While the maintenance operations of most U.S. airlines are cherry picking repair and overhaul specialties and outsourcing all other work, American Airlines Maintenance and Engineering (M&E) is increasing its range of aircraft support services and adding as much third-party work as possible. With an annual operating budget of $900 million, M&E is able to offer a mix of support that includes engine overhaul, structural repair, modification work, composite repair, engineering and planning, inventory support and avionics test and repair down to Level 3 circuit board work. These services are provided to American's fleet of more than 700 aircraft, which primarily serve four hubs: Dallas-Fort Worth, Chicago O'Hare, Miami, St. Louis' Lambert Field, and Luis Muñoz Marín International Airport in Puerto Rico.
The decision to counter the trend of increased outsourcing was made jointly by M&E management and the company's workforce-members of Local 514 of the Transport Workers Union of America (TWU)-with funding from the City of Tulsa, Okla., where the company's main facility resides. It was no small decision. With American Airlines facing financial difficulty since 9/11, the Tulsa facility's future was in doubt. More than 4,000 maintenance jobs had been eliminated. "Trust was lost, and labor-management relations were at their lowest ebb in 2003, when we had the layoffs," says Carmine Romano, vice president of AAMS' Tulsa-based operation.
The decision to become a comprehensive support organization-and a profit center-was made as the result of a meeting of some 150 management and labor personnel in March 2005. Some in the company light-heartedly call the meeting a "pajama party," but its purpose of determining how to become a profit center was serious. Participants set a "breakthrough goal" of achieving $500 million at the Tulsa facility through cutting costs and enhancing revenue by the end of 2006.
The meeting also was instrumental in launching a policy of joint, management-labor decision making on issues ranging from how to best perform a task to specifying bids for outside work. The "working together" policy, a cultural change, was adopted to give the company a new direction and to become a profit center.
Working together, M&E management and labor have advanced a policy of "continuous improvement," in which they jointly identify waste and inefficiencies in order to reduce costs and streamline operations. Along with a consulting firm, they also have developed a Performance Leadership Initiative in which they benchmark themselves against their competitors to identify the "best in class." Once these studies are completed, they will work to close any identified gaps. It's an ongoing process to become more competitive as a maintenance, repair and overhaul (MRO) facility.
Organizational leadership is maintained within a hierarchy of management-labor teams, from floor level to company management, in which managers and workers meet regularly to solve problems and pursue greater efficiency. With multiple levels of teams, if one team can't resolve a problem, it is referred to the next level, according to product support manager, Steve Glime. So collaborative are M&E's managers and workers that when Avionics Magazine recently visited the Tulsa facility, it was met by both a company official and a TWU official, and was joined during lunch by both Romano and Dennis Burchette, president of Local 514.
Providing incentive to adopt these policies was $22.3 million from Tulsa's Vision 2025 program, which supports local businesses. The city's investment in M&E is understandable, given its local employment of more than 7,000 people-Tulsa M&E is the world's largest airline maintenance center-and the $2 billion the company pumps into the local economy annually. The Vision 2025 funding significantly benefited M&E's avionics department, providing enough money to acquire an EADS ATEC-6 and two Aeroflex (formerly JCAir) IRIS 2000 automatic test equipment (ATE) stands that cost between $1.1 million and $2 million each.
M&E has two maintenance centers in addition to the one in Tulsa. One is in Alliance, Texas, near parent company AMR Corp.'s headquarters in Fort Worth, and the other is in Kansas City, attained as a result of American's acquisition in 2001 of TWA. The avionics repair shops in Kansas City were moved to Tulsa, which is M&E's primary avionics facility, employing 545 avionics technicians. (The facility employs a total of 5,500 maintenance technicians.)
