Outsourcing At Ua

[novaqt]

"Outsourcing Flies UA Into Uncharteres Skies", October 13 edition of Chicago Business Journal

http://chicagobusiness.com/cgi-bin/mag/art..._id=20626&arc=n

Anyone care to comment?

The above combined with the sale of 4 slots to BA at Heathrow and the 767-200's listed in wwww.speednews.com ought to raise a penny or two!!

 

[atabuy]

Can you give a little info about the article?
I don't want to sign up for the service on that site.
You know I always have an opinion.

IMHO I was saying to some friends I thought Ual could do better with communication to it's new employees and even the older ones. People lose prospective very easily, and it is important to keep reminding them that the work they are doing keeps them working. If it is putting mail, freight, bags, or people on the airplane. Or fixing or flying it.

Outsourcing is a new tool all business is using to lower wages or increase productivity. Ual has been able to circumvent the contracts with this tool, and the only recourse for labor is to show that they can do it for the same price.
Labor has always been affected by the bottom line, and now more than ever, the company feels no compassion or obligation to its employees to save jobs.
The attitudes of some employees has not been a help to this process either.

Results are the only thing Ual wants. At a high cost to a lot of dedicated employees.
I told you I always have an opinion.

 

[DalMD88]

I truely wonder if this is a smart move. Outsourcing small specialized functions makes sence. At DL we outsource 777 engine heavy maintenance. If it gets pulled off the wing it gets sent out. It would be stupid for us to set up an engine shop and test cell for the support of 10 engines. Now cargo handling in your hub city just sounds wrong. This is a big operation. Many forgin carriers use third party here in the US. These are small operations though. How can paying someone else to do the work for you at your largerst hub be saving you money? Sure they may have been fat in this area. So trim out the dead weight. Will the employees of company XYZ care about your customer as much as a UA employee?

I still can't understand the reasoning behind the Maintenance oursourceing. When a fleet is as large as UA it rarely payes to send the planes to third party shops. Sure the mechanics get paid nothing( the rate is about half of a major), but the quality of the work isn't up to the same standards. No I'm not talking about planes falling out of the sky. It's more of a pay me now or pay me later situation. Let's say the guy putting the floors down under the lav is a little sloppy and doesn't do a great job sealing everything. Over the next five or six years all that 'moisture' from the lav area leaks down in to the bottom of your plane. Next overhaul you are replacing frames and stringers that should have lasted the life of the plane. It could add five six seven days of down time and thousands of dollars of parts and labor. Sure you only paid a rate of $18/hr for that seal job and it sounded like a deal at the time. Don't worry the mechanic who only got $12.00/hr doesn't work there anymore. He quit the industry to go work at the local Ford dealership. It paid better and he gets to work days. They did find another guy fresh out of school to fix all those corroded parts.

 

[novaqt]

Right now Crain's has an 8 week promotion going on to sign up for free. You do not have to continue at the end of the free period.

 

[whatkindoffreshhell]

Here's the article. You can express your gratitude financially by sending a contribution to the UCT fund "wasted minds are terrible" etc.


Issue Date: Oct 13, 2003


Outsourcing flies UAL into uncharted skies


October 13, 2003
By Paul Merrion

Virtual airline: UAL's Amos Kazzaz says turning over functions such as fuel purchasing and cargo handling to outside specialists will save money.

When United Airlines closed maintenance hubs this summer in Indianapolis and Oakland, Calif., triggering howls from thousands of mechanics whose jobs were outsourced, it was just getting started.

Below the radar, the nation's second-largest carrier is becoming something of a virtual airline as it quietly turns over more functions, such as cargo handling, airplane cleaning and fuel purchasing, to outside firms.

Individually, these outsourcing moves have been too small to gain much attention. Collectively, however, the savings from outsourcing and other cost-cutting moves eventually will add up to about $900 million a year, according to a United official — a large chunk of the $5-billion reduction in costs the carrier has achieved since filing for bankruptcy last December.

"There are more than 80 projects that drive these savings," says Amos Kazzaz, vice-president of financial planning and analysis at United parent UAL Corp., who heads the Business Transformation Office of the Elk Grove Township-based holding company. "There are always those who are specialists. We looked to outside parties who can do it better."

