Outsourcing and insourcing the friendly skies

The Washington Post‘s Sara Kehaulani Goo has a story on how the outsourcing phenomenon is affecting aircraft maintenance. Turns out to be a two-way street:

Northwest Airlines is gutting two hangars at Minneapolis-St. Paul International Airport because the standard work of overhauling the airline’s 747 fleet has moved to Asia. Air China, meanwhile, is sending its planes to San Francisco for high-tech engine work by United Airlines mechanics. U.S. carriers have outsourced thousands of maintenance jobs. At the same time, however, some airlines have stepped up their efforts to bring maintenance work into their shops. The major carriers are “insourcing” work from domestic low-cost carriers that don’t have their own maintenance crews and from airlines based in China, South Korea, Canada and elsewhere. The aircraft maintenance industry is “a classic manifestation of globalization,” said Martin N. Baily, senior fellow at the Institute for International Economics. “Labor-intensive, somewhat less technically sophisticated stuff goes overseas, but more high-tech, leading-edge stuff would remain in the U.S. Maybe the U.S. even has a comparative advantage.” Delta Air Lines’ insourcing includes repair work on engines for Atlantic Southeast Airlines and Comair at Delta’s hub in Atlanta. Its revenue from such work has increased, to $200 million last year from $40 million in 1999. American Airlines recently signed a contract that gives it the option to repair Rolls-Royce aircraft engines for other airlines. United does maintenance work for Air China, Korean Air, Air Canada and the U.S. military. “We make a high profit margin on engine overhauls and landing gear,” said Joseph Prisco, president of Local 9 of the Aircraft Mechanics Fraternal Association, the union representing mechanics at United Airlines. “Air China sends a lot of their engine overhaul work to us. The costs are probably more expensive per head, but we do a faster job and better job than they can get done in their own country.”

The article also highlights a genuinely worrisome regulatory gap, however: “For example, airline maintenance workers in other countries do not have to undergo mandatory drug and alcohol testing or criminal background checks as they do in the United States.” If I’m a terrorist wishing to strike fear into American travelers, this is an obvious loophole to exploit. To be fair, the Transportation Safety Administration is planning on promulgating regulations this month to deal with this loophole — I just hope they’re implemented soon. UPDATE: If you’re interested in the topic, be sure to check out the Discovery Channel’s “The Other Side of Outsourcing” this evening — it’s a documentary of Tom Friedman’s trip to Bangalore. 10:00 PM, ET.