Tulsa has 23 aircraft bays to perform heavy maintenance and modification on American's narrowbody fleets: MD-82/83s, B737-800s, B757s and Airbus A300-600s. The Alliance center staffs avionics technicians for heavy maintenance on the carrier's widebody fleets of B767s and B777s. Technicians at this facility also work on in-flight entertainment (IFE) systems. The Kansas City facility has 12 bays and is staffed to perform heavy maintenance and modification work on B757s and B767s. They currently are accomplishing a cabin improvement program, which includes installation of new, lay-flat seats in American's B767 business class section and performing heavy maintenance on American Eagle's Saab 340s. In total, M&E performs more than 150,000 maintenance checks each year, from A checks in the field to heavy C checks, and plans to grow that number through third-party business.
Alliance and Kansas City have had their own "pajama parties" and have outlined how they, too, will become profit centers for M&E. The continuous improvement policy established to help make the company profitable is migrating throughout the company, including to the flight operations and to M&E's four "class-one stations," or secondary hubs: New York's JFK International and LaGuardia Airports, Los Angeles International and Logan International in Boston. Each station is staffed and stocked to support the aircraft that operate at those airports.
Much of M&E's work consists of modifications. It just completed probably its largest cockpit mod, installing a Smiths Aerospace electronic flight instrument system (EFIS) in 128 of its MD-82/83 aircraft. American is the largest MD-82/83 operator, with a total of 335 aircraft, about 25 percent of the worldwide fleet. One-hundred seventy of American's MD-82/83s are factory-equipped with the Honeywell EFIS; the remaining aircraft, including 40 that came with the TWA acquisition, were retrofitted with Smiths' SDS-2000 digital EFIS, a four-display package comprising two primary liquid crystal displays (LCDs) and two navigation displays per aircraft. All displays are interchangeable and accompanied by interface wiring harnesses and circuit breaker panels. The SDS-2000 interfaces with the aircraft's GPS nav system, terrain awareness warning system (TAWS) and weather radar.
Each installation took 18 days; four installations were performed at one time in two specially equipped hangars. All MD-82/83s were upgraded by October, about four years after American awarded Smiths the contract for new displays. The modification-which replaces a mechanical flight director, attitude indicator and radar altimeter with a single line replaceable unit (LRU)-is saving the company money in various ways. For example, the Smiths package allows better area navigation performance, which in turn has saved fuel during operation. In addition, M&E calculated that it took four avionics technicians to maintain the old analog instruments compared with one technician to support the digital EFIS. "The mechanical flight director alone takes at least 40 hours to repair," says Gilbert Sanchez, avionics technician. The time saved "gives us capacity to bring in more outside work," he adds. Also, since the Smiths EFIS emulates the Honeywell system, American is able to save money by unifying its flight crew training.
With the MD-82/83 cockpit upgrades complete, M&E is equipping the hangar bays for another modification job: installing winglets on American's B737s. It also is preparing for a midlife upgrade of its B757s and B767s. Plans call for upgrading the aircraft's flight management systems (FMS) and adding GPS sensors, communication management units and VDL Mode 2 high-speed data link. "We're evaluating responses to an RFP [request for proposals]," says Dennis Zvacek, avionics engineering manager. "We hope to have a prototype in late 2007 and begin installations in 2008."
Other avionics modification jobs at M&E, says Glime, are small, routine upgrades, such as to the B777 Airplane Information Management System (AIMS) and B737 FMS and EFIS.
Not far from the mod bays for the MD-82/83s are various avionics facilities, the largest of which is a seven-story structure that was built to meet the specifications made by avionics technicians. The facility is pressurized and made dust-free, negating the need for dedicated clean rooms.
On the top floor is a live radar antenna test facility, the only one in the world owned by an airline maintenance center. This unique complex includes three closet-size enclosures, each with a pedestal to mount an antenna and a large window made of lead-free glass. On the other side of the enclosure wall is a test bench, where the radar receiver/transmitter (R/T) is connected to the antenna. Technicians can troubleshoot or test the entire radar system, instead of using a generator/test stand to evaluate just the parts in the R/T. The facility also includes a thermal chamber to test the R/T throughout the temperature range in which the radar manufacturer says the unit will operate.
