At its sprawling maintenance base in Fort Worth, Texas, American Airlines is demonstrating that it isn't always necessary to follow the pack. American is not only the world's largest airline, it's also in many respects the most innovative of the major U.S. carriers. American, a unit of AMR ( AMR), is the only one of the six major legacy carriers that has never sought bankruptcy court protection, and today it's embracing an effort at cooperation between labor and management that's unprecedented in the industry. Moreover, despite a nationwide trend toward outsourcing, American is moving to bring more work in house. Its mechanics work not just on the AMR fleet but also on planes operated by others. "You're standing in the only active, open, full-up running 777 heavy maintenance facility in North America," Peter Sirucek, the American managing director who oversees the Fort Worth base, said during an interview at the base. "No one else is doing it." Last month, a team of Fort Worth managers, union leaders and workers agreed to work together to generate $400 million in new revenue and cost savings by the end of 2008. Combined with the goals at American's two other principal maintenance bases -- $500 million from the Tulsa base by the end of 2006, and another $150 million by the end of next year at the Kansas City facility -- the total benefit would be about $1 billion.
Local InputAMR's shares, which closed Monday at $24.51, have risen steadily since reaching a 52-week low of $10 in September. The airline's cost-reduction efforts have contributed, along with the overall industry's rising demand and reduced capacity. Last week, Standard & Poor's boosted its ratings on AMR's credit. "The upgrade reflects improving earnings and cash flow prospects, driven by better revenue generation and ongoing cost-cutting efforts, which have more than offset the effect of high fuel prices," wrote S&P analyst Philip Baggaley.
To be sure, several past efforts at labor-management cooperation in the airline industry have failed. A notable example was the case of Eastern Airlines, where employees gained a role in corporate planning and 25% of the company's stock in 1983. However, the effort collapsed after Frank Lorenzo's Texas Air bought the carrier in 1986. American hasn't been immune from labor strife. The flight attendants struck in 1993, and pilots staged an 11-day sickout in 1999. But in 2003, when its stock sank to $1.25 and a bankruptcy filing was widely expected, American negotiated a cost-cutting plan with its unions that included a $1.8 billion reduction in labor expenses. About 6,000 workers were let go, and most who remained took salary cuts of 16% to 17.5%. "We had spent so much time together and developed so much respect for each other that we made a decision to try to continue to build our relationships," says Mark Burdette, AMR's vice president of employee relations. Nowhere are the benefits of that decision more evident than in the alliance between the airline and the Transport Workers Union, which represents about 26,500 of AMR's 96,200 workers. At the Fort Worth maintenance base, constant meetings between managers and union members are at the heart of a new American. In some meetings, teams of workers and managers seek methods to reduce costs. At others, the financial aspects of each job are laid out, in the belief, Burdette said, that "when you get rational people with the same set of data, they frequently come to the same conclusions." Now, local TWU officials help to build the business plans at their shops. "Three years ago, we would never have been invited to the party," says Gary Peterson, president of TWU Local 567, which has 1,600 workers at the Fort Worth plant. "Today, we're in the center of the dance.
"We used to be separate," he continues. "Finance did their work, and maintenance did their work. Now, it's become critical
to show somebody like myself what it means, because I can go back to union members and tell them. Before, it was out in outer space. Now, we can bring it to the shop level." managers would come and say, 'This is how we're going to do it,'" he says. "The mechanics would say it wouldn't work, and six months later, they would say, 'We told you so.' "But we're changing," he adds. "The idea is that if you can understand the process, it helps people to understand why we need change."
Mechanical ResonanceLast week, the Fort Worth base completed its first heavy maintenance check on a Boeing 777. The initial expectation was that the check would take 20 days, but American's first thorough evaluation indicated that 15 days would suffice. Then, Sirucek says, the crew chiefs got involved. They said 12 days. The first plane actually took 14 days, but Sirucek is confident that the time will be reduced. Moreover, he believes that other airlines will come to realize that because the Fort Worth plant is cost-competitive with any other option, they should bring their 777s there for maintenance. Among the changes suggested by Fort Worth union members are:
- When seats are taken out of an airplane for maintenance, they're placed on specially designed metal carts rather than wooden flatbeds. The metal carts are dedicated to a single purpose, so there's no delay in finding them. Seats stay on the carts the entire time they're out of the airplane, even when being washed.
- Sets of tested, cabin-ready oxygen masks are now delivered to each airplane, ready to be installed. In the past, "we had to take them off and send them to the shop and wait," said Greg Mackey, TWU benefits coordinator. "If you were ready to put them in and they weren't there, 15 or 20 mechanics may have had to wait for them before they could send a plane out."
- Many of the parts regularly needed to maintain an airplane are now made by American mechanics and stocked in advance. For example, a part called a "stringer," essentially a beam that goes under the seats, often becomes corroded and requires replacement. In the past, a mechanic would prepare new stringers each time they were needed, but now an AMR shop makes them in batches and has them ready in advance.
- When engines are taken off airplanes and maintained, they're placed vertically on hydraulic lifts in a pit, then moved up and down so that sitting mechanics can work on them. Engines used to be mounted horizontally on a platform, requiring workers to use ladders to work on them. The improvement works so well, not only in providing efficiency but also in reducing injuries, that a third pit is being installed.