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In-House or Outsource?

by David Wyndham 1. May 2005 00:00
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We had an interesting question from a client the other day. He was evaluating his aircraft operation and asked whether doing maintenance in-house versus outsourcing will affect costs.

In our Aircraft Cost Evaluator, our maintenance labor hours per flight hour are based on "billable hours" or "wrench on airplane time." The rate per labor is a typical rate for airframe maintenance. The maintenance is for routine scheduled and unscheduled and does not include off-aircraft overhauls or life-limited components such as landing gear overhaul, rotor blade overhaul, etc. If in-house maintenance staff does the routine scheduled and unscheduled maintenance, then their salary replaces the hourly maintenance charge.

In house versus outsourcing costs will vary. For example, if the nearest service center is next door, it is cost effective for a single-ship operator to simply have the service center perform the maintenance rather than employ a full-time maintenance staff. Especially if that service center operates around the clock, or close to it. If the service center is 400 miles away, then you have the added cost of maintenance ferry flights and a grounded aircraft at home waiting for the A&P to show up can be a real problem. As you add aircraft in the flight operation, the cost effectiveness and fast response of in-house maintenance staff is valuable.

Having in-house maintenance staff is sort of like having the fire department split into several small companies. Your taxes may be less if there was one large, central fire department in the center of the city, but when you have a fire; you want a response time of now. In-house maintenance staff gives you the dedicated response and also gives you someone who know your aircraft intimately.

With small flight departments (1 - 2 aircraft) that have good maintenance service at home station generally can get away without in-house maintenance and still maintain a high level of service. An example of this was a client of ours in Houston. His hangar for the Lear was next to Garrett, so he was never more than five minutes away from his maintenance facility. He had high dispatch reliability and reasonably fast response times from Garrett.

Another client of ours with one aircraft is based at a small airport in CT. The preferred service station for their aircraft is a service center in Wilmington, Delaware. So, they keep a mechanic on staff for the routine stuff and schedule major inspections with the service center. While the cost per aircraft flight hour of the A&P's annual salary exceeds the Conklin & de Decker maintenance labor cost per hour, the flight operation maintains the required high level of service and avoids the added cost of extra maintenance ferry flights at about $1,000/hour.

Larger operators and those smaller operators lacking qualified and responsive maintenance at home station generally are better served by in-house maintenance staffs. Also with a large operator's fleet of aircraft, the learning curve is such that in-house staff can become very proficient at the routine tasks, know the aircraft history and will be there when you need them to be there.

So I think the answer regarding the impact on cost is "it depends." That is where some life cycle costing can help. Calculate the total cost with in-house maintenance (salaries and overhead) versus out sourcing (perhaps added flight hours for ferry flights).

Also to include in the analysis is the impact on the level of service. When your aircraft is in for major maintenance, such as a 12-year airframe inspection, having your in-house A&P work with the service center typically results in jobs being completed on time and close to budget. "The squeaky wheel gets the grease." While the dollars may not favor the in-house approach, the aircraft availability and level of service may make in-house maintenance a must.

If you operate a corporate flight department, charter, or managed aircraft, how and where do you do your aircraft maintenance? At what level do you out-source? Drop me a line and let me know.


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