Airworthiness: Coursework A

Shafik

By: Islam Ahmed

OPTION 1 - Development of a maintenance contract

Introduction:
Since all airlines outsource some or all maintenance activities to Maintenance
Organizations, civil aviation authorities require that a maintenance contract must
be written between the airline and the Maintenance organizations. The
maintenance contracts must also be acceptable to the regulators, therefor they
require that certain information must be stated in the maintenance contracts to be
acceptable. For example the European Aviation Safety Agency (EASA) Part-M
regulation states that a maintenance contract must include Scope of work,
Locations, Subcontracting, Maintenance programme, Quality monitoring,
competent authority involvement ... etc. (EASA Part-M, 2012)1. But usually the
regulation focuses only on technical matters that affect the Safety, serviceability
and airworthiness of the Aircraft or Aircraft components. And since the main target
of any airline is profit, they should endorse articles in the maintenance contracts
that ensure the commercial and safety performance of the airline are not affected
by the maintenance organisation performance.
In these modern days a Cooperative Relationship between Airlines and
Maintenance Organization is very important for both parties to survive in the
current competitive market. Cooperative relationships are not built on deadlines
and targets, they are built on actions and procedures to help both parties to reach
a mutually agreed goals. This type of relationship is reflected in the method that
the airline should be using for monitoring the commercial and safety performance.
Usually the size of the business and the duration of the contract plays a big role in
the way of monitoring the performance. In Short term Contracts, The use of
Performance indicators may not be efficient because of the limited duration and
the limited amount of data. Therefore all the delivered products from these
contracts are fully monitored/inspected to control the performance of the
maintenance organization. In long term contracts, the use of Commercial Key
Performance indicators (CKPI) and Safety Key Performance Indicators (SKPI)
becomes mandatory to effectively control the deliverables of the maintenance
contracts. The details of the monitoring system, Targets and the penalties or
incentives are usually stated in the maintenance contract under a title which is
commonly called Service Level Agreement (SLA), and both parties will accept
these terms by signing the contract. In this paper the author will discuss the
importance and the way of using CKPIs for monitoring the commercial /quality
performance, and SKPIs to monitor the safety performance, and also application
of incentives and penalties as contractual obligations.
Commercial Key Performance Indicators:

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Airworthiness: Coursework A
Shafik

By: Islam Ahmed

The main product of the aircraft maintenance function in the aviation industry is to
deliver an Airworthy Aircraft, on time and with minimum cost. Those three items
have a direct impact on the Airline commercial performance, thats because they
strongly affect the operation plan and schedules of the airline. Consequently,
Airlines must ensure that the maintenance contract includes Indicators to monitor
these items. These indicators will be set to continuously measure the Quality of
the product, the on time Performance and the Maintenance costs as described
below:
- Quality of the product
There are three main sources of data that can be used to monitor the quality of
the product delivered by the maintenance organization. First, Airlines perform
quality audits on the maintenance organization on yearly basis (sometimes more
than once a year). These audits doesnt only cover the quality system of the
organization including the internal audit program and the maintenance procedures
& processes but also Product Integrity as explained by Sidney Vianna Secondparty (The Airlines) auditors are moving away from broad, quality management
system audits, and paying closer attention to process effectiveness and product
integrity (Vianna, 2009)(3).This allows the airline to ensure the stability of the
maintenance organization. Secondly, airlines also perform product audit on the
aircrafts and aircraft components after they are received from the maintenance
organization. This type of audit is carried out by sampling or by 100% check and is
used to check the condition of the received product verses the work requested
and also checks the documentation completion. This type of check allow the
airline to monitor the delivered product conformity and to early tackle any
maintenance errors. Thirdly and as Berry said Air carrier audits are only one part
of the MRO evaluation (Berry, 2013)(2) , Airlines should monitor and record
incidents of sudden and unplanned failures of aircrafts and aircraft components,
especially life limited parts which retire before their due date. This will allow the
airline to monitor the reliability of the maintained products.
Using the data collected form the three sources stated above, the airline can carry
out in-depth analysis to define a potential decay in maintenance organization
performance concerning the quality of the product. In this case, the airline and
maintenance organization can cooperate to prevent this from happening by
setting corrective and preventive action plans to solve the problems.
- On time Performance
Time is the most critical factor for any airline. A delayed or cancelled flight cause
huge losses to the airline, and also it has a negative impact on the airline
reputation. Thats why airlines must always monitor the on-time performance of
the maintenance organization. But the methods of measuring the on-time
performance is different in each maintenance activity. In line maintenance, airlines
should monitor the Dispatch reliability. Dispatch Reliability is expressed as the
percentage of flights that depart within a specified time of the scheduled
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Airworthiness: Coursework A
Shafik

