Flying Cheaper

Airlines outsource repairs, but cost-cutting leads to weaker oversight

Tuesday, January 18th, 2011 

MOBILE, Ala.—Every day, in the last dark hour before the break of sunrise, hundreds of workers stream into brightly lit airplane hangars at ST Aerospace Mobile, an independent airplane repair station on an old Air Force base here. The workers are going spend the next 10 hours or so repairing planes on which millions of Americans will book a seat. They are part of a tectonic shift in the way the major airlines fix their planes.
 
Over the past decade, airlines hit by a tsunami of financial woes created by a mix of highly competitive online fare competition, the Sept. 11 tragedy, low-cost carriers and soaring fuel prices have switched to cheaper ways of maintaining their fleet of planes. Four of the major airlines declared bankruptcy. They’ve since been shedding costs by the hundreds of millions in order to stay afloat.
 
For the past year, American University’s Investigative Reporting Workshop and PBS FRONTLINE have teamed up to look at the ramifications of such cost-cutting. The first investigation focused on who was flying our planes and led to the documentary  Flying Cheap. The focus on this most recent FRONTLINE magazine project is on who is fixing our planes. We call it Flying Cheaper.

Majority of maintenance moves away

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FRONTLINE

Sarah MacLeod says maintenance is a tight-margined business.

US Airways, United Airlines and Delta Air Lines all struggled through bankruptcy, and, as a result of cutting maintenance jobs, now send much of their work to cheaper facilities like ST. They aren’t alone. Although only a third of heavy maintenance was outsourced in 2003, that share grew to close to three-quarters by 2007, according to the most recent survey of nine major airlines by the Department of Transportation’s Office of the Inspector General. Heavy maintenance involves stripping the airplane completely down to its shell for inspection and then reassembling it. It’s labor-intensive, so, according to the IG report, about 30 percent of that outsourced maintenance is sent abroad, where labor rates can be a fraction of those in the U.S.

The major airlines now are outsourcing to what are called MROs, or Maintenance, Repair and Overhaul facilities. One can get the sense of how vast that industry is by attending the annual MRO conference, as the Workshop and correspondent Miles O’Brien did last April in Phoenix. The football-field-sized convention floor was packed with company representatives from El Salvador, Singapore, Turkey and China, all competing for the repair business of U.S. airlines. See our map for the nearly 5,000 repair facilities worldwide that are licensed by the Federal Aviation Administration.

It’s an incredibly tight-margined business, said MRO representative Sarah MacLeod, executive director of the Aeronautical Repair Station Association, who attended the conference and spoke to FRONTLINE.

Domestic repair stations bidding against the likes of Ameco in Beijing face steep competition. In the past few years, Ameco, a facility that employs low-wage Chinese, has enticed United Airlines to move its 747 and 777 overhaul maintenance work to Beijing.

The investigative team wanted to see just how a facility like Ameco persuaded a major airline like United to switch from its reputable maintenance facility in San Francisco to Beijing. Key questions focused on the quality of Ameco’s workforce, the competitiveness of the industry and its regulatory compliance records, which the team obtained from the FAA.
 
We asked both United and Ameco for a visit to the Beijing facilities, and initially both accepted. Then about a week before the team’s visit, after weeks of preparation with Ameco and successfully obtaining permission from the Chinese government, Ameco suddenly backed out, saying it had “unforeseen events.”

Out of sight

One of the concerns of consumer watchdogs is about how little the public — and perhaps more important, the FAA — knows about where planes are maintained and how the process is handled.

 “Our concern is, is to be quite honest, it’s not so much the work itself, it’s the oversight,” says Bill McGee, who writes for Consumer Reports and represents consumers on the Department of Transportation’s Future of Aviation Advisory committee and considers outsourced airline maintenance to be the No. 1 safety concern for passengers.

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FRONTLINE

Jeff Skiles, the US Airways co-pilot who helped safely land Flight 1549 in the Hudson in 2009, has been working on safety reforms in the industry.

Jeff Skiles, the US Airways co-pilot who helped safely land Flight 1549 in the Hudson in 2009, has been working on safety reforms in the industry. He is also concerned about outsourced maintenance because he says inadequate oversight heightens his sense of not knowing exactly what is being done to an aircraft before it reaches the tarmac. “As a pilot, you have no idea what the maintenance history of the airplane was,” he said.

FAA inspectors said they are frustrated as well. They used to have centralized shops at the airlines to oversee, but now the work is spread across the globe. The FAA has beefed up its inspector workforce, but veteran FAA inspector Linda Goodrich says not enough has been done, especially abroad. “The business models have radically changed,” Goodrich said. “Work is being done globally now.” She said inspectors are spread thin, especially abroad, where the FAA relies heavily on oversight performed by foreign regulatory agencies akin to the FAA.
 
But Peggy Gilligan, the FAA associate administrator for aviation safety, disagreed with Goodrich, saying the agency has plenty of coverage abroad. About 100 foreign-based FAA inspectors oversee about 700 stations, she said, “So they’ve all got plenty of time to get to those facilities that they are responsible for.”

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FRONTLINE

Peggy Gilligan of the FAA says the agency has enough inspectors overseas.

Furthermore, she says each foreign station’s certificate has to be renewed each year, a more onerous requirement than for domestic MROs, whose certifications don’t expire unless they are suspended by the FAA. 

