Team wins contracts worth up to £5m

TEAM Aer Lingus has won new contracts worth $8 million (£5 million) and is in negotiations for a contract worth $5 million. However, the aircraft maintenance company has warned that the situation remains difficult and its return to profitability is one year behind target.

TEAM chief executive, Mr Donnacha Hurley, said yesterday that the company had recently clinched contracts worth $5 million to service aircraft belonging to US, Spanish and Ukranian companies. In addition, it has secured five maintenance contracts from other major European and US firms which will be worth a further $3 million.

The company is also courting Tower Air for further contracts which would net an extra $5 million. The contracts, which were announced at the Farnborough Airshow yesterday, mean that TEAM's order book is now full for 1996 and a significant volume of business has been signed for the first quarter of next year.

Mr Hurley said the deals mean that TEAM, which is labouring under heavy losses, can now plan its operations in a far more cost efficient way, in order to try to meet its targets.

"Until now, TEAM has been in a stop start situation," he said. "These contracts will help us plan for better efficiencies, such as getting better prices by ordering materials in advance."

Mr Hurley said the contracts had been won against stiff opposition in an industry which was still massively oversupplied.

Capacity in the aviation maintenance market continues to run at about 30 per cent with commercial airline fleet growth running about 4 per cent.

He said the company still needed to make major advances to secure its long term viability. "In line with our five year plan, we are still forecasting a return to viability by 1999, but the continuing depressed rates in the market and slower than planned progress in some areas of the business may mean a change in the pace, and shape of that recovery.

Mr Hurley declined to forecast losses for 1996. However, last year the company lost £5 million, down from £17 million in 1994. Losses this year are expected to run at similar or slightly below the £5 million figure.

In general, TEAM needs to secure $80 million worth of maintenance contracts each year. It faces intense competition, especially from the Far East, but also from the US, where overheads are significantly lower than in Europe.

Mr Hurley said over capacity would remain a feature of the industry.

It is understood that the company faced several setbacks earlier this year, including industrial relations problems and contracts which turned out not to be profitable. It is understood that TEAM had an overrun of £1 million on a maintenance contract for the first of a series of jumbo jets for Saudia, the Saudi Arabian state airline.

The company had targeted 1998 as the year when it would achieve bottom line profits - achieving both trading profits and eliminating financing costs. It now believes that it will only achieve this in 1999, coinciding with the end of its five year plan.

Under a plan drawn up by the Labour Court in 1994, TEAM employees agreed to a two year pay freeze which would have expired this year.

However, following further difficulties last autumn, the company was given the flexibility to plead inability to pay wage increases until 1998, if necessary savings under an £8 million cost cutting plan were not achieved in other areas.

The company has said it cannot pay the increases and the matter has been referred to the Labour Relations Commission which will hear submissions on the matter within the next two weeks.

Industrial peace is crucial to TEAM which suffered a damaging strike in 1994. During that dispute, it lost a £14 million contract with Virgin Atlantic.

The contract is now in the hands of British Airways, but TEAM intends to bid for it again, when it comes up for renewal.

Among the contracts announced yesterday are two major overhaul contracts for Spanair, a Spanish airline charter company, and a components support contract for Air Ukraine's Boeing 737 fleet.

Mr Hurley paid tribute to the 1,580 strong TEAM workforce which he said deserved great credit in helping to win the contracts. He added that there had been a major improvement in attendance which had seen the level of absenteeism fall from 13 per cent to 5 per cent in little over a year.

He said there was still plenty of room for improvement in how TEAM runs its business, including the processes it uses. He revealed that TEAM is introducing a new fully integrated information technology business system which will help the company achieve its goal of "world class status" through operating data and management information.