The risk, however, is that things don't go as smoothly as planned, as is the case with outsourced cargo operations at O'Hare International Airport. There are new distractions for management at a time when survival is the top priority. And, of course, there's the issue of employee morale.

There's not much United's unions can do, "other than screaming about it," says O. V. Delle-Femine, national director of the Aircraft Mechanics Fraternal Assn. (AMFA), which has seen more than 2,000 mechanics and about 850 cleaners replaced by outside firms. "They've got carte blanche."

His union replaced the International Assn. of Machinists (IAM) as the collective bargaining agent for United mechanics and airplane cleaners over the summer, shortly after the IAM agreed to accept outsourcing and other concessions. AMFA's lawyers are now looking for loopholes. "We're going to fight it," he adds. "Nothing is in stone."

United expects to save only about $5 million on $2.8 billion in annual fuel expenses by turning over jet fuel purchasing and hedging operations to Morgan Stanley Capital Group. Yet, the big benefit of joining forces with the New York investment bank is that Morgan Stanley will carry the inventory, freeing about $250 million in working capital to bolster United's cash position.

UAL executives have told union officials that outsourcing plane cleaning to several companies around the country — including Philadelphia-based Aramark Corp. at O'Hare — is expected to save $4.6 million at O'Hare and more than $20 million nationwide, according to AMFA official William Skjoldager. "We're being phased out," he adds.

The question is whether these savings alone are enough to ensure United's survival — and, of course, the answer is no. One Wall Street analyst likened outsourcing to "rearranging the deck chairs on the Titanic" unless United can reduce additional billions of dollars in near-term pension contributions, finish hammering out lower-cost aircraft leases and present a credible business plan to investors so that it can line up the financing it needs to exit bankruptcy.

However, by chipping away now at a costly culture and union work rules that dictated doing almost everything in-house, United is laying the groundwork to be more profitable in the future, if it survives bankruptcy intact.

"There are going to be some growing pains here, but it's still a winning strategy," says Joseph Schwieterman, director of the Chaddick Institute for Metropolitan Development at DePaul University in Chicago and a former United strategic planning specialist. "United can't move as quickly as an outside contractor to increase productivity."

While it's far more common for smaller carriers and discount airlines to outsource much of their cargo handling, ground services and other operations, United is using its new labor agreement and the protection of Bankruptcy Court to press further into outsourcing than its larger competitors.

For example, American Airlines outsources overnight cabin cleaning but not cargo handling, says a spokeswoman for the unit of Texas-based AMR Corp.

But things can go wrong. Between lost shipments, late deliveries and miscommunications, a variety of large and small Chicago-area freight handling companies say they are reeling from United's hiring of Swissport International Ltd. to handle cargo at O'Hare, starting last month.

For Itasca freight forwarder AIT Worldwide Logistics Inc., a major user of United's cargo services, "one of our greatest strengths was that we knew who to call" in every part of the carrier's network, says Vaughn Moore, vice-president of sales and marketing. Now, he adds, "It's like you throw your whole Rolodex out and start over."

Zurich, Switzerland-based Swissport and Texas-based Worldwide Flight Services Inc., formerly a unit of American Airlines, are replacing United employees at 17 warehouses across the U.S. Both companies have extensive, worldwide experience in freight handling operations. The cargo sales and customer service call center, whose Chicago workforce has been cut almost in half, to 60 employees, in recent months, will soon be outsourced to Texas-based Electronic Data Systems Corp.

Cargo shipments drop

The result may be lower costs, but United also reported a 31.1% drop in cargo shipments in September, compared with only a 2.9% decline in passenger revenues per mile flown.

"We were using United on a regular basis, but we're holding back on putting things through there until things settle down," says Janet Dahl, Chicago district manager for New York-based Concordia International Forwarding Corp. "We knew the day they were going to turn everything over to a new handling agent, so we've just avoided it."

UAL's Mr. Kazzaz acknowledges there were start-up problems in cargo outsourcing at O'Hare, but he insists the freight operation is running more smoothly now.

"It's not yet at the expert level of where it was, but certainly a great deal improved from the initial transition that took place Sept. 7," he adds.

Says AIT's Mr. Moore: "We're both hometown players and we're going to make it work. It has not been a good transition so far, but they are working very diligently to make it work. It's important to their survival."

©2003 by Crain Communications Inc.

