Inthemarket

Word from JHAS engineers as of yestreday,in a newsletter update to them, stating that JHAS has been selected to proceed to the next stage of the process for determining the A380 Line and Base Maint services provider for Qantas.

Romulus

Correct.

We're in there with a chance, Qantas have yet to actually outsource, we have merely made the shortlist.

blackhander

Hiring Romulus?

chockchucker

Don't pitch your tent quite yet Blackhander. As Romulus correctly points out, QF is yet to outsource on such a grand scale, and QF Engineering are by no means out of the hunt. Paricularly as far as Line Maintenance goes. The A380 payment has recently been agreed upon by the ALAEA and QF management. Included in the agreement are: A380 specific rostering,Training bond, EASA part 66 conversion payment, and a selection process and expression of interest guidelines (whatever that means?).


I don't think that QF would go to all that trouble if Engineering didn't have a good shot. Heavy Maintenance is another issue altogether but, my money would be on Qantas to end up handling Line Maintenance of both the A380 and the 787 in-house.


All those of you who think I'm sadly mistaken, I await your reasoning and insights that follow.

Romulus

I actually think you're correct, ACS are by far the strongest contender of the two of us and we'll have to make an exceptionally strong case to beat them.

But that's our job, if we don't win we'll push QF Eng as hard as we can.

Short_Circuit

QF has reached agreement with ALAEA over A380 payments etc because they do not intend to win the contract, my opinion, hope I am wrong.

The Mr Fixit

QF engineering NOT handling the A380

(Big Whistle)

Now thats a call, the guys in ACS would put a cap in somebody's @$$ if QF don't choose them.

and the deal would stink of nepotism

Inthemarket

Why would QF go to "all that trouble" negotiating with the ALAEA over the A380 only to consider outsourcing the maintenance of it???
One would think it would be more logical for QF management to use the outsourcing call as leverage in negotiations with the ALAEA.
I tend to agree with short circuit, that QF management have no intention of keeping the maintenance in house at QF!

domo

qantas engineering is worth x dollars, if they give the a380 away it reduces what it is worth I dont see that happining, I think john holland is there to push qantas engineering people to easy back on conditions to win this important contract

qantas flag ship maintained by ansett

Sunfish

(Rant Mode On)

I'll say it again. Outsourcing is only a business option when you have a multiplicity of suppliers to choose from. If there are just two or three then getting tenders is like dancing with your sister - there is nothing sexy going on.

On the other hand, photocopiers, air conditioners and other stuff where there is large, competitive free market then go right ahead and outsource because under these circumstances it makes good business sense.

Look at Linfox and the other big logistics players. They go to the tyre companies and say "You have 24 hour access to our depots, you supply, fit, repair tyres to the following operational rules and you quote us a fixed cost per kilometer per wheel billed monthly. They do the same with maintenance and even the supply of vehicles themselves. They can do this because there are any number of people with the necessary resources who can supply tyres and fix trucks.

Now ask your self what people and resources are available to maintain aircraft? What is that market like? Are there literally tens of thousands of players eagerly waiting to overhaul your 787 or 380? Nope. Can you simply call any number of firms when you need an engine module change at 2.00AM, just like you can call a plumber? Nope.

But the real issue is not the actual cost of the spanner wielder. When you simply look at that your own employees are going to look more expensive, because you are paying for the 30% or more "dead" (unproductive in a strict time and motion sense) time, that any time and motion consultant will demonstrate. In outsourcing you are paying for productive time only.

Or so you think, and thus outsourcing now looks 20% cheaper to you.

Then of course there is the capital cost of the necessary servicing equipment and spares - which in my day was estimated at at least 10% of the fleet cost. With outsourcing you don't have to pay for that either.

My, doesn't outsourcing look attractive now? We put in place guaranteed service levels with penalty clauses for non compliance and in turn accept that "variations" (such as AD's) to the work in excess of what we have contracted for will be paid at higher labor rates. Thats only fair. Sure, there are unresolved issues about how we are going to re-tender the work five years from now, but by that time I will have departed, clutching nice big bonuses from the last five years.

Still looks rosy don't it?

But it really isn't.

The first fly in the ointment is the little matter of transaction costs. The legal negotiation of the legal agreements surrounding such a deal are not cheap, and they are going to absorb an inordinate amount of corporate management time as well.

