Rolls Deal Benefits American Subsidiary


Nov 21, 2003

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."

Trebor Banstetter, (817) 390-7064 [email protected]


© 2004 Star Telegram and wire service sources. All Rights Reserved.
Another article details just how beneficial this joint venture has already been to AA and the AFW mechanics:

The new deal could more than double the amount of work performed at the facility, the companies indicated. Since American and Rolls-Royce formed the joint venture in 1998, the Alliance plan has brought in revenue of more than $1.2 billion, they said.

American has revamped its maintenance bases as part of an effort to recover from near bankruptcy last year. The Fort Worth-based airline launched aggressive programs to cut costs and consolidate some of its work among its three bases at Alliance, Kansas City and Tulsa, Okla. The moves have helped free space to bid for contracts to repair engines for outside companies.

The Alliance facility employs more than 530 American mechanics and other workers, of which more than 200 were added to handle maintenance work for customers other than American Airlines. Work for those new customers has grown 75 percent over five years, American said.

While no new employees are expected to be added right away, the article quoted above says that more than 200 were added in recent years to handle insourced work.

This is outstanding news. B)
jimntx said:
Definitely sounds like a win-win situation for the AA mechanics and the company!
You've "ommited" one part.
"This is good for the AMT's, AA, AND THE "TWU"

Am I the ONLY ONE who finds the timing of this announcement a "little suspect" ???

Anybody remember REGAN announcing the release of the American hostages, on his innauguration day ????????


"GO AMFA" !!!!!!!!!!!!!