] Retrieved fromhttpwwwcertfiedaviationcom

Continuing Analysis and Surveillance 14 CFR 1 121373 (1996)Retrieved from the FAA Website httpwwwairwebfaagov

Figure 7 Differences in Requirements for FAA Certificated Repair Stations and Non-Certificated Facilities Adapted from lsquolsquoAir carriersrsquo use of non-certificated repair facilitiesrsquorsquo 2005 Department of Transportation p 12

McFadden and Worrels Journal of Aviation Technology and Engineering 71

Fully Integrated MRO

An airline performs all aircraft maintenance activities in-house In addition it may look to sell excess capacity toother airlines

This practice is well-suited for airlines with large variedfleets and an extensive route structure (Al-Kaabi et al2007)

Partially Outsourced MRO

An airline meets a large portion of its needs in-housewith a minimum of outsourcing This permits a good dealof flexibility and adaptation to seasonable demands and isbest suited for airlines that have just a few different fleettypes

Mostly Outsourced MRO

Most maintenance is outsourced while critical needs arekept in-house (Al-Kaabi et al 2007) lsquolsquoCritical needsrsquorsquo aredefined by individual carriers For example Jet BlueAirlines defines line maintenance as critical to its operationand keeps most of that activity in-house

Wholly Outsourced MRO

All maintenance is outsourced This model is used bystartup airlines that do not have the capital to establish anMRO capability or that choose not to as a part of theirbusiness model

MRO Provider Selection

Perhaps the most important factor to consider is theselection of the MRO provider Many variables come intoplay and each one must be considered carefully Wymanuses a very thorough six-step process that evaluates allaspects of a provider before making a recommendation toan airline These six steps are

1 Define requirements Develop a detailed descriptionof what is to be expected including the volume andtiming of the work required

2 Explore and understand the current marketplaceKnowing who is doing quality and reliable work isextremely important

3 Define outsource strategy and require initial bids forthe work Determine whether or not to bundleunbundle services length of contract and type ofcontract

4 Feedback for bidders Specific details concerningpricing and suggestions on ancillary services arediscussed

5 Face to face negotiations Establish terms andconditions On-site inspection must be a contractprovision Conclude with formal Memorandum ofUnderstanding (MOU)

6 Convert MOU into formal detailed contract (as citedin Canaday 2007 para 5)

It should be noted here that this last step is recommendedby the FAA in AC 120-16E Chapter Nine as an importantfactor in the outsourcing process The Federal AviationAdministration states

When possible you should have a written contract withanyone performing maintenance work for you on acontinuing basis This will help ensure your responsi-bilities are addressed In the case of major operationssuch as engine propeller or airframe overhaul thecontract should include a specification for the work Youshould include or reference that specification in yourmanual system (2008 p 33)

Sakburanapech (2008) describes a process that wasdeveloped by Momme and Hvolby that has three phasesand six activities as shown in Figure 5

The actual selection process varies by airline and isbased on needs and priorities set by managementHowever regulatory requirements must be addressed to

Figure 5 The outsourcing process Adapted from lsquolsquoDevelopment of a relationship management framework and related performance metrics for outsourcedaircraft maintenancersquorsquo by A Sakburanapech 2008 Cranfield University p 15

McFadden and Worrels Journal of Aviation Technology and Engineering 69

the satisfaction of the FAA For example Becher aspokesman for Northwest Airlines stated in 2005

While costs for outsourced maintenance are lower thanfor in-house maintenance quality and safety are notcompromised Northwest selects them because of theirworld class management control systems and technicalability Outside vendors undergo a rigorous reviewbefore being offered a maintenance contract byNorthwest (as cited in lsquolsquoMaintenance Outsourcingrsquorsquo2009 para 14)

Jet Bluersquos vice-president of technical services Ramageuses turnaround times and the quality of service as keyfactors in the selection process He said lsquolsquoThe first thing welook at is the culture of the company And obviously whenI talk about quality it is what the safety culture is and canthey do the job well Quality safety and experience isimportantrsquorsquo (as cited in Arnoult 2010 para 7)

