0900-0930 DL Outsourcing Strategies

Harry Chowbey,Managing Director, Supplier Operations and Cabin Mtc.

Outsourcing Strategy:The Right Formula for Success

October 20, 2011

1Table of Contents

Delta Air Lines

Delta Air Lines 2

Strategy 5

Footprint 10

Key Metrics 15

Performance 20

Strategy Footprint Key Metrics Performance Questions

2Overview Delta Air Lines employs 80,000 employees

worldwide Serves more than 160 million customers each

year Has a world-class airline loyalty program;

award-winning BusinessElite service; and more than 50 Delta Sky Clubs in airports worldwide

Named Most Admired Airline Worldwide

Delta Air Lines Strategy Footprint Key Metrics Performance Questions

3Delta TechOps Delta TechOps is the largest airline MRO

in North America and the third largest worldwide

Is one of the most experienced MROproviders in the world with more than 70 years of aviation expertise

Employs more than 9,600 maintenance professionals

Provides full-service maintenance to Deltas fleet of more than 750 aircraft

Serves more than 150 aviation and airline customers from around the world, specializing in high-skill work such as engines, components, airframe and line maintenance


4Supplier Operations

Delta Air Lines

Supplier Operations has four main groups: Airframe, Engines, Components, & CabinMaintenance

It is the branch of Delta TechOps responsible for outsourcing maintenance to over 35 locationsaround the globe

Core values are governed by safety, quality, turnaround time, reliability and cost

Airframe

Engines

Components

Cabin


5Why Outsource?

Background Strategy Footprint Key Metrics Performance

An outsourced supplier is an extension of your company.Outsourcing is about partnering, not contracting!

Question you should ask: Can someone else do it better, faster and cheaper; safely?

Expectations from outsourcing: Quality Reliability Timeliness Cost savings Strategic benefits

Questions

6Organize the Idea & Assess the Benefits


What are you trying to accomplish? Is your organization struggling in a

particular area? Are there leaders in the area who

can do the job better, faster, cheaper?

Are they your competitors? Can you create a partnership that

would be mutually beneficial?

Questions

7Develop a Plan & Framework


Design a plan that is quantifiable and measurable

Know the goal and have a firm expected end-result

The plan is your blueprint for success

Design a reliable system for tracking: Quality Cost Reliability Performance

Questions

8Gather the Right Information


Learn who the key players are Familiarize yourself with your

potential partners business and understand their: Safety record Reputation Strengths and weaknesses Work ethic Limitations Current customers Performance metrics

Do your homework before creating a partnership

Not every supplier can be the right partner

Questions

9Choose the Right Partner


The right partner takes on a vested interest in your success and understands: Your business Your values Your needs Your expectations

Becomes an enabler to make success happen

Completes the work safely, better, faster and cheaper than you can

Questions

10

Global Presence

AirframeAero Mexico Guadalajara MD88 HMVHAECO Hong Kong B767 HMV, B747 checksSASCO - Singapore A330, B747 checksAMECO Beijing China 747-Checks / Lie-Flat SeatsEGAT Taipei, Taiwan B777 PSVs / Lie-Flat SeatsSan Antonio Aerospace San Antino - B757 HMV & checksMobile Aerospace - Mobile, AL A319/A320 checksAAR Indianapolis, IN 737, MD90 HMVAAR Miami, FL MD90 PTSTIMCO Greensboro, NC - ModsLeading Edge Victorville, CA PaintLeading Edge Greenville, MS PaintEvergreen Mesa, AZ - StorageSCA Victorville, CA Storage

EnginesPratt & Whitney Cardiff, Wales GE90Pratt & Whitney (ESA) - Singapore PW4168Pratt & Whitney Christchurch, New Zealand V2500Pacific Gas Turbine Corp (PGTC) San Diego, CA JT8DIsraeli Aerospace Industries (IAI) Tel Aviv JT8D SNECMA France, Mexico & Montreal CFM56-5Rolls Royce (TAESL) Dallas, TX Trent 895Evergreen (EGAT) Taipei, Taiwan CF6-B8F, V2500MTU Hanover, Germany V2500

ComponentsNordam Singapore Thrust Reversers Triumph Airborne Structures - Hot Springs, AR - Thrust ReversersNordam USA Tulsa, OK Thrust ReversersHoneywell and Triumph both in Phoenix, AZ - APUsHoneywell Memphis, TN Wheels & BrakesMessier-Bugatti Walton, KY Wheels & BrakesMeggitt ABS Akron, OH Wheels & BrakesAAR - Miami, FL Landing GearGoodrich, Troy OH Wheels & BrakesUltimate Aircraft Composites Miami, FL - Thrust ReversersMichelin Kansas City, MO Tires GoodYear Stockbridge, GA TiresBridgestone Mayodan, NC TiresWeber Aircraft Atlanta, GA SeatsFlight Line Products Valencia CA Interior Products

