Merger mania is gripping the airline industry, with high profile consolidations taking place in the U.S. and Europe over the past two years. In the U.S., United Airlines and Continental Airlines expect to operate under a single operating certificate (SOC) and the United name before year-end 2011. Southwest Airlines, which purchased AirTran Airways in May, aims for an SOC for the two companies by March 2012—under the Southwest brand.

European merger and acquisition activity continues to make headway, with the just-completed merger of LTU into Airberlin, and Lufthansa's equity stake in Swiss International Air Lines and Austrian Airlines among recent examples (see Sept. issue, pg. 11 for Iberia/BA.) In all cases, the road to mergers means merging maintenance—at least to some extent.

Meshing Maintenance

Jim Keenan, United's senior vice president, technical operations, points out that following the United/Continental merger announcement in May 2010, the two carriers established an integration management office that brought together the managers “of every discipline within both companies” for purposes of integration planning. United and Continental, he reports, “were substantially different” in terms of their capabilities specific to maintenance and engineering.

“For example, Continental had always maintained a deeper infrastructure to support line maintenance and airframe overhaul at Houston and Orlando. But United had a deeper experience-base, and a very large maintenance and engineering infrastructure for component and engine overhaul. By combining the best practices in those areas, we have the right people and infrastructure to optimize all aspects of engineering and maintenance.”

That maintenance infrastructure, Keenan adds, will be further strengthened through 40 line support stations for the merged company. Where overlaps in the network occur, operations will be combined following the SOC.

Planning calls for new hangar space by 2013 at United's Washington Dulles hub, and at Continental's hub at Newark-Liberty International Airport. Both will perform widebody aircraft maintenance checks. “We also expect to make significant investments at San Francisco, Chicago O'Hare and Denver, where we also have extensive maintenance activities,” Keenan says.

Along with new hangars, the airlines' information technology (IT) infrastructure for maintenance and engineering will be merged, but with the idea that the groundwork will be laid for a new, state-of-the-art system to be procured from the commercial market. That process, says Keenan, is being planned on a two-phase basis:.

Right now, United uses the AMIS (aircraft maintenance information system) platform and Continental uses SCEPTRE. “Under Phase One, which we expect to complete by 2013, all of the maintenance and engineering data will migrate to SCEPTRE. At the same time, we will be building in some of AMIS's capabilities, and balancing the way the IT resources from both systems will be integrated. We consider this to be the transitional phase, because under the second phase, we will identify the capabilities and attributes that will be required for a 21st century IT system. That should be completed within the next several years,” says Keenan.

Because the merged fleet will have a common image, it needs a harmonized fleet appearance—inside and out. “Since the day the merger closed last October, we began to paint airplanes from both companies in the new United livery,” says Keenan. “By the end of this year, about 70% of the mainline fleet will have been painted, with the remainder in 2012.” He adds that projects also are in progress to modify the aircraft interiors to create a single, onboard passenger experience, which includes using the same seating configurations, row and seat numbers, from one fleet to the other. As examples, in 2012, the Continental fleet will be retrofitted with an Economy Plus section, while United's 14 Boeing 767-300s will undergo interior modifications for international flying. Those interiors will be similar to those on Continental's international fleet.

While the maintenance and engineering staffing levels of the combined operation will remain the same, overall Keenan says that some reductions are likely to take place to eliminate redundancy in some staff and management functions. At the same time, the merged company is working to negotiate a joint collective bargaining agreement with the International Brotherhood of Teamsters, which represents technicians at both carriers.

Going forward, vendors will continue to be evaluated using standard methods, although as Keenan explains, some customization will be required in certain cases. He adds that maintenance in-sourcing and out-sourcing levels will generally remain the same.

For Southwest, absorbing AirTran means folding maintenance support for AirTran's 88 Boeing 717-200s into an infrastructure that has been exclusively 737-focused. Jim Sokol, Southwest's VP maintenance operations, reports that Southwest will operate the 717s for the foreseeable future—at least until they come off lease. “We will have to acquire the tooling, and expand technician training to provide the required level of support for the 717 throughout the entire combined airline network. This means developing a broader intermediate level program for 717 maintenance, which will include more mechanical type work, such as elective modifications and component changes dictated by time requirements,” he says.

In spite of the challenges of bringing 717 MRO into the Southwest fold, Sokol states that the two carriers' maintenance organizations are “a good fit,” because both are 737 operators. Southwest operates 550 Boeing 737s, a mix of the -700s, -300s and -500s; while AirTran flies 55 737-700s. In 2012, Southwest will began taking delivery of the first of 20 737-800s.

