Wednesday, July 25, 2007

Outsourcing aircraft maintenance-"In the long run we are all dead"

During the first three years of the Bush administration American workers lost 2.2 million jobs.

In a remarkable display of political tone deafness Gregory Mankiw, Chairman of the President's Council of Economic Advisers at the time, praised the outsourcing of American jobs stating: “I think outsourcing is a growing phenomenon, but it's something that we should realize is probably a plus for the economy in the long run"

Since Makiw's remarks disenchantment with outsourcing has grown beyond job loss to include consumer concerns with lead-laced toy trains, poisoned toothpaste and pet food, contaminated fish and counterfeit drugs.

Now add to your list of fears the outsourcing of commercial jetliners maintenance.

That's right- we are outsourcing air traffic safety!

Business Week reports that commercial jetliners are routinely repaired in 698 maintenance shops around the world that hire unskilled and untrained employees.

The Transportation Dept. estimates U.S. airlines spent 64% of their maintenance budgets, or some $3.7 billion, at outsourced facilities last year, up from only 37% in 1996.

Yet, the Federal Aviation Administration (FAA) has neither the funds nor the staff to oversee these far flung international operations.

Even more disturbing, there are literally hundreds of unlicensed maintenance subcontractors that operate completely below FAA radar. Licensed outsourcers turn to these shops to save money, according to recent congressional testimony by Calvin L. Scovel III, the Inspector General (IG) for the Transportation Dept.

The IG testified that uncertified foreign repair stations repair critical components, such as landing gear and perform complete engine overhauls. The FAA admits that it doesn't even know the extent of the maintenance performed at these uncertified and unregulated repair facilities.

Free market zealots, if they are consistent, would argue that we should rely on market mechanisms, not the heavy hand of government regulation, to weed out incompetent maintenance firms. In plane language (excuse the pun), improperly maintained planes will crash sending market signals to commercial airline companies and passengers alike to avoid rouge maintenance companies or airlines that source to them. This gives new meaning to John Maynard Keynes prescient rebuttal to laizze faire economics that "Long run is a misleading guide to current affairs. In the long run we are all dead."

Perhaps we should ask Dr. Mankiw, now a Harvard professor, whether he thinks outsourcing commercial aircraft maintenance to rouge, low cost facilities is a "plus?" And whether he's willing to risk his own personal safety as the market responds " in the long run" to short run airplane crashes?


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