FEDERAL AVIATION ADMINISTRATION

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3^RD^ ANNUAL FAA INTERNATIONAL AVIATION SAFETY FORUM

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BREAKOUT PANEL SESSION C: MANUFACTURING AND MAINTENANCE HAVE BECOME
GLOBAL MARKETS

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THURSDAY

NOVEMBER 2, 2006

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The breakout session was held in the Grand Dominion Salons III & IV, The
Westfields Marriott, November 2, 2006, at 2:30 p.m., Louis J. Mancini,
Moderator, presiding.

PANEL MEMBERS:

RON D. UTECHT President and Chief Operating Officer, TIMCO Aviation
Services, Inc.

RAY VALEIKA Independent Aviation Consultant, Retired Senior Vice
President of Technical Operations, Delta Air Lines

DAVID L. JOYCE Vice President and General Manager, Commercial Engines
Operation, GE - Aviation

SATOSHI YOKOTA Executive Vice President, Engineering and Development,
Embraer

WARREN CHIM General Manager of Quality, Hong Kong Aircraft Engineering
Company LTD

P‑R‑O‑C‑E‑E‑D‑I‑N‑G‑S

(2:35 p.m.)

MR. HICKEY: Good afternoon, and welcome, and I hope everyone enjoyed
lunch, and I certainly enjoyed the interesting lunchtime discussion. You
know, one of the questions asked was how much was it going to cost to
fly up in one of those things. I was going to ask how much was he going
to charge to ride in his car. I think I would have had an interest in
that.

I\'m John Hickey, for those who don\'t know me, and I\'m the Director of
FAA\'s Aircraft Certification Service, and I have the great privilege
and honor of kicking off this panel this afternoon, and it\'s
\"Manufacturing and Maintenance Have Become Global Markets.\" I believe
very strongly that this promises to be an informative and provocative
panel discussion.

For many of us, we hear so much about the sexy things, I think, in
aviation like the new A-380 coming and the 787. We were talking this
morning about some of the new technologies and ADS-B. All you have to do
is go next door and see some of those and unmanned aerial systems, and,
of course, our space friend from lunch today.

Those are the things that I think often get the newspaper stories, but
this panel is going to address what is really, in my view, another
significant area, and it\'s a significant challenge that is being
reflected in the changing environment of the aerospace business, and
it\'s the nature of the manufacturing and maintenance.

These are big businesses that have been rapidly changing direction in
very, very short order. I know one only has to look at the Boeing
Company to see how this company has gone from building, not only
designing its own airplane. It has always done that, but they used to
build their own airplane, I think from the beginning, you know,
manufactured all the parts, and very little of it is done these days,
and that, I think, reflects very significant change going on in the
business.

The biggest challenge, as the panel\'s title says, is globalization, and
I think that\'s really going to be a focus, and I am so proud to see
some of the great leaders on this panel who are going to give you their
thoughts and opinions on that. I think some of the trends they\'re going
to do is outsourcing, financial pressures, worldwide growth in technical
competence, which I think is a challenge for all of us, developments in
information technology capabilities, and that\'s just to name a few.

As my good friend and panelist Ray Valeika once said, it\'s a new world,
but with its new complexities, and I think that\'s going to be the
essence of what we\'re going to hear. And I think the key goal is for
these guys is to help address how do we assure the highest standards of
safety in this new world.

So with that, I\'m going to turn it over to our panel, and before I do
that, though, I\'m going to introduce, I think, one of the true titans
and leaders in this business. I am personally proud to be associated
with him in some way, and I\'ve known Lou now for quite a few years, and
he\'s truly a real, real great leader in this business of aviation
safety.

So without further ado, I\'d like to introduce Boeing\'s Vice President
and General Manager of Commercial Aviation Services, Lou Mancini.

MR. MANCINI: Thank you, John. Hi, everyone. Thank you for being here. I
want to let you know it\'s okay to move forward. I came a little bit
early to the room, and I increased pitch on the first three rows, so if
you move forward, you\'re going to get a much more comfortable setting.

So I want to thank you for being here. We would like this to be very
much a dialogue, so that we\'re not just talking to you, that you\'re
asking us, and you\'re talking with us. This is the whole idea here is
to create a dialogue. We may have some of the answers, because I\'ve got
a great panel up here, but I\'m sure we don\'t have all of them, and
we\'d like to hear from you.

So let me tell you a little bit how we\'ll run it. I\'m going to start
with \-- I\'ll introduce each person as they speak, but I want to give
you the format of how we\'ll do the first part of this. Warren Chim is
with HAECO. He\'s a quality executive out in Hong Kong. He has
operations in China. We\'re going to ask Warren to start off and set the
stage. This is about globalization. We wanted to start off with our
premiere international MRO operation.

We\'ll then move to Ron Utecht. Ron is now the President of TIMCO.
Ron\'s got a great background, and we\'ll be asking Ron to articulate
how do we make the system better. As John Hickey so nicely said, the
world is changing, and so we\'ve asked Ray Valeika, who is probably one
of the resident experts on the trends in maintenance and what\'s
happening to us all \-- we\'ve asked Ray to comment on that.

We then end up with the panel with two executives from OEMs,
manufacturers. We have David Joyce here from GE to talk about how they
moved into services and how they extended product support, and Satoshi
Yokota from Embraer is here, and wait until you hear his resume. He\'s
been \-- he\'s just done it all down there at Embraer, and he\'ll give
us also an OEM perspective.

After each presenter, we would like to have your questions, so I don\'t
want to wait. I\'d like you to be as participatory as possible, and then
we\'ll, of course, open it to open debate at the end.

So let me start off, if I may, introducing to you Warren Chim. Warren is
a graduate of the Hong Kong Engineering Limited, HAECO. He got his
aircraft engineering apprenticeship in 1988. He achieved his Hong Kong
CAD aircraft maintenance engineer license in 1989 and working experience
in line maintenance, base maintenance, and technical training.

He joined TAECO, the project team, in 1994, and I believe in 1994,
Xiamen TAECO was a duck farm, if I remember right. It now has over 4,000
people working there. He was selected for attachment to Japan Airlines
in NADA maintenance base, so he got an opportunity to see the airline
side.

After his return from Japan in \`95, he then was assigned to Xiamen,
China, for the start-up of TAECO, and he worked at TAECO there for four
years as the Deputy Quality Manager. He then was seconded to Hong Kong
Dragon Airlines as Manager of Quality Assurance to establish their
quality system in E&M. He returned to HAECO as the Quality \-- in
Quality Assurance in 2001, and he was promoted to his current position
as General Manager of Quality in 2006.

So Warren, thank you so much for being here.

MR. CHIM: Thank you. Thank you for the kind words. Ladies and gentleman,
good afternoon. It\'s my honor to be here to learn from the experts and
also to share our experience with you. For those not familiar with
HAECO, actually it\'s the short name for Hong Kong Aircraft Engineering
Company based in Hong Kong, and it is a aircraft engineering and
maintenance group, not only in Hong Kong, but also in Maris Paresis
location in China.

HAECO was established in 1950. Already have more than 50 years in this
industry, but since day one, HAECO is an independent MRO. We are not
attached with any airlines. At the same time, in 1950\'s, a small
airlines who was flying the DC-3 is one of our customer.

They do not have their engineering. They do not have their maintenance.
They contract out all the engineering and maintenance to HAECO 50 years
ago, and today, this airline just celebrated its 16^th^ birthday. It is
Cathay Pacific Airlines, and right now Cathay already have more 100 wide
body aircraft, and before the traditional practice contract out all the
maintenance to HAECO.

So contracted maintenance is not new in our part of the world. We have
the FAA repair station certificate in 1959, and we have the full range
of maintenance on airframe, engine, and component, but we are not doing
everything by ourselves. We tried to establish joint venture with the
OEM like Boeing, Rolls Royce, and also we have joint venture together
with our customers like TAECO in Xiamen.

TAECO is a joint venture between Boeing, Japan Airlines, and Cathay
Pacific Airways, and as mentioned by Lou, in \`93 TAECO \-- Xiamen is a
Chinese city about 15-minute flight from Hong Kong. In \`93, it\'s still
a duck farm, and we do the landfill. We built the hangar from the hangar
one to hangar two, and right now we already got four hangar, and each
hangar became house to jumbo aircraft.

And we already started the 747-400 cargo conversion, and right now we
have three sites dedicated for the cargo conversion. And the fourth
hangar will \-- the fifth hangar will be coming next year, and this year
we just had the groundbreaking for sixth hangar.

As the whole HAECO group, including Hong Kong base and the Xiamen
facility, we have more than 8,000 staff. We are expanding, so every day
the numbers of our staff is increasing, and we are holding more than 20
approvals from various aviation authorities.

We generate about eight million man hours last year. Within that eight
million man hour though, less than 50 percent are from our home base
customer, both in Hong Kong and Xiamen. That\'s mean less than 50
percent of the work load from Cathay or Japan Air. All the other work
load is for other customers all around the world.

And we\'re not only engaged in maintenance, but also we provide the
total care package. We call it FTM, free technical management for some
newly established low-cost carrier in Hong Kong. FTM means we take care
for everything for the airlines. If they only got two or three people in
their airline\'s engineering department monitoring the operation, have
the final responsibility, but all the engineering and maintenance work
are done by HAECO.

With this kind of business model, our customers or our shareholders like
Japan Airlines, Cathay Pacific Airways, they enjoyed a significant in
their maintenance cost. In \`93, when we proposed the set-up of the new
facility in Xiamen, at that time Hong Kong staff actually have some
worry about their job, but after ten years, it proved that the business
is growing, and with the new facility in Xiamen make the whole HAECO
group stronger.

And right now, next month we\'ll see the second hangar become
operational in Hong Kong and the third one in the forefront is coming,
so all this fact and experience reflect our core value of HAECO. The
core value of HAECO is can we make it in a triangle, and each point of
triangle represent a staff, shareholder, and customer. It\'s the win-win
situation for our customer, for our staff, and for our shareholder.

Again, I pass to Lou.

MR. MANCINI: Okay. Thank you, Warren, and congratulations on the success
of the business.