The Oversight Process and its Contribution to Safety

Air Carrier Oversight

The first line of defense in prevention of errors that maylead to improper maintenance is an air carrierrsquos CASSRequired by FAR Part 121373 CASS is one of the 10elements of a maintenance program (Continuing Analysisand Surveillance 1996)

The high level purpose of a CASS is to reduce oreliminate the likelihood of your aircraft being approvedfor return for service when it is not airworthy through thecontinuous system safety-based closed loop cycle ofsurveillance investigation data collection analysiscorrective action monitoring and feedback of aCASS (FAA 2010 p 6)

Four basic activities of CASS are surveillance analysiscorrective action and follow up Encompassed therein areaudit processes data collection processes Root CauseAnalysis (RCA) and performance measurement This risk-based closed loop system verifies performance andeffectiveness of a maintenance program (see Figure 6)(FAA 2010)

FAA Oversight

US repair stations Problems with FAA oversight ofoutsourced maintenance and contract repair stations drewattention from Department of Transportationrsquos (DOTrsquos)Office of Inspector General the public and the USCongress The catalyst for this attention was the crash ofValuJet Flight 592 into the Florida Everglades in May1996 The ValuJet accident was one of three fatal airlineaccidents related to contract maintenance (Adams 2009)The ValuJet accident investigation ultimately laid blame atthe feet of the Sabre-Tech (the contract maintenanceprovider) ValuJet and the FAA (National TransportationSafety Board 1997)

International repair stations The US and selectforeign countries recognize each otherrsquos aviation safetystandards and programs through Bilateral Aviation SafetyAgreements (BASA)

The purposes of this Agreement are to (a) enablereciprocal acceptance of findings of compliance andapprovals issued by the Technical Agents and AviationAuthorities (b) promote a high degree of safety in airtransport and (c) ensure continuation of high levelregulatory cooperation and harmonization between USand EC The scope of cooperation under this Agreementis (a) airworthiness approvals and monitoring of civilaeronautical products (b) environmental testing andapprovals of civil aeronautical products and (c)

Figure 6 Four Basic CASS Activities Adapted from lsquolsquoDeveloping and implementing an air carrier continuing analysis and surveillance systemrsquorsquo 2010FAA AC 120-79A p 15

70 McFadden and Worrels Journal of Aviation Technology and Engineering

approvals and monitoring of maintenance facilities(Council of the European Union 2011)

Certifiednon-certified repair stations Certification ofPart 145 repair stations is subject to regulatory require-ments of the FAA non-certificated stations are not (seeFigure 7)

Air carriers ensure through proper audits and oversightthat contracted facilities perform according to approvedmaintenance programs According to the DOT lsquolsquoNon-certificated facilities performing critical maintenance cre-ates a double standard because certificated repair stationsare required to have designated supervisors inspectorsreturn-to-service personnel and quality control systemsNo such requirements apply to non-certificated facilitiesrsquorsquo(DOT 2005 p 6) A DOT investigation found

hellipas many as 1400 domestic and foreign facilities thatcould perform the same work (eg repairing flightcontrol systems and engine parts) a certificated facilityperforms but are not inspected like certificated facilitiesOf those 1400 facilities we identified 104 foreign non-certificated facilitiesmdashFAA had never inspected any ofthem (2005 p 6)

Conclusion

Contract maintenance is as old as the aviation industryitself Over time and as the aviation industry has evolvedthe airline industry has integrated contract maintenance intoa post-deregulation business model that emphasizes its corebusiness transporting passengerscargo from point to pointwhile marginalizing to the greatest extent possible the costof aircraft maintenance Worldwide MROs have grown inresponse to continuous and increasing demand into a

viable segment of the aviation industry Proliferation ofMRO facilities worldwide should continue althoughgrowth has slowed as a result of current economicstagnation as long as the industry and the regulators meettheir responsibility to ensure aircraft are maintained to thehigh standards required by regulation and good businesspractice