By: Islam Ahmed

departure time(de Decker)(4) . The targeted dispatch reliability percentage must

be stated in the contract and any deviation from this percentage must be recorded
and continually monitored. For base and component maintenance, the term
Availability is more commonly used. Availability means that the Aircraft or
component is airworthy and ready for use on the time agreed on. The availability
is measured in hours per day or days per year. The information that needs to be
recorded is the aircraft tail number, the number of hours that the aircraft was not
available, the detailed cause and whether this impacted a scheduled passenger
flight(de Decker)(4)
With a proper analysis of the above data, the airline can forecast future
probabilities of delays and act together with the maintenance organization to
avoid these delays.
- Maintenance Costs
All maintenance contracts contains articles and clauses regarding the price of
maintenance services, also some maintenance contracts like Power-By-the-Hour
and Total Care contracts contain fixed prices for long term agreements . However,
the prices stated in these contracts are not be considered the total maintenance
costs for an airline. There are other hidden costs that must be monitored and
taken in consideration. One of the hidden costs is the cost of delay. When
calculating the maintenance costs the airline should add to them the costs of
delay due to maintenance inconvenience. Another hidden cost is the cost of unavailability for an aircraft or component. In this case the airline takes some actions
to mitigate the losses caused by the un-availability. The costs of these actions
should be added to the cost of maintenance in case dereliction of the maintenance
organization. These two indicators reveal the financial impact of delays and unavailability. The continuous tracking of all the maintenance costs will give the
airline a clear view about how the maintenance contract is affecting the airline
expenses.
Adding Commercial Key Performance Indicators to the maintenance contracts
allows both airlines and maintenance organizations to be proactive and maintain
acceptable commercial performance. Tracking, monitoring and analyzing the three
above indicators is not the duty the airline only, the maintenance organization
also monitors its own performance. And since both parties are keen to work
together to keep these indicators in the green band, the undesirable results will be
minimum.
Safety Key Performance Indicators:
Although Safety is a prim in the aviation industry, many maintenance contracts do
not include safety indicators and only rely on the airworthiness requirements by
the civil aviation authorities. But since the occurrence of accidents and incidents
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Airworthiness: Coursework A
Shafik

By: Islam Ahmed

have a major impact on an airline reputation and image, the safety indicators
must be included in the contracts and treated as important as (sometimes more)
the commercial indicators. The ICAO has a near term objective for SMS
implementation Those States having mature safety oversight systems should
focus on the continued implementation of safety management in the near term.
The target implementation date for the near-term objectives is 2017(ICAO) (5). It is
expected soon after that date the regulators will require that safety indicators be
included in the maintenance contracts.
There are two inputs to measure safety performance. First is the existence of an
effective safety management system. And second is the proper analysis of
incidents and accidents that are reported.
Safety Management system:
The best way to measure the effectiveness of Safety Management system of the
maintenance organization is by performing Safety audits. The airline should carry
out in depth safety audits on regular basis on the Maintenance organization. These
audit should be be exclusively on safety and the main objective of these is stated
in the ICAO SMM as follow Audits are intended to provide assurance of the safety
management functions, including staffing, compliance with approved regulations,
levels of competency and training.(ICAO, 2013)(6). the audit also should focus on the
effectiveness of the occurrence reporting system and the staff awareness about the
importance of reporting. All the data collected through the audits and from the safety reports
should be recorded and analysed for potential failure in the safety management system that
may lead to an accident or incident.
Analysis of incidents and accidents:
In case any accident or incident that is related to the airline occurs, the
maintenance organization will carry out an internal investigation to identify the
root cause and the contributing factors for this occurrence. However, the airline
should carry out its own in-depth investigation and take in consideration the
investigation results of the maintenance organization. The data of accidents and
incident collected for a certain period of time (ex. 6 months) should be analysed to
define the most contributing factors. Then these factors should be addressed to
the maintenance organization for proper actions.
Since Quality and Safety are two sides of the same coin. Airlines should take
inconsideration some of the data that are collected through performance
indicators related to quality. Taking the above mentioned indicator Quality of the
product as an example; the data related to noncompliance that is collected
through the Quality audits & Product Audits have a huge value when measuring
the potential safety risks.
Maintenance Contracts should include details about how the above indicators will
be measured. For example, all indicators could be merged to present a safety
performance trend analysis over a period of time. Also the contract should include
the acceptable level of safety agreed on by both parties. This level should be
revised regularly to be effective.

