Sunday, April 1, 2007
Commercial: Delta TechOps Rejuvenated
As Delta emerges from Chapter 11 protection it gains a significant boost from its maintenance division. The restructured MRO has survived difficult times, strengthened its third-party business and become a significant contributor to its parent company’s bottom line.
While, as this is written, rumors swirl of the parent company’s possible merger with, or acquisition by, another airline, Delta TechOps continues to steadily fine tune its services and expand its third-party business. Its primary function remains supporting the 440 aircraft operated by Delta Air Lines, the third largest U.S. carrier. However, the maintenance, repair and overhaul (MRO) organization can boast of a boost in third-party maintenance that has offset the reduction of in-house work, which began even before Delta entered into Chapter 11 under bankruptcy law in September 2005.
The company reached a turning point in 2006. Both its in-house and third-party maintenance activity grew, delivering TechOps’ most successful year, according to John Laughter, Delta TechOps’ vice president of maintenance operations. Its annual revenue exceeded $310 million; this represents a 30-percent year-over-year increase and will contribute significantly to Delta’s discharge from Chapter 11, which is expected soon.
Laughter reported that third-party maintenance produces 20 to 25 percent of his company’s business, and added, "At any given time, more than 50 percent of the engine maintenance can be third-party." Delta TechOps services more than 600 engines annually; these comprise the following models: GE/CFMI CFM56-3/7, CF6-80A2/C2 and CF34, and Pratt & Whitney PW2000, PW4000 and JT8D-219. In addition, it leases to its customers between 20 and 30 engines a year.
TechOps’ relationship with its parent company remains unchanged. While some airline MROs have been spun off to become separate profit centers, TechOps remains quite solidly a division of Delta Air Lines — and apparently will continue to be so. Jack Turnbill, the company’s director of technical sales, said the outside work is "a separate business within TechOps." But, he added, "We think there are advantages to TechOps remaining linked to the airline. Being a part of Delta allows us to better understand our customers’ needs."
Though its position within Delta’s corporate structure remains constant, TechOps has had to restructure. Prior to entering Chapter 11, TechOps began transforming itself to be more competitive by focusing on core capabilities and outsourcing its heavy maintenance. "It was really the result of changes in market dynamics and the globalization of the MRO market," said Laughter.
The restructuring impacted TechOps’ employee count. "Over two years, we reduced our workforce by about 3,000 employees," said Laughter. TechOps let go up to 1,000 maintenance jobs as recently as April 2006. Concessions in pay and benefits also had to be made — a situation, Laughter stressed, that "impacted all Delta employees."
The parent company’s bankruptcy filing did not impact TechOps’ third-party business, however. "Losing customers was a concern for us," said Turnbill. "But we didn’t lose one customer."
He admitted it was challenging to help TechOps’ international customers understand U.S. bankruptcy law. "We got help from our legal department, then spent a lot of time with our customers. We had to be educational," said Turnbill.
TechOps has more than 100 customers worldwide. Among its larger ones are ABX Air, World Airways, Aeromexico, Comair, ASA, Air Berlin, Hawaiian Airlines and Gol, a fast-growing low-cost carrier in Brazil.
The company’s current upswing in business has reversed the outflow of employees; Laughter announced that his company is "recalling 700 A&Ps right now." Having previously recalled about 200 employees, this will place the company’s workforce at more than 7,000.
Delta TechOps relationship with its employees is particularly critical to its goal of remaining a non-union shop. "It requires constant attention," Laughter said of the relationship. "You can’t be distracted from taking care of your people. Our leadership keeps an open door, and we include employees in the decisions made."
"We have established continuous improvement initiatives that are front-line led, and we have an employee council program that allows employees to share thoughts or concerns with counterparts and management," the vice president added. "There are both formal and informal channels for both employees and leaders to use."
Such care no doubt contributes to low employee turnover at TechOps. "Our A&Ps have been with the company an average of 17 years and our inspectors, 20 years," said Turnbill.
TechOps benefits, Laughter believes, by having a flexible workforce. "We deal directly with our employees and not through a third party, such as a union," he explained.