Then there are transition arrangements. That costs heaps of money as well. For example, who is going to own the servicing infrastructure? Qantas? The outsourcer? Who pays for its maintenance and repair? What happens to the equipment if you change suppliers? Who pays for training and insurance? Who pays for spares? Who owns the spares? Who leases what to whom and where? Yet more legal agreements to be negotiated.

Even if you get the complete turnkey solution, you are paying for the transaction costs in setting up the complete deal even if the it is all included in the simple "hourly rate".

And don't forget the little matter of the outsourcers profit as well.

But the really big festering blowfly in the ointment is that a good outsourcer will do their level best to get complete and total control of your technical agenda. I've done it, McDonnell Douglas tried to do it with the F18 (as Beazley correctly alluded to in Parliament on his retirement, but I'm not going into details).

By "getting control of your technical agenda", I mean actively doing your best to ensure there is no one left in your customers organisation that is capable of arguing with what you say about technical matters. You do this by hiring over their best staff and encouraging your customer to fire the rest.

We did exactly that to a big organisation when we took over its IT Department. The deal was the brainchild of the head bean counter (or so he thought ). Not long after we took over, we had one or two complaints, so we went to said Bean Counter and explained that his wonderful deal was being "sabotaged" by certain malcontents. It didn't take much character assassination on our part to have them fired, and it became standard practice as we took over their subsidiaries IT Departments for us to trawl through their staff and maybe hire one or two and then the rest got fired. After all, for the Bean Counter to receive his annual bonus (many $100,000's) the deal had to be seen as a success.

It's an old trick, if someone complains about your performance, make the complainers go away! Thats what will happen in Qantas if they ever identify who took photos of those high tech staple repairs.

That way there was nobody in our customers organisation that could talk knowledgeably about our service levels or the expense of the technical solutions and technology strategies we proposed - they were all accepted, at great cost (and profit to us) by the organisation. We even took on the onerous task of providing the required Board level reports on our performance! Guess what they always said?


So at about three and a half years into a Five year contract, the Board of our Customer woke up one day and started to think about contract renewal - and discovered they had nobody left in their organisation to advise them. We had sucked all the IT technical competence out of their company.

Furthermore, they could see their IT costs going up instead of coming down and we had also made a myriad of small technical decisions that had locked them into dealing with us (for example locking them into Digital Equipment Company VAX computers and refusing to use Unix and IBM PC's).

They then spent millions on consultants to look at themselves, and us, and our relationship. It was finally deemed to be unhealthy, because they simply didn't know what they didn't know anymore, we had seen to that.

So they hired a Chief Information officer to rebuild their IT competence. We had her fired in Six months. They tried again, and this time they realised their plight. IT was central to their business strategy, but it was out of their control. We kept it that way till the end of the contract then negotiated a "surrender" deal and allowed them to slowly get back control over their IT systems and equipment, gracefully making more money for us, then we sold the business to a bigger fish and moved on.

So thats whats in store for you Qantas if you outsource maintenance and overhaul. It's all "flowers and chocolates" at the start, but five years on you will be in the "Divorce Court" with mounting maintenance and overhaul costs, depressed performance and service levels and now where to go but bring most of it in house again.

To put it in simple terms, the transaction costs and increased risk will outweigh the savings very quickly unless there is a vibrant and highly competitive free market for what you want to outsource.

Good luck with that.

(Rant Mode off)

rudderless1

With that rant Sunfish, not the first time you have mentioned it on PPRUNE. I am not sure whether to castigate you for being a typical beancounting, self serving, manipulating ars.hole or whether to congratulate you for being honest.
A fine example of truly typical leadership situation these days where nothing is about good management but all about self serving manipulation at the expense of companies and their employees and in the long term Australia and its society.
Sunfish, I hope your ethics have improved somewhat since. Sadly this style of white collar crime is admired rather than admonished. To many see this selfish greedy and destructive practice as acceptable.
David Cox, the man responsible for engineering and its destruction along with others sees himself worth every cent of his 27% payrise to $1.89mil plus 250 000 Qf shares. At equating to a 38hr week thats around $5000/hr base pay add the bonus for stuffing engineering brings it upto around $11000/hr.
To give 1500 engineers 3% is painful to him
Is engineering growing and thriving,strong and robust. What has he done to deserve this? His staff are performing he is not.
The A380 tender project is another act of terrorism against its own employees.
Peter Gregg who sits on both Qf and John Hollands boards, the two contenders for the A380 maintenance, is this just when tendering for the same project?