Our second speaker is Ron Utecht, and it\'s really a privilege to
introduce Ron. He\'s currently President and Chief Operating Officer at
TIMCO, and I think he\'s been there about a year or two, Ron?

MR. UTECHT: About a year.

MR. MANCINI: But he has had a very long career in this business with
United Airlines. Ron started off as a maintenance technician. He has an
airframe and powerplant license, and he went from maintenance technician
to Senior Vice President at United Airlines in 39 years.

He was responsible for overseeing 16,000 employees, including me, so I
was one of them, and great guy, really knows this business, and I think
he can give us some particular insights, because now, being on the MRO
side, he knows how both of those sides really work. So Ron, thanks for
being here.

MR. UTECHT: Thank you, Lou. I appreciate it. Talk just a little bit
about TIMCO. It\'s a triad, international maintenance corporation, and
we\'re headquartered in Greensboro, North Carolina. We have about 1,500
employees there. We have about 500 in Lake City, Florida. We have
several large hangar bays there. We have a small, four-bay facility in
Macon, Georgia. We have a seat company, Brice, out in the Los Angeles
area. Now we have an engine company up in Oscoda where we do -8Ds.

Most of what I\'m going to start with is really talk about the people. I
think anything we talk about or do at this conference, if it doesn\'t
meet \-- if it doesn\'t reach the mechanics, technicians, and the pilots
on the floor and how they do their job, I think it\'s probably somewhat
meaningless. That\'s where the rubber meets the road and where we really
have to make the change.

When I was in the airline, we focused on people and their skills and
their training and how well they fit into the process. We also focused
heavily on process, process improvement, continuous improvement, lean,
those sorts of activities to improve the process, and then we tried to
make the job as standard as we could among the different airplane types.
If you change the shock strut oil on one airplane, we tried to make it
the same on the next airplane where there was a commonality.

We had our own maintenance program, as United does today, and obviously
we thought it was better than anybody else\'s, and it really addressed
the needs of our airplane. And it did, and it did for many years. Since
I\'ve moved over to MRO, and I was at United when we made that move to
move the work to MRO, and we saw dramatic savings in a ball park of 20
percent of our heavy maintenance of costs. It was lowered by that
amount.

So now I\'ve moved over to the MRO, and guess what? I\'m back to the
same issues. People, looking at their skill, their training. Can they
make the needs of the job? We\'re back looking at process improvement.

We\'ve mapped our entire process of what our books said we did at TIMCO,
and then the next exercise was to map what we really did at TIMCO, and
we found out they were very different, so that\'s an opportunity.

And, of course, now we\'re looking at standardization. What\'s really
interesting to me, and it goes back a lot of years in my experience,
every carrier has their own maintenance program, and for every carrier
in the U.S., when they take their work outside, they\'re responsible
that the work on the airplane is done in accordance with their plan.
Can\'t deviate. That includes the entire plan, A to Z, from inspection
requirements to type of oil you use to the way you take an engine off
and put it back on.

While that\'s the strength of the carrier controlled internal
maintenance program, it\'s also a real negative when they bring it to a
third party, if you want to say that, or a contracting agency, because
now we have a technician that has to be an expert in each customer as
they move from one plane to the other.

The other thing that\'s really interesting is the customers come in and
audit us, of course to assure that we are complying with their
maintenance program. There\'s a strong pressure from the customer to
become like they were, but they audit us. Their program says that. It
pushes us that way.

When you look at this, the cost of the customer doing that is \-- it
costs them a lot of money to come in and audit us. It costs them a lot
of money to still maintain that infrastructure and maintain that
maintenance program. When one just sits back and looks at it, and
believe me, I realize this thing has tentacles that run over everywhere,
but it calls, I think, for the industry to begin to more toward
standardization in our maintenance programs.

Now hats off to Lou. Boeing is doing this with Gold Care, where we will
hopefully have one maintenance program for the industry. I worry a
little bit if it\'s controlled only by Boeing, because then it\'s going
to cost more than we can afford. You know, I really believe the right
way to do that is an industry council that is like our \-- oh, you know,
when we first buy or build an airplane, we have an MRB, but keep that an
active, ongoing MRB, where we change that maintenance program.

My view of it when I was in the airline, if somebody\'s doing something
different than we are, if our engineer said we need to look at this more
often, and we\'re not, I\'d like to know that. I\'d like to know why,
you know. So I think that would be a very, a good thing.

If we could come to a standard maintenance program, the airlines can
save a lot of money in the infrastructure that has to produce that
constantly and maintain it constantly. We could have common reliability
reports. To me, it\'s \-- and I\'ve seen it happen. An airline buy old
airplanes, go back and pick up the original MPD, and present that to
their maintenance provider as their maintenance program.

Well that, there\'s a gap of 25 or 30 years of airplane knowledge
that\'s gone. It\'s not there, and they\'re trying to maintain an
airplane, and they have none of the knowledge that all of us have
accrued over time about how to maintain that airplane or what fails and
when it fails. Somehow, we have to get this knowledge as public data
where we all share it.

So if we standardize our maintenance programs, how we can begin to
collect data from that standardization and share that data as an
industry. And we were talking, listening this morning, talking about
data and what do you do with data. Well, you know, data\'s useless if
you don\'t \-- if you can\'t get it standardized and in some form where
it\'s useful. It\'s like collecting sea water.

I think the next major step in doing that would be if you look \-- it\'s
easy to do with a new airplane. It\'s more difficult to do with an aging
airplane or an airplane we already have, but I think it would be
relatively easy to go back to our MPD, take our inspection job cards,
and standardize those to begin with.

And then as we begin to get the findings from the standardization of
those inspection cards, make that a public database where a mechanic or
inspector, when they go out to do an inspection of a pylon on an
airplane, they can look and see what everybody else has been finding out
there. The power of being able to do that means that you, you know, when
you have a brand new airplane, you don\'t have to learn all that.

You know, and I go back to the days that I was Chief Inspector, and I
had an inspector named Norm, and Norm was a very good inspector, just
had about as gruff a personality as an inspector can have. Unless
you\'re in the business, you don\'t know how to describe that, do you?

But Norm was a heavy smoker, and what Norm really liked to do is he\'d
walk out, and he\'s look at the \-- these were DC-8s. He\'d look at the
DC-8 for maybe 15, 20 minutes. He\'d walk around with his flashlight,
kind of look up above him, and he\'d go back in the break room, and
he\'d sit down, and he\'d get his cigarette and his coffee, and he\'d
sit there, and he\'d make 50 notes.

And, you know, so I\'d go down and talk to Norm, you know. \"Norm,
shouldn\'t you be out there?\" \"Well, I\'ve already been out there.\"
Norm had a little book. Norm knew everything that was wrong with the
DC-8, and he\'d go out there with his flashlight, and he\'d walk around.
\"Yep, it\'s there. It\'s there. It\'s there.\" He\'d come back, and
then he\'d make all those red inks. Okay. Now rarely would you have an
inspection missed with Norm. It just \-- it didn\'t happen, okay.

So you look at that model, if you\'ll allow me to call it that, and say,
\"Why can\'t we do that as an industry? Why can\'t we begin to collect
inspection findings and share those with one another?\" To me, those are
all reliability or potential safety issues. That ought to be a common
database. If I\'m going to go out and do an inspection, I ought to be
able to go to the list and find what somebody else has found.

So you carry it one more step, and you can say, okay, if I can
standardize the findings, and I go out and I look for these ten things,
I just say, \"Yes,\" \"No,\" \"Yes,\" \"No,\" \"Yes,\" \"No,\" my
inspection goes very quickly. Okay, the quality of my inspection is
better. I take each one of those items now, and I can attach a standard
repair to it.

So I think, you know, the challenge that we heard this morning was
great. I think we need to think differently about this whole maintenance
business. You know, we need an MRO. We need a stronger \-- we need to
close that system safety loop. If you look at it from a maintenance and
inspection point of view, it goes out here, we issue inspection cards,
we repair them, and it doesn\'t loop back to the OEM. It doesn\'t really
loop back to the change in the maintenance.

We\'ve got to get away from inspection being an Easter egg hunt and make
it a process that\'s appropriate. I think with that, that\'s my
thinking. I\'d love somebody to bring up questions and talk about it. It
would have to be an industry effort. No one organization can take it on.
I think it\'s something we have to do together, but somehow we have to
do maintenance and inspection findings and repairs as a public
information, and we have to share it, and we have to focus on doing it
better. Thank you.

MR. MANCINI: Great thoughts, Ron. Thank you. Before we move on, I forgot
to ask for questions for Warren or Ron. Are there any questions yet?
Yes, sir?

MR. HEATH: This is Web Heath from Boeing. What do you see in the
airlines? Do you see the willingness in the airlines to want to go do
this standardization of maintenance? It\'s a great idea \--

MR. UTECHT: Yes.

MR. HEATH: But it\'s always been a competitive issue with the airlines.

MR. UTECHT: We talked about it a little yesterday in an ARSA meeting,
and there were three different airlines there that expressed interest in
it, in the concept of doing that. The obvious questions about ownership,
you know, \"Ron, if you do that.\" Of course, they\'d like me to do it,
but we can\'t. We\'ve got to do it together. If you do it, and I decide
to go to another operator, do you still own it? Do I own it? And I think
it needs to be public. It needs to be public data, public information.

You use the \-- If you look at the auto industry, if you take your
Toyota into a repair garage on the corner with a problem, he\'s probably
going to change four or five things, and it may or may not be fixed the
next day. If you take it to Toyota, you know, the guy\'s going to look
at it, listen to you, reach under hood, and change one thing and charge
you for it. Why? Because he\'s changing four or five of those every day,
because they share that data, so just the whole process improves. Answer
your question? Okay.

MR. MANCINI: Larry?

MR. GANSE: Larry Ganse with COPA Airlines. I think \-- you know, Ron, I
think intuitively your concept is good. I mean, there are some hurdles,
but on the other hand, you never met a lady that worked for the
*Minneapolis Star*. Remember SDR\'s loop?

MR. UTECHT: Yes.

MR. GANSE: There\'s \-- and we heard some of it this morning, though, in
the plenary session about this, I guess, kind of glass cage that we live
in in this business, and what you can disclose and how you can make
something that has to become fairly standard and public work. So how do
you get \-- what\'s your idea for getting around that?

