Surviving the Perfect Storm

Record oil prices are pushing the cost of jet fuel to nosebleed heights, forcing many operators and their suppliers into retrenchment and decline — even bankruptcy.

In the matter of a few months, the aviation industry has slipped from prosperity into red ink, uncertainty and doubt. As already lean operators desperately look for new ways to cut costs, one of the first casualties is maintenance, repair and overhaul (MRO). The U.S. credit crunch, sparked by the sub-prime mortgage meltdown, has generated a recession in America and turmoil in global financial markets. In countries around the world, rising unemployment and energy costs are dampening stock prices, consumer confidence and discretionary income.

It all adds up to a dramatic decline in demand for air travel. Combine these interrelated factors with oil prices that could conceivably reach $200/bbl, and the aviation industry faces a "perfect storm" of woes.

The Big Three costs in aviation are fuel, labor and maintenance. An easy — but myopic — target of cost cutting for beleaguered operators is MRO. And that’s what’s now unfolding, as even the most basic maintenance is increasingly deferred.

These were the salient talking points during an Aviation Today sponsored webinar, "New Maintenance Procedures: How to Keep Pace With Globalization and Rapid Change", conducted Tuesday, July 29 from 11:00 a.m. – 12:00 p.m. (ET). This MRO webinar was recorded; you can still gain access to the entire proceedings (to register, click "Webinars" in the left-hand navigation bar on the home page of www.aviationtoday.com). Among the webinar’s speakers was Joy Finnegan, editor-in-chief of this magazine. The current crisis in aviation also was addressed by a separate webinar, conducted June 26 and now archived on the web site, entitled: "Your Survival Guide to the Farnborough Air Show."

Jack up the price of fuel and the aviation industry takes a dive — and the MRO/aftermarket industries go down with it. Aircraft are capital intensive; they must be diligently maintained and repaired over a period of several years. Simultaneously, the industry is under hideous pressure to pay less for the mechanics who turn the wrenches.

The question is, how do operators keep their aircraft in the air at the lowest possible cost, without compromising safety? More and more revelations are coming to light that operators are cutting MRO corners to survive, and regulators are looking the other way.

In July, the Department of Transportation’s Inspector General’s office revealed that a cozy relationship between the Federal Aviation Administration and Southwest Airlines led to MRO lapses that placed thousands of passengers in danger. The report asserted that the FAA has been harboring "an overly collaborative relationship" with Southwest, by which FAA inspectors improperly allowed the airline to fly 46 Boeing 737 jets that required inspection for fuselage cracks.

Similarly, it was revealed in April that FAA regulators ignored several dangerous incidents in which cockpit windshields in commercial airliners shattered in mid-flight, sometimes compelling emergency landings. (For more on these and other related stories, go to the "Daily News Archive" at the top of Aviation Today’s home page.) The list of recent incidents of compromised maintenance, accomplished with the craven complicity of regulators, goes on and on. Sadly, aviation regulators who are supposed to protect the public’s safety are in bed with the executives they’re charged with overseeing — often because these regulators once served as industry executives themselves. It’s difficult to crack down on the guys that you still hang out with on the golf course. The result: aviation’s watchdogs turn into lapdogs.

The fact remains, though, that the MRO market is incessantly wracked by unpredictable change. What are the latest procedures that MRO managers need to master, to ensure a healthy bottom line and the safety of aircraft? To find out, register for Aviation Today’s recent MRO-related webinars.

The good news is that the drive to reduce costs also is leading to aircraft technologies and MRO procedures that are more efficient. The increasing prevalence of composites and winglets in aircraft reduces fuel burn, while greater automation and integration in the supply chain lowers MRO costs. Many new opportunities are emerging from today’s crisis in aviation, if operators and regulators have the imagination to seize them.