Since 1978's deregulation, the passenger airline industry has seen significant changes in the United States. Domestic operations allow airlines almost complete freedom in deciding which markets they will serve and how much to charge. Increasing fuel prices and changing travel patterns have put the industry under financial pressure. This has been demonstrated by numerous mergers or bankruptcies. Many airlines have formed alliances to increase their global reach and scale up to remain competitive and profitable. However, airlines have had to reduce costs due to price competition. Outsourcing aircraft maintenance, repair, and overhaul (MRO) is a common practice that helps keep costs down. It isn't just for U.S. airlines. Many cargo and foreign airlines also outsource maintenance to outside service providers. This report is focused on U.S. passenger airlines because they outsource maintenance to foreign countries like El Salvador and China. This report examines MRO outsourcing trends and discusses the main factors that contribute to them. The report then examines the safety and employment consequences of increased foreign maintenance on U.S. passenger planes.
MRO encompasses four types of activities:
* Airframe Heavy Maintenance. An in-depth inspection of the aircraft's airframe and some components. This includes any corrosion prevention programs. Comprehensive structural inspections and overhauls of the aircraft are also performed. Heavy maintenance can be labor-intensive.
* Engine Repair and Overhaul. Repair and replacement of engine parts, including off-wing repairs. These procedures are done by the manufacturer's guidelines. The engine is usually disassembled, inspected, and repaired as needed. Finally, it is reassembled for testing. The technology required to make an engine MRO is complex.
* Component MRO. Repair and overhaul of basic components for air flight. This includes communications and control, navigation, and cabin air conditioning.
* Line maintenance. Regular, light maintenance checks are performed to ensure the aircraft is safe for flight. Line maintenance includes troubleshooting and defect rectification as well as overnight maintenance.
All airlines outsource some aspects of their aircraft maintenance. A large portion of the maintenance is outsourced by some newer airlines. Heavy maintenance on aircraft frames, which is labor-intensive and involves substantial investment in equipment and maintenance facilities, seems more likely to be outsourced. As American Airlines, which previously outsourced most of its passenger carrier MRO work internally, has announced that it will be outsourcing heavy maintenance previously done at company-owned facilities in Oklahoma, Texas, and Texas. This will result in the loss of around 2,000 jobs. While most of the work was outsourced to third-party vendors in the country, some will be done by HAECO, a Hong Kong-based MRO.
Over the last few decades, international aviation travel has increased significantly due to population growth, rising income, and global expansion of travel and business. By designing and manufacturing larger and more efficient aircraft that can fly longer distances, the aerospace industry has helped to expand global aviation networks. The real cost of air travel has fallen by 60% between 1970-2010, thanks to deregulation in the aviation market and the rise of low-cost carriers.16 Today it is easier for more people to fly by air. The global passenger air travel network included more than 1,500 airlines, nearly 24,000 aircraft, and almost 4,000 commercially scheduled airports. Between 1990 and 2011, international air travel from the United States increased by more than two-thirds.17 In 2011, there were nearly 4,000 airports with scheduled commercial flights and 830,600 international flights. This number carries 92.5 million passengers. Because of the expansion in route networks, aircraft MRO in foreign countries was easier and cheaper. This allowed airlines to use foreign maintenance bases, without having to pay additional fees for transporting aircraft. Foreign MRO was also necessary for emergency repairs. International airlines must have access to maintenance work at all their airports.
The Chinese commercial airline fleet grew more than 10 times between 2000 and 2010. It now has over 1,300 aircraft and passengers. This is at an average annual growth rate exceeding 10%. According to Boeing's Commercial Market Outlook 2012, Chinese airlines will purchase 3,770 new aircraft between 2010 and 2028. This represents a market worth $400 billion. China's MRO industry has expanded with the airline industry. The Civil Aviation Administration of China, which controls China's aviation system has supported the growth of MRO with state investment and other incentives. CAAC published a document in June 2011 to help guide China's MRO industry development through 2016. This document shows that China had 389 MRO companies at the end of 2010 and more than 30 were certified by either the European Aviation Safety Agency or the U.S. Federal Aviation Administration. At the same time, 331 foreign repair companies had been certified by China. This allows them to work on aircraft operated by Chinese airlines. China had 104 hangars that could accommodate more than 360 narrow- and wide-bodied aircraft. The Chinese MRO industry had nearly 5% of global revenue in 2010, with a total of $2.3 billion in revenues. Chinese companies have less than 25% of their domestic market, based upon annual revenues. This is because many Chinese companies lack the technological or engineering sophistication required to manage high-value, more complex MRO projects such as engine work. According to the CAAC document, Chinese airlines have to send around 70% of their engine overhauls to foreign-owned businesses every year. CAAC also indicated that MRO specialists are not insufficient supply in China's civil aviation industry. China would require at least 24,000 additional technicians by 2015. There is also a large knowledge gap and lack of experience among MRO workers, many of whom have little work experience. A serious shortage of inspectors to supervise their work and ensure quality is another problem. 212 inspectors oversee approximately 42,000 MRO technicians. This means that there is only one inspector for every 200 technicians. The government had certified 44 MRO training schools by the end of 2010. MRO and OEM companies from abroad, including Airbus and Boeing, offer training for cabin crew and maintenance technicians. Boeing Shanghai Aviation Services Co. Ltd. (Boeing Shanghai) is a joint venture between China Eastern Airlines, the Shanghai Airport Authority, and an MRO center that performs line maintenance, heavy maintenance, and airframe modifications. It also upgrades airplane interiors, avionics, and an in-flight entertainment system. Since 1993, Boeing has offered professional training to almost 40,000 Chinese aviation professionals in cooperation with Chinese airlines, CAAC, and industry. Training provided by foreign OEMs has contributed to the improvement of skill levels for Chinese aviation professionals and maintenance workers. Some of these workers service U.S.-made aircraft. Boeing announced in June 2012 that it would increase its Boeing Shanghai Aviation Services training facility to include a program to train workers for the maintenance of its 787 Dreamliner.
