Delta Air Lines' maintenance business Delta TechOps is focusing on building its Airbus capabilities through the merger with Northwest Airlines and creating new international partnerships as it sets about continuing the strong growth that it has achieved in recent years.
The unit pushed operating revenues up to $547 million in 2008, and president Tony Charaf is forecasting more modest but still strong growth towards his aim of building a $1 billion business.
Interviewed at the MRO Americas convention in Dallas, Charaf said: "Although 30% of CAGR (compound annual growth growth) based on where the economy is may not be achievable, we think 10-12% is achievable. One of the reasons we feel that strongly is that our five year book of business is continuing to grow - it's now $2 billion."
Charaf makes clear that integrating the Northwest operation is the number one priority, but he adds: "The second thing is global alliances. We are working diligently to establish these outside the US in south and central America, the Middle East and Asia. Our preference is to do business with Skyteam but it will not limit us. In the Middle East especially it is likely to be [an] independent [partner].
The company has an existing relationship with Aeromexico but Charaf indicates that he is looking to add to that in Latin America, and he has previously talked of being "engaged" in China where Skyteam member China Southern holds the majority of major maintenance business GAMECO, but he declines to discuss candidate partners.
As guidance, he comments: "We prefer to do business with companies that could provide a reciprocal business process. That has proven to be very successful with Aeromexico around the CFM56 and JT8D-200 engines. They get a fair deal from us on the CFM56 and we do on the JT8. Our intention around the world is to continue to look at those opportunities."
Meanwhile the Northwest deal provides a huge opportunity to add a complete Airbus capability to Delta TechOps' current Boeing-oriented operation.
Charaf lists the three key merger issues as being first, the attainment of the Delta/Northwest single operator's certificate planned for the end of the year; second, integrating the companies' IT systems; and third "to continue to work very hard to assimilate the cultures cultures, so there is quite a lot of training and mentoring and coaching to do that".
The Northwest workforce's agreement to de-unionise, like the Delta staff, is enabling Delta TechOps to move quickly to create an integrated offering because of the flexibility in working practices that is available - for example being able to move technicians "in a very agile way" between the CFM56 and PW2000 lines to match demand.
Charaf says: "We are already marketing the Airbus capability to prospective customers. Our offering is much more complete than ever before. Northwest is very good at the A319, A320 and A330 and the technicians will bring skills and competences that are second to none.
"The fact that we have inherited a non-union workforce is great. It will be seamless completely. You will not know the difference. And we will turn Northwest onto Boeing.
"If we have an existing Boeing customer then for us to handle Airbus is a no-brainer. For people we have no relationship with it is more challenging."
Asked whether existing customers will buy into a Delta promise that its Northwest/Airbus offering will be comparable, he insists: "Actually the hardest selling point is selling a new product line that we don't have the experience on. But Northwest is an easier sell."
Charaf notes that the two airlines are already "supporting the cross-fleeting strategy by using each others' metal" and adds: "Because of the combination of the two airlines we are doing a lot of make/buy analysis on components and landing gear and there are a lot of synergies that we can take full advantage of."
Meanwhile Delta TechOps is focusing on honing its existing business, like other MRO companies taking advantage of the current dip in activity. Charaf explains: "While the economy is down we are working this time to really focus on what is core to us - IT, continuous improvement, and absolutely delighting our customers.
"For example we have always been very committed and focused on continuous improvement - six sigma and then lean - and now we are setting about absolutely dramatic change - reducing time in shops, and I am not talking small numbers but about something like 50%.
"I think we will get there no later than the end of 2009, early 2010. Starting in engine maintenance and going onto everything. Our people are so connected to the strategy it is unbelievable. People ask more and more about customers and who is coming in.
"We have been so transparent in our leadership process and we share everything, and our communications are second to none, and [our people] have access to us at any time."
Source: Air Transport Intelligence news