In 2006, when Ameco was being evaluated for re-certification, an FAA inspector noted he wasn’t able to fully inspect the facility because of its “size and complexity and scope.” But what he did find greatly concerned him. In a subsequent review, the FAA inspector refused to renew Ameco’s certificate for the customary full year in 2007 because of “systemic non-compliance” with FAA regulations. Instead, the FAA renewed certification for four months. The company has since taken corrective action and is again fully certified.
 
Goodrich says the FAA’s coverage has changed dramatically over the years. FAA inspectors once acted as a “cop on the corner” who paid surprise visits to maintenance hangars based at the airlines. Today, she said, surprise visits to airplane repair stations are rare; overseas, they are basically impossible because of the logistics planning and governmental approvals that must be in place beforehand.
 
Maintenance oversight is now more of a data-driven system. “The majority of our time is behind a computer, taking in data, most of which is provided by the carrier,” she said.

Inside an MRO

Most of the outsourced maintenance is still performed stateside, where mechanics the FRONTLINE team spoke to complain of weak oversight. One mechanic who worked at a major airline before coming to ST Aerospace said he noticed a dramatic drop in the FAA’s presence.

“Now, when I worked at this MRO, I never actually seen an FAA inspector walk on an aircraft,” he said of the facility here in Mobile. At the airlines, he said it was a different story: “They’d actually walk around the aircraft and inspect the aircraft. They’d inspect everything.”
 
ST officials, along with other domestic MROs officials, declined FRONTLINE’s requests to be interviewed on camera. But several mechanics agreed to talk as long as FRONTLINE disguised their identities to prevent possible retribution.
 
Some of their most trenchant criticisms of ST were about mismanagement, lack of qualified mechanics and long hours, all of which caused serious maintenance issues on takeoff in commercial airplanes. Several internal safety memos document mechanical jobs gone wrong on commercial aircraft, including a series of fuel leaks on three US Airways planes that could have resulted in “serious aircraft mishaps.”
 
Many of the mechanics’ complaints were backed up by the FAA. Below are some of the disturbing conclusions from some of the 2010 FAA inspections reports of ST Aerospace Mobile:
 
• “A shortage of qualified maintenance personnel across all maintenance programs.”
• “Your production department continually fails to adhere to your quality system, thus allowing for repeated findings and quality escapes.”
• Numerous failures of senior management, including “A failure of senior management to ensure that proper work techniques and procedures are adhered to, thus allowing for ‘work arounds’ to become a standard procedure in your organization.”
 
After reviewing ST Aerospace’s inspection reports and internal safety memos and listening to mechanics’ on-camera interviews for our documentary, FAA inspector Goodrich didn’t mince words in her impression of the company’s practices: “Something’s seriously wrong here, and we need to investigate this,” she said. 

Hiding questionable parts

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FRONTLINE

Oversight concerns Bill McGee, who writes for Consumer Reports.

One of the more troubling stories we uncovered was of ST Aerospace’s handling of airplane parts. More than a dozen FAA inspection reports cited problems with inconsistent parts identification, including a December 2009 report that listed parts identification issues as a “Repeat Finding.”

 ST Aerospace mechanics revealed a secret operation last year at the company to move questionable parts out of the facility before a team of FAA inspectors arrived for an announced inspection.
 
“It was amazing all the stuff that was thrown out,” said one mechanic. “We had Dumpsters full of stuff carried away. We had Dumpsters carried out of there constantly.”  

 Workers say ST Aerospace  rented Penske trucks to move thousands of parts whose origins could not be traced or were otherwise thought to cause problems for the FAA inspectors to an off-site warehouse to store and either sell to other MROs or bring back into the system after the FAA left the premises. Some workers told us many of these parts have come back to the ST Aerospace facility.
 
In response to the allegations, Joseph Ng, president of ST Aerospace Mobile, wrote FRONTLINE that the company does not have untagged or undocumented parts. He said that all parts used on aircraft are properly documented and that ST Aerospace’s records are regularly audited. In addition, he said the company initiated an inventory review at the end of 2009 when, as typical with such reviews, it would dispose of "inactive" parts not needed for future work. 
 
The FAA’s Gilligan said, “If those kinds of activities are happening, they should be reported to the FAA. And our inspectors will inspect.”
 
Skiles had strong reaction as a pilot to what the mechanics said is happening inside one of the MROs that fixes his company’s planes — planes that he could eventually fly.
 
“That’s pretty shocking,” he said. “I mean, I never would’ve thought that it was that bad . … We’re as much in the dark as pilots and employees of airlines as you are as a passenger.”
 
ST Aerospace is just one company, and to what extent it represents the industry is unclear. But industry watchdogs such as McGee have serious questions about the quality of the workforce and the quality of the work at MROs.
 
“The airlines have looked at absolutely every possible thing that they can to cut costs,

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FRONTLINE

FAA inspector Linda Goodrich said she worries about the impact of cost-cutting.

but again, you know, maintenance traditionally has been sacrosanct,” McGee said. “It was one area where the industry collectively said, ‘No, that’s not something we can cut.’ In recent years, we’ve seen a change, and I don’t think that we’ve yet seen all the manifestations of that change.”
 
Goodrich said one of her biggest worries is about the impact of cost-cutting on the safety buffer zone. “It’s down to the nubs as far as the degradation of the margin of safety now,” she says. “Unfortunately, because it’s become so competitive out there.”
 
While admitting concern about airline industry pressures, Gilligan defended the system’s safety, saying the accident record speaks for itself. “I would say over the last 10 or 12 years, we have actually reduced the risk in aviation by over 80 percent for fatal accidents,” she said. “So if anything, we have expanded the safety margins. We haven’t eaten away. But [industry pressure] is a concern.”