GoingDutch

The Air France-KLM tie-up has been one of the most successful of airline mergers enacted. Roy Allen hears what it means to KLM Maintenance & Engineering.

In a world where well-backed airlines start up daily, KLM and Air France believed there was enough room for old major flag-carriers — but together rather than separate. So after much deliberation and a trial period, the two airlines merged officially on May 5, 2004, through a share exchange, and they now regard it as one of the best moves they could have made. "Our quarterly and annual results for the group continually prove it was a very wise step to take, for we beak record after record, we are way ahead of the targets we set at the beginning of the merger, and I think myself and Alain Bassil in the engineering and maintenance domain are getting things together and preparing ourselves to be very successful in the global maintenance market." Peter Somers, executive vice-president KLM Maintenance and Engineering division, responded to questions about developments in the Dutch airline’s MRO business, for as the oldest airline in the world, KLM Royal Dutch Airlines carried on maintenance work virtually from the start of its operations on May, 17 1920.

"I consider myself a lucky guy in the sense that I happen to have known my colleague at Air France Industries for over ten years, so there was no power play, and there is a natural split of activities in the portfolio. As we make new additions to the portfolio we will do so in a balanced way so we make a fair distribution of work. We have never had a reason so far for the group board to make a decision over maintenance and engineering. Luckily, we were in an economical upturn with a big surge in air travel, for it is always easier to grow into a merger than if you have to do this in a downturn." Talking at the airline’s Schiphol base, Peter Somers continued, "The way we divide workshare between ourselves and Air France is very simple. The portfolio of Air France Industries and KLM Engineering and Maintenance is almost a natural fit. Together we cover all the Airbus products, all of the Boeing products, all of the GE engines and with our subsidiaries a number of other dedicated technologies like APUs. The natural position of activities flows from the portfolios both parties had. To give you an example, where we have an overlap, such as on the General Electric CF6-80C2, both shops, in Amsterdam and Paris, carry the capability for the -80C2 so its never been a problem. Actually, it’s a relief valve, in the sense that the Air France engine shop has a lot of work to do on upgrading the CFM56-5A for their A320s and other customers, and in order to maintain the flow for customers some of this work is being transferred from the Paris shops to Amsterdam. Many of the other services, specific to the A330 or to the 747, have a natural fit and so end up in Amsterdam or Paris."

KLM has always been strong in maintenance and engineering (as KLM terms it) and in recent years this has become big business for the airline, which has built new, dedicated facilities for the business to serve itself and third-party customers. These centered on Hangar 14, a state-of-the-art building opened in the mid-1990s, measuring 900’-by-300’ and providing more than 700,000-square-feet of workshop and office space. The hangar floor area covered 312,000 square feet, large enough to accommodate a mix of B747s, MD-11s and B737s, which types all make up KLM’s fleet of 110 aircraft together with eight A330s and 15 Boeing 777-200s (the airline is also buying seven B777-300s). Together, the combined fleet of KLM and Air France total some 390 aircraft.

Hangar 14 has since been expanded, into the 108,000-square-feet of further usable space, to provide C-check capability for the 747s, A330s and B777s, with one of the three bays used for washing and painting. This maintenance center is neatly slotted in between other hangar buildings at KLM’s Schiphol-Oost location and has recently been joined by a new engine shop, immediately adjoining Hangar 14. Opened in December 2004 and costing €75 million it has a capability for handling up to 350 engine shop visits a year and includes a test cell able to test engines of up to 100,000 pounds of thrust. This is a separate entity and a major addition to KLM’s overhaul capability. "This is actually my biggest unit, producing over €400 million ($5.84 million) a year, with 75 percent of the activity and turnover for third parties," said Peter Somers. "Next to ourselves, Air France is my biggest customer and then General Electric, because we are an official contractor for GE for the CFM56-7, so on behalf of GE we perform a lot of work for their customers."

Smaller Partner, Big Business

Where the two airlines are concerned, KLM is smaller, but is generating more business than ever, seeing an annual growth in maintenance and engineering of 5-6 percent for the past three years. Current turnover is €1 billion ($1.46 billion) while the combined total being earned is €3 billion or some $4.38 billion. KLM has an engineering staff of 5,500 compared with Air France Industries’s approximate 10,000. "The intention," said Peter Somers, "is to grow our own bases naturally while expanding the network globally, so that growth is predominantly elsewhere than in western Europe. KLM’s M and E total staff includes its subsidiaries, together with its base in Norwich, England, KLM UK Engineering, which handles ATR 72, BAe 146s, Avro RJs and B737s. We see a growth in the Norwich shop because of the generally increasing workload, while here at Schiphol we are trying to do more work with the existing work force by applying smart technology, employing lean processes and basically doing things in a more clever way."

Overall, KLM’s M and E division is currently serving some 100-plus third party customers, many of which are long-timers, including Virgin Atlantic, Cargolux and Martinair, in which the airline has a 50 percent stake. A strong part of the business is in components and parts, which KLM offers under a component lease program, together with a parts service which may be provided on a loan, lease, exchange or purchase basis.

Composite materials are being seen in increasing volumes, and KLM’s shops are increasingly familiar with these in aircraft. Peter Somers said, however, "Yes. Even the Triple 7 has a reasonable amount of composite in its construction, but I’ve just been to the composite shop and they were doing a lot of work for the engine shop on the CFM56-7 outer guard frames, which have combinations of composite and metal. Composite materials are now in the aircraft and in the components in the engines, and with newer generations there will be more of this. The manufacturers are fitting them routinely. We see this as the CFM56 is one of our main product lines."

So what of PMA parts? "We stay away from these in engines, but they are certainly accepted in aircraft parts; definitely not in the engines, however," Somers continued. "We have always preferred OEM parts, but we spent some time doing research into the matter but in the end the conclusion was that we would stick with OEM parts; we came to an understanding about our preference and the appreciation of that preference. There is of course a distinct difference between minor parts and major engine parts, the rotating parts for example and the minor nuts and bolts. If a third-party client should insist on having PMA parts in his engine then of course he would get PMA parts in his engine. If customers leave all the engineering work to us then we would design OEM parts. As with aircraft, we repair the engines according to the manual and we will do the work in house."

Qualified Staff is a Problem

Aviation Maintenance asked Peter Somers, "So what of problems?" "Well, what would life be without problems, but let me tell you about the problem of technical staff, to take one. In maintaining the influx of technical staff we’ve spent a lot of effort and a lot of money working with the schooling system in the Netherlands, all across the country, to ensure the long-term influx of qualified technical personnel. In England, I have a training technical college delivering for me ab initio training, because KLM decided eight to nine years ago to close its ab initio training facility and integrate that into regular training schools outside. So we tried training in specific skills and our own training department is now training these, while ab initio training is being handled by the product school system. We need to spend a lot of effort attracting people, which is a general problem for western Europe. Today, school leavers prefer to work in IT or something like that, but for the longer term we have a program with a long-term investment because even if we don’t grow we will still need to replace retirees. As we grow we will have a continuing need. This is a problem across Europe, and when I look at the States I see the same thing happening."

The official name for the Group is now Air France-KLM, with the organization overseen by a supervisory board and with the French Government retaining a minority stake in Air France. The separate brand names are retained, so we put it to Peter Somers that this might change? "The last thing I heard our president say on that matter was that there was so much value in the two names that there is no need to abandon them. I think we will continue to see KLM and Air France as brand names. Another partner in the merger? Well, you read the papers as I do, but two cooks in the kitchen is already a challenge, so I would refer you to the company corporate people on that one."