References

Adams C (2009 June 1) Maintenance outsourcing safety debateAviation Today Retrieved from httpwwwaviationtodaycomregionscaMaintenance-Outsourcing-Safety-Debate_32488html

Air Transport Association of America (2003 March) Operatormanufacturer scheduled maintenance development Retrieved fromhttpwwwcastcorgcnweixiufilewxgc8pdf

Arnoult S (2010 October 26) Maintenance special report the MROquandary Airline Business Retrieved from httpwwwflightglobalcomarticles20101026348942maintenance-special-report-the-mro-quandaryhtml

Al-Kaabi H Potter A amp Naim M (2007) An outsourcing decisionmodel for airlinesrsquo MRO activities Journal of Quality in MaintenanceEngineering 13(3) 217ndash227 Retrieved from wwwemeraldinsightcom1355-2511htm doi 10110813552510710780258

Canaday H (2005 October 21) Cost control over time Overhaul andMaintenance Retrieved from httpwwwaviationweekcomawgenericstory_genericjspchannel5omampid5newsom1005cvrxmlampheadline5Cost20Control20Over20Time

Canaday H (2007 October 1) Intelligent outsourcing Overhaul andMaintenance Retrieved from httpwwwaviationweekcomezproxylibproxydberauedusearcharticleQuickSearchdoparameter5displayArticlesampreference5xmlom_xml20071001OM_10_01_2007_p59-01xmlamppubDate5Oct012007ampdatabaseName5omampkeyword5Intelligent+OutsourcingampissueDateWT510012007amppublicationName5omampheadline5Intelligent Outsourcing

Certified Aviation Services (2007 December) Improving the bottom linethrough outsourced line maintnenance [White Paper] Retrieved fromhttpwwwcertfiedaviationcom

Continuing Analysis and Surveillance 14 CFR 1 121373 (1996)Retrieved from the FAA Website httpwwwairwebfaagov

Figure 7 Differences in Requirements for FAA Certificated Repair Stations and Non-Certificated Facilities Adapted from lsquolsquoAir carriersrsquo use of non-certificated repair facilitiesrsquorsquo 2005 Department of Transportation p 12

McFadden and Worrels Journal of Aviation Technology and Engineering 71

the satisfaction of the FAA For example Becher aspokesman for Northwest Airlines stated in 2005

While costs for outsourced maintenance are lower thanfor in-house maintenance quality and safety are notcompromised Northwest selects them because of theirworld class management control systems and technicalability Outside vendors undergo a rigorous reviewbefore being offered a maintenance contract byNorthwest (as cited in lsquolsquoMaintenance Outsourcingrsquorsquo2009 para 14)

Jet Bluersquos vice-president of technical services Ramageuses turnaround times and the quality of service as keyfactors in the selection process He said lsquolsquoThe first thing welook at is the culture of the company And obviously whenI talk about quality it is what the safety culture is and canthey do the job well Quality safety and experience isimportantrsquorsquo (as cited in Arnoult 2010 para 7)

The Oversight Process and its Contribution to Safety

Air Carrier Oversight

The first line of defense in prevention of errors that maylead to improper maintenance is an air carrierrsquos CASSRequired by FAR Part 121373 CASS is one of the 10elements of a maintenance program (Continuing Analysisand Surveillance 1996)

The high level purpose of a CASS is to reduce oreliminate the likelihood of your aircraft being approvedfor return for service when it is not airworthy through thecontinuous system safety-based closed loop cycle ofsurveillance investigation data collection analysiscorrective action monitoring and feedback of aCASS (FAA 2010 p 6)

Four basic activities of CASS are surveillance analysiscorrective action and follow up Encompassed therein areaudit processes data collection processes Root CauseAnalysis (RCA) and performance measurement This risk-based closed loop system verifies performance andeffectiveness of a maintenance program (see Figure 6)(FAA 2010)