For further flexibility, TechOps cross trains its mechanics. "We don’t have silos of specific skills," said Laughter. "We train so they can work on any part of the airplane. That’s beneficial from our point of view, but it’s good for the mechanics, too."
Delta TechOps has made recent dramatic adjustments and come a long way from its humble beginnings in 1929, when it and Delta Air Lines was launched in Monroe, Louisiana The company moved to Atlanta, Georgia, in 1940. In 1983 it began taking in outside maintenance, and in 1999 it made a big push for third-party work, establishing a dedicated sales and marketing group.
Several years ago TechOps decided to abandoned labor-intensive, heavy airframe maintenance and apply its highly skilled expertise in the following:
Repair, overhaul and testing of engines
Repair, overhaul and testing of components including pneumatic and electromechanical and avionics units
Line maintenance services
Base maintenance airframe services. Laughter calls these services the company’s "four pillars of support." TechOps also offers logistics support, fleet engineering, engine and APU leasing and training and instruction in such areas as safety, ground support equipment, avionics repair, welding, sheet metal and composites.
Despite some "unexpected costs" associated with outsourcing airframe heavy maintenance, TechOps officials claim, "The overall savings remains substantial, and we are seeing solid overall program economics."
The company initially outsourced the heavy airframe work for Delta’s B767-300s and B757-200s to Air Canada Tech Services in Vancouver, British Columbia. However, that has changed. Now Timco is performing heavy maintenance on Delta’s 757s at its Lake City, Fla., facility, and HAECO (Hong Kong Aircraft Engineering Co.) has recently been selected to perform services on 11 B767 aircraft. The first B767 is scheduled to enter a HAECO hangar in Hong Kong this spring.
For the Bombardier CRJ200 regional jets flying for Delta, TechOps supports the CF34 power plants and some components, such as the integrated drive generators, air-cycle machines and starters. But the airline’s regional partners are responsible for either contracting out or performing internally CRJ heavy airframe maintenance.
TechOps is expanding its support capabilities for the 737NG, considered a "core aircraft" at Delta. Its support includes engine and component repair, airframe maintenance including packaged service visits (PSVs) in Atlanta and line maintenance services.
The company may also expand its maintenance capabilities on the B777, said Laughter, providing it can attract a customer or two to increase work volume. Delta operates eight 777s and has five on order; two 777LRs are to be delivered in 2008.
Delta has had Aeromexico Maintenance and Engineering performing insulation blanket modifications on its MD88s for two years and in April 2006, entered into a unique agreement involving reciprocating support services with the Mexican company. The arrangement, initially covering 10 years, "complements the maintenance capacity of both suppliers," said Tony Charaf, senior vice president of technical operations for Delta TechOps. It has Aeromexico becoming the exclusive heavy maintenance supplier for Delta’s fleet of more than 100 MD88s, while TechOps becomes the exclusive maintenance supplier for the CFM56-7 and the 131-9B auxiliary power units for Aeromexico’s 737NGs. (TechOps was the first company other than the manufacturer, CFM International, to support the CFM56-7.) The MD88s are serviced in Aeromexico’s Guadalajara maintenance center.
Aeromexico, which is a SkyTeam partner with Delta, operates a comparable fleet of B777s, B767s, B737NGs and MD80s. Its maintenance arm has more than 20 years of heavy airframe maintenance experience on the MD80 - series aircraft. TechOps officials say their company may expand its business with Aeromexico to include MD90 heavy maintenance at some point in the future, however that work is currently performed by AAR in Oklahoma City.
In a relationship established in 1999, TechOps has provided support for Aeromexico’s JT8D-219 engines and is currently providing support for its PW2037 engines.
"Our current focus is on support for the Delta fleet and Aeromexico engines," said Turnbill, commenting on the reciprocal agreement. "However, as the program matures, we do anticipate seeking other third-party work together as we offer comprehensive maintenance options and add joint sales and marketing efforts."
Outsourcing heavy maintenance, TechOps focuses on other areas of support; for example, it works on an average 120,000 components annually. Laughter broke down the company’s workload: 40 percent engines, 20 percent components, 20 percent airframe, 15 percent line maintenance and five percent support and training.
