Air New Zealand to outsource maintenance of wide body aero engines

Air New Zealand will commence outsourcing heavy maintenance of its wide body aero-engines from next year.

Chief Executive Officer Rob Fyfe said today the company had made the decision after more than 18 months of exhaustive research and consultation with staff and union representatives. This will result in the loss in the New Year of around 110 of the 617 jobs affected by the proposal to outsource some of the work conducted at Air New Zealand Engineering Services (ANZES), the airline’s engineering division.

Around 13% of the 110 jobs are licensed aircraft engineers’ positions with the remainder being made up of non-licensed aircraft engineers, other trades, supervisory, planning, cleaning, administrative and clerical roles.

Air New Zealand already outsources maintenance for the engines of its narrow body jets and turboprop aircraft.

The final decision affecting the remaining 507 jobs (including around 95 licensed aircraft engineers’ positions), which are in wide body airframe, overhead and support functions across the division, will be made in February after further discussions with unions.

Mr Fyfe said that neither ANZES management nor unions representing staff was able to deliver a viable case for retaining the wide body aero engine business.

“The analysis has painted an extremely bleak picture.  Volumes in this business are low and falling.  There is no sign of sustainable third party work due to considerable excess international maintenance capacity and no joint venture partners could be identified,” he said.

“The closure of this unit is in no way a reflection of the ability of the staff.  They have demonstrated a high level of professionalism in their workmanship.”

The decision to outsource wide body aero engine maintenance is expected to deliver cost savings of $53 million over five years.

Mr Fyfe said that for five days last week senior members of the ANZES management team and union representatives met to discuss options for both aero engines and wide body airframe heavy maintenance.

“The unions accepted that significant change is necessary if wide body airframe maintenance is to be retained in-house.  It is clear through their counterproposal that they had put considerable effort into trying to understand the problems and come up with possible solutions, and while we have not agreed on everything they have come back to us with, we have been able to find some common ground.

“If the unions and their members are able to commit to extensive across-the-board labour reform in both ANZES Auckland and Christchurch operations, there may be an opportunity to retain some wide body airframe maintenance capacity in-house.”

Mr Fyfe said such reforms could include flexible shifts, time-off in lieu and fixed hour employee arrangements – suggestions which had already been made by the unions.

“We estimate we would need to make $48 million in cost savings over five years to make retaining wide body airframe maintenance in-house a viable option.”

ANZES management will work with union representatives over the next month to determine whether the required labour reform can be achieved before a final decision on wide body airframe outsourcing is made in February 2006.

Mr Fyfe said Air New Zealand had entered the consultation period with unions and staff with an open mind and today’s announcement was a clear reflection of that.

“We are keen to find a solution.  We would not have offered this time extension unless we felt there was a reasonable chance of success.  However, I must reiterate, that unless a revised wide body option produces comparable savings to outsourcing, then we will have no option but to close this part of the business.”

Meantime, Mr Fyfe said suggestions that outsourcing wide body engineering work offshore might compromise safety were grossly incorrect.

“For many years Air New Zealand has outsourced various component, engine and airframe maintenance work to organisations in Europe and Asia without safety issues being raised.  Recent questioning over the outsourcing proposal is nothing more than scaremongering.”