FAA Oversight

US repair stations Problems with FAA oversight ofoutsourced maintenance and contract repair stations drewattention from Department of Transportationrsquos (DOTrsquos)Office of Inspector General the public and the USCongress The catalyst for this attention was the crash ofValuJet Flight 592 into the Florida Everglades in May1996 The ValuJet accident was one of three fatal airlineaccidents related to contract maintenance (Adams 2009)The ValuJet accident investigation ultimately laid blame atthe feet of the Sabre-Tech (the contract maintenanceprovider) ValuJet and the FAA (National TransportationSafety Board 1997)

International repair stations The US and selectforeign countries recognize each otherrsquos aviation safetystandards and programs through Bilateral Aviation SafetyAgreements (BASA)

The purposes of this Agreement are to (a) enablereciprocal acceptance of findings of compliance andapprovals issued by the Technical Agents and AviationAuthorities (b) promote a high degree of safety in airtransport and (c) ensure continuation of high levelregulatory cooperation and harmonization between USand EC The scope of cooperation under this Agreementis (a) airworthiness approvals and monitoring of civilaeronautical products (b) environmental testing andapprovals of civil aeronautical products and (c)

Figure 6 Four Basic CASS Activities Adapted from lsquolsquoDeveloping and implementing an air carrier continuing analysis and surveillance systemrsquorsquo 2010FAA AC 120-79A p 15

70 McFadden and Worrels Journal of Aviation Technology and Engineering

approvals and monitoring of maintenance facilities(Council of the European Union 2011)

Certifiednon-certified repair stations Certification ofPart 145 repair stations is subject to regulatory require-ments of the FAA non-certificated stations are not (seeFigure 7)

Air carriers ensure through proper audits and oversightthat contracted facilities perform according to approvedmaintenance programs According to the DOT lsquolsquoNon-certificated facilities performing critical maintenance cre-ates a double standard because certificated repair stationsare required to have designated supervisors inspectorsreturn-to-service personnel and quality control systemsNo such requirements apply to non-certificated facilitiesrsquorsquo(DOT 2005 p 6) A DOT investigation found

hellipas many as 1400 domestic and foreign facilities thatcould perform the same work (eg repairing flightcontrol systems and engine parts) a certificated facilityperforms but are not inspected like certificated facilitiesOf those 1400 facilities we identified 104 foreign non-certificated facilitiesmdashFAA had never inspected any ofthem (2005 p 6)

Conclusion

Contract maintenance is as old as the aviation industryitself Over time and as the aviation industry has evolvedthe airline industry has integrated contract maintenance intoa post-deregulation business model that emphasizes its corebusiness transporting passengerscargo from point to pointwhile marginalizing to the greatest extent possible the costof aircraft maintenance Worldwide MROs have grown inresponse to continuous and increasing demand into a

viable segment of the aviation industry Proliferation ofMRO facilities worldwide should continue althoughgrowth has slowed as a result of current economicstagnation as long as the industry and the regulators meettheir responsibility to ensure aircraft are maintained to thehigh standards required by regulation and good businesspractice

References

Adams C (2009 June 1) Maintenance outsourcing safety debateAviation Today Retrieved from httpwwwaviationtodaycomregionscaMaintenance-Outsourcing-Safety-Debate_32488html

Air Transport Association of America (2003 March) Operatormanufacturer scheduled maintenance development Retrieved fromhttpwwwcastcorgcnweixiufilewxgc8pdf

Arnoult S (2010 October 26) Maintenance special report the MROquandary Airline Business Retrieved from httpwwwflightglobalcomarticles20101026348942maintenance-special-report-the-mro-quandaryhtml

Al-Kaabi H Potter A amp Naim M (2007) An outsourcing decisionmodel for airlinesrsquo MRO activities Journal of Quality in MaintenanceEngineering 13(3) 217ndash227 Retrieved from wwwemeraldinsightcom1355-2511htm doi 10110813552510710780258

