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Outsourcing Severely Compromises Airline Safety, Say Industry Insiders

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One senior mechanic says he "won't fly on an American Airlines' 757 and will not allow [his] family to, either."

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An American Airlines (PINK:AAMRQ) 757 made an emergency landing yesterday at JFK after a row of passenger seats came loose, mid-flight.

"A row of seats basically became unbolted from the floor. The seats were completely not attached," Sam Mayer, an AA pilot and a spokesman for the Allied Pilots Association, told the New York Post.

The plane landed safely and no one was hurt. But if your first reaction was, "Thank God it was only the seats," keep reading.

"We've had two diverts and a series of write-ups about the same problem with 757s," Tom Hoban, an American Airlines First Officer and a spokesperson for the Allied Pilots Association, tells me. "They used to go to American maintenance facilities in Fort Worth and Tulsa but now they go to an outside vendor; our guys tell us the work is pretty shoddy."

Indeed, American's 757 maintenance is being outsourced. And the work is, by all accounts, pretty shoddy. According to one AA insider, the same shoddy workmanship that caused a row of seats to "slid[e] around like a carnival ride" is also going into the most critical parts of the aircraft.

"The company is called TIMCO," Larry Pike, a veteran American Airlines mechanic and president of the Transport Workers Union Local 567 in Fort Worth, Texas, tells me. "And the same people who forgot to bolt down the seats are also working on the engines."

Pike says he "won't fly on an American Airlines 757 and will not allow my family to, either."

"The pilots who went to pick up some of the first ones TIMCO did said they weren't even airworthy," Pike tells me. "I read the reports, just unbelievable -- the cockpits were a shambles, there was leaking oil, brake lines leaking fluid, lines left loose; our pilots refused to take them -- and these planes were coming out of an overhaul. It's like shade tree mechanics working on a car, only they're working on aircraft."

An Industry-Wide Crisis

The problems associated with the outsourcing of aircraft maintenance is not limited to one airline or one plane.

"This is not just American, it's industry-wide," says Tom Hoban. "The biggest heavy maintenance facilities are in El Salvador and China and there's essentially no real daily oversight there. You don't have A&P (Airframe & Powerplant) certified mechanics, there's a lack of quality assurance programs, and you're at the mercy of how that particular facility is run, and you really have no idea as to what kind of maintenance actually occurred. The only time you have any actual visual assessment is when you have an in-flight emergency. And we pilots are the ones left holding the bag."

Why is this happening? Money. A recent study in the Journal of Aviation Technology and Engineering quoted industry experts who estimated two-thirds of heavy maintenance costs are labor costs.

"With foreign labor costs less than 50% of those in the US, it is easy to see why many air carriers have shifted their HMV (Heavy Maintenance Visits) to overseas providers, with estimated savings at $1 million per aircraft each year," the authors of the paper wrote. A 2008 audit by the Department of Transportation's Office of the Inspector General identified nine carriers -- Continental Airlines (NYSE:UAL), Delta Air Lines (NYSE:DAL), JetBlue (NASDAQ:JBLU), Southwest (NYSE:LUV), United, AirTran, Alaska Airlines (NYSE:ALK), America West (PINK:AWSR), and Northwest -- that outsourced 71% of their heavy airframe maintenance checks in 2007. About 27% of these heavy airframe repairs were outsourced overseas. Drilling down a bit deeper, approximately 20% of airplanes are being maintained in developing countries – like El Salvador, where mechanics start at under $5,000 a year, compared to the US average of $52,000.

However, as the authors of the Journal of Aviation Technology and Engineering study also noted, "Outsourcing of aircraft maintenance is a business critical activity with regard to strategic importance and finances. What makes outsourcing of aircraft maintenance unique is that lives are potentially at risk if maintenance is not done properly."

Unlicensed Mechanics Part of the Business Plan

Louie Key, an Airframe and Powerplant technician since 1979 and the National Director of the Aircraft Mechanics Fraternal Association, agrees that money is the primary driver behind maintenance outsourcing.

"The airlines find it easier to write a check to a vendor than managing their own workforce," Key tells me. "They're saving money in the short-term, but at what cost in the long-term? It's a business decision the airlines made and I think it will ultimately prove to be a bad one."

One cost-cutting measure involves having teams of unlicensed mechanics working under the tutelage of one supervising licensed mechanic -- and again, substandard oversight is a front-and-center concern.

"There's no oversight, that's the biggest problem," Larry Pike tells me. "The airlines think they can get one licensed guy to oversee like, 20 unlicensed guys and sign off on their work. There's no way we're going to be able to do that and be safe."

Louie Key says the powers that be in the industry have their heads in the sand.

"The airlines can sit back and say, 'Well, the FAA has signed off on this,' but when you talk to the FAA inspectors, they say they're raising alarm bells within the FAA, that they can't do what they're tasked with doing," Key tells me. "But talk to the higher-ups at the FAA and they talk about their glowing safety record. When you tell them that their margin of safety is being eroded, they point to statistics."

Key believes it will take an "event" (industry-speak for "catastrophe") before changes are made -- or not.

"Thing is, that event will be an anomaly on the chart," he says. "So, it'll take another, and another, and another."

Smoking Holes in the Ground

The stories about lax standards at outside maintenance vendors (like TIMCO, which had five aircraft mechanics arrested by federal agents during an illegal-immigration sweep in 2005, and San Antonio Aerospace, which was fined more than $1 million last year by the FAA for failing to conduct pre-employment drug tests) don't inspire confidence. And Larry Pike has seen the results.

"We have found corrosion on some of our aircraft coming back from maintenance that was just painted over," says Pike. "You can take a screwdriver and scrape flakes of metal right off."

Pike says corrosion "takes time" to show up, but when it does it will be too late.

"Corrosion eats away at aluminum like battery acid," he says. "It takes a little while to start seeing it, but I'm afraid that we'll start seeing airframes falling out of the sky. I'm concerned one day we'll be seeing smoking holes in the ground."

Tom Hoban is equally distressed by the industry's shift to lower-cost maintenance.

"We've been carrying this airline on our backs for quite some time with the maintenance issues," he tells me. "We have had enough and we're not going to do it anymore."

Louie Key, for one, is not optimistic.

"It's probably going to get worse; it's certainly not getting any better," he says. "This is going to spread, and it certainly has already."

To Larry Pike, even a mid-air tragedy might not be enough to force changes.

"The airlines have insurance by Lloyd's of London and everything's covered," he says. "They don't lose any money. But I look at the tail numbers of these aircraft and I know what's going on. American continues to downplay all of this, 'The union is upset because they're losing work.' Yeah, I am concerned about losing work, but I'm concerned about losing my family too."

Follow Justin Rohrlich on Twitter: @chickenalaking
No positions in stocks mentioned.
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