MR. UTECHT: Well, I think the only way I know is to make it \-- bring it
to the industry with OEM leadership. It\'s not just Boeing or
necessarily Airbus, but I think it\'s OEM leadership across the board on
all of the components and engine parts. We all have to do this together.

I\'m glad you brought up SDRs. Have you ever gone and looked at SDR?
It\'s interesting, but it\'s in there by part number, and because it\'s
a written narrative, they all look different, and if you begin to kind
of standardize \-- if you had an inspection part, it said, \"Look for
these.\" That would begin to become standard and I think you\'d see \--
you\'d begin to see repeats.

I mean, working as a mechanic, you know, the chief inspector, front line
supervisor, you walk out to the airplane. You have a couple dozen places
you look. You know that. You look right away, because you know that\'s
wrong. There\'s going to be something wrong. You go check and see. Well,
why can\'t we share that? Why can\'t that be public information?

I think there is today. That\'s one person\'s opinion. I talked to some
of the folks in the airline. You know, if we adopted one maintenance
program for all airlines, from my perspective in MRO, that may be a real
tough one to do, but I don\'t think the performance of the airplanes
would be any \-- I don\'t think the airplane would notice it. The
hardware\'s going to behave the same.

Yes, sir?

MR. Farea: Farea from Civil Aviation Authority of United Arab Emirates.
I think the industry have the mechanism, but I think it\'s not being
addressed in a proper way. I mean, for example, if you know the airline
and the manufacturer, they have a council related to the MRB to address
these issues, but I think the issue is not being addressed properly. So
I think, in reality, the aviation has these issues already being
addressed, but they actually \-- it\'s not being implemented in a good
way.

MR. UTECHT: I\'m not sure I totally understood that. I mean, when \--

MR. Farea: The MRB \--

MR. UTECHT: \-- you get old, you don\'t hear well.

MR. Farea: The Maintenance Review Board is from the manufacturer, the
operators, which is they share information through the change to
maintenance program, share information.

MR. UTECHT: Yes. Yes. I agree with that, but what they share is about
one-tenth of one percent. If I walk out -- Lou's got \-- we were talking
about it this morning, the myboeing.com. They do have an area that you
can go to and find previous failures and fixes, but it\'s so small. If
you \-- what you have to \-- somehow we have to get information to the
technician that\'s out in the field, whether he\'s in San Francisco,
Greensboro, or somewhere in Africa. We need to be able to get
information to him.

When you do this inspection, here\'s what to look for. I mean, if you
look at the language that it says today, if you want to take a pylon
inspection, it\'ll say if it\'s a number four engine on a -47. It\'ll
say, \"Inspect Zone 5400 with a visual type inspection.\" Okay, a
general visual, and it\'ll say, \"Pay \-- Structures and
installations.\" That\'s pretty good, but it doesn\'t tell you what\'s
happened there before, so you don\'t have the opportunity of all the
industry knowledge of what happened previously. But I agree with you.
There is a lot of information already.

MR. VALEIKA: Can I say something?

MR. UTECHT: No.

MR. VALEIKA: You\'ve got to fire all the maintenance program people.
You\'ve got to fire all the engineers. Look, the airlines grew up over
70 and 80 years that created a system and a structure, and there are
people that are doing that for a living. So to undo a culture in one day
or in one moment is very difficult. We\'ve created a system that we all
were smarter.

Look, my maintenance program is a lot better than Ron\'s ever was at
Delta Airlines for God\'s sakes. What, am I going to tell the Vice
President how stupid I am?

MR. UTECHT: I\'m working with yours right now.

MR. VALEIKA: So, you know, no, but in reality, you know, it\'s a little
bit of a philosophical argument, but the system, and I\'ll get to some
of these comments, but I really just have to comment on it, because we
can talk philosophically.

As long as we\'re talking about they and them and those other people,
it\'s easy to talk about this, but the reality is we have an
infrastructure that we built up, and you\'ve got to fire those people.
If you do this, you\'ve got to get rid of all these people and say,
\"Boeing\'s going to do it,\" or say, \"Ron\'s going to do it,\" and
that\'s where the conflict is, because until the airlines and the
airline system changes fundamentally to become a marketing venture, and
the maintenance side becomes a business on a stand-alone basis, it\'s
going to be very hard to do this.

MR. UTECHT: Absolutely. I think it\'s great vision.

MR. VALEIKA: Yes, there\'s another sort of infrastructure that we need
to think about, and that\'s the regulators, because they have their own
kind of piece of this action on maintenance programs that frequently
goes beyond the MBD.

MR. MANCINI: Good comments, everyone. One more?

MR. BOGOSIAN: This is Joe Bogosian. Maybe a provocative question, but
this morning the administrator talked about data sharing, the importance
of data sharing for the advancement of the safety culture, and then we
had the data sharing example come up in the accident investigation
discussion during the plenary session and the importance of data sharing
there. And here again we have the theme of data sharing, and what I\'d
like to throw out there, and I think a number of panelists might be
interested in commenting on this, here we have a commercial interest.

There is an OEM that\'s saying, \"You know what? We do this. We do this
well, and so why should we share our data, because what you\'re really
asking us to do is hurt our business model.\" So is there a difference
in the data sharing concept between the broad theme that the
administrator struck, the data sharing as applies to accident
investigation and data sharing here in terms of maintenance and repair
entities?

MR. MANCINI: I guess I\'ll try to answer it. I didn\'t want to have to
answer any questions. I don\'t believe on the issue that Ron has brought
up it\'s a commercial interest. We, in fact, at Boeing publish
maintenance programs for our operators. Ron is right that I think over
time we didn\'t think of the MRB as a living document.

We do make changes to our maintenance program, and what we do is we
collect a bunch of operators who are willing to participate. We got
through their maintenance operation. They give us their non-routine
cards, the cards that Ron was talking about. It\'s not the whole world.
It\'s probably usually ten, 20 operators, and we study those cards, and
we redo the maintenance program.

We have recently, in the last few years, accelerated that effort. Our
customers are dying for efficiency and higher reliability and
availability, so we took in the last four years all our fleets up to the
latest MSG-3 standards. Some of our operators have really appreciated
it. We have \-- I have a international customer that has a large -47
fleet. They were able to give a whole airplane back to the company. They
were able to close down a whole maintenance line, and their check yield
went from about 80 percent to 95 percent on their checks.

And when they did that, they came off of their customized maintenance
program. They came back to the standard Boeing program, but they did it
performance-based. They came back four years ago, and they said, \"If I
could have a C-check at 18 months and 7,500 hours, I am willing to say
goodbye to my highly customized program and tell the company I\'m going
to transition back to the Boeing program,\" and we created that.

It\'s not a commercial issue. We give it for free. So I don\'t believe
on this particular point it\'s a commercial issue, but I think what Ron
is trying to say is rather than the process that gets a bunch of people
together every few years and then brings it up to the standard, can we
have a process that\'s a little bit more real-time and a process that
feeds back down to the inspection job card level?

Why doesn\'t every inspector who does a task have a list of things that
the industry says that are very current, I might add, that he should be
particularly looking at? And why don\'t we build that whole feedback
loop? And it would be something that would have to exist in real-time,
and I think Ron\'s challenge to you and me is to take the process we
have, which is not bad, by the way, and take it to a new level? And
that\'s the challenge we heard from the FAA this morning is you\'re
going to have to think differently if the accident rate is going to go
to another threshold. That help? Thank you.

MR. UTECHT: Thank you, Lou. I couldn\'t agree more.

MR. VALEIKA: Lou, tell me how does Boeing \--

MR. MANCINI: How do I introduce you?

MR. VALEIKA: Tell me how does Boeing spell \"free\"?

MR. MANCINI: Well, Ray, I\'ve got to tell you, when you were at Delta,
you taught me. I\'ll give it to you free.

MR. VALEIKA: I was gone for two years. I missed free. Where did this
come from?

MR. MANCINI: I learned from you, Ray. Please, Warren.

MR. CHIM: Lou, I would like to add some words on the data sharing. I
would believe regarding the safety management system or the data
sharing, it should be those occurrence and also those that you miss.
Occurring is something already happened. It is the tip of the iceberg,
already above the water level, and also those near misses could just be
below the water surface, and it is the focus that we should emphasize on
the reporting culture.

And for what Ron proposed, it is the learning culture. It is to enhance
the one individual airline or one individual MRO with some particular
experience on the inspection findings that we can collectively learn and
share amongst the aviation maintenance industry. So it is the learning
culture.

With this reporting culture, with this learning culture, trust culture,
we will equal to a safety culture, and it is important for ensure safety
and reduce accidents.

MR. MANCINI: Thank you, Warren. Okay. This is exactly what we wanted to
happen.

MR. HEALY: I\'m Jerry Healy with the NORDAM Group, and what Ron brought
up is a really fantastic idea, but we invest a lot of money in the
engineering and our DER staff, and a lot of times those repairs that are
over and above what the SRMs are give us the competitive advantage in
the industry that makes us who we are.

So we invest a lot of money developing these new repairs that are above
and beyond and require DER approval. So the challenge would be the
transparency of this data would be great, but like I say, it does create
a competitive advantage for companies that are in the MRO business.

MR. MANCINI: Good comment. Thank you. Okay. As you can tell, he hasn\'t
been quiet. Our next speaker is Ray Valeika, and I wanted to introduce
him, but you can tell he\'s got a lot on his mind, and he\'s got a lot
of energy. I\'ll tell you. This is \-- I almost feel humbled having to
introduce Ray Valeika to this audience, but Ray has just got a
tremendous background in this business.

He was, as you have already heard, he was Senior Vice President at Delta
Tech Ops and did a wonderful transformation and brought a lot of
innovation. His list of industry awards go on for about a page. He won
the ATA Nuts & Bolts Award in 1996.

He won a Laurel Award for human factors from Aviation Week, but
particularly he\'s got a long list of interests and achievements in
human factors, and in that sense, very focused on the individual like
Ron Utecht. He won the Marvin Whitlock Award. He recently got a Lifetime
Achievement Award from *Overhaul and Maintenance* magazine.