Canaday H (2005 October 21) Cost control over time Overhaul andMaintenance Retrieved from httpwwwaviationweekcomawgenericstory_genericjspchannel5omampid5newsom1005cvrxmlampheadline5Cost20Control20Over20Time

Canaday H (2007 October 1) Intelligent outsourcing Overhaul andMaintenance Retrieved from httpwwwaviationweekcomezproxylibproxydberauedusearcharticleQuickSearchdoparameter5displayArticlesampreference5xmlom_xml20071001OM_10_01_2007_p59-01xmlamppubDate5Oct012007ampdatabaseName5omampkeyword5Intelligent+OutsourcingampissueDateWT510012007amppublicationName5omampheadline5Intelligent Outsourcing

Certified Aviation Services (2007 December) Improving the bottom linethrough outsourced line maintnenance [White Paper] Retrieved fromhttpwwwcertfiedaviationcom

Continuing Analysis and Surveillance 14 CFR 1 121373 (1996)Retrieved from the FAA Website httpwwwairwebfaagov

Figure 7 Differences in Requirements for FAA Certificated Repair Stations and Non-Certificated Facilities Adapted from lsquolsquoAir carriersrsquo use of non-certificated repair facilitiesrsquorsquo 2005 Department of Transportation p 12

McFadden and Worrels Journal of Aviation Technology and Engineering 71

approvals and monitoring of maintenance facilities(Council of the European Union 2011)

Certifiednon-certified repair stations Certification ofPart 145 repair stations is subject to regulatory require-ments of the FAA non-certificated stations are not (seeFigure 7)

Air carriers ensure through proper audits and oversightthat contracted facilities perform according to approvedmaintenance programs According to the DOT lsquolsquoNon-certificated facilities performing critical maintenance cre-ates a double standard because certificated repair stationsare required to have designated supervisors inspectorsreturn-to-service personnel and quality control systemsNo such requirements apply to non-certificated facilitiesrsquorsquo(DOT 2005 p 6) A DOT investigation found

hellipas many as 1400 domestic and foreign facilities thatcould perform the same work (eg repairing flightcontrol systems and engine parts) a certificated facilityperforms but are not inspected like certificated facilitiesOf those 1400 facilities we identified 104 foreign non-certificated facilitiesmdashFAA had never inspected any ofthem (2005 p 6)

Conclusion

Contract maintenance is as old as the aviation industryitself Over time and as the aviation industry has evolvedthe airline industry has integrated contract maintenance intoa post-deregulation business model that emphasizes its corebusiness transporting passengerscargo from point to pointwhile marginalizing to the greatest extent possible the costof aircraft maintenance Worldwide MROs have grown inresponse to continuous and increasing demand into a

viable segment of the aviation industry Proliferation ofMRO facilities worldwide should continue althoughgrowth has slowed as a result of current economicstagnation as long as the industry and the regulators meettheir responsibility to ensure aircraft are maintained to thehigh standards required by regulation and good businesspractice

References

Adams C (2009 June 1) Maintenance outsourcing safety debateAviation Today Retrieved from httpwwwaviationtodaycomregionscaMaintenance-Outsourcing-Safety-Debate_32488html

Air Transport Association of America (2003 March) Operatormanufacturer scheduled maintenance development Retrieved fromhttpwwwcastcorgcnweixiufilewxgc8pdf

Arnoult S (2010 October 26) Maintenance special report the MROquandary Airline Business Retrieved from httpwwwflightglobalcomarticles20101026348942maintenance-special-report-the-mro-quandaryhtml

Al-Kaabi H Potter A amp Naim M (2007) An outsourcing decisionmodel for airlinesrsquo MRO activities Journal of Quality in MaintenanceEngineering 13(3) 217ndash227 Retrieved from wwwemeraldinsightcom1355-2511htm doi 10110813552510710780258

Canaday H (2005 October 21) Cost control over time Overhaul andMaintenance Retrieved from httpwwwaviationweekcomawgenericstory_genericjspchannel5omampid5newsom1005cvrxmlampheadline5Cost20Control20Over20Time