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Airworthiness: Coursework A
Shafik

By: Islam Ahmed

Application of incentives and penalties:

Incentive-based contracts shift much of the risk onto the contractor, who is
rewarded for productivity improvement and penalized for poor performance or
rising costs (Eggers, 1997)(7). Contracts that are based only on penalties and
incentive are no longer effective in the aviation business especially in managing
big long term contracts. These type of contracts are only focused on the required
service level and not the performance level. As stated before, modern days
contracts focuses mainly on cooperation between both parties. And thats why the
maintenance contracts are a Performance Based Contracts type. It is a type of
contracting with (1) a clear set of objectives and indicators, (2) systematic efforts
to collect data on the progress of the selected indicators, and (3) consequences,
either rewards or sanctions for the contractor, that are based on performance.
(Loevinsohn, 2008)(8) And thats because the operators want better maintenance
service rather than more penalties. And the main role of the key performance
indicators included in the contracts is to continuously monitor the service level
and give indication of potential penalties. This way the maintenance organization
will have the opportunity of improving before reaching the limits. So in the end,
when a penalty occurs that means that there is a serious problem and not a
onetime event.
Applying Incentives is the best way to reach a better service level. But the value of
the incentive to be offered should be valuable enough for the maintenance
organization to invest in it. The traditional incentives like giving bonus when
reaching a certain level (example: 99.5% Dispatch reliability) can be effective for a
short period of time and also may not be consistent. A Better incentive it to offer a
business expansion when a certain service level is maintained for an agreed
period of time (Example: Adding 5 more aircrafts to the contracts when the
dispatch reliability is 99% for 3 months). And the continuous monitoring of the key
performance indicators will be the main evaluator for reaching the required target.
Formalization of the service level and the applicability of penalties and incentives
must be in the maintenance contract. This way the airline will be sure that the
maintenance organization will either maintain or improve the contracted service
level
Conclusion:
To Conclude, Maintenance Contracts is a regulatory requirement, and the
regulators specified some main points that a maintenance contract should
contain. Airlines should also take the maintenance contract as an opportunity to
ensure receiving the best service. Thats why the use of a Performance based
contract is the best and effective way for modern commercial contractual goals.
All contracts must contain key performance indicators to monitor both the
commercial and safety performances. Where commercial indicator can be
summarized in monitoring the Quality of the product, the on time Performance and
the Maintenance costs , while safety indicators can be summarized in monitoring
the safety management system and the analysis of accidents and incidents. These
indicators should be the tool for applying the applicable and effective penalties
and incentives which are the main drive for better performance. Finally the main
key for all the above is that a cooperative relationship between the Airline and the
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Airworthiness: Coursework A
Shafik

By: Islam Ahmed

Maintenance Organization is established properly maintained by the exchange of

information and removing the obstacles.
References:
(1) European Aviation Safety Association (EASA) Part M Regulation, Appendix XI to
AMC To M.708 (C), August 2012
(2) Vianna, Sidney Aerospace Standard for Maintenance, Repair, and Overhaul
Services Improves Safety | QUALITY Digest.com
Oct 22, 2009
http://www.sae.org/iaqg/projects/9110article09Sep.pdf
(3) Berry, Vern. 'Air Carriers Developing The MRO Interface | Aviationpros.Com'.
AviationPros.com.
MAR
17,
2013.
http://www.aviationpros.com/article/10895400/air-carriers-developing-the-mrointerface
(4) de Decker, Bill. 'Measuring Reliability And Availability'. Conklindd.com.
https://www.conklindd.com/t-measuringreliabilityandavailability.aspx
(5) ICAO
Global
Safety
Plan
http://www.icao.int/safety/SafetyManagement/Documents/Flyer_US-Letter_ANBGASP_2013-08-22.pdf
(6) ICAO Safety Management Manual (SMM), Third edition 2013 Page 181
(7) Performance based Contracting by William D Eggers, May 1997
http://reason.org/news/printer/performance-based-contracting
(8) Benjamin Loevinsohn, 2008, The World Bank, Performance-Based Contracting
for Health Services in Developing Countries: A Toolkit Page 9
http://www.who.int/management/resources/finances/Section2-3.pdf

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