 

[atabuy]

novaqt Posted on Oct 14 2003, 01:33 PM Right now Crain's has an 8 week promotion going on to sign up for free. You do not have to continue at the end of the free period.

novaqt,
I have about all the passwords I can remember.

whatkindoffreshhell,
The checks in the mail. Thanks for the article.

If Ual kept harping on employees why they have jobs, maybe outsourcing would not be neccessary. Prior to 9/11.

I am sure there is a domino affect happening now.

 

[kcabpilot]

Outsourcing is all about making it "look" like you're saving money. On the maintenance end it "looks" like they are getting a great deal from Timco if you don't factor in all of the tooling and equipment that was given to them for free. If you ignore the labor that goes into getting the aircraft to work properly again after coming out of an OSV overhaul. They were able to get a couple of thousand Mechanics off the payroll so the little numbers on the Excel spreadsheets "look" the way they want them to look.

It's nothing more than a whole lot of management (layers upon layers of them) deluding themselves into thinking that they are successful. In maintenance we've got a bloated Engineering staff comprised of ex foremen that didn't have anywhere else to go. We've got a whole new management department that supposedly oversees all of the outsourced work going on. How they do that from their cubicles upstairs is beyond me. On the floor we've got dozens of foremen along with the new position of "technical resource coordinator", operating managers, general managers and all of the supporting staff of executive secretaries and what not else. They all walk around with the false belief that they are instrumental in getting an aircraft repaired and back on the line.

In the end, nothing could be further from the truth. It's just a bunch of Mechanics dealing with broken down, antiquated equipment and tooling, lack of replacement parts, lack of support, layers of management's beauracratic roadblocks, hoops and "ideas" to run through like a gauntlet, that still manage to get these aircraft out on time.

Frankly, in maintenance, if you can't turn a wrench you're just in the way.

 

[atabuy]

Frankly, in maintenance, if you can't turn a wrench you're just in the way. atabuy Posted on Oct 15 2003, 12:57 AM

I agree.
To model Ual after a low cost carrier would mean cutting management drastictly.
That is why they did it within the framework of the larger company.

It gives an illusion of doing something.

I am not anti management, but fares can not support non productive jobs. Everyone who is working at Ual must be produtive.

If you take the pyamid and lop off a quarter off the top, Ual could be profitable.
Managements problem is they are eroding the base by taking blocks out there. Things will start teetering if they continue there.

Micro managing is a downward spiral which will benefit no one.

 

[Segue]

With stuff like this, any surprise companies like outsourcing?

http://biz.yahoo.com/bw/031016/165659_1.html

When you outsource, other companies compete for your business - in good times and bad times. If one supplier becomes too costly, there is another ready to take their place. Can you imagine an MRO saying "you made money last quarter, now your price goes up for the next ten years".

 

[wts54]

Frankly, in maintenance, if you can't turn a wrench you're just in the way.

So true.

 

[atabuy]

With stuff like this, any surprise companies like outsourcing?

I have to defend the blue collar guy here.
There is a good chance executives will get a bonus for turning a profit on labors sacrifice.
Is this ok? Or should everyone's pay rise and fall on the bottom line.

During the esop execs. got bonuses because employees took paycuts. That changed the bottom line but they did nothing to earn those bonuses.

Make it a fair wage arena, and all can be happy.

 

[aircraft_artificer]

What the OSV's do for "Safety"

 

[aircraft_artificer]

Went through all maint runs AND a test flight at OSV. First flight from OSV to an airport "No Bleed Air", gripe. They work better when the bleed air valve is not safety wired to the "CLOSED" position. Just some more of the quality work from the OSV's that employ more NON-AMERICAN workers than US Citizens.

 

[Segue]

Went through all maint runs AND a test flight at OSV. First flight from OSV to an airport "No Bleed Air", gripe. They work better when the bleed air valve is not safety wired to the "CLOSED" position. Just some more of the quality work from the OSV's that employ more NON-AMERICAN workers than US Citizens.

Rather than attribute it to nationality or race, exactly why do you think that work was done? As for "quality", the safety wiring looks pretty meticulous and intentional. I'm not trying to support it or anything, just curious.

 

[High Iron]

Rather than attribute it to nationality or race, exactly why do you think that work was done? As for "quality", the safety wiring looks pretty meticulous and intentional. I'm not trying to support it or anything, just curious.

The upper bolt looks like a neutral at best safety to my eyes.