The Mr Fixit

Two villains of the same ilk no doubt

Gregg if indeed sitting on both boards definitely has a conflict of interests perhaps this should be made public, I wonder if Purple P has the balls.

But can I add Rudd,

COX GOT A 48% PAYRISE FROM 1.2 MILLION TO 1.9 MILLION

IN ALL HONESTLY IT'S AN ABSOLUTE DISGRACE when he contends his staff are GREEDY for requesting 5%

Jabawocky

YOU ARE F kidding me!

Is this the same wally who was stuttering all over the TV about High Quality Stapling of EEL's???????

Maybe (a long shot) GD is entitled to such pay (yes hold back on that)......but not the head spanner man.

What a joke!

J

Launch_code_Harry

Have you ever heard of the Stockholm Syndrome? I guess modern management speak would call it "managing expectations".

1746

May there is only one other contender at the moment but the following was noticed in Flight Inernational......
Macquarie to buy Goodrich's airframe maintenance business
By Nicholas Ionides
Australia’s Macquarie Bank has agreed to buy US company Goodrich’s airframe heavy maintenance business.
Goodrich says in a statement that it has entered into a definitive agreement to sell the business, Goodrich Aviation Technical Services, to Macquarie.
Financial terms of the deal are not being disclosed. Goodrich says it expects the sale to close in the fourth quarter of this year.
Goodrich says Aviation Technical Services has more than 1,200 employees at a 950,000ft facility in Everett, Washington.
Services include airframe heavy maintenance, aircraft modifications and painting, passenger-to-freighter conversions, engineering and certification, and component repair and overhaul.

Bolty McBolt

Romulus said..
Romulus
You are welcome to the A380. DC and MH have both been trashing their staff to the point where many in base ACS are over their threats and no longer interested in their new machine and have no interest "the light house new way of doing business".
I would suggest you are only still in the tender process to keep the cost down as someone else sugested PG is a member of both boards. I am sure it would not have taken much more than a phone call, and whadya know JHAS is back in the game.
I hope ACS call your bluff make the price so high you get the contract.
You can then compete for the remaining engineers with Jet * Int to fill your hangar.
I see your company little more than a pawn to earn someone a bonus
Would you still take the A380 contract if it effected your ability to look after Tiger?

Romulus

Excellent work.

Now, you've identified the problems with outsourcing if it's done poorly, what are the current practices in the field to ensure exactly this doesn't happen?

And believe me, we've covered all the problems you identify, they're the usual ones people who want to resist any change outline. I'll be interested to see if you got beyond the "let's rip teh client off' stage.

Plus I'd be interested to know if you worked for Andersen Consulting or EDS....

Romulus

Thanks, can you get me a contract on teh terms we have proposed?

Can't comment on DC and I have no idea who MH is, nor do I know what "the lighthouse new way" of doing things is.

But I do know one thing - I'll never trash our staff, barring some major turnaround from their current attitude they're way ahead of the QF team on the flexibility curve.

Possibly, but if you're going to believe that then the bigger threat would be SIAEC given their access to the type and all.....

Which raises the interesting point of why you aren't happy that the only competitor is Australian instead of an OS company.

And even if you're right then sooner or later they have to give us something to keep us in the game, a threat is only useful if there's the belief it will be exercised.


He is and we have never met with him to my knowledge. He is certainly aware of our existence, beyond that we don't exactly have a direct line to the boardroom of a multibillion dollar company.

And if I did do you think we'd be talking about a small fleet of aircraft?

Well may you be sure of that, equally I'm sure the effort the team put in to put a really new way of doing business together means we're there to provide options.


So do I!

Interesting questions come out of that line of thinking.

I like being a pawn, nobody really bothers you until you reach the other end of the board and all of a sudden you're the most powerful piece on the board. We just have to make sure we get there.

Judging from your reaction we have a few people worried already.

Good.

No.

But it won't. We've already declined several options to bid for work that would put us in that situation.

Have a nice day.

No SAR No Details

Romulus,
Would you still treat your employees like endentured slave labour if you won the 380 contract?

primethius

The question begs...Why would any sane Aircraft passenger service provider use the most expensive ground handler on the planet as their service of choice???
The 380 must logically be up for grabs despite the courses and the agreed payments.
I'm sure the newly trained will jump ship at the right price.
This maybe the beginning of the end of the QF line maintenance monopoly.
No doubt the New ALAEA saw this coming, we hope???