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Posted on Mon, Apr. 19, 2004
Rolls deal benefits American subsidiary
By Trebor Banstetter
Star-Telegram Staff Writer
FORT WORTH - American Airlines has struck a deal with aircraft engine maker Rolls Royce that will guarantee up to $1.6 billion in new work for a subsidiary based at Alliance Airport.
The subsidiary, Texas Aero Engine Services, is a 50-50 joint venture between American and Rolls. Texas Aero repairs and overhauls aircraft engines and is staffed almost entirely by American mechanics.
Under the deal, expected to be announced today, Rolls will funnel contracts for outside maintenance work, valued at $900 million over five years, to the firm.
If American meets performance guidelines, Rolls agrees to provide an additional $700 million in contracts.
Executives at Fort Worth-based American said the arrangement is uncommon in an industry where more and more airlines are outsourcing their maintenance, rather than bringing in outside work.
"If you look at traditional maintenance organizations at most airlines, they're not doing a lot of third-party operations," said Pat Stewart, vice president and chief operating officer of Texas Aero.
"We see this as creating long-term stability for our Alliance base."
American does extensive maintenance on its fleet at the Alliance facility, which has about 1,700 employees. More than 500 of those workers do engine overhauls for Texas Aero.
Officials said the company will not immediately add workers but the deal could boost employment if the third-party maintenance business takes off.
The joint venture repairs and overhauls the R111 engine, which is used on Boeing 757 airplanes, and the Trent 800 engine, which propels Boeing 777s.
American is able to add the engine work because cutbacks in its fleet, coupled with recent productivity gains, have opened additional capacity at the maintenance base.
And officials want to use the deal as a foundation for snaring more outside business.
"Over time, we hope we can grow the facility, add capacity and employees," said Will Folger, vice president of finance for Texas Aero.
Taking on contract work also allows American to harness its maintenance facility as a revenue generator, rather than a cost, Stewart said.
Customers whose engines will be serviced at Alliance include Delta Air Lines, ATA Airlines, America West and several aircraft-leasing companies, he said.
The added work is a welcome change for workers at Alliance.
Less than a year ago, American contemplated closing at least one of its three maintenance facilities -- at Alliance, Kansas City, Mo., and Tulsa, Okla. -- because of reduced work.
But the bases stayed open. Tulsa and Kansas City offered more than $100 million in incentives to offset the costs and upgrade some facilities.
That, in turn, allowed American to use the extra capacity for outside work.
"So many of our competitors have decided that outsourcing is the solution," said Robert Reding, American's senior vice president of technical operations.
"But I think we've found a way to keep the work here, done by our own employees, and bring in some additional money as well."
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ONLINE: AMR Corp., www.amrcorp.com
Trebor Banstetter, (817) 390-7064 [email protected]
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© 2004 Star Telegram and wire service sources. All Rights Reserved.
http://www.dfw.com
Posted on Mon, Apr. 19, 2004
Rolls deal benefits American subsidiary
By Trebor Banstetter
Star-Telegram Staff Writer
FORT WORTH - American Airlines has struck a deal with aircraft engine maker Rolls Royce that will guarantee up to $1.6 billion in new work for a subsidiary based at Alliance Airport.
The subsidiary, Texas Aero Engine Services, is a 50-50 joint venture between American and Rolls. Texas Aero repairs and overhauls aircraft engines and is staffed almost entirely by American mechanics.
Under the deal, expected to be announced today, Rolls will funnel contracts for outside maintenance work, valued at $900 million over five years, to the firm.
If American meets performance guidelines, Rolls agrees to provide an additional $700 million in contracts.
Executives at Fort Worth-based American said the arrangement is uncommon in an industry where more and more airlines are outsourcing their maintenance, rather than bringing in outside work.
"If you look at traditional maintenance organizations at most airlines, they're not doing a lot of third-party operations," said Pat Stewart, vice president and chief operating officer of Texas Aero.
"We see this as creating long-term stability for our Alliance base."
American does extensive maintenance on its fleet at the Alliance facility, which has about 1,700 employees. More than 500 of those workers do engine overhauls for Texas Aero.
Officials said the company will not immediately add workers but the deal could boost employment if the third-party maintenance business takes off.
The joint venture repairs and overhauls the R111 engine, which is used on Boeing 757 airplanes, and the Trent 800 engine, which propels Boeing 777s.
American is able to add the engine work because cutbacks in its fleet, coupled with recent productivity gains, have opened additional capacity at the maintenance base.
And officials want to use the deal as a foundation for snaring more outside business.
"Over time, we hope we can grow the facility, add capacity and employees," said Will Folger, vice president of finance for Texas Aero.
Taking on contract work also allows American to harness its maintenance facility as a revenue generator, rather than a cost, Stewart said.
Customers whose engines will be serviced at Alliance include Delta Air Lines, ATA Airlines, America West and several aircraft-leasing companies, he said.
The added work is a welcome change for workers at Alliance.
Less than a year ago, American contemplated closing at least one of its three maintenance facilities -- at Alliance, Kansas City, Mo., and Tulsa, Okla. -- because of reduced work.
But the bases stayed open. Tulsa and Kansas City offered more than $100 million in incentives to offset the costs and upgrade some facilities.
That, in turn, allowed American to use the extra capacity for outside work.
"So many of our competitors have decided that outsourcing is the solution," said Robert Reding, American's senior vice president of technical operations.
"But I think we've found a way to keep the work here, done by our own employees, and bring in some additional money as well."
--------------------------------------------------------------------------------
ONLINE: AMR Corp., www.amrcorp.com
Trebor Banstetter, (817) 390-7064 [email protected]
--------------------------------------------------------------------------------
© 2004 Star Telegram and wire service sources. All Rights Reserved.
http://www.dfw.com