He came from Delta as Senior Vice President of Continental Airlines. I
believe, if I have my memory right, he went to Continental as a Vice
President from Pan Am, so tremendous background, and we\'re looking
forward to what you have to say, Ray. Thank you.

MR. VALEIKA: Thanks, Lou. I always like to pluck a beard out of \--
pluck a hair out of Boeing\'s beard or General Electrics beard
occasionally just to keep these folks honest.

I retired a couple years ago, and what\'s really great about retiring is
that now I can be free. I\'ve never been afraid to say things, but now I
can say more things, and however, since I\'m trying to do consulting,
I\'ve got to be careful, because I may blow my wad and not be able to do
any consulting work with some of my comments, because I think, and I
guess Friedman spoke yesterday, and I think he used the term of \-- what
was it \-- destructive technology on steroids in his book, *The World is
Flat.* When I read that book, it just absolutely made me think about
maintenance.

You know, unfortunately, I started about 40 years ago, so I got to see,
you know, the real introductory of the jet age, really getting the tour,
the wide bodies, Pan Am, and I really loved this career. It was great,
but what I\'m doing now, I love it just as much, because it\'s a
different challenge. It\'s a different intellectual pursuit.

What\'s really interesting is in that career that I spent, and Ron and
folks like that really made it a special career because the integrity
and the confidence we have with each other when we talked about airplane
problems, or David Joyce called me one day on the golf course and said,
\"You\'ve got to change 17 engines over the weekend,\" and we swapped 17
engines at Delta Airlines over one weekend, because he called me and
told me, and we didn\'t debate it, but I had to finish the round of
golf, so I didn\'t want to debate it.

But seriously, it was the kind of relationship that we built up, and so
safety was never something, and Nick and I go way back, and if somebody
told you something, it was right. So it used to be a little more of a
club of intellectually competent people that entrusted each other, and
as this industry grew, the system we built, unfortunately, and mostly in
the United States, has become a burden in some ways.

We created this great system, but over the years it\'s really become a
burden, and the burden is that we\'ve depended on Norm, who had all the
knowledge in his head, and so we created the individual as the center of
the system, and as better information technology arrived, we depended
less and less on that person, but we kept paying him more and more
money. So we had this conflict between labor and people, because we
depended less on individual knowledge and more on knowledge based on
systems, et cetera.

In addition to that, the regulators and us, we created the system
together. You know, regulators didn\'t come out on their own one day and
said, \"We need an MRB\" or \"We need PMA or something.\" These were
happening. We worked together and developed the system, so the
regulations today are a reflection of the system that we built up.

And so what\'s happening is that the system that we built up now is
being torn down to some degree, and I\'m going to focus more on the
United States. And when I say torn down, I don\'t mean that in a bad
way. It\'s being changed in that the airline system, which is now a
burden, is being disbanded.

Airlines, in my opinion, will not be doing maintenance. They will do
some maintenance in the U.S., but certainly not to the level that
maintenance has been done. We\'ve already seen that. The greatest
outsource market in the world today is right here in the United States.
We have freed up, from union contracts through the last bankruptcy, two
to three thousand airplanes. That\'s more than all the airplanes
combined in China, in India, in the Middle East.

We\'ve freed all those airplanes up that are currently done by airlines
to be outsourced, so, you know, this is the golden opportunity for
outsourcing is the United States. It\'s not all these new start-ups.
Just think. Between United, with four or five hundred airplanes going
outside, Delta, four or five hundred, Northwest, three to four hundred.
These are thousands of airplanes that currently \-- and so the system is
fundamentally changing.

So as the system changes, what\'s happening with the regulations? Are
the regulations going to change? And some of these things, what I\'ll do
is I\'m going to ask you questions when I\'m giving you answers, because
I think these are issues I do want to discuss.

So we have created a really great system. The system we\'re going to is
going to be just as great. It\'s going to be a lot more market-driven,
and once we get that settled out, I think the issue that will drive us
to success will be can we integrate, like each individual airline
integrated a very good system. It didn\'t take a lot of FAA inspectors
and a lot of FAA surveillance to manage a Delta Airlines or to manage a
United Airlines, because they could go to one place. The log books were
there, et cetera, et cetera.

It now is being disbanded all over the world. We have cultural issues.
We have language issues. We have all kinds of time issues, so all of
these issues now present a whole plethora of different problems, and
what\'s really ironic about the United States, to some degree, and I
look at my friend from Lufthansa.

If you look in Europe and in Asia, airlines have built very, very strong
business out of maintenance. Lufthansa Technic is a world class
operation with \$3 billion or so, roughly, in revenue and very large.
KLM-Air France, another airline operation, you know, Singapore, another
airline-related operation, and SRT used to be Swiss Air, yet look at the
United States. United States, none of the airlines are \-- you know,
we\'re diddling with it, but we\'re not really building businesses out
of maintenance. We\'re all doing some in-sourcing and outsourcing, but
certainly not to the degree that the Europeans and others have, so while
United States is divesting itself, other places are investing in
themselves.

So a couple of big issues that are out there. Number one issue is there
are 17,000 jet aircraft, about 6,000 in the United States. They\'re
going to grow to 25,000 in ten years. The maintenance business is \$40
billion. It\'s bigger than Boeing. It\'s bigger than Airbus, and it\'s
going to grow to \$60 billion, so, you know, this kind of business is
not going to be just left to drift alone. And yet, in the United States,
the biggest engine OEMs, the biggest maintenance provider, as my friend
here on the right, is about a \$300 million business. It\'s peanuts.

If you think of \$300 million, the fragmentation is so enormous here
that the obvious thing that\'s going to happen is there\'s going to be
consolidation. There\'s going to be augmentation. Things are going to be
put together, and there\'s going to be a whole new business model arrive
out of that. The basis for that business model will be fundamentally
information. Maintenance is all about information and not about wrench
turning.

The reason we haven\'t done all of these things, to some degree, is none
of us have information systems that talk anywhere more than inside their
little vertical silos. People have not invested information money in
airlines. Take a look in the United States, and ask every single
maintenance executive what is his budget for capital investment and what
is his budget for information, and you\'re going to be appalled.

What is the budget for information in reservations, in revenue
management, in all the fru-fru stuff? It\'s pretty big, but in the
airline maintenance side, we do not have those, so we had little systems
to plan, little systems to track parts, but none of these systems really
are truly integrated.

We got by in the past, because we had monks. I don\'t know if you follow
history, but, you know, in the Middle Ages we had monks they used to
track down in books. At Pan Am, when I started, we had monks in the
basement in these little cubicles. They used to write every little thing
down.

That was our information system, but the MBAs came, which were a bunch
of barbarians, and they killed all the monks, so, you know, we kind of
lost a lot of the information. But that was an information system. It
was very good in the past. We had paper and all that, but we\'ve never
developed comprehensive, integrated information systems that track three
things.

What kind of information system do you have to have? One is you\'ve got
to track parts. Most people have some information system. Where are the
parts? I guarantee you my airline friends out here probably know where
about 85 or 90 percent of their parts are. The other parts are
somewhere.

The second thing you\'ve got to have is a system that tracks your
maintenance program where it is. What\'s the status of the maintenance
program relative? And the third part of the maintenance system is what
is the reliability of the part that you have the maintenance program on?
So you\'ve got to tie all these together, so that means findings and
information, all that.

There is no such thing available. Now people will come to you and tell
you that there is, but there isn\'t, so information will set up the
integration. Information will set up the new models, but the
fragmentation is very significant.

So we have the airlines in the United States disbursing maintenance. We
have regulations that really now are going to have the reality of the
New World. There\'s nothing bad, and there\'s nothing good, but I think
the regulations, quite frankly, are lagging this, you know, this
disruptive system that\'s occurring.

And we\'re going to have politics, folks. Don\'t think that politics are
not going to play a big role in outsourcing. Last week, there were 14
congressmen that wanted GAO to look at outsourcing and terrorism, so
next thing we know, we will not be able to use anything more than a
four-ounce cleaning bottle to clean airplanes, because you can\'t bring
those on airplanes.

So we\'re going to come up with a new system. There are 14 congressmen,
you know. They\'re looking \-- is outsourcing now an opportunity for
terrorism? If the Democrats get in, there\'s going to be new people
involved in the aviation subcommittees, not that it\'s good or bad or
\-- it\'s going to be new and different.

There\'ll be a different attitude about outsourcing. The aviation
subcommittees will look differently at outsourcing with the Democrats
than they do with the Republicans, so there is a political issue out
here in the United States, and it will affect outsourcing one way or the
other.

So having said all of this profound stuff, none of you have been taking
notes. I really want to summarize by saying there is nothing unsafe
about outsourcing, and there\'s nothing safe about outsourcing. It is a
system that you put in place, just like we have airlines, you know. You
create a system that works, and it\'s great.

So in itself, outsourcing does not lead you to any kind of conclusion
like, \"Oh, my God, what\'s going to happen tomorrow?\" but outsourcing
will lead us into issues, because it\'s going to be different. Will the
MRB in the future be the airlines, the OEMs and the manufacturers and
the FAA, or will the MRB of the future be the MROs, the manufacturers,
and maybe the airlines? Or maybe the airline won\'t even be there, so,
you know, it\'s conceivable that the system that we have in place will
fundamentally be altered, and it\'s going to scare a lot of people.

Well, I wasn\'t whimsical, but in order to change the system, it is
going to affect a lot people, so certainly there\'s going to be a lot of
resistance. So as the system changes, I think we have a lot of
challenges, and I think that having grown up with the system, built the
system, and we\'re very proud of it, I think the next phase will be now
a maturation of the system whereby we\'re going to integrate through
information.

We\'re not going to be dependent on the location, because information
now makes you location-independent. You can do an airplane at HAECO. You
can do another airplane in Lufthansa. You can do another airplane in the
United States, and if you\'ve got the same standards and data system,
it\'s going to capture it. You can have the same pictures. You can have
the communication systems that are all out there.

So I see it coming. I\'m advising differing groups on something that\'s
going to aggregate the MRO system in the United States. I think the
areas that it\'s already happening, obviously, are air frame
maintenance, very labor intensive. I think it\'s already occurring.

