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Friday, August 1, 2003

What’s Wrong with this Picture?

Matt Thurber, Editor (mthurber@pbimedia.com)

Activity

Rate Per Hour

Aircraft Maintenance:


���� Light aircraft (piston)

$70.00

���� Business Jet

$75.00

���� Airliner MRO (3rd party)

$44.00

Auto Maintenance:

���� Dealership

$92.50

���� Independent

$77.28

Flight Instruction

$40.00

Golf Lessons

$80.00

Look at the chart on this page. It shows that there is something wacky with the aviation industry.

These figures come from mostly local businesses near Washington, D.C. The Airliner MRO figure is from a large third-party maintenance, repair, and overhaul company that has multiple bases throughout the U.S.

The most interesting item to note in this chart is that none of the aircraft facilities charge more for the services they provide than does a teacher of golf. The most shocking item is that flying lessons cost half as much per hour as golf lessons. We’re talking about instruction that is focused on teaching someone to be a safe and effective pilot; the goal is to teach a new pilot how to stay alive, is it not?

The goal of golf lessons is somewhat less critical, teaching a student how to hit a little white ball in the desired direction for the desired distance. Nothing to do with survival, except for the part on avoiding sheltering under trees during thunderstorms.

Note the auto maintenance labor rates. Even the independent auto shop charges more than the business jet shop. The dealer, which I’ve noticed is constantly busy, gets away with a solid $92.50 per hour. And that’s before added fees for consumables, typically 3 percent or more.

Most disturbing is the extremely low labor rate charged by the airline MRO facility. Only $44 an hour? Sorry, but that’s pitiful. This tells me that the customer (airlines) value the maintenance of their aircraft at a terribly low cost. And the airline customers somehow think that $44 an hour is an amount sufficient to ensure that quality maintenance gets done on their aircraft. How could this possibly be the case?

Airline executives know that it costs far more than $44 an hour to provide maintenance services, especially those who work for airlines that do their own maintenance. Wages for some airline mechanics today are nudging awfully close to that $44 per hour figure, so how in the world is it possible to charge $44 an hour and pay mechanics a decent wage, buy tools, keep tools calibrated, purchase and maintain necessary maintenance data, keep the hangar safe, provide heat in winter and cooling (if you’re lucky) in summer, pay for training, retain employees by offering raises, bonuses, and ever-improving working conditions, and pay salaries of managers? And that doesn’t even take into account profits.

This is strange. I don’t see how it can possibly continue. Something is going to give, if it hasn’t already.

The airlines–and the rest of the aviation industry–have been grappling with the fundamental cause of this problem for many years. The root cause of this problem is simple: the aviation industry doesn’t charge enough for the services it provides.

The biggest complaint from financially troubled airlines these days is that they can’t raise fares. The general public has been trained, since derugulation, to expect impossibly low fares, despite the extraordinarily high cost of providing safe airborne travel. Excess competition kept that impossible dream going, with fares artificially low, and now the airline industry is paying the price. Yet the public still resists higher fares.

Note that labor rates for maintenance grow in the business jet and even the single-engine piston portion of the market. Why is it that an owner will happily pay upward of $70 per hour for aircraft maintenance on a Learjet 55 or Piper Malibu, but an airline balks at more than $40 an hour?

Airliners do fly a lot and require far more man-hours of maintenance than business jets or light airplanes. An extra $10 to $30 an hour makes a huge difference to an airline’s bottom line.

But with all the current airline troubles, one result is that many experienced technicians are leaving aviation. They’ve had enough of being nickled and dimed to death and they aren’t taking it anymore. Market forces are driving them to better pastures, and market forces are what keep airline fares and the amount airlines are willing to pay for maintenance low.

This can’t last forever. As one MRO executive told me, "at $40 an hour, we’re not making any money." No entity that doesn’t make money survives for the long term. Costs are going to go up someday, and pricing will become more realistic. Meanwhile, don’t be surprised when you bring your car to be serviced and learn that it costs more than twice as much per man-hour as it does to maintain your 747. And, I do like golf. Good instructors are worth every bit of $80 an hour. The question for the aviation industry is, where is our pride? Isn’t performing safe maintenance and teaching people how to be safe pilots worth far more than what we’re charging?