ACTS to add thousands of workers to its El Salvador

Brick Head · Post by **Brick Head** » Mon Nov 26, 2007 9:07 am

ACTS readies its expansion plan
Aircraft repair company to add thousands of workers to its El Salvador facilities
BRENT JANG

Monday, November 26, 2007

Canada's largest aircraft repair company, a specialist in fixing Air Canada jets, plans to quadruple the size of its El Salvador operations as it pursues heavy maintenance contracts from foreign carriers.

ACTS Aero Technical Support & Services Inc., controlled since last month by two U.S. private equity firms, is embarking on a major expansion at its 1,000-worker Aeroman subsidiary's facility in El Salvador's capital of San Salvador.

Montreal-based ACTS, formerly named Air Canada Technical Services, outlined its strategy in an 83-page report that it prepared with financial adviser JPMorgan Chase & Co. and Air Canada's parent, ACE Aviation Holdings Inc.

“This expansion plan contemplates an increase of Aeroman's capacity from four to up to 16 lines over the next six years,” the report states.

Two new lines, or hangar bays, are slated to be built in 2008, followed by two more lines annually until 2013. The report doesn't state how many new jobs would be created at Aeroman, but sources say that over the next six years, the work force in El Salvador could grow to nearly 4,000, an increase of 3,000 jobs.

ACTS has 3,600 employees in Canada – mostly in Montreal, Winnipeg, Vancouver and Toronto. “ACTS plans to restructure its existing Canadian heavy maintenance operations to improve productivity and efficiency and reduce their cost structure,” the report states.

Sources say the ACTS paint shop in Toronto will close at the end of December, affecting 34 people, but other contracts will remain at the site. While union leaders have warned that there could be an exodus of jobs to El Salvador, ACTS counters that restructuring doesn't translate into widespread downsizing in Canada.

The goal isn't to transfer Air Canada work done in Canada south to Aeroman, but to broaden the San Salvador plant's non-Air Canada customer list, ACTS chief executive officer Chahram Bolouri said in an interview.

“My biggest issue in El Salvador is how to build capacity to keep up with customer demand,” he said.

The maintenance, repair and overhaul company still envisages a stable work force in Canada. ACTS is striving to win new third-party contracts for engine overhaul and electronic component work to keep its Canadian operations healthy. The goal is to focus on higher-margin specialty projects in Canada that require technically skilled staff.

Canadian employees earn between $1,700 and $5,500 a month, depending on their skills and experience. That compares with $350 to $1,200 a month at Aeroman.

Regularly scheduled heavy maintenance excludes engine and major electronic work. The top-to-bottom inspection of the airframe's exterior and interior occurs every one-to-seven years over a plane's lifetime, taking one-to-six weeks to complete, depending on the scope of the work required, said the confidential report. A single line is staffed by hundreds of workers who attend to one plane at a time.

Montreal-based ACE, which owns 75 per cent of Air Canada, sent the report to more than 20 prospective bidders for ACTS. Last month, ACE sold a 70-per-cent stake in ACTS to New York-based Kohlberg Kravis Roberts & Co. and Greenwich, Conn.-based Sageview Capital LLC, founded by two former KKR partners.

The Aeroman plant in San Salvador has contracts with foreign carriers such as Mexico's Volaris, US Airways Group Inc. of Tempe, Ariz., JetBlue Airways Corp. of Forest Hills, N.Y., and El Salvador-based Grupo TACA Holdings Ltd., a major operator of Central American airlines.

ACTS bought an 80-per-cent stake in Aeroman last February from Grupo TACA.

The report said the shift toward lower-wage operations is a global trend in plane repairs as “airline customers seek to lower their heavy maintenance expense.”

A major challenge will be hiring and training enough aircraft mechanics in Central America to meet demand for plane repairs, so it may take longer than six years to reach the targeted work force of 4,000 at Aeroman.

ACTS, formed in 1937 to service Air Canada aircraft, has done third-party contract work since 1968 but wants to be more aggressive in winning outside jobs for the El Salvador plants.

ACTS at a glance

Founded: In 1937, as maintenance unit of Air Canada.

Sold: In October, 2007, ACE Aviation Holdings Inc. sold 70-per-cent stake to two U.S. private equity firms, Kohlberg Kravis Roberts & Co. and Sageview Capital LLC; co-owners are ACE (23 per cent), Grupo TACA Holdings Ltd. (5 per cent) and ACTS management (2 per cent).