While automatic test equipment provides a "snapshot" of an R/T's operability, the live radar test facility provides total testing, says John Blackman, lead test equipment engineer. This, in turn, significantly reduces the chances of no fault found (NFF) during troubleshooting and the chances of defective from stock (DFS) following radar-system repair. "We've learned that automatic test equipment often doesn't show the problem that the pilots observe," says Blackman. "This [total evaluation of a system] confirms the problem. We find we get better reliability and reduced costs."
The facility is set up to test all of American Airlines' flat-plate radar antennas (from both Rockwell Collins and Honeywell), as well as its traffic alert collision avoidance system (TCAS) indicators. Test time ranges from 15 minutes to more than an hour.
American's MD-82/83s are equipped with the Honeywell RDR 4A, and prior to 9/11, the airline had planned to upgrade to the RDR 4B with clear air turbulence detection. That plan was shelved, but Blackman says two of the seventh-floor facility's benches can be quickly set up to test the RDR 4B, should a customer request the service. The facility also tests radar systems in American's B767s and B757s.
M&E has found that its continuous improvement policy and quest to bring work in-house can save money. Improvising helps, too. For example, M&E technicians designed a wiring tester for continuity tests when installing EFIS in the MD-82/83s. They took a tester used on the Fokker F-100s that American had retired two years ago and converted it for use on the MD-82/83s. During this process, which involved making a harness that connects to the EFIS wiring, the technicians "determined how many 'wringouts' [tests for damage in individual wires] could be eliminated," says Jeff Schultz, aircraft overhaul avionics technician. From this effort, they were able to cut the time to perform a continuity check from three days down to just six hours.
"We have the tester programmed so you just push a button and the system tests by itself," says Schultz. "It will tell you what wire to go to, to find the problem," adds production manager Dan Blackburn. "You don't have to go through charts, and you will find faults not found in the manual wringouts." M&E saved both the money to buy a new tester and the test time of each EFIS installation.
M&E engineers also developed two test systems for air data computers. From the original equipment manufacturer (OEM) the testers would have cost $3 million; in-house, they cost $250,000, according to Glime.
On a larger scale, M&E's avionics department is building two ATE stands for digital electronic engine controls, one for tests at room temperature and the other, connected to a thermal chamber, for testing at a wide range of temperatures. The cost to purchase the two generator/test stands would have been about $2 million; M&E's budget to build them is $350,000.
M&E has adopted "lean manufacturing" practices to save money, as well, such as kitting. Instead of having technicians walk back and forth to fetch tools and parts, all that is needed for a job is put in a kit that can be rolled on a specially designed mobile cart to the work site. "Now you get your work assignment, pick up your kit and do the job," says Blackburn. Photos of each part, accompanied by the appropriate part number, are often attached to the cart to further assist the mechanic.
PMA (parts manufacturing approval) parts are entering more and more into M&E's cost cutting mix, too. M&E purchases most of its PMA parts for engine maintenance; however, Glime sees the company expanding its purchasing effort for other parts over the next two years. "When we identify parts that are grossly overpriced, we determine whether or not they can be manufactured in-house," he says. "Then, if we can't, we'll see what PMA parts are available."
M&E looks to computer technology to deliver efficiency, as well. The company has just implemented a dock workload management system (DWMS) meant to create a paperless environment during aircraft heavy maintenance. The software develops a work package and monitors workflow, taking into account the non-routine maintenance activity. When a technician enters an airplane in a dock he takes a laptop, and instead of signing off his work on a card, he logs a job's completion in the computer. Accepting this information from each technician, the DWMS software is able to provide a continuous, real-time picture of the work accomplished and a workflow projection. M&E has been working jointly with Continental Airlines, which also has acquired the DWMS program.
M&E has yet to adopt bar coding of parts; however, they are evaluating the benefits, according to Glime. "Still, some departments have gone to bar coding, in preparation, in case we do go company-wide with it," he says.