Canaday H (2007 October 1) Intelligent outsourcing Overhaul andMaintenance Retrieved from httpwwwaviationweekcomezproxylibproxydberauedusearcharticleQuickSearchdoparameter5displayArticlesampreference5xmlom_xml20071001OM_10_01_2007_p59-01xmlamppubDate5Oct012007ampdatabaseName5omampkeyword5Intelligent+OutsourcingampissueDateWT510012007amppublicationName5omampheadline5Intelligent Outsourcing

Certified Aviation Services (2007 December) Improving the bottom linethrough outsourced line maintnenance [White Paper] Retrieved fromhttpwwwcertfiedaviationcom

Continuing Analysis and Surveillance 14 CFR 1 121373 (1996)Retrieved from the FAA Website httpwwwairwebfaagov

Figure 7 Differences in Requirements for FAA Certificated Repair Stations and Non-Certificated Facilities Adapted from lsquolsquoAir carriersrsquo use of non-certificated repair facilitiesrsquorsquo 2005 Department of Transportation p 12

McFadden and Worrels Journal of Aviation Technology and Engineering 71

Regulatory_and_Guidance_LibraryrgFARnsf005249BA96A808EBD852566EF006C69C9OpenDocument

Council of the European Union (2011 March 1) Agreement between theUnited States of America and the European Community on cooperationin the regulation of civil aviation safety Retrieved from httpregisterconsiliumeuropaeupdfen09st08st08312en09pdf

Czepiel E (2003 March) Practices and perspectives in outsourcingaircraft maintenance (DOTFAAAR-02122) Retrieved from theFAA website httpshfskywayfaagov

Department of Transportation Office of Inspector General (2005December 15) Air carriersrsquo use of non-certificated repair facilities(AV-2006-031) Retrieved from the DOT website httpwwwoigdotgovlibrary-item4044

Department of Transportation Office of Inspector General (2008September 30) Review of air carriersrsquo outsourcing of aircraftmaintenance (AV-2008-090) Retrieved from the DOT websitehttpwwwoigdotgovlibrary-item4992

Federal Aviation Administration (2008) Air carrier maintenanceprograms (Advisory Circular 120-16E) Retrieved from the FAAwebsite httpwwwairwebfaagovRegulatory_and_Guidance_LibraryrgAdvisoryCircularnsf0D505FFC06AECC27E862574C6005480A2OpenDocument

Federal Aviation Administration (2010) Developing and implementing anair carrier continuing analysis and surveillance system (AdvisoryCircular 120-79A) Retrieved from the FAA website httpwwwairwebfaagovRegulatory_and_Guidance_LibraryrgAdvisoryCircularnsf05BFD9BFF65324C40862577990057AA4FOpenDocumentampHighlight5120-79a

Ferreira M amp Serra F (2010 JanuaryndashMarch) Make or buy in a matureindustry Models of client-supplier relationships under TCT and RBVperspective Brazilian Administration Review 7(1) 22ndash39 Retrievedfrom httpwwwanpadorgbrperiodicosarq_pdfa_1022pdf doi 101590S1807-76922010000100003

International Air Transport Association (2011 January) Airline main-tenance costs executive commentary Retrieved from httpwwwiataorgworkgroupsDocumentsMCTFAMC_ExecComment_FY09pdf

Jackman F (2007 April 1) MRO market is up and down Overhaul andMaintenance Retrieved from httpwwwaviationweekcomezproxylibproxydberauedusearcharticleQuickSearchdoparameter5displayArticlesampreference5xmlom_xml20070401OM_04_01_2007_p47-01xmlampdatabaseName5omamppubDate5Apr2001202007ampkeyword5MRO+Market+is+up+and+downampissueDateWT504012007amppublicationName5omampheadline5MRO20MARKET20IS20UP20AND20DOWN

Maintenance outsourcing emerging appeal (2009 October 29) AirlineBusiness Retrieved from httpwwwflightglobalcomarticles20091029334031maintenance-outsourcing-emerging-appealhtml