I think the second phase will be in the logistics area, because many of
the large companies can invest in the hardware, and it\'s easy to do,
and I think so the areas that I think most of the change will occur will
be primarily in air frame and then components. I think the engine part
will be more difficult unless you buy airline shops, because it\'s a
very high investment, and so the GEs and the Pratts and the Rolls Royces
and other folks will continue playing dominant roles in the engine area.

But I think eventually, as the information progresses, the next area
that will transform into a business venture will be engineering,
maintenance programs, all of those pieces, so that you then have what
Ron is envisioning as a more standard program.

Just one last thing I want to say, I contend that all maintenance are
the same today, and the reason they\'re different is because we capture
the information differently. If you really think of it, an airplane is
an airplane is an airplane, and when you say it in spec stations 1480 or
whatever, we write, you know, different nuances and language. We write
little different things, and if we really tracked it down to the basic
MRB, the fact of the matter is as much as we complain about all these
little nuances, fundamentally we do the same thing, but we put different
codes on, because we\'re so much smarter than him.

Delta\'s just obviously superior to United, so we can write much nicer,
and so we do things differently than they do, but fundamentally, it is
an airplane, and it is the same place you look, and you do these things,
and with a good, solid information system, I think you could convince
one operator that you\'re doing his program when, in fact, you\'re doing
the standard program, but that\'s to be seen.

So other than that, I just want you to know St. Louis Cardinals won the
World Series. We did not spend \$200 million like the Yankees, and I
grew up in East St. Louis, Illinois, and it\'s great too \-- growing up
in East St. Louis, Illinois, you always like the Cardinals, and no
matter where you go, it\'s better. So that\'s my comments.

MR. MANCINI: Ray, great job. Questions at this point? John Hickey?

MR. HICKEY: Hi, John Hickey of the FAA. Ray, you \-- 40 years experience
in many of the maintenance capacities, and you\'ve had a pretty close
observation of the surveillance models that the agency has employed for
the 40 years. So my question, though, is only not whether they were good
or bad, but how do you see now the transformation that you seem to be
conjecturing that might occur in the future with maintenance, both with
the carriers and maybe the OEMs\' involvement and the MROs? What do you
see for FAA\'s need to change and surveillance models to be prepared to
meet that?

MR. VALEIKA: Well, I really think there\'s going \-- first of all,
there\'s going to be a major, major issue that we\'re going to have to
resolve, obviously. From what I see, if we really look at the
surveillance model of the FAA in a single airline, it really is a good
model. I mean, we can diddle around that the guy\'s a jerk, because he
kicks tires, and he doesn\'t write well, and the airlines hide things,
but fundamentally, it is a sound model. You know, obviously, it\'s
sound. We are not killing people, so, you know, it\'s working, so it\'s
a fundamentally sound model.

What I envision is an information system that, instead of just focusing
on that airline, will now focus more on individual airplanes by serial
number, as an example, perhaps even engines by serial number. And so
what I envision, whether it\'s doable or not, is instead of overlooking
at the airline, you\'re going to overlooking at the equipment, what\'s
done to it, what parts are, and so forth and so on.

I think the information systems today are strong and rigorous enough to
do that, so in other word, the FAA, if their aircraft is 467PA \--
we\'ll use Pan Am. You may, in fact, track those wherever they are, and
it could be that some of the data from that airplane would be at Boeing,
and some would be at an airline somewhere else, but that data will be
congregated at the airplane\'s serial number level, as opposed to
necessarily the airline level.

So from an airplane information, I think you\'re going to be tracking
maybe the patients. I look at airplanes as people going to a doctor and
having medical records, and then I see the CDC, which to some degree
might be you, getting some of the records and seeing if diabetes is a
big problem, because today, you know, in some ways it\'s really stupid.

Some of you have heard me speak before, but, you know, if we treated
people like we treat airplanes, we would take all men\'s kidneys out at
50 years old. We\'ve got to take a kidney out, because, you know, some
people have failed kidneys at 50. Therefore, they\'ve all got to come
out. But I do think that the future oversight system will probably be
more specific airplane related, as opposed to necessarily airline
related.

We\'re worried about the condition of the airplane and how it\'s
operated, so you\'ve got an operation side, which you\'re going to have
to oversight, but you also want to make sure that the airplane is in
right condition to be commissioned. I don\'t know if that\'ll happen
soon, but that\'s the question, and I can see that.

MR. MANCINI: Sure, John.

MR. HICKEY: I understand. I agree, except I think the surveillance of
that airplane might be more of the responsibility if the maintainer
might be doing more of that, and then the agency\'s surveillance model
would be towards \--

MR. VALEIKA: I do agree.

MR. HICKEY: \-- your system for doing that. Would you agree with that?

MR. VALEIKA: I agree fully with that. I mean, that, to me is saying that
you\'re going to have the information available to you to make sure
that, you know, that patient had proper medicine and so forth and so on,
but somebody\'s going to have to keep that system. I agree with that.

MR. HICKEY: And I\'m going to go for a three-parter. And would you agree
that that would be enhanced \-- the ability to do what you just said
would be enhanced if we have, as you\'ve mentioned to us before, this
some level of an RFID such that we have a better understanding of what
every airplane actually does look like on any given moment in time,
which I think today \--

MR. VALEIKA: Oh, clearly.

MR. HICKEY: \-- we realize it doesn\'t.

MR. VALEIKA: I don\'t think we\'ve even touched RFID as it applies to
maintenance. To me, you know, the potential of RFID, it\'s just one tool
of this total information system, but certainly RFID can instantly tell
you what\'s on the airplane, so once you know what\'s on the airplane,
you can see a history and so forth. But I agree.

I\'m not necessarily saying that you\'re going to sit in Ok City, you
know, and have these things pop up, but I am saying that there will be
data available for you, not only to see what each airplane is doing, but
maybe out of that data there will be some trend analysis that will be
available to the airline system.

Somebody was asking a question about, you know, freedom of information.
Do we want to tell people what\'s going on? One way we don\'t have to
tell people what\'s going on in each individual airplane, but we can
tell them what trends. So, you know, possibly the answer to that
question \-- I don\'t know who raised it earlier, I think, when you
brought it up, but if we have this data sharing, maybe the data sharing
is at the trend level. The FAA has details, specific level. The operator
and the MRO have specific level. There may be \-- you know, for CNN news
you say, \"Okay, here\'s the trend.\"

MS. MACLEOD: Sarah Macleod \--

MR. VALEIKA: I can say all of this stuff. Who, you know, I mean, who
knows?

MS. MACLEOD: I\'m fascinated. Sarah Macleod, Aeronautical Repair Station
Association, so obviously I have a vested interested in this
conversation. Information sharing is going to happen, one way or
another. I think that that\'s going to be the regulator\'s job, and I
just wanted to point to this conversation.

The FAA and national air authorities control design, production,
operation, and maintenance, and their job is to oversee it. Our job is
to do it right in all of those areas, so I\'m not sure that the
requiring us to do our jobs better is what we\'re really talking about
all the way here to, you know, safety. That\'s the focus of all of our
jobs, and a rising tide, you know, raises all ships.

The more we can share, the more we know, the lower the cost is for all
of us, the more efficient we become. It won\'t cut off the NORDAMs of
the world, because repair is different than what do you look for, and
what do you find, and when it needs to be fixed. Those are much more top
level than the money area where you can make these individual decisions
to do a job better or to check it more often or to \-- you know, those
are going to always be residing with the air carrier and the MRO that\'s
doing the work.

But Ray, listen to us. We\'re doing 60 percent of the work now. There is
lots of aircraft out there that we created their maintenance programs
for them, and we monitor their maintenance for them. So the engineers
aren\'t going to lose their jobs. They\'re just going to move to another
organization to help us do those jobs.

I mean, it\'s happened already, and we\'ve got to put \-- we\'ve got to
shift our systems to accommodate the MRO. Should they be sitting down
with the airlines and the \-- I mean, Norm\'s book is what we need, and
the only person that has that book is the MRO. I always threaten people
when I go out to do inspections or in audits that I want to get in their
drawers. That\'s where their \-- I\'m not talking \-- thank you.

MR. VALEIKA: I think that \-- I concur with you. I think the difference
is that your \-- I don\'t completely agree with you that it\'s all
FAA\'s thing on the oversight anymore. I think what\'s happening is
getting so darned complicated in a sense that, because it\'s being
spread out.

I think some of the responsibility will rest more and more \-- not
traditional responsibility that we\'re used to, but new responsibility
\-- on the repair stations. You\'re going to have to have more
information gathering available stuff than you currently do today.

MR. UTECHT: Yeah, I don\'t think it\'s system safety if we\'re not all
involved. To be truly be system safety, we\'ll have to all be involved.
It has to make the circle from the bottom to the top and from the OEM
out to the repair technician back to the OEM, back to the engineer who
designed it. I mean, a lot of that happens already. That\'s how come
airplanes improve so much with each new model. Yes, that\'s the system.

I just think we need to intensify what we created a long time ago, and
we need to do it together. I mean, to me that\'s the answer of an
airplane that\'s an aged airplane that is flying on the continent of
Africa or continent of Africa, and they don\'t know how to maintain it.
They don\'t have the history to it. They can\'t access what we learned.
It all needs to be one, and it\'s public data, and I don\'t see it.
Safety should not be a competitive issue.

MR. MANCINI: Well, this is really great, because we were hoping \-- we
all met earlier, and we said, \"Are we going to have an engaged and
interesting audience?\" and you all are just wonderful, so thank you so
much for your participation. But I do have to manage the clock a little,
and by the way, I\'ve been warned that there\'s no overtime allowed, you
know. It apparently has something to do with the translators.

So let\'s move on to our next speaker, and just a great guy, David
Joyce. He\'s Vice President and General Manager of Commercial Engine
Operations at GE, and you\'re going to find out as he speaks with us
he\'s a real engine guy. And I used to get phone calls from David like
Ray got, and you know there\'s a whole lot of trust in this business,
and when David called, you listened, and it was a great communication.

David joined GE in the engineering department, program management, in
1980. He then moved on to Manager of Engineering Quality and Processes.
He\'s a black belt in GE engineering design, so be careful not to offend
him. In 1998, he was appointed General Manager of Customer and Product
Support, and that\'s where we all got to know him really well, because
he was taking care of all the customers out there, and we really
appreciated his leadership.