Outsourced Maintenance to over 35 Locations 12 Cabin Maintenance Stations


11

Outsourced Airframe Maintenance


12

Outsourced Engine Maintenance

V2500 - MD90 CF6-80C2B8F - B767-400 Trent 895 B777ER

GE-90 B777LR PW4168 A330CFM-56-5A A319/320


13

Outsourced Component Maintenance

Thrust Reversers

Landing Gear

APUs

Delta Air Lines Strategy Footprint Key Metrics Performance

Wheels and Brakes

Questions

14

Cabin Maintenance


15

Maintenance Cancellations

Maintenance D0 Rate

MEL Count

Aircraft Out of Service

Operational Difficulty Index

Avoid Aircraft Damages

Eliminate on the job injuries

Produce an excellent product

Dependable product

No days out of service

No Air Turn-backs or

Diversions

Deliver on-time every time

In 2010 completed 392

Airframe maintenance visits

and completed 103 Engine

maintenance visits with 100%

on-time delivery

Always on plan or below

Manage yearly budget of

$780M

Created E-cost program which

provided real-time expense

management

Saved over $100M year to

date

Key Metrics

Delta Air Lines

SAFETY & QUALITY RELIABILITY

TURNAROUND TIME COST

PERFORMANCE


16

Quality Ensure all suppliers are in compliance with

OEM, Federal Regulations, and Deltas MM, ADs, SBs, and EOs

Monitor aircraft open-up initial inspection for defects and appropriate corrective action

Emphasize quality and safety at all MROs thru leadership discussions and process improvement:

Daily Safety Inspections Safety Stand-Downs as necessary Include quality discussion at all

Quarterly Business Reviews (QBRs) Track suppliers for product quality through

core reports and metrics structure Lead all safety-related investigations

Background Strategy Footprint Key Metrics Performance Questions

17

Reliability Ensure all Delta assets leaving MROs

meet or exceed contractual requirements

Engine log page reviews for 30 days after installation

Measure airframe metrics for a 21-day period after check completion and track:

Operational Difficulty Index (ODI) Technical Dispatch Rate (TDR) Pilot Write-Ups (PIREPS)

Review unscheduled engine removals (UER) for root cause and drive back to the suppler if applicable

Facilitate Quarterly Business Reviews (QBRs)


18

Turn-Around-Time Monitor, track and hold MROs

accountable to contractual performance Hold daily discussions with on-site

management teams from tag-on to tag-off dates

Establish early detection of potential schedule slippage allowing for corrective actions

Provide MRO with feedback regarding turn-time performance and identify improvement opportunities

Single point-of-contact for supplier engine program

Coordinate airline required technical training at supplier locations


19

Cost Hold weekly meetings with site teams

to discuss costs vs. plan Invoice Reconciliation performed by

Site Managers via e-Cost Technology Invoices reviewed by Director and

General Managers for over & above expenses

Discussions with MRO as necessary over disputed items

Identify cost pressures, opportunities, and develop initiatives to ensure plan is met

Business Performance Group supporting operations staff with tools to help track their businesses


20

Utilize the 5 is for SuccessBackground Strategy Footprint Key Metrics Performance Questions

1. information

2. initiative

3. intelligence

4. intuition

5. insistence

21

Process Mapping


Be sure to have a road map to guide you for whats ahead:

Follow-up, Follow-up, Follow-up On-site Management Safety Tracking Quality Oversight Timeline / Critical Path Take Initiative Effective communication and

follow-through

Questions

22

On-Site Management Properly staff the operation to

provide oversight at the supplier site Maintain the appropriate level of

communication with external partners

On-site managers are assigned to each MRO facility

Site and Project Managers possess extensive experience on aircraft type being serviced at MRO

All are A&P licensed and have received appropriate level of DAL training

Site Managers assume business manager function for their locations


23

Remote Management

Include General Managers for Airframe, Engines, and Components

Business Performance Group works closely with staff on key metric measurement

Regular site visits to all MROs Periodic requested MRO

management visits to Atlanta Daily morning conference calls with

Airframe/QA on-site teams Quarterly Business Reviews (QBRs) G10 Summits Daily interface with DAL functions to

ensure efficient outsourcing


24

Measuring Airframe Production


TOTAL

0

200

400

600

800

1,000

1,200

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Supplier #1

050

100150200250300350400450


Supplier #2

0

50

100

150

200

250

300


Supplier #3

0

20

40

60

80

100

120

140


NOTE: Production figures EXCLUDE drop-in activity.CHART LEGEND

PlanActual

Questions

25

Measuring Airframe Performance


QualityCAT-1 Aircraft Damage Incidents

2010 YTD August

PerformanceOut of Service vs. Plan

2010 YTD August

ReliabilityODIs

2010 YTD August

CostInvoice Variance to Plan

2010 YTD(B)/W

($1,800)($1,600)($1,400)($1,200)($1,000)

($800)($600)($400)($200)

$0$200

Supplier#1

Supplier#2

Supplier#3

Supplier#4

Supplier#5

Supplier#6

Supplier#7

0

1

2

3

4

5

Supplier#1

Supplier#2

Supplier#3

Supplier#4

Supplier#5

Supplier#6

Supplier#7

0

1

2

3

4

5

Supplier#1

Supplier#2

Supplier#3

Supplier#4

Supplier#5

Supplier#6

Supplier#7

-7.7 -4.1 -2.7

3.612.1 16.8

125.5

(20)0

20

40

60

80

100

120

140

Supplier#1

Supplier#2

Supplier#3

Supplier#4

Supplier#5

Supplier#6

Supplier#7

D

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Questions

26

Measuring Components Reliability


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Actual MTBF Goal

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Actual Goal

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Log Item Rate Goal is < .1

Questions

Documents

0900-0930 DL Outsourcing Strategies