Thursday, May 01, 2008

Outsourcing Airplane Maintenance to El Salvador and Personal Household Outsourcing


San Luis Talpa, El Salvador/LA TIMES BUSINESS--Southwest Airlines planned to begin flying planes to this small Central American nation this year -- but not with passengers aboard. The carrier wanted to outsource some of its maintenance to a Salvadoran repair shop called Aeroman (pictured above).

Aeroman already services jetliners operated by U.S. carriers JetBlue and America West. The airlines fly empty planes hundreds of miles from the United States to have them refurbished, repaired and inspected. It's like driving across town for a cheaper mechanic -- except that airlines can save millions of dollars over the life of their rides.

Industry experts say maintenance outsourcing will only increase as airlines grapple with post-9/11 security costs and sharply higher fuel prices. Already a $41-billion business, so-called MRO (for maintenance, repair and overhaul) outsourcing is expected to reach nearly $60 billion within a decade.

HT: Ben Cunningham

MP: Just in case you have any objections to this type of outsourcing, consider your own frequent personal outsourcing at the level of your own household. You probably outsource the cleaning of some of your clothes to a local dry cleaner, you often outsource the preparation and cooking of your food to a local restaurant, you outsource the upkeep and maintenance of your vehicle to a local car wash, oil change service, and repair shop, you might outsource the cleaning of your house and your lawn maintenance to an outside agency, you outsource the preparation of your taxes to a tax service, etc. etc.

In almost all of these examples, you could have performed those services internally within your own household (cleaned your own clothes, prepared your own food, changed your own oil, cleaned your own house or prepared your own taxes), but a personal cost-benefit analysis suggested that it was more cost-effective for you to outsource those tasks to someone outside your household, compared to performing those services yourself. In that sense, a household is just like a small business firm, which continually makes business decisions that involve comparing the cost of external vs. internal production. Just like a small or large firm, your household chooses the least expensive alternative, and outsources when it makes economic sense.

5 Comments:

At 5/01/2008 8:02 AM, Blogger randian said...

Don't forget that "least expensive" has dimensions other than money.

 
At 5/01/2008 9:50 AM, Anonymous Anonymous said...

By far, you presented the best case for outsourcing that I have ever read. I am not sure that make me feel better...

 
At 5/01/2008 11:36 AM, Blogger Dave Narby said...

As long as this cost is not offset by lawsuits due to catastrophic failures, I'm fine with it.

And this is said by someone who observed and reported jet fuel leaking from a faulty filling port (during flight) to a flight attendent, and was asked to "keep an eye on it for us".

I did, and dutifully also reported a patch that partially peeled off the plane's wing a while later.

I was told a while later they were probably going to ground the plane when we got down...

 
At 5/02/2008 8:49 AM, OpenID sethstorm said...

Now I know who to avoid at all cost. Thank you.

There is a large difference in going across town and going across countries. Going across town doesn't mean that the whole locality suffers. Going across to unstable/hostile countries

randian:
Don't forget that "least expensive" has dimensions other than money.
I definitely agree on that one.

 
At 5/02/2008 8:52 AM, OpenID sethstorm said...

Going across to unstable/hostile countries
Oops. Meant:
Going to unstable/hostile countries seems a bit absurd. At least there is some stability over here that is worth the extra cost.

 

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