More recently, David joined, served as the General Manager of GE\'s
small commercial engine operation and was named to his current role in
November of 2002. David, it\'s all yours.

MR. JOYCE: Thanks, Lou. It\'s always such a pleasure to follow Ray on
these panels, and he always comments about plucking hairs out of the
beards of the OEMs like Lou and I. I\'d like to suggest that if you look
at my hairline, it\'s been a little higher than my beard, and most of
that is gone as a result of working with Ray over the years.

But I\'m going to pick up on a few things that both Ron and Ray and also
Warren have had to say so far about our perspective on MRO, but I\'m
going to transition it to the role of an engine supplier, if you will,
in this world. And, you know, it\'s very, very similar.

I mean, the dialogue that we\'ve been talking about MRB, about having
maintenance programs, MSG-3 in our case, we already have the steering
groups formed for the 787, Lou, that are working through what that
maintenance program looks like together. But in the case of the engines,
it\'s a very, very highly specialized, as you know, engine maintenance
environment, and it has grown up as a collaborative network from the
beginning of time.

I mean, if you really take a look at where we\'ve been on engines, we
have never not collaborated in order to create the best practices in a
global environment from the biggest operators that were doing their own
overhauls and their own care of their engines, and that feedback loop to
us as designers and the OEM and the support team was very, very, very
tight, very collaborative. And today\'s standards that we all enjoy of
safety and reliability and dispatch capability on the engine side all
were born from a very, very collaborative environment.

You know, you go back to the Atlas Group, the KSSU Group. You go to
Lufthansa, United, Delta, American, all of which would find themselves
in a room at all operators conference, arguing out maintenance practices
on a CF6-50 or on a CF6-6 before that or whatever the engine may be. And
that really has served us well, and it continues to serve us, because
that collaborative network exists as much today as it did back when we
started this business.

It\'s harder today because of the fragmentation of the equipment to
many, many more operators than we used to have, and many of those
operators now, having only five or ten aircraft or three or five
aircraft versus the big fleets where experience of seeing something in
the engines over and over and over again we could rely on, and we could
have Ray call us up and say, \"Hey, I\'m seeing something in the
compressor, and I\'m a high cycle operator,\" or ANA or someone else,
and then they could give us a heads-up on something that we may see
throughout the globe within the next year, year-and-a-half, depending on
how many cycles were on the equipment.

And using that as a way of creating a maintenance program that was
preventative without having data systems back then that allowed us to
collect the data in a more formalized way was really the way the network
grew up and the way we all learned to operate.

Now to give you a perspective on how global it is, the airlines
themselves overhaul. For example, GE and CFM, the engines in the field,
we\'ll see about 3,800 shop visits on CFM and GE powered engines this
year, maybe a little more. Somewhere around 50 percent of those will be
done by the airlines that own it, that have their own overhaul
capability and are very, very well capable, I should say, of maintaining
and do that within their own shops.

About 35 percent of those engines will be done by either Snecma or GE or
the OEMs in general, and then about 15 percent will be done by
independent overhaul, very specialized independent overhaul sources like
MTU, like Standard Aero, like HAECO, et cetera. That\'s kind of how the
numbers spilled out.

And to give you a perspective on the reliability and safety since the
beginning of this system, you only have to go as far as look at the CFM
engine, which, when it started re-engine in the DC-8s, we were lucky to
get 5,000 hours out of that motor, and now we\'re getting 20,000 to
25,000 hours on first run. And that is the collaborative, collective
competencies of this industry as it feeds back to the designers and the
maintenance programs that allow us every day to make improvements, which
then create the real value in the marketplace for all the people flying
the equipment.

So I\'m really pretty satisfied with the global nature of the way this
business has grown up, and I agree with Ray that there is no such thing
as bad outsourcing as an entity by itself, as long as this network that
works together from the engineers to the maintenance providers to the
operators and back to the engineers continues to be a very tight link.

But I think the challenges as we go forward are what were referred to by
Ron, the pressures on these critical resources that exist redundantly in
some cases in this system to assure ourselves that we look at things and
communicate correctly.

As fleets fragment, as operators grow, as those resources are under more
and more pressure, we have to look for much more efficient ways of
creating the same networks with the same information, and I think
that\'s where this whole idea of information technology really does
become an essential element of us maintaining, let alone growing our
record of safety as we continue to look out for the growth of this
industry.

To give you an idea in the engine business, we\'re all working on now
prognosis and diagnostics packages that independent of anybody will look
at streamed data 24 hours a day, seven days a week. They move themselves
into algorithms that are very sophisticated, that can tell trends, that
exist on that serial number engine that says, you know, two flights ago
that engine was operating different than it is now.

And so we do now propose situations by serial number as a way, and not
having people look at it 24 by seven, but literally having a
sophistication of the algorithms do that for us, which is just the
beginning of trying to figure out how do we get to Ray\'s dream of, on
the new equipment, looking at each one of these engines as an entity
unto itself, being able to have a 24 by seven monitor on it and really
recognize when that engine is behaving differently than it did even the
cycle that it flew before.

And that should require some proactive maintenance within the next three
to five days to go look for something, whether it be a variable state
vein shift that has occurred so that the speeds of the engine are
running differently, and that may be a preemptive issue for a coming
failure, or whether it be a shroud that\'s starting to droop in a flow
path, and therefore the temperatures in the turbine look different than
they did two flights ago.

And we have the capability to \-- or it could be a vibration signature
that we can tear apart and take a look and see that we don\'t like the
way a bearing is wearing, and we could eliminate potentially a bearing
failure in two to three flights as a result of looking at it.

So I think, for us, we in the engine business are looking very much at a
future that allows us to create this very collaborative network, but do
it in a much more efficient manner that not only maintains the current
safety standards but grows those standards and does it through these
tools and processes that keep us pretty well linked together without
needing, necessarily, this drain on these resources that have done it in
the past. That\'s it. That\'s all I\'ve got.

MR. MANCINI: David, great job. Thank you. Questions, comments for David?
Terrific. Wow. Boy, that was really good.

MR. JOYCE: Thanks.

MR. MANCINI: Boy, that was really a good job.

MR. JOYCE: Man.

MR. MANCINI: Okay, so let\'s move on to our last panelist, Satoshi
Yokota. He\'s the Executive Vice President of Engineering Development at
Embraer. This is a great background. He started in 1964 as an avionics
research engineer. He then moved on to be an engineer at a regional
airline, and by the way, that was his day job, because I think his night
job he was electronics professor at the same time.

He joined Embraer in 1970 in the area of avionics and electrical, went
on to be the section head and manager of test division for the Embraer
145, went on to be director of Embraer programs for the 145, moved to be
Executive Vice President of Development and Industry, responsible for
engineering, production, procurement, and programs, where then he was
responsible for the launch of the Legacy business jet and the Embraer
170/190 family of jets. In 2005, he was appointed to his current
position, where he\'s supporting Embraer in the very light business jet
market. Wow. Satoshi, thank you so much for being here.

MR. YOKOTA: Well, thank you. Since, I guess, the aspects of the
maintenance MRO are being very well covered by the previous speakers,
I\'ll move on to the manufacturing side and globalization and safety
aspects. I think Embraer is the proof that globalization did not have
anything to do with the safety. It doesn\'t affect safety.

If you look back at when Embraer was started in 1970, Brazil was a third
world country, with barely any kind of industry, including automobile
industry, which was just starting. So if you look from that perspective,
and you say, \"Well, how can you believe in an aircraft built in
Brazil?\" And the fact is that the Bandit was one of the workhorses of
the commuter industry after the regulation came in 1978 and competing
against products built in Texas, Kansas, Canada, Sweden, England and so
on, and it was probably one of the most successful commuter aircraft at
that date.

What the succeeding aircraft like the Brazilia, the 145 and more
recently the 170/190, have shown that it does not leave anything
compared with the competitor aircraft of the first so-called first
world. In fact, our track record for safety shows that it is equal to or
better than the others in each respective category, considering the
design when it was designed, 1970s, 1980s, and so on. This is public
data, so I\'m not saying anything new.

So being from the third world \-- now we should call it the developing
world, I guess \-- does not have to do anything with the safety of the
product. In fact, what we have seen is that operating conditions were,
how, and so on, have much deeper effect on safety than the product
itself. In even the newest products, we can see differences in
reliability airline to airline, from airline to airline, and, of course,
country to country, that may be even more so.

So there are several factors affecting safety and not necessarily one
factor affected directly. There is a direct correlation between
globalization or procurement from not-so-developed countries and the
safety of the product itself.

What we \-- besides that, since 1992, when we launched the 145 program,
we set out to do a very strong partnership program around the world with
suppliers in Chile, Spain. At that time, Spain didn\'t have quite such a
strong aerospace/aeronautical industry. Now it\'s much stronger. In
Belgium, in France, and so on and so on, we were able to set up a
network of suppliers, which were doing their job right and allow us to
have a safe product.

Of course, we had teachers, of course, like Boeing, where we built some
parts for Boeing in 1970s and 80s, and we learned with them how to
manage, audit the quality of the product which was delivered to us. You
need to do oversight, of course. You need to follow. You have to audit
their quality systems. You have to audit their production system, the
maintenance manual, and so on.

Not necessarily that is tied with the power of the local authority. It
is important, certainly, and we need the referendum of the local
authority, but it\'s in itself is more how the systems in-house is
built, how strong it is, what is the commitment of the management for
the quality, and so on. And, really, in this business, which is a
long-term business, either in manufacturing or in operations, you don\'t
buy an aircraft to use for two or three years. You buy it for 20 or 30
years. You don\'t design an aircraft to build 50 of them for one year.

What does that mean? We depend a lot on image. The safety record, the
operating record of the product, of the airline is fundamental, and if
you have safety issues affecting your image, you\'re dead. Your business
will deteriorate, and there are several examples of airlines and OEMs
which didn\'t do quite well because they had some safety issues or
reliability issues.