A major difference between the two airlines' maintenance organizations concerns heavy airframe inspections, which, unlike Southwest, are totally outsourced by AirTran. “We plan to perform more comprehensive, intermediate type checks on the 717 at AirTran's Atlanta facility, which now handles light, routine overnight (RON) maintenance,” he notes. “It will continue to have RON capability for the 737, but we want Atlanta to become a center of excellence for the 717, to include engineering and planning functions to support its maintenance requirements,” says Sokol.

While the merged airlines will continue to use AirTran's Orlando hangar for RON, the capability to perform 737 C checks there could be added in the future. Sokol stresses that there is no immediate need to do that.

With the addition of Atlanta and Orlando, Southwest's total maintenance network will expand from 16 to 23 locations, which includes seven AirTran facilities where overnight checks are performed. Southwest's 16 locations include four that perform major inspections.

Southwest, liked United, plans to blend all of the maintenance related IT into a single enterprise networking system, says Sokol. The airline uses its own, internally sourced and maintained Wizard system, while AirTran uses TRAX, developed by a Miami-based company of the same name.

Under a three-phase program, Southwest will transition all maintenance-related data from Wizard to what Sokol describes as the “more sophisticated” TRAX starting in the first quarter of 2012. The first phase will bring in the 737-800 while the second phase, scheduled for the third quarter of 2012, will fold in the 717 and the 737-700. The 737 Classics will be brought into TRAX by the third quarter of 2013.

“We want the combined carrier to achieve improved automation, better configuration control, better vendor score-carding, and keep on top of compliance issues,” says Sokol. “With engineering, we are shifting to a much larger operation/organization, which will mean increased responsiveness and technical substantiation capabilities. Although we will have a fleet of over 700 aircraft when we achieve the SOC, we will have an engineering and maintenance organization that will be capable of supporting a fleet of over 1,000 aircraft.”

He adds that upon award of the SOC, the combined fleet appearance will be dealt with. “As AirTran planes go in for work specific to the configuration of the new fleet, they will go out mirroring the Southwest brand. Using three vendors, this will be accomplished between mid-2012 and mid-2014,” says Sokol.

European Mergers

When Airberlin finalized its merger with LTU on April 1, the two German international airlines also completed the integration of their maintenance organizations—Airberlin Luftfahrttechnik Berli and Airberlin Luftfahrttechnik Dusseldorf, (formerly LTU Technik) into Airberlin Technik. The integration process actually commenced in 2008, one year after the Airberlin-LTU merger was announced in August 2007. The LTU operation included the Deutsch BA hangar in Munich, which came with Airberlin's purchase of that airline in 2006.

“The two companies had different areas of [MRO] focus,” says Tobias Hundhausen, VP business development for Airberlin Technik in Dusseldorf. “The LTU facility in Dusseldorf specialized in the Airbus A320 and the A330, as well as the Boeing MD-11, although they were no longer operating that aircraft at the time of the merger. The Airberlin facility at Berlin Tegel airport focused on the Boeing 737 and the A320. And, while LTU had a heavy investment in depot level airframe work, Airberlin concentrated on line maintenance,” says Hundhausen.

With the merger, a number of other capabilities have been added to Airberlin, such as C checks, notes Hundhausen, adding that the former Deutsch BA Munich hangar shares base maintenance with Dusseldorf.

“At Dusseldorf, we continue to provide Airbus A320 and A330 heavy maintenance, while in Munich, we have heavy inspection capability for the 737, with our current fleet consisting of the 737-700 and -800,” says Hundhausen. “Berlin continues to specialize in line work which is expected to grow, especially at the hangar we will be opening at the new Berlin Brandenburg International Airport in June 2012. That is when Berlin Tegel airport closes.”

The combined company also maintains 17 outstations, which mostly complete line level work.

The merger, he points out, has resulted in some important synergies and economies of scale. “We created a single maintenance schedule for the Airberlin and LTU A320s. We have also improved logistics, with joint sharing of spares and materials. We can extend the same training programs to all of the technicians from the (combined) companies,” he says.

It achieved synergies by combining the two carriers' IT systems, which were located at Berlin and Dusseldorf. LTU, Hundhausen explains, was using Prothema, which was developed in-house, while Airberlin used TRAX.

“By the fall of 2010, we had migrated all of the [two airlines' data] to TRAX,” he says. “Aligning the maintenance administrative processes was the greatest challenge but resulted in the greatest efficiencies. For instance, when the mechanics at the two airlines worked on aircraft, there were different processes of administering work orders. Now they use the same process,” says Hundhausen.

He stresses that the consolidation had to address corporate culture issues. “Both the Airberlin and LTU cultures were unique. Flexibility and entrepreneurship are strong points of the Airberlin culture. LTU's strength in the past was attention to detail and a very consensus-driven decision making process. It was a challenge to create a new cultural fit. You cannot pay enough attention to aligning corporate cultures.”