Economic Advantages and Disadvantages: Aviation Maintenance and Repair Industry

The three leading corporations in the commercial aviation, maintenance, and repair industry are Goodrich Aviation Technical Services, Pemco Aviation, and Singapore Technologies. Although Goodrich is the largest third-party repair station in the world, all three corporations have their economic advantages and disadvantages, both internally and externally.

Over the last fifteen years, airlines have closed their own repair centers and laid off excess mechanics in favor of outsourcing their maintenance, repair, and overhaul work to third-party repair stations to reduce costs. The reason it is more cost effective to outsource maintenance is because their own workers are unionized, while third-party vendors have competitive pricing and are typically not union. The customers have no reason to worry if their planes will be left not serviceable due to a potential strike. Typically, this is incorporated into a contract agreement between the airline and the vendor. According to Lori Ranson, “Carriers are slowly embracing the idea of outsourced line maintenance, results of a recent maintenance, repair and overhaul market study by Mercer Management Consulting show with airlines noting they expect a 3% boost of line maintenance outsourced by 2009. Right now, airlines are using some third-party companies for selected line maintenance tasks at non-hub airports” (4).

The airlines also save on costs by not having to store their own spare parts. A basic check list of repairs is usually established before an aircraft touches ground at a repair center. With this basic checklist, the vendor usually has the parts already there or on order. With this trend for outside maintenance growing, commercial aviation maintenance, repair, and overhaul will continue to grow in the future at a rapid pace. According to Michael Zubovic, Vice President of Finance for Goodrich Aviation Technical Services, “The most difficult barrier to entry into this industry in the Pacific Northwest is location. Most of the airlines are based on the east and gulf coast and with the rising price of jet fuel, many airlines are opting to send their planes to repair centers closer to their main quarters.”

According to Frank Jackman, “The value of the $38.8 billion worldwide commercial jet transport maintenance, repair and overhaul market is expected to grow at 4.5% annually in the next 10 years as a recent decline in labor rates bottoms out and engine overhaul costs keep climbing…The worldwide MRO market will be worth $48.8 billion by 2011 and $60.6 billion by 2016, according to the annual MRO Forecast prepared for Overhaul & Maintenance by Team SAI and Back Aviation Solutions” (3). We should expect to see a few more repair centers entering this industry.

Unlike other industries where the company needs to invest in a new building and equipment, the largest barrier to entry into the aviation, maintenance, and repair industry is money. The government encourages the development of new aviation, maintenance, and repair stations through grants because of the many unoccupied facilities setting on government subsidized land with no “tenants.” Many of these empty repair centers come with serviceable ground support equipment, all other assets left behind by folded aviation and repair companies, along with the building. This includes any commercial aircraft acquired through an unpaid transaction.

To develop a new AMR station, the entrepreneur would first petition the Federal Aviation Administration for a right to the repair station license of the folded business. The requirement would be to change the name on the license and write a safety and business plan of how they plan to run their business. When an aircraft repair center has its own plane, the company has automatic ability to certify any repairs without petitioning to the Federal Aviation Administration.

Zubovic states, “Goodrich Corporation, a Fortune 500 company, is a leading global supplier of systems and services to the aerospace and defense industry. If there's an aircraft in the sky - we're on it. Goodrich technology is involved in making aircraft fly … helping them land… and keeping them safe. With annual revenues of over $4.7 billion, Goodrich is headquartered in Charlotte, North Carolina, and employs more than 21,000 people worldwide in over 100 facilities across 16 countries.”

Generally, when people think of Goodrich Corporation, they think of tires. Goodrich sold its last tire in 1983. Goodrich Aviation Technical Services is the aviation maintenance, repair, and overhaul division of the Goodrich Corporation. Goodrich Aviation Technical Services started in 1996 when the Goodrich Corporation purchased the Everett, Washington based TRAMCO from Ron Crockett, current owner of Emerald Downs.

I have worked for Goodrich Aviation Technical Services for the past eight years. It is from my previous work experience that this company provides line maintenance, airframe, electrical, avionics, hydraulics, pneumatics, minor engine repair, engineering, components repair and overhaul along with ground support services. Although Goodrich ATS provides all of these services, they claim that the real products are labor hours, efficiency, turn time, quality, and a safe reliable product.