Cost savings also have been achieved in repairs. For instance, M&E technicians previously removed a switch from a control panel and sent it to the OEM, which would either replace it for $10,000 or repair or exchange it for $5,500. "We found the common problem with the switch was a spring, which we replaced for $14," says Glime. "It's a matter of getting down to piece-part replacement; we can manufacture or purchase a piece for minimal cost," says Sanchez.
Cost-cutting measures such as these are credited to M&E's working together policy. "Technicians may not have said anything [about a way to cut costs] in the past," says Schultz. "Now they bring an expense or problem to a [joint management-labor] meeting, and everyone comes on line to see how we can save money." Burchette elaborates on Local 514's change in thinking, saying, "At one time we wanted all the work in-house, and we didn't care if it was profitable or not. Now we make a case to have the work in-house. In fact we have an agreement that if we're not profitable [performing a maintenance service] within two years, and we can't fix it so it will be, then we let the work go outside."
Complementing that attitude is M&E's practice of having management-union teams conduct cost-benefit analysis for every maintenance job. This assurance that a job can best be accomplished in-house is done, for example, as components in the B777 come off warranty.
M&E also applies the team effort to combating NFF. "We have a reliability engineering group that looks for no fault found on the component level," says Schultz. "They put out a monthly report that goes to the shops, where we [management and workers] look for a solution. We look at no fault found on a continuous basis."
M&E personnel find they can almost always turn a repair around faster than an outside vendor, and often do so at a lower cost. For example, the company recently began maintenance on the digital flight data displays in the B777 and B737, and found they could save $40,000 per unit, compared with the OEM price. Such efficiency helped the firm land a contract from an Ohio maintenance center to maintain the digital displays for other operators.
"The driving factor of whether we outsource or not is test equipment," says Sanchez. "We may outsource for a period of time, until our engineers develop the necessary test equipment. When we have the test equipment, we bring the job inside."
Glime states that M&E's avionics department currently takes in a small amount of third-party business. "But we're planning to see that business grow significantly with the ATEC 6 and IRIS 2000 test stands. Those are [test] systems that few other maintenance centers have."
M&E has accumulated an impressive array of automatic test equipment. The ATEC 6 is dedicated to testing the Smiths SDS-2000. It tests each pixel in the display and makes calibrations through the color spectrum to make corrections. It also tests for display brightness and to correct angle of view.
In addition, one of the company's general-purpose IRIS 2000s has been set up for radio frequency (RF) testing on such systems as radar altimeters, VOR receivers and transponders, while another is used for Rockwell Collins' and Honeywell's TCAS, which requires more processor testing. The company also has an ATEC 5000 for testing A300-600 avionics, most made by Thales. For the B757 and B767, M&E has Boeing's ATS 182a, which tests and troubleshoots down to the card level, a unique feature among ATEs. M&E has an Avtron Univate generator/test stand for generator control units and bus control units. A Honeywell STS-1000 ATE is employed to test the MD-82/83's digital flight guidance computers, and an IRIS 1200 is available for the Honeywell inertial reference units. These ATEs are in addition to the two being designed in-house.
With its line of test equipment, unique test facilities, process innovations and policy of working together and continuous improvement, will M&E in Tulsa meet its goal of achieving $500 million by Dec. 31, 2006? Romano and Burchette agree that the company is "on track" to meet the goal and become a profit center, providing new management software systems become operational soon enough. M&E in Tulsa is at 80 percent capacity compared to about 50 percent two years ago. It has eight third-party contracts for airframe overhaul and five for engine overhaul. M&E has doubled its MRO revenue in 2006 over 2005 and plans to double it again in 2007.
Perhaps equally important, morale has improved dramatically since the layoffs three years ago. On top of the working together policy and commitment to full employment, Gerard Arpey, chairman of AMR Corp., has assured American's employees that the company will "make good on $11 billion of pension obligations."