Maintenance outsourcing trends (2005 April) Aircraft TechnologyEngineering amp Maintenance Retrieved from httprelaisillcomposttoweberauservletDownloadDocument2361787pdf

McGee W J (2008 May 23) Outsourcing of airline maintenancesoursConsumer Reports Retrieved from httpblogsconsumerreportsorgsafety200805airline-safetyhtml

Moody E (2009 June 1) Top 10 airframe MRO providersOverhaul andMaintenance Retrieved from httpwwwaviationweekcomezproxylibproxydberauedusearcharticleQuickSearchdoparameter5displayArticlesampreference5xmlom_xml20090601OM_06_01_2009_p33-143878xmlamppubDate5Jun2001202009ampdatabaseName5omampkeyword5Top+10+Airframe+MRO+ProvidersampissueDateWT506012009amppublicationName5omampheadline5Top201020Airframe20MRO20ProvidersampINTERCEPT_MESSAGES5S_IP_AUTHampPRIOR_REQUEST_URL52Fsearch2FarticleQuickSearchdo3Fparameter3DdisplayArticles26reference3Dxml2Fom_xml2F20092F062F012FOM_06_01_2009_p33-143878xml26pubDate3DJun2520012C2520200926databaseName3Dom26keyword3DTop2B102BAirframe2BMRO

2 B P r o v i d e r s 2 6 i s s u eD a t e W T 3 D 0 6 2 F0 1 2 F 2 0 0 9 26publicationName3Dom26headline3DTop2520102520Airframe2520MRO2520Providers

Moody E (2010 November 1) Southeast Asia special DynamicdemandsOverhaul and Maintenance Retrieved from httpwwwaviationweekcomawgenericstory_genericjspchannel5omampid5newsom20101101OM_11_01_2010_p22-260993xmlampheadline5nullampnext510

Moorman R (2011 January 1) ROI for rotables Overhaul andMaintenance Retrieved from httpwwwaviationweekcomezproxylibproxydberauedusearcharticleQuickSearchdoparameter5displayArticlesampkeyword5ROI+for+rotablesampreference5xmlom_xml20110101OM_01_01_2011_p51-275643xmlampdatabaseName5omampissueDateWT501012011amppublicationName5omampheadline5ROIFor RotablesamppubDate5Jan 01 2011

National Transportation Safety Board (1997 August 19) In-flight fire andimpact with terrain ValuJet flt 592 (NTSBAAR-9706) Retrievedfrom the NTSB website httpwwwntsbgovpublictn1997aar9706pdf

Pandit P (2007 December) Tenets of MRO strategy for airlinesRetrieved from httpwwwinfosyscomofferingsindustriesairlineswhite-papersDocumentstenets-MRO-strategypdf

Phillips E (2008 January 28) Decade of growth ahead for MROAviationWeek and Space Technology Retrieved from httpwwwaviationweekcomezproxylibproxydberauedusearcharticleQuickSearchdoparameter5displayArticlesampreference5xmlawst_xml20080128AW_01_28_2008_p65-15687xmlampdatabaseName5awstamppubDate5Jan2028202008ampkeyword5Decade+of+growth+ahead+for+MROampissueDateWT501282008amppublicationName5awstampheadline5Decade20of20Growth20Ahead20for20MRO

Phillips E (2009 January 26) Market outlook for MRO sector AviationWeek and Space Technology Retrieved from httpwwwaviationweekcomezproxylibproxydberauedusearcharticleQuickSearchdoparameter5displayArticlesampreference5xmlawst_xml20090126AW_01_26_2009_p57-93380xmlamppubDate5Jan2026202009ampdatabaseName5awstampkeyword5Market+outlook+for+MRO+sectorampissueDateWT501262009amppublicationName5awstampheadline5Market20Outlook20for20MRO20Sector

Responsibility for Airworthiness 14 CFR 1 121363 (1973) Retrievedfrom the FAA website httpwwwairwebfaagovRegulatory_and_Guidance_LibraryrgFARnsf03AA283C5FA474201852566EF006C62D3OpenDocumentampHighlight5121363