Total staff: 4,600

Head office: Montreal

Plant locations, with employee count: San Salvador (1,000), Montreal (2,421), Winnipeg (630), Vancouver (344), Ontario (174) and other (32).

Heavy maintenance: San Salvador, Montreal, Winnipeg, Vancouver, Toronto.

Engine and/or component work: Montreal, Vancouver, Toronto.

Contracts: Canadian plants specialize in Air Canada work; San Salvador focuses on work for foreign carriers.

http://globeinvestor.com/servlet/story/ ... 126.wracts 26/GIStory/

abc xyz · Post by **abc xyz** » Mon Nov 26, 2007 2:20 pm

we all know making a healthy profit is essential BUT this is probably not the "optics" of the situation Air Canada wanted.

By-passing work from their own highly trained well equipped staff to some bucket shop 3rd world outfit operating under the veil of developed world standards. I guess safety isnt paramount anymore.

whats next - ???

tonysoprano · Post by **tonysoprano** » Mon Nov 26, 2007 3:21 pm

I don't like this at all. Taking jobs away from home is never a good thing. Milton still has till the end of the year to do damage. Yikes!

Bede · Post by **Bede** » Mon Nov 26, 2007 4:06 pm

To play the devil's advocate once again:

For El Salvador, those are excellent wages. There will be a lot of people who live in poverty (by our standards) who's standard of living will increase dramatically because of this outsourcing.

Fire Away.

Hyster · Post by **Hyster** » Sat Dec 01, 2007 9:42 am

Bebe, thanks for caring about people who dont even know or care where Canada is. What about the 1000 plus technicians laid off in Canada, most recently in Vancouver? Do they deserve to live above the poverty line too or just the people in a third world country?

Four1oh · Post by **Four1oh** » Sat Dec 01, 2007 12:09 pm

on a more positive side, last time I checked there was huge demand for AME's countrywide.

Bede · Post by **Bede** » Sat Dec 01, 2007 4:44 pm

Hyster wrote:Bebe, thanks for caring about people who dont even know or care where Canada is. What about the 1000 plus technicians laid off in Canada, most recently in Vancouver? Do they deserve to live above the poverty line too or just the people in a third world country?

Hyster,

The technicians in YVR will find work elsewhere given their experience, however they may not be able to find work locally (welcome to aviation). However, the workers in El Salvador probably have no opportunities other than this.

I'll try not to take this thread in the wrong direction, but other than trading with and employing people in third world countries, do you have any suggestions on how these people are to escape poverty?

PS. Like I stated, I'm playing devil's advocate for the sake of a good discussion. If you're one of the AME's laid off, I wish you all the best and hope you can find work soon.

yycflyguy · Post by **yycflyguy** » Sat Dec 01, 2007 5:43 pm

Bede wrote:
Hyster wrote:Bebe, thanks for caring about people who dont even know or care where Canada is. What about the 1000 plus technicians laid off in Canada, most recently in Vancouver? Do they deserve to live above the poverty line too or just the people in a third world country?
Hyster,

The technicians in YVR will find work elsewhere given their experience, however they may not be able to find work locally (welcome to aviation). However, the workers in El Salvador probably have no opportunities other than this.

I'll try not to take this thread in the wrong direction, but other than trading with and employing people in third world countries, do you have any suggestions on how these people are to escape poverty?

PS. Like I stated, I'm playing devil's advocate for the sake of a good discussion. If you're one of the AME's laid off, I wish you all the best and hope you can find work soon.

FYI - TACA is headquartered in San Salvador and is one of the largest operators in Latin America. It is not as though they are a bunch of farmers lucky to find a job.

One of the beautiful things about Latin culture is the fact that they do NOT place the same emphasis on material wealth as North Americans do. After spending a significant amount of time in Central America I can tell you that poverty isnt viewed in the same light you portray it as. They generally are happier with less and have a much closer family life than we demonstrate in North America.

Your comments regarding their living situation comes across as patronizing even if it is meant in the spirit of playing the devils advocate.

Bede · Post by **Bede** » Sat Dec 01, 2007 7:23 pm

yycflyguy,

I stand corrected about the size of TACA. I will cede the point to you.

I'm not sure how patronizing my comments are though about the poverty though. El Salvador has a PPP corrected (Purchase Power Parity) GDP per capita of about $4500USD. That is 1/4 of the low income cut-off (poverty line) in Canada. I think we can all agree that with those numbers, the salvadorian people are impoverished. I will agree that N. American materialism is excessive. However wealth creation need not be used to fuel excess consumerism. Increased wealth can be used to pay for expensive necessities such as health care, increased protein diets, technology to increase productivity, etc.

