Time running out for TEAM Aer Lingus

An illogical decision by a narrow majority of dissatisfied workers has seriously threatened the continued existence of TEAM Aer Lingus. Their failure to accept a more than generous cash offer from the Aer Lingus Group, in return for their "letters of guarantee", spells the demise of TEAM as a much respected international aircraft maintenance contractor.

Acceptance would have cleared the way for completion of a £26 million takeover by FLS Aerospace, a deal that would have guaranteed TEAM Aer Lingus's survival and prevented possible job losses.

If the impasse is not broken, the only possible future for TEAM is that of parochial maintainer for the Aer Lingus fleet, an undertaking that would require considerable financial support from the Government and Aer Lingus.

Such a scenario would not endear the Aer Lingus Group to the European Union and it would bring cries of foul from those stand-alone European aircraft maintainers who survive by their own skills and efforts.

An even more unpalatable move would be that of closing down TEAM. This would allow Aer Lingus to follow the current airline trend of contracting out its aircraft maintenance to the most competitive bidder.

This is an option that the airline will consider very carefully.

The last decade has seen unprecedented changes within the aircraft maintenance industry: the traditional third-party contractor and smaller airline-owned inhouse engineering division, once the acknowledged backbone of the industry, are being driven to the verge of extinction by a new breed of highly efficient mega-maintainers.

Through economy of scale, they are able to offer airline customers attractively priced contracts, quick turnaround times and product knowledge that smaller rivals cannot match.

These developments have been further compounded by the entrance, and proposed entrance, into the maintenance arena of major original equipment manufacturers such as Rolls-Royce, General Electric, Pratt and Whitney, Boeing and Airbus Industrie, which claim marginal profits on engine and airframe sales have forced them to take this action, destabilising the established maintenance, repair and overhaul industry.

The message to small and medium-sized maintenance companies by the mid-1990s was loud and clear: expand by acquisition, establish joint ventures with compatible partners or die.

Companies of similar size to TEAM who acted on this advice were Braathens Technical, the maintenance arm of the privately-owned Norwegian airline, Lufthansa Technik and FLS Aerospace.

Braathens, which specialises in the maintenance of B737 aircraft, realised that to survive it needed a partner. Negotiations with KLM Royal Dutch Airlines resulted in it taking a 30 per cent interest in the Norwegian company.

Because of this liaison, Braathens Technical has been able to contract business from KLM and its alliance partners Kenya Airways and Air UK, global enterprise being their key to survival.

German maintainer Lufthansa Technik also recognised the threat and to combat it embarked upon a programme of rejuvenation and acquisition.

In particular it targeted the Irish aerospace industry with the takeover of Aer Lingus subsidiary Airmotive Dublin and, with partner SR Technics of Switzerland, increased its maintenance capabilities with the buy-out of Shannon Aerospace.

FLS Aerospace, which suffered heavy financial debilitation in the early years of the decade, grabbed the bull by the horns and reorganised itself as a prime maintenance organisation in order to compete on a worldwide scale.

Firmly believing in organic growth and the takeover of companies such as TEAM Aer Lingus, FLS Aerospace has now proved itself equal to, if not better than, any other maintenance contractor in Europe when it comes to securing new business.

In 1997 it signed a record number of new contracts worth more than $300 million, twice the figure for 1996. In 1998 expansion has continued unabated with the acquisition of the Copenhagen facility of US maintainer PEMCO. In the UK new maintenance deals have been struck with British Airways, TransAer, Air Europa and AB Airlines. So why did TEAM Aer Lingus not pursue an expansionist policy when all signs indicated that it should do so? The reasons are many and varied, but at its most basic the need to comply with Bernie Cahill's five-year rescue plan almost certainly blinkered the company to the importance of outside issues.

TEAM Aer Lingus workers should view with the utmost seriousness the fact that FLS Aerospace has "suspended" its take over talks and note that the Minister for Public Enterprise, Ms O'Rourke, is now off the fence and has told TEAM trade unions that "jobs for life" are a thing of the past.

Blame for the current fiasco must lie to some extent with Aer Lingus and the Government. By allowing trade union activists to dominate TEAM in the early years of the decade, and by agreeing to issue so-called letters of comfort, shopfloor workers were handed an almost unbeatable negotiating stance.

Now Aer Lingus must show its mettle. Time is fast running out, and if TEAM is to remain a potent force in aircraft maintenance a salvaging act must be successfully concluded within a very short period.

Steffen Harporth, FLS Aerospace's chief executive officer, told The Irish Times on Friday that the company "had not expected the offer to be rejected and had no contingency plans to fall back on".

"But the decision will not affect our growth plans. We are still interested in acquiring TEAM Aer Lingus, but the world changes. It must not be forgotten that we are looking at other expansionist projects in continental Europe and the United States."

The ball is now firmly back in the Aer Lingus court and it must act immediately to ensure the takeover process with FLS Aerospace gets firmly back on track. TEAM Aer Lingus can no longer afford to wait for another white knight to gallop over the horizon.

Doug Birch is a freelance journalist based in Wales and specialising in the aircraft industry