Selecting the best contract to keep critical engine maintenance humming
An airline wanted the best outsourced engine maintenance solution
An airline needed to understand its options for outsourced engine maintenance. The airline’s challenge was to leverage its position as a top tier operator with a large un-contracted engine fleet to attract a quality maintenance provider under favorable economic conditions. The airline wanted to evaluate alternative approaches of paying for maintenance by the flight hour and paying for time and materials per shop overhaul. Primary goals for a deal were: safe and reliable maintenance to support the airline’s high customer service standards and growing overwater operations; incorporate the past lessons learned; be fair and sustainable for both parties, flexible enough to withstand the test of time, and provide price protection for changing industry economics. The airline engaged SeaTec to lead the market strategy, fleet analysis and sourcing process that would result in a new maintenance agreement for the engines.
The SeaTec Solution
SeaTec’s consulting team had extensive expertise in airline operations, specifically engine maintenance for both FAR 121 and FAR 145 facilities. The team brought in-depth working knowledge of: airline maintenance, repair and overhaul (MRO); independent /OEM MRO facilities involved with the management of traditional maintenance agreements; as well as direct involvement in the management of risk transfer arrangements. SeaTec formed a cross-functional working team jointly with airline Finance, Legal, Procurement, and Engineering functions. Key airline personnel at the working and management levels were interviewed using structured interview techniques to understand airlines business plan, operational plan, the company and organizational culture, and the requirements for the new engine contract.
SeaTec prepared a unique life cycle model cost for the engine fleet under consideration. This model took into account airline-specific operating parameters as well as SeaTec experience with the engine maintenance details. The financial aspects of the model accommodated airline business plan requirements, including expected service life of the fleet and hurdle rates. Estimated costs were benchmarked, including likely future expenses to the airline if they continued to work engines with providers on a time and material basis. Modeling the life of the fleet provided essential insight into the maintenance periods, necessary lease return conditions, and most advantageous contract duration, plus impact on life limited parts residual life planning for fleet retirement.
Impact on the Customer’s Business
Using model results and detailed scoring of competitive supplier proposals the working team reduced the number of suppliers to a short list. With SeaTec’s help, the airline ran the remaining suppliers through clarifying questions and a Best and Final Offer process. The final selection was then made by the airline.
SeaTec’s value added was extensive knowledge of both technical and business aspects of engine maintenance, coupled with the ability to transfer this knowledge into a sophisticated evaluation model. SeaTec expertise and tools enabled the airline to quickly and accurately evaluate the competitive proposal received during this process. SeaTec’s approach helped ensure a fair and transparent competition for a very large engine maintenance contract.