AAR lands another maintenance customer at base: Work for ATA Airlines raises questions about future of carrier's own maintenance hangar as fleet shrinks

July 18, 2005

ATA Airlines Inc. has tapped aircraft repair firm AAR Corp. to refurbish up to 14 older Boeing 737s joining its fleet rather than using its own maintenance operation barely a mile away.

The Indianapolis-based airline also is considering a plan to abandon its maintenance facility for a smaller location at Indianapolis International Airport, according to a source involved in the leasing discussions.

The bankrupt carrier indicated in a court hearing last week that it would not reject its current maintenance hangar lease. But ATA has been talking with airport officials about the possible move to accommodate a prospective new tenant that is interested in its giant repair hangar.

"The parties may negotiate a new agreement that might involve movement of the ATA maintenance operations to another building," said the source.

The developments are likely to raise new concerns of job cuts among ATA's local mechanics as the airline attempts to emerge smaller but profitable through Chapter 11 bankruptcy reorganization.

The Aircraft Mechanics Fraternal Association warned last October that ATA might be forging a deal with AAR or other non-union maintenance providers. Just before ATA's Oct. 26 bankruptcy filing, the airline had 400 mechanics at its Indianapolis base. Current numbers were not available.

"AMFA has a reason to be concerned about remaining competitive," said Michael Boyd, president of the Evergreen, Colo., aviation consulting firm Boyd Group.

Chicago-based AAR, which last year moved into 10 of 12 bays in the former United Airlines base at Indianapolis International, quietly announced the ATA contract at the Paris Air Show last month.

AAR said it will reconfigure up to 14 Boeing 737-300s and 737-500s ATA is acquiring to replace its larger and expensive-to-lease Boeing 737-800s.

The stubby, older 737s will be repainted in ATA livery at a different location. But everything from structural inspections to cabin renovation to new seat installation will be performed by AAR in Indianapolis.

"The first of those airplanes should be arriving here for work probably within a week," said Fred Kocher, general manager of AAR's Indianapolis operation.

The facility now employs about 300 people, who primarily maintain United Airlines 737s.

"We will add a few people [for the ATA contract]. We will also be redeploying people as they become available," added Kocher.

AAR said ATA "will manage future maintenance requirements" of the 737s, once the reconfiguration work is finished over the next six to 12 months.

Airline expert Boyd said tapping an outside firm for configuration work isn't unusual.

"That's peak-demand maintenance. To have your own [ATA] people do it, possibly on an overtime basis, may not be as cost-effective," he said.

At the same time, AAR has vowed to aggressively pursue more airline customers. In return for a $12 million incentive package, it pledged to city and state officials that it would employ at least 800 people in Indianapolis by 2010.

"We're aggressive in the market. We're out selling," Kocher said.

That's what worries Indianapolis ATA mechanics, who earn about $27 an hour. That compares to about $20 an hour for AAR mechanics.

AMFA Regional Director Jim Young charged last fall that "the writing is on the wall" with AAR's new presence in Indianapolis. AMFA and ATA have been at an impasse over a new labor pact.

Union officials did not return phone calls.

Airport officials declined to discuss the ATA situation or identify the prospective new tenant, saying it could hamper negotiations.

The other principal repair operations at the airport, besides AAR and ATA, are two bays in the former United base recently occupied by Indianapolis-based Republic Airways, and the 131,000-square-foot FedEx aircraft repair hangar built originally for US Airways.

FedEx operates its second-largest U.S. hub in Indianapolis and has been rapidly expanding the operation over the last decade. The larger, 198,000-square-foot ATA hangar might better suit its needs. But FedEx spokeswoman Paula Bosler said she was not aware of discussions to obtain more repair capacity in Indianapolis.
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