So you have to protect the safety of your product. You have to assure
it, and how do you do that? With oversight. You have to follow what each
of your suppliers is doing, be that in manufacturing or in maintenance.
It doesn\'t matter if Legacy Airline A goes to Vietnam or wherever or
Costa Rica, et cetera, to do some maintenance work. It\'s their
responsibility, the airline, or in our case, the OEM, to assure that the
product is being done right, because in the end, it\'s your product.

It\'s your image, your insurance costs, your RBG, your everything which
is being affected, and that affects your bottom line. So you have to
assure that you have a safe product, and if we do it right, there is no
difference whether that\'s being done in Southeast Asia, in South
America, Europe, Eastern Europe, or Western Europe or U.S.

Of course, considering differential costs of each location, we have to
look for the right balance, right, where you have the lowest cost, but
the safety and the quality which you need. So my point of view is that
globalization doesn\'t have any correlation with safety. Thank you.

MR. MANCINI: Thank you. Questions and comments, please. John?

MR. HICKEY: Satoshi, I want to thank you for coming up here for this
conference. I think this panel very much values your perspective, so I
have a question for you or really anyone on the panel is the nature of
this conversation really is around there is very much a widely
acknowledged change going on in the business model, and I think we all
know it.

Maybe we all have different perspectives on where it\'s going five, ten
years from now, but if I ask you if there was one thing that the FAA
could do, either right away or fairly quickly, that could remove a
barrier or to help facilitate the movement of what is going on in this
business without compromising safety, but, of course, intended to help
make it more efficient in the globalization of either maintenance or
manufacturing, what would that one thing be?

MR. CHIM: Responding to your questions, I would say it\'s appropriately
change the rule, because, say, for somehow, we are not talking about,
say, our contracted maintenance. It seems to be new thing in the U.S. It
is because in the 121, the FAR 121, it allows the AOC, the air carrier,
to carry out maintenance, so it give the impression that maintenance
should be part of the airline\'s job, but in the other part of the
world, like in Hong Kong, as I mentioned, 15 years ago Cathay Pacific
Airways totally outsourcing everything to HAECO. I think it is the case
in Europe or in Australia.

So in Hong Kong or in Europe, the AOC is just to fly the aircraft. If
you want to maintain your aircraft within your AOC interim, you have
also to apply the 145. So it will help to give the perception to the
general public that airlines should not be the only service or the
source for maintenance, but the 145, no matter if in-house or
externally, should be the ones who do the maintenance. It will help a
lot.

And second response to your question, previous question is about the
role of the regulator. In today\'s world, like HAECO, we\'ve got over
100 external audits a year, from whatever is airline\'s QA or the
regulators. Of course, from this external audit, we can learn everything
from all over the world, but whether this, all this hundred audit add
value to safety, I would have doubt.

So from the regulator, the role of the regulator should have the
oversight on the system and the process, rather than the individual\'s
task or individual product. Ensure the airlines, ensure the MRO have the
system in place, well documented, and the process is effectively
implemented. And based on that, the individual airlines and the MRO, it
is their own responsibility, because if they cut corner or not doing it
properly, of course, there will be incidents. There will be accidents,
and the cost for accident and incident they will bear.

MR. UTECHT: You know, I really concur with that. What\'s happening, I
think, is our landscape is changing, and today the knowledge is still
within the airlines about the airplane and how it operates, but if you
think about where that\'s going to be in ten years, it\'s really moving
to the MRO.

And, you know, if you look at the European regulation model, it allows
that far more than our U.S. model does, and I think that\'s the one
thing that we need to think how are we going to make that transition?
How are we going to get the 145 really being more responsible and have
more input to the care and feeding of the airplane, because, frankly,
the carriers are kind of becoming virtual airlines, and over time
they\'re going to lose that knowledge.

MR. YOKOTA: Very briefly, John. We know that you are \-- we have been
working and progressing on delegation of tasks and so on, and I think
that has to continue, because the complexity of designing and certifying
the right testing and certifying aircraft is becoming larger and larger.
And as technology votes, there are changes in the design, which are
requiring advances in regulations or interpretation. You know very well
what we went through on softer integration, softer, and so on, and right
now what is happening on the VLJ market, you know, really we\'re
discussing requirements which should have been defined maybe a couple
years ago, but anyway, it\'s still on time. I mean, maybe some people
who already finished their job may be affected. I don\'t know, but
anyway, we, I think, the FAA and other authorities, if they are able to
delegate more, they can dedicate more of their power, their resources,
to advancement for the future.

MR. VALEIKA: John, I\'d like to just add one point on this, and I really
do agree with the comments fundamentally. In the world today \-- I\'ll
give you some statistics again, because some of these statistics are
interesting \-- is of the 17,000 aircraft, something like 6,000 or so
are owned by people who have more than 20, so 11,000 airplanes are being
flown in the world by people who have less than 20 airplanes.

Now I come from a big airline. He comes from a big airline. We had
sufficient number of airplanes to create our own database. We didn\'t
need other airplanes, and you lived off of our database, and so did
Boeing live off our database, because they had five big, six big
airlines, seven, whatever is United States. They had Lufthansa. They had
KLM-Air France in Europe and, you know, a few other big ones, and in,
you know, Singapore and Cathay Pacific, guys like that. That was the
basis of the safety information.

Now in a way, it just seems silly to think that somehow an airline that
has two engineers can provide the same level of technical expertise on
engine maintenance or oversight or whatever words you want to use, and
yet that is the system, that each one is responsible for its maintenance
program, blah, blah, blah, blah, blah, and we create the system.

So the reality is that most of the data that creates change to the
airplanes comes from \-- you know this is the pro rata rule. It comes
from a few airlines that formed the data, but more fundamentally, I
think you\'ve really got to think through what do you get from somebody
that\'s got five airplanes, and he\'s managing his own maintenance
program? Is he really managing his own maintenance program, or is the
MRO managing the maintenance program, or what?

So, you know, it\'s not a solution, but the reality of the world is that
if my numbers are anywhere near right \-- if 11,000 airplanes are owned
by people that have less than 20 airplanes, the technical capability of
those people to manage effectively the whole maintenance program,
understand reliability and all that, probably is not as good as the guys
who have 500 airplanes. I\'m not going to say it\'s bad, because the
safety numbers still tell you every \-- you know, we\'re really doing a
good job, but realistically, it just, you know, something isn\'t there.

MR. MANCINI: I\'ll take a small swing at it, John. I listened to Warren
and Ron. We got together earlier, so they were talking about their
businesses, and the one thing that came out, EASA rules and FAA rules,
and so I guess the one answer is maybe really look at harmonization
opportunities, because it sounds like their businesses, they really
operate differently if their operating under EASA or FAA, and I think
maybe we ought to take a good look at that and see if \-- you know, take
a look at it.

Hold on a second. I\'ll come back to you, though. I want to \-- is that
Jay Pardee? Who is that?

MR. PARDEE: Thank you. Jay Pardee from the FAA. Maybe actually a
question related to John Hickey\'s question. You know, not only have the
regulations have they kept pace with the changing business model, but as
one of the panelists indicated, technology has changed and been changing
dramatically.

In your judgment, for any of the panel members, have the FAA regulations
and guidance kept up with \-- from a repair or replacement part
perspective, have they kept up with changes in technology in the
industry? Do you see that they\'re up to speed, or do you see a gap?

MR. VALEIKA: Let me have a shot at one area, Jay. Actually, I had it in
my notes, but I got so carried away in my own eloquence that I forgot to
say it, and that\'s part of the price of getting older, I guess. But I
think the one area that \-- and, you know, I have talked to the FAA on
this issue, as you know, and I just wanted to raise it again, because
the whole PMA issue, to me \--

Look, we grew up in a very controlled environment, and nobody in their
wildest dreams thought we would do more than toilet shrouds and little
handles here and as we grew up, and there\'s a whole issue of PMAs and
expenses. I\'m not even going to touch that, but I think the one area
that really needs to be thought through is we have a world now that is
very global, that is very capable, and we have also regulators that have
different perspectives and responsibilities.

Eastern Europe has tremendous amount of good engineers, capable
engineers. You know, they shot things to the moon and all this other
stuff, great airplanes. India has a brilliant group of individuals.
China is producing, you know, thousands of engineers, and so the whole
world is developing.

I think the concept of PMAs, while we in the airlines obviously want to
reduce cost, I think it\'s one of those things lurking under the
regulator\'s bonnet that could really sting you, because what happens
when you start getting PMAs from somewhere else under somebody else\'s
rules? Are you not going to let the airplane fly here? Are you going to
penalize the American operator for not being able to use it, because the
other operator can use it?

So I\'m not really \-- I think the regulations around PMAs probably need
to be thought through. You know, is the airplane really certified? What
if I have a PMA compressor blade from one guy, and I\'ve got a GE blade,
and I\'ve got a Prub blade, and I\'ve got a Joe Blow disk and
somebody\'s nozzles, all of that put together? Is that engine doing the
same thing that the engine was certified to do? I don\'t know.

I\'m not asking for you to answer that question. I\'m only posing that
the issue of PMAs, I think, is one of those issue that globalization can
have a major impact in stymieing growth to some degree or progressing
growth. I don\'t know.

MR. MANCINI: Warren\'s got a comment, also.

MR. CHIM: Responding to your questions, you asked any barrier right now
for manufacturing or on design. One typical example or experience that
because right now the world is flat, manufacturing can take place in
every corner of the world. Say, for example, like the TAECO, the Boeing
747-400 cargo conversion modification kit, it\'s manufactured in Japan
and China and assembled in Xiamen.

Right now under the existing rule, even the whole process is under the
Boeing proportion certificate, but because it is outside U.S., of the
U.S., we cannot use the \[FAA Form\] 8130 for this mod kit. If the
customer insists to have the 8130, we have to ship all the mod kit, so
for with accompaniments, back to the U.S. and waiting for a stamp for
8130.

So it is something that FAA can consider without this process for
shipping the parts around and allow the usual 8130 under the FAA \[14
CFR\]21 system. It is something that can help the industry. It will add
value to the airlines.

MR. MANCINI: Good point. John?

MR. HICKEY: To Warren and Ray\'s comment \-- to Warren, I think, if I
understand your issue, I do think we have a notice of proposed rule
making out right now that might help facilitate that issue, the
transferring of products without having to come back to the States. I
think we\'re talking direct ship issues, and I think we have an NPRM on
that that might address that.