I used to be firmly against globalization until I moved in with a roomie who was Malaysian. Continuing with my tradition of opening mouth and inserting foot, I asked, "did you ever work for Nike". The answer I received shocked me. I was told that while Nike paid poor by western standards, it was by far, the highest paying and most coveted factory job in Malaysia.

Cheers,

yycflyguy · Post by **yycflyguy** » Sat Dec 01, 2007 8:28 pm

In no way do I profess myself to be an economist, but I would think you would need to compare your corrected GDP per capita with a local cost of living index for it to be truly representative. Maybe that is incorporated into your numbers.

My point is that most of the time a foreign culture doesn't need to be told how they should live or what should be important to them only because it is important to us. It is not their priority to escape this perceived financial poverty like we view it.

Now, back to my big screen tv.

Bede · Post by **Bede** » Sun Dec 02, 2007 7:39 am

yycflyguy,

The PPP-corrected GDP is corrected for cost of living.

I certainly agree with your last paragraph. I do believe though that we must allow these people the opportunity to enter our market and prosper should that be their wish.

My brother spent some time in Africa, and many people are tired of all the foreign aid (which does nothing but drives down the cost of food for farmers), and just want to be able to sell their products to N. American consumers without discouraging tariffs or subsidies for our producers.

Cheers

Hyster · Post by **Hyster** » Sun Dec 02, 2007 8:30 am

Bebe, you should be careful what you say. Your comment that engineers could just go find a new job, not a big deal. Remember 2009 is coming my friend. I might say the same to you then but I'm sure your opinion will have changed slightly when US regionals are doing your RJ routes.

To anyone who thinks ACE shareholders give a shit about helping out another countries economy please speak up.

Cheers

Bede · Post by **Bede** » Sun Dec 02, 2007 3:36 pm

Hyster wrote:Bebe, you should be careful what you say. Your comment that engineers could just go find a new job, not a big deal. Remember 2009 is coming my friend. I might say the same to you then but I'm sure your opinion will have changed slightly when US regionals are doing your RJ routes.

To anyone who thinks ACE shareholders give a shit about helping out another countries economy please speak up.

Cheers

Hyster,

Easy does it- you have my sympathy. Like I mentioned, I am playing devil's advocate and making the argument no one else is willing to make. No doubt this is a touchy subject for you. Like I mentioned earlier, I wish you all the best.

As for the US regional bit...interesting point. I think we all need to be careful that we remain as competitive as possible. Despite what I think of the wages at Jazz, I would rather earn what I do and keep my job, than get a big pay raise for a year and lose my job, as you were alluding to. I do see what is/might be happening to you, possibly happening to me, so I decided to upgrade my education a bit. If the worst happens, I have something to fall back on.

As for shareholders- you are absolutely correct, they don't care about workers in a third world country, us, or anyone else, only the bottom line. Let us assume that this outsourcing will continue to affect all of us. Foreign workers will benefit, passengers will benefit, and shareholders will benefit. We, of course, are screwed; however, Joe Public really couldn't care less as long as he gets his $59 air fare to Vancouver.

Cheers

2R · Post by 2R » Sat Dec 08, 2007 4:17 pm

Does anyone remember Frank Delorenzo's work at Eastern Airlines and Continental ???

tonysoprano · Post by **tonysoprano** » Sat Dec 08, 2007 7:16 pm

Yep. Frank sure sunk a great airline. Wasn't it the F/A's that finally had the "balls" to stand up to him?

2R · Post by 2R » Sun Dec 09, 2007 10:03 am

Frankie played a shell game with parts and maintenance that was so clever even the forensic accountants could not get him under the catch all racketeering laws the US have .If i was a shareholder i would want to know how many inventory controls are on the parts that are shipped out of the country .Frankie used to ship engines between companies that he was involved with and a lot of equity disappeared weaking the company to a point where it could not compete.He did manage to place the blame on the demise on the unions .Give him credit for providing the media with something to report while the pillaging of a legacy carrier went on.On the other hand he could have been completly innocent and just the victim of slander by some of the Pilots who where shocked to find out that eastern engines where being used by other companies .Sadly they did not find that out until the dust settled .As one of them told me the hardest license he got was his real estate license.Something to do on furlough's to keep the family fed.
What is an engine worth these days ???or are they all leased???