Smart airframe maintenance is seldom subject to big changes. Rather it requires careful choices and small tradeoffs, weighing in-house against outsource options, balancing downtime costs with favorable rates, seeking efficiency through long-term contracts or exploiting inexpensive short-term deals. These kinds of balances can be different for each airline and, of course, are constantly changing.

KLM is not only a global airline but also, together with Air France Industries, the second-largest airline-affiliated maintenance provider. VP-Base Maintenance Karel Bockstael says scale allows his carrier to economically do all its airframe checks in-house except for D checks on MD-11s, which are done in China. An airline should be able to fill its production line from its own fleet to do D checks in-house, he argues. He estimates this requires 30-40 of a type.

The outsourcing decision on C checks is different. New-generation aircraft, even widebodies like A330s and 777s, require only three days of downtime for early C checks. Adding a day or half-day ferry time each way to an outsource provider can expand this downtime to five days. "The new technology puts more emphasis on doing C checks ourselves at our hubs," Bockstael says. D checks for 747s and MD-11s can run 3-5 weeks of labor-intensive work, so savings in lower-cost labor regions offset time losses.

Over the long term, he expects in-house, hub-based airframe maintenance to become more important for many carriers as new aircraft enter service. He sees three major factors playing out: Shorter downtimes, fewer man-hours to save money on and the likelihood that labor rates will converge over the next 10-15 years. "If it takes 100,000 hours for a D check on a 747, there is still a major difference between regions. But for 6,000 hours there is not that much."

KLM will not compromise on quality for outsourced checks. Bockstael says "not many providers" match its standards. In addition, there must be excellent information exchange and logistics. Provider and airline can have different information systems as long as these are adapted to exchange information efficiently.

The provider is expected to have a robust supply chain. KLM also seeks a 24-hr. connection for shipping parts, especially rotables, to the provider. Bockstael acknowledges this is not always possible with China, or due to customs processes elsewhere, but he tries to make exchanges as fast as possible. KLM's own global network and cargo business give it advantages not available to many smaller airlines in moving parts. In any case, the ability of MRO providers to get necessary parts quickly is much more important than having large stocks on hand. Solid MRO providers usually have their own local logistics partners to meet this requirement.

KLM keeps very tight control of its outsourced airframe maintenance, partly through on-site staff. "We send our best guys there," Bockstael emphasizes. "It is not a treat for someone waiting for retirement."

The carrier does have some penalties and incentives in its outsource agreements. But he says penalties are trivial compared with the operational costs of a delayed return from a heavy check. The key is partnering with the provider to ensure these delays do not occur, and KLM invests heavily in these partnerships. The airline seeks long-term partnerships with top MRO providers rather than shopping for low-price bids on each job. "If your primary goal is to maximize the operational availability of your fleet, there is no use trying to save pennies."

New aircraft do not offer many choices on their basic maintenance program except for lighter or heavier C checks. In scheduling and sourcing these checks, carriers "should be very clear on what they want as an airline," Bockstael says. Cargo carriers have certain slow periods, passenger airlines have seasonal peaks and troughs and network carriers seek reliability over high utilization. "First look at what the airline demands and then develop the maintenance concept," he urges. "Do not optimize maintenance alone; the airline must drive maintenance plans."

ECONOMIZE ON ASSETS OR CHECKS?

Oliver Wyman partner Tim Hoyland believes airlines have largely exploited the savings of low-cost regions for airframe maintenance. "The next big thing is operational transformation, finding ways to reduce the aircraft assets needed for the business," he argues. Airlines need to think of maintenance choices "holistically," including ferry and downtime, to do this. Reducing the numbers of days required for heavy checks can reduce the number of aircraft needed to serve a network by up to 3% of planes in his estimate.

But restructuring maintenance programs along these lines is a significant effort, as many cost and revenue variables must be taken into account. Hoyland says it takes about three months to figure out a better plan and up to 18 months to put it fully into place.

Tristan Whitehead, a consultant in Deloitte's aerospace and defense practice, thinks the key to more economic airframe maintenance, both within airlines and at independent shops, is further progress in Lean initiatives. "Lean can reduce the distance a part travels by up to 75% in many shops and reduce the number of handoffs by up to 50%," he says. "There are tremendous opportunities for savings."

But cash-strapped carriers may not be able to fund vigorous Lean reviews. And some choose to implement new Enterprise Resource Planning systems before Lean is exploited thoroughly. "If you overlay SAP or another ERP on old processes, you are just automating bad processes. You can get much more out of Lean than ERP," he says.

Part inventories to support airframe maintenance also can be trimmed further, Whitehead says. "Fast-moving parts are not the problem, slow and intermittent parts are the problem." One challenge is that sophisticated models for predicting part demand are actuarial and many veteran maintenance engineers do not understand or trust these models. "They still go with their gut, no matter what the model says."

There are a number of software packages available to do this forecasting, with suitability dependent on airline needs. For complex, multichannel, multiconfiguration requirements, Whitehead says MCA is still the top predictive tool. "It can take a budget and tell you how much reliability you can get, or take a reliability goal and tell you how much you will have to spend."

In contrast to Bockstael and Hoyland, AeroStrategy Principal Kevin Michaels believes airframe outsourcing will continue to expand in low-cost regions. "There will be more done in Eastern Europe, Asia and Latin America," he argues. "Doing heavy checks in high-cost regions does not make sense, and airlines increasingly think of maintenance as outside their core competence." US carriers in Chapter 11 have sent more work out, to Asia for widebodies and Latin America for narrowbodies. Michaels predicts the next big wave will be sending Western European narrowbodies to Eastern Europe and North Africa.

He also sees opportunities for very attractive deals. "With the parking of jets, capacity will free up and labor costs will come down. It is a buyers' market, and airlines will not be looking for long-term deals but favorable short-term prices."

BETTER SHOP PRACTICES

Leonard Kazmerski, marketing VP at TIMCO, notes that new operators already are extensively outsourcing airframe maintenance and this option is increasingly attractive to established airlines. Legacy carriers with major maintenance capability concentrate on new models with light and predictable checks while outsourcing checks and modifications on older types.

This leads to a source of inefficiency that TIMCO would like to reduce: The variety of maintenance programs for older fleets. Unlike OEM programs for new planes, older programs have been developed separately over time by different airlines. For providers, they require additional planning, training, specialization and resource commitments, creating waste and duplicated efforts.

The general outsourcing trend partly reflects much more capacity around the world. But Kazmerski cautions that fuel costs and exchange rates still must be considered carefully when crossing international borders. And he thinks long-term partnerships between carrier and MRO provider are critical to minimizing downtime costs.

Some airlines and vendors are adopting a Performance-Based Logistics approach to airframe maintenance. "The airline hands over greater control of decision-making to the provider and the provider commits to delivery standards and aircraft availability," Kazmerski explains. "This is likely to become a growing practice in coming years."