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Delta Air Lines hires Boeing to manage parts inventory

SHARE Delta Air Lines hires Boeing to manage parts inventory

NEW YORK (Dow Jones/AP) — Delta Air Lines Inc. has hired Boeing Co. to manage its inventory of spare airplane parts as the airline seeks to cut costs.

The companies said Friday aircraft giant Boeing will operate a spare-parts shop at Delta's technical operations facility, managing the airline's inventory of nuts, bolts and other expendable parts for the airline's fleet of 550 airplanes.

Delta and Boeing wouldn't give financial details of the deal.

Joe Brummitt, head of Boeing's Integrated Materials Management program, said other airlines in the program have cut total maintenance costs by as much as 20 percent.

Last year, Delta spent $630 million on aircraft maintenance materials and outside repairs. Delta officials declined to say how much the program might save them.

Mechanics at Delta might not know the difference once Boeing takes over the parts shops. Brummitt said he doesn't plan to change the way mechanics order supplies. The only change will be that Delta doesn't actually buy the parts until a mechanic takes them from the shop. Instead, Boeing owns the spare inventory, allowing Delta to take a liability off its balance sheet.

At the end of 2003, the airline's total parts inventory amounted to $202 million, net of a $183 million allowance for obsolete parts. Delta said Boeing will manage less than 20 percent of the total consumable inventory.

Boeing's Brummitt said the airplane maker started the program as a way to help customers cut costs.

"We want to provide them with a cost-reduction option," he said, adding Boeing is "aware of the current environment" for airlines, in which the carriers with the lowest costs are generating the highest profits.

Boeing has also signed deals this year to manage expendable parts for low-cost carrier AirTran Holdings Inc., as well as Japan Airlines' Japan TransOcean Air unit under the IMM program, Brummitt said. Before Boeing began the IMM program, the company had deals to manage inventory for Japan Air and KLM Royal Dutch Airlines.