Economic Advantages and Disadvantages: Aviation Maintenance and Repair Industry

PEMCO Aviation Group is another highly competitive corporation that has a domestic and international customer base. The company has military contracts to provide maintenance, repair, and overhaul services. The company recently signed a contract with Alaska Airlines to provide a conversion modification from passenger to freighter aircraft. From my previous experience in working on passenger to freighter conversions, the process entails removing eighty percent of the passenger seats and installing non-slip floor panels, cargo tie down harnesses, installing a reinforced bulk head behind the cockpit wall (commonly known as a Nine G wall). A Nine G wall is designed to protect the pilot and crew from being killed from the cargo plowing through the wall if the aircraft is in a nose down configuration. According to Conway from the company online news article:

US-Based PEMCO Aviation last month announced the world's first ever B737-400 conversion deal, with Alaska Airlines placing five firm orders and two options for the type, with some being converted to freighters and others to Combis. The deal is a coup for Pemco, which otherwise has been finding high residual values are holding back expected demand for its 737 conversions and program. However, longer term, he predicts no shortage of conversion candidates for the 20-tonne freighter, with more than 1,000 737-300s and more than 400 737-400s now in passenger service, many approaching the 15 years service level that makes conversion to freighters attractive. (1)

PEMCO Aviation Group faces economic disadvantages also. The contracts with the Air Force and the Coast Guard are becoming increasing difficult as the military upgrades its aircraft. Each type of aircraft has different maintenance procedures. In an online published interview, O&M editors asked Ronald Aramini, President of Pemco Aviation Group, “How did 2004 go for Pemco?” Aramini replied, “We've had some issues with restructuring the facility so that we could produce the product quicker to support the Air Force and Coast Guard needs, and we've put a lot of money into the facilities to prepare for the future” (1). O&M goes on to ask Aramini, “How did you change its processes? Aramini states, “The majority of those changes are part of our effort to reduce flow days. Instead of a moving line concept where the aircraft moved 12 to 15 times over nine months to a year, we isolated it down to about five movements inside our hanger and two or three movements outside the facility, and we were able to create workstations that are more efficient. We were able to reduce the size of the footprint in the hanger so we could do the same amount of work in less space and sell extra space to other customers” (1).

One major external economic disadvantage that all three corporations have in common is aging aircraft. Typically, the Boeing 727-200 is a thirty to forty year old aircraft that was far advanced when it first was built in the 1960's. Today, they are considered inefficient due to fuel consumption and the parts are obsolete. Although the article written by Roberto Suro is geared towards military aviation and repair, the parts shortages also extend to the commercial aviation maintenance and repair industry. Suro states:

Aviators in all the armed services increasingly face similar problems and are obligated to cancel or delay missions at an alarming rate, according to senior military officials. The trouble lies in shortage - both of spare parts and of skilled mechanics-that developed during a decade long reduction in military forces following the end of the Cold War. (1, 2)

From my experience, it becomes increasingly difficult to procure parts the longer the aircraft is in service. Service bulletins for specific parts get handed down over the years to improve safety and reliability. After time, parts get modified to the point where they are not economically feasible for the airline or the repair center. Michael Zubovic states:

Aging aircraft is causing a financial hardship for airlines and they are now in the process of purchasing more fuel efficient airplanes. With the trend of purchasing newer aircraft, repair centers will not receive as many heavy checks as in the past. Airlines now can elect in five year cycles of sectional repairs. The customer can direct maintenance personnel to inspect certain items on a task card. If a mechanic finds anything extra broken, he is required to document his findings and report this to the airline representative. If the airline representative determines that the finding does not hinder airworthiness, then it goes on a task card for the next scheduled visit.

This causes repair centers to be more creative in attracting customers or schedule the new checks in bulk to fill out the hanger spaces.

Goodrich Aviation Technical Services, PEMCO Aviation Group, Inc., and Singapore Technologies Aerospace are classified as an oligopolist because the industry they are in has just a few sellers. Slavin explains, “An oligopoly is an industry with just a few sellers. How few? So few that at least one firm is large enough to influence price” (255). None of these companies is large enough to influence price. The price that is set in this industry depends on market demand and outside influences such as fuel prices.

The economic advantages and disadvantages for each of the three corporations are remarkably similar. Of the three companies that I have mentioned, the one that will be the most successful in the long run will be the company that can be the most productive with the new passenger to freighter conversion project. Although each company has independent writers proclaiming that their company is the largest repair center in the world, the difference may very well lie in the actual physical size of the company, or the size of their customer base which is generally not disclosed to the public.

For motivation and inspiration with writing tips check out  Liane Schmidt

Also see 10 Ways for Restaurant Owners to Expand Their Customer Base http://www.bizcovering.com/Business/10-Ways-for-Restaurant-Owners-to-Expand-Their-Customer-Base.192199 by Lauren Axelrod

Deception Pass Sunset http://www.quazen.com/Arts/Visual-Arts/Deception-Pass-Sunset.326355

See my History, Policies and Our School Lunch Program http://www.healthmad.com/Nutrition/History-Policies-and-Our-School-Lunch-Program.309255