Increased Hiring, Wages Pressure U.S. MRO Costs United Airlines

Increased Hiring, Wages Pressure U.S. MRO Costs

Rising labor-associated costs challenges airline maintenance divisions.

Maintenance cost per flight hour edged up in 2016 for most U. S. airlines. As a group, the three network airlines, American, Delta and United, paid $1,032 per flight hour for their mixed fleets, up 1.7% from 2015. American and United paid the most, $1,175 and $1,000 per flight hour, respectively. Delta paid the least, $905 per flight hour, and actually nicked 0.8% off its prior-year rate.

The three biggest low-cost carriers, Southwest, Jetblue and Frontier, paid $708 as a group to maintain their less-expensive narrowbody fleets. That was 1.5% higher than in 2016. Southwest incurred $720 in flight-hour MRO costs, up 2.2% from 2015, and Jetblue $850, a stiffer 5.6% jump.

For the entire U.S. fleet, including Alaska, Hawaiian, Spirit and Allegiant, MRO cost per flight hour were $700, virtually the same as in 2016. This relative stability likely reflects a shift in the overall fleet mix toward LCCs and younger aircraft.

But individual airlines remain under pressure to control their maintenance costs, and one major reason is the need to hire more techs at higher wages for a growing airline business. The Labor Department estimates that U.S. avionics technicians rose only slightly, from 17,150 in 2015 to 17,330 in 2016. Yet their average annual wages, excluding benefits, increased from $58,460 to $61,390, or 5%, in one year. For aircraft mechanics, the headcount rose more strongly, from 116,830 in 2015 to 128,570 in 2016, more than 10%. And that big increase was only achieved by increasing average wages from $58,850 to $61,190, or 4%.

At a time when most U.S. blue-collar wages have been stagnant or growing only slowly, these one-year rises are striking. And the latest data from the Labor Department suggests that wage pressures are continuing. The Producer Price Index for aircraft parts rose only 0.4% from May 2016 to May 2017, and PPI engine part prices increased only 0.2% over the same period. Yet the PPI for aircraft repairs per transaction increased 2.7% in these 12 months. That would imply employee compensation rates rose another 4-6% in the year to May 2017.

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