Laughter said the company will continue emphasizing its engine and component support, base maintenance and line maintenance services to achieve continued growth, and plans not to de-emphasize any service it currently offers. "Having come through bankruptcy has given us the opportunity to look at what we want to be," he explained. "We feel we’re there; there’s no area we want to de-emphasize."
The vice president does foresee the company seeking new business in aircraft modifications. "In the past we sent most of that work outside because it didn’t provide a continual workflow," he said. "But now we’re seeing a growing demand for that kind of service, and it looks like we could put together a more constant workflow. It’s work we do well, and that includes [installing] in-flight entertainment."
TechOps has three modern paint bays, using one exclusively for paint and the other two for airframe maintenance and as-needed paint services. The facility averages about 75 paint visits annually; about 20 percent are for outside customers.
Most of TechOps work is done at its sprawling, 64-acre facility at Hartsfield-Jackson Atlanta International Airport. The maintenance center includes three main structures: a large hangar that can take in up to six widebodies and six or more smaller aircraft at once, a smaller hangar that can accommodate up to two widebody aircraft and four narrowbodies simultaneously, and a four-story building that includes the paint bays, shops and warehouses. Its other, significant facilities are at:
Boston Logan Airport, for line maintenance
New York Kennedy and LaGuardia airports, line maintenance
Cincinnati/Northern Kentucky Airport, hangar and line maintenance
Los Angeles International Airport, line maintenance
Salt Lake City Airport, hangar and line maintenance
All facilities offer light maintenance for both narrowbody and widebody aircraft. Delta Air Lines has the world’s largest hub in Atlanta and also has hubs in Cincinnati and Salt Lake City; and an international hub at New York’s Kennedy Airport.
TechOps also has a total of 17 domestic line stations and 13 line stations outside the United States. Laughter said that by the end of this year’s first quarter, it will have opened three additional line stations, in Charleston, South Carolina; Savannah, Georgia, and Baltimore, Maryland TechOps’ line stations provide service, layover, overnight and transit checks, as well as unscheduled maintenance, for example, engine swaps and aircraft-on-ground (AOG) support.
In this competitive MRO environment, TechOps officials know they must provide efficient service. The company has established the Six Sigma system of practices to help eliminate waste, as well as continuous improvement and lean maintenance processes to save both time and money. As part of its lean maintenance effort it established, for example, a workflow concept that has lowered the turn time for the CF34 engines from 55 to 60 days down to about 35 days, according to Laughter.
TechOps has shown a willingness to embrace change, especially when it delivers greater efficiency. The work management tool that TechOps currently uses is called "theory of constraints." Essentially, this theory, or thinking process, is based on the premise that every profit-making organization has at least one constraint, or bottleneck, to achieving a goal. It could be an internal resource constraint, market constraint or policy constraint. The intent is to identify and deal with the constraint in order to better manage the process — for example, a maintenance process.
Described another way, the theory of constraints is an on-going improvement process that conjures three questions: What to change? What to change to? And how to cause the change?
"We’re rolling the theory of constraints out into several of our work areas," said Laughter. "We rolled it out in 2006 in our engine shop; it starts in the support shops and then will make its way into the engine assembly area."
"We are already beginning to see the benefits," he added, "as much as a 20 percent improvement on certain engine lines.
Beyond management tools, TechOps also seeks efficiency through new and improvised equipment. For instance, it recently designed an overhead engine handling system that reduces the time required to transport and prepare power plants for testing. The monorail system has reduced the process time for engine tests by about 20 percent, according to Laughter. The company has four engine test cells and tests more than 600 engines and 350 auxiliary power units annually.
For work primarily on 737NG and 777 avionics and components, TechOps added to its array of numerous test stands Teradyne’s NxGen automatic test system (ATS). "We received it last fall  and just now have it up to speed," said Laughter.
Delta Selects Flightscape
Delta Air Lines Inc. chose Flightscape Inc.’s Insight product line, which will update and modernize flight data analysis capabilities. Delta will use Insight to study all aspects of flight data from their fleet of 449 aircraft. Captain Michael New, director of Flight Safety at Delta stated, "The transition to Insight will help Delta advance its safety programs to new levels when it comes to flight data analysis tools."