But I\'ve got to come back to Ray, because I\'m looking at Mr. Joyce,
and we could debate this for hours on PMA, but I do want to say and
acknowledge that I agree, Ray. PMA has blossomed into a problem right
now, and it\'s a problem, and now I know Sarah \-- Sarah, hang. It\'s a
problem in that the rules and the policies today have not kept up to
where PMAs have gone. And so what I think we\'re doing, Ray, is I think
our first step is I think we\'re trying to develop better guidance
around what we\'re expecting for continued operational safety.

And our evaluations for PMA-ers on the very sophisticated ends of the
products, hubs, or anything in the very high end that I think do cause
me concern, and it is still a very significant debate in the business.
David Joyce will be the first to tell you he doesn\'t want, you know,
those kinds of things being PMAed, and Sarah over here would say they
can\'t, and so we\'re kind of caught in the middle here, trying to do
the right thing.

But I do think that the time is ripe for a proposed rule on PMA to
better define, because that rule existed back in the fifties when they
were for fasteners and for little things like that, and, Sarah, I
believe the preamble of that does describe it in that sense and did not
describe it into the sophisticated level it went to. So I would like to
say that we would probably look forward to doing some kind of rule
making, not to remove it, but to better clarify what we think we would
expect from PMA.

MR. JOYCE: John, let me \-- let me. You know, let me talk a little bit
as the OEM on this thing. The issue here for us is not that PMA does or
doesn\'t exist, nor should it be, and we recognize it isn\'t. The issue,
I think, for us has been, as we see the penetration into systems that
together create some of the more significant operating responsibilities
of the engine, like air starting, like, you know, inclement weather,
like hail ingestion, et cetera.

Do we as a community feel as confident that the engine, when it has
three different pedigrees of compressor blades in it operating off
design to do an air start, has the same characteristics as the type
certificate holder demonstrated when the type certificate was presented?
That\'s the question on the table.

And then what comes next is where does the name plate need to be like a
generic drug? Where does a name plate become generic, because the
percentage of pieces in that engine are no longer OEM. Where do you get
into these systems to the point that the data used to create the type
certificate no longer represents the configuration that the engine is?

And so we\'ve had some great dialogue. We\'ve got some terrific
engagement with Nick and you guys, and I personally want to just thank
you. I mean, this is not a controversial issue where we\'re going to,
you know, run off and say, \"Help me, I\'m losing my revenue stream.\"

This is, \"Let\'s all sit down and make sure that we\'ve got good rule
making that everyone can understand and that the safety of the product
as we go further and further is not the issue that ends up in the end of
the day that we all have forensic dialogue about, to use a term from
this morning. And as long as we\'re there, I think you\'re going to get
a harmonization amongst all of us, but that\'s \-- I think that\'s the
path we have to be able to move forward with.

MR. MANCINI: Sarah?

MS. MACLEOD: John, actually I was going to agree with you, and my
members will probably shoot me, because I\'ll agree with Mr. Joyce, too.
The rules have got to ensure that the integrity of the technology
remains even. That\'s what the rules have to do. You guys did take a
first step.

I wish you had have done both design and production in this FAR 21 rule,
because I think it\'s going to be very disruptive to manufacturing and
owner-produced parts and all of these other controversies that have been
the elephant in the room for the 20 years I\'ve been in this business.

I\'ll even admit it. I\'m pushing 50 and very proud of it, and someday
I\'ll even be calm and collected in these meetings instead of having so
much passion. But at any rate, I can\'t agree more. We\'ve got to get
these rules to be understood. I mean, I commend Warren and others out
there, because the EASA, since 1994, split the airline from the
maintenance.

You can\'t do your own maintenance in Europe, and you can\'t do it in
three-fourths of the world, but you can do it here. That was a
recognition that there was expertise in the maintenance arena that
needed to be paid attention to by the administrators, and I think that
we\'ve all got to move towards continually improving all of our
processes.

I wouldn\'t question any of the processes we have in place, but I sure
question whether we actually understand them. And some of the dialogue
on the regulations is a clear view to me that people don\'t understand
the current regulations on PMA. I mean, it\'s there if the enforcer \--
sorry \-- the overseer enforcer, because that\'s your job, and it\'s
always going to be your job.

There\'s a \-- you know, there\'s a federal law out there that says
that\'s the FAA\'s job, and that\'s the thing that\'s got to be on the
table. They are \-- that\'s their job. Our job is to follow the rules.
Your job is to write them so we can bloody understand them.

MR. MANCINI: Sarah, don\'t lose your passion. It\'s always great to have
you. Jay, you asked an interesting question about technology, so I want
to get off the PMA issue, because that\'s a whole conference in itself.
But I\'d like to answer it from a different way.

David Joyce did a wonderful job telling you about data streaming and his
ability to monitor engines using high performance algorithms, because
they\'re always running, right? And we\'ve done some work. We have a \--
you know, at Boeing we do aircraft health management in a couple of our
products.

I actually think in the future we\'ll have airplanes and engines and
components that are very intelligent, that will be telling us a lot
about their health. We\'ll have advanced tools that will be able to get
prognostic, and I think we should think about getting maintenance
program relief.

In other words, if you know a lot about the airplane, do you really need
to do the same maintenance program? And so I think that\'s one thing, as
our technologies get better and better, we should look for opportunities
to capitalize on.

Any other questions and comments for us? Yes, sir?

MR. COOPER: My name is Tim Cooper. I\'m also with HAECO. Sitting here,
there\'s lots of things going over in each one of our minds, I think.
This morning we heard about taking safety to a higher level. I think
that also applies in some of the things, many of the things, if not all,
that we\'ve been talking about.

I\'d like to comment on one that Warren mentioned before. At HAECO, we
have over 100 formal audits, external audits, not counting our own, each
year. I\'ve been there for ten years, so you figure that\'s a lot of
audits, and I\'ve been responsible for interface with the American
customers, which is a very large part of our business.

Looking back over that time, yes, we are human. All of us have human
factors. We make mistakes. Everybody does. But if I look back over ten
years of experience, with very, very few exceptions, the findings
written against us have been because we violated some \-- we forgot to
cross a \"T,\" dot an \"I,\" in the customer\'s GMN. Now we are forced
or required to comply with the applicable portions of the customer\'s
GMN. The argument comes, \"What is the applicable portion?\" That
continues to cause lots of problems.

If we are to take safety to the next level, one of the things we need is
simplification. I think Ron talked before about the tasks cards. How
about non-routine cards? Take a typical Legacy Airline, been in the
business for 50, 60 years. Every time they had a problem or an incident
\-- we now call it human factors. Back then we didn\'t, and I\'ve been
in the business since \`62. We would tend to build something into our
system, in to our GMM, to protect, to build a fence around our
particular weakness.

That worked well for the Legacy Airline. Now the Legacy Airline comes to
someone like HAECO. We\'ve been in the business for 56 years. Because
we\'re human, we also have built fences around weaknesses in our system,
but we\'re no longer allowed to build those fences, because that is
different from the customer\'s GMN.

So we have a conflict. We\'re forced to build fences around areas in our
system that don\'t have weaknesses, because their GMM requires it. So
that\'s one of the issues that, for an MRO, causes us a lot of
unnecessary grief that we don\'t believe contributes anything to the
bottom line of safety.

MR. MANCINI: Great comments. Thank you, sir. Thanks for being here.
Bill?

MR. NORMAN: Thanks, Lou. Bill Norman from United Airlines. Just to your
question about what you can do, and I don\'t want to put this solely on
you, right, or the administrator, but I think it\'s more of a
collective.

I grow concerned when I hear we need an effective safety management
system, and we speak to it as a single element, right, that is not
integrated into the fundamental operating systems of how work occurs on
the shop floor. And so we stand that risk of having a system that
operates on the side, sort of perhaps by, for quality assurance or
safety folks, and not fundamentally working or integrated into how work
occurs on the shop floor.

So I would encourage us to think about that, right, and having a type of
system that is not \"a safety system\" but an operating system, if you
will. And in the operating system is embedded elements like error
proofing and exposing problems and using practical problem-solving tools
in everything we do, not just in the safety element, but in all aspects,
whether it\'s an efficiency aspect or reliability aspect.

And so we see the effect of that. We are approached from one element on
a safety system we need to manage, but at the same time, if you\'re
running the operation, also trying to make a more efficient operation,
and it\'s really weaving the fabric of these things together, rather
than speaking of them independently. I know that\'s a lot of the intent
of the ideas, but I think collectively we don\'t have our head around
that yet.

MR. HICKEY: It is not an independent thing over to the side. It is
absolutely not, and it\'s everything what you said. It\'s every
operation that\'s on the floor right now at United that has established
processes for doing what they do, and it has processes for evaluating
the risk management of the things that aren\'t going well and a process
for you to decide where you put your effort into changing those things.

That\'s exactly what it is. It is in no way, as we understand it and as
our colleagues in Canada and other areas, it is not a site effort that
comes in later sort of as a quality control organization, so I very much
agree with you.

MR. MANCINI: Warren has a comment.

MR. CHIM: Responding to Tim\'s frustration and the question asked by
John about what we can do. Of course, I\'m not trying to indicate that
EASA 145 or EASA system is the best, but in the EASA system, in the 145,
there\'s a requirement for the MOE, the exposition manual, and for the
exposition manual, there\'s a format. It\'s a appendix to 145. In the
past form of the MOE, it provide or it requires the MRO to specify that
interface procedures for airlines working in that MRO.

So the system already there for the MRO to find out which is the
applicable process produce the applicable requirement in the airlines
for working in, say, 500 miles away or 5,000 miles away in the facility
and not disqualify that GMM. So it is the infrastructure already there.

MR. MANCINI: Thank you, Warren. Well, I want to thank the panelists for
being here and for their leadership, but I most importantly want to
thank you. I can see that this is a room of passionate people that
really care about the business and care about what they\'re doing and
want to do it right, want to take on Marion\'s challenge of taking it to
the next level. So thank you for all your energy, and on behalf of the
FAA, thank you for attending the conference.

(Whereupon, the foregoing matter adjourned at 4:30 p.m.)