Rieple A (2008) Outsourcing for competitive advantage an examinationof seven legacy airlines Journal of Air Transport Management 14280ndash285 doi101016jjairtraman200806002

Sackett P amp Sakburanapech A (2006) Criterion for success in criticaloutsourcing (IAMOT 1682ndash1544) Retrieved from httpwwwiamotorgconferenceindexphpocs10paperview1682772

Sakburanapech A (2008 August) Development of a relationshipmanagement framework and related performance metrics for out-sourced aircraft maintenance Retrieved from the Cranfield Universitywebsite httpdspacelibcranfieldacukhandle18264091

Schifrin C (2007 March 1) Leveraging line maintenance Overhaul andMaintnenance Retrieved from httpwwwaviationweekcomezproxylibproxydberauedusearcharticleAdvanceSearchdoparameter5displayArticlesampreference5xmlom_xml20070301OM_03_01_2007_p28-01xmlampdatabaseName5omamppubDate5Mar2001202007ampkeyword520line20maintenance20outsourcingampissueDateWT503012007amppublicationName5omampheadline5Leveraging20Line20MaintenanceSeidenman P (2008 October 1) Line main-tenance outsourcing Overhaul and Maintenance Retrieved from httpwwwaviationweekcomezproxylibproxydberauedusearcharticleQuickSearchdoparameter5displayArticlesampreference5xmlom_xml20081001OM_10_01_2008_p39-81712xmlampdatabaseName5omamppubDate5

Oct 01 2008ampkeyword5outsourcing+line+maintenanceampissueDateWT5

72 McFadden and Worrels Journal of Aviation Technology and Engineering

10012008amppublicationName5omampheadline5Line Maintenance Out-sourcing

Seidenman P amp Spanovich D J (2009 August 1) Whatrsquos next for theoffice Overhaul and Maintenance Retrieved from httpwwwaviationweekcomezproxylibproxydberauedupublicationomloggedinAvnowStoryDisplaydofromChannel5omamppubKey5omampchannel5omampissueDate52009-08-01ampstory5xmlom_xml20090801OM_08_01_2009_p44-151365xmlampheadline5Whats+Next+For+The+Office3F

Smith G amp Bachman J (2008 April 10) The offshoring of airplanecare Bloomberg Businessweek Retrieved from httpwwwbusinessweekcombwdailydnflashcontentapr2008db2008049_205948htm

Tegtmeir L (2011 April 1) Central America an emergingmarketOverhaul and Maintenance Retrieved from httpwwwaviationweekcomezproxylibproxydberauedupublicationomloggedinAvnowStoryDisplaydofromChannel5omamppubKey5omampchannel5omampissueDate52011-0401ampstory5xmlom_xml201104

01OM_04_01_2011_p33-297952xmlampheadline5Central+America3A++An+Emerging+Market

Trebilcock B (2007 December 1) Links in the chain changing dynamicsin the MRO supply chain Overhaul and Maintenance Retrieved fromhttpwwwaviationweekcomezproxylibproxydberauedusearcharticleQuickSearchdoparameter5displayArticlesampreference5xmlom_xml20071201OM_12_01_2007_p51-02xmlampdatabaseName5

omamppubDate5Dec01 2007ampkeyword5Links+in+the+chain3A+Changing+dynamicsampissueDateWT512012007amppublicationName5

omampheadline5Changing Dynamics In The MRO Supply ChainWeaver J (2008 August) Outsourcing aircraft maintenance designed

around safety diversification and performance (SAE 2008-01-2266)Retrieved from httpwwwsaeorgsearchsearchfield52008-01-2266amptyp5paper

Wensveen J G (2007) Airline pricing demand and output determina-tion In Air transportation a management perspective (6th ed pp283ndash318) Burlington VT Ashgate

McFadden and Worrels Journal of Aviation Technology and Engineering 73