Wednesday, January 29, 2020
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Outsourcing looms large in NWA-mechanics dispute
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Northwest ground workers watch political speakers at a 2003 union rally in Bloomington. Northwest sends more than a third of its maintenance work to outside shops. As more maintenance has gone outside, the company has slashed its mechanics workforce by almost half. (MPR File Photo)
Outsourcing is one of the key issues in the contract dispute between Northwest airlines and its mechanics union. The union has criticized the company's use of outside maintenance shops. Some say outsourcing is the way of the future. The Northwest mechanics union fears it could lead to the union's demise.

St. Paul, Minn. — Northwest sends more than a third of its maintenance work to outside shops. As more maintenance has gone outside, the company has slashed its mechanics workforce by almost half. The mechanics union has retaliated by challenging the safety of outsourced maintenance. Northwest maintains the outsourced work is just as safe as work done by company mechanics.

Resistance to outsourcing may be a bit like shaking a fist at the sky and telling it not to rain, even as you stand soaked by the downpour already in progress. More than half of all airplane maintenance is outsourced to contract mechanics, according to the U.S. Department of Transportation.

Barbara Beyer, president of the aviation consulting firm Avmark says the outsourcing trend has developed at varying rates throughout the industry, depending on the degree of maintenance. They range from light repairs to more involved maintenance, called C- and D-checks.

"The new start ups have outsourced almost all their maintenance, they do their minimal checks in house, because it's more cost effective, but once you get up to the c's and d's done once a year, they're fully outsourced," she said.

Beyer says the larger carriers have done their outsourcing in more piecemeal fashion. And it's hard to pin down just when that started. But airlines have increasingly embraced outsourcing in the wake of recent financial turmoil. Competition from low-fare carriers, rising operating costs since the attacks of September 11, 2001, and skyrocketing fuel costs have hammered airlines' profits.

Beyer says outsourcing helps airlines cut costs. For one thing, contracting work out eliminates the expense of employee benefits.

"So for example you don't have to fund pensions, you don't have to give employees the travel discounts," she said.

The growth in outsourcing has afforded more opportunities to mechanics at third party maintenance providers. Marshall Filler is the managing director and general counsel of the industry's trade organization, the Aeronautical Repair Station Association. He says outsourcing's increasing popularity should not be lamented.

"If you're a mechanic today, and you'd like to work in aviation, going to work for a certificated repair station, as opposed to an air carrier is a smart move, because you're going to a part of the industry that's growing and is stable, versus an area that's in a lot of turmoil," Filler said.

If the jobs are more stable, they also are likely to pay less than airline jobs. Lower wages are a key factor making third party maintenance facilities cheaper and more attractive to airlines than using their own mechanics.

That's one of the biggest problems facing O.V. Delle-Femine, national director of the Aircraft Mechanics Fraternal Association, which represents Northwest mechanics. He says there has been talk among laid off mechanics about forming a third party maintenance operation on their own. But he says that would require tremendous capital. And the competition from overseas facilities may be too keen to preserve mechanics union salaries.

"Could we pay the going rate they're used to being paid? And when you got these South American and these European and Chinese and Singapore paying less, how are you going to compete," he asked.

Dell-Femine says a union-run contract maintenance shop might not actually solve any problems.

But if the union can not compete with contract maintenance providers, the larger air carriers may be better equipped to do so. And some are trying.

American Airlines spokesman John Hotard says his company is trying to bring back some work it had previously outsourced. And it is also positioning itself as a third party overhaul shop.

"We're going out and looking to other airlines, or aircraft owners, leasing companies, etc to do work for them, and we're being successful in that area," Hotard said.

United Airlines is also seeking to sell its maintenance services.

It remains to be seen whether American and United can preserve mechanics jobs over the long term by trying to bring in new maintenance business.

In any case, airline mechanics are likely to be dealing for years with the competition posed by outside contractors.