Jan 18 2007
Mobile Press Register
By GEORGE TALBOT
ST Mobile Aerospace Engineering Inc. on Thursday signed a $470 million contract to convert 87 passenger jets into air freighters for FedEx Corp., a deal expected to bring 200 jobs to Mobile.
MAE, already Mobile County's largest private employer, has about 1,200 workers at its aircraft maintenance and repair hub at the Brookley Field Industrial Complex.
The contract calls for MAE to convert 87 Boeing 757-200 passenger planes over a seven-year period beginning in May. FedEx wants the new freighters to replace its aging fleet of about 110 Boeing 727s, a twin-engine workhorse that first hit the skies in 1963.
The Memphis-based courier is one of MAE's top customers for aircraft maintenance work, and the two companies have a relationship dating back to MAE's founding in Mobile in 1991. MAE helped convert 21 of the original fleet of 727s into freighters for FedEx.
"MAE has proven they have the capability and the flexibility to meet the changing needs of our demanding markets," said Mark Blair, vice president of engineering and planning for FedEx Express, the company's chief subsidiary. "We value very highly the dependability of MAE and look forward to broadening our partnership with them in the years to come."
MAE officials said at a news conference Thursday that they would begin hiring immediately to fill jobs tied to the conversion program. Under terms of the agreement, MAE will receive the first 757-200 jet in May and deliver it to FedEx by December.
The company said it will use its existing hangar space at Brookley and that it will establish three production lines for the program, enabling it eventually to turn out about one freighter per month. MAE three years ago struck a licensing agreement with Boeing to develop and sell a freighter version of the 757-200, which entered service in 1983.
The FedEx deal "is a validation of our efforts to be a world-class provider of passenger-to-freighter conversions," said Tay Kok Khiang, president of MAE's parent company, Singapore Technologies Aerospace Ltd. "We are honored that FedEx selected us."
The company said the new workers will make wages comparable to other aircraft maintenance and sheetmetal workers at MAE, which averages between $14 and $18 an hour, depending on experience. MAE is hosting a job fair at Brookley on Saturday.
"It is gratifying to see companies like Mobile Aerospace create good, high-paying jobs that are so important to our local economy," U.S. Rep. Jo Bonner, R-Mobile, said in a statement.
The conversion work basically includes the installation of a side cargo door, a reinforced cargo deck and loading system on the planes.
The new freighters primarily will be used by FedEx for domestic routes. The so-called 757-200 Special Freighter is larger, more fuel efficient and cheaper to maintain than the narrowbody 727, according to the company.
FedEx said it will spend $2.6 billion to complete the replacement program by 2014, including the cost to purchase the 757s. The company declined to identify the sellers but said it had agreements in place to purchase the planes that will be converted in Mobile.
The deal with MAE "is a significant milestone in the history of Federal Express," Blair said, noting that the new freighters will replace a venerable aircraft in the 727. The plane became the company's first dedicated cargo hauler in 1978 -- FedEx initially flew a fleet of 14 Dassault Falcon jets -- and essentially put FedEx on the map, helping a small courier service become the world's largest transportation company.
FedEx operates an air cargo terminal at Brookley, shuttling about four flights per day between the city and its Memphis hub, and the company's FedEx Ground subsidiary last year opened a $5.2 million distribution warehouse in Prichard.
"FedEx has been a great partner to Mobile and it's great to see them take their relationship with MAE to the next level," U.S. Sen. Richard Shelby, R-Tuscaloosa, said in a telephone interview. "MAE earned this contract by delivering on their promise to FedEx time and again. Success breeds success."
In addition to new jobs, the deal should create stability at MAE, which depends on aircraft maintenance contracts that can be highly cyclical, according to company officials. While Singapore Technologies has no immediate plans to make capital investments in Mobile, the FedEx contract "gives us confidence that the demand is going to be here, so investments could follow," Tay said.
Local and state officials also said the contract should continue Brookley's re-emergence as an economic engine in Mobile. The former U.S. Air Force base employed 17,000 at its peak immediately after World War II. But its closure in 1969 put the city into an economic tailspin that lasted for years afterward.
The 1,700-acre industrial complex was selected by Northrop Grumman Corp. and EADS North America Inc. as the site of a 1,000-worker aircraft assembly plant, though the $600 million project depends on Northrop and EADS winning a contract over rival Boeing to build aerial refueling tankers for the Air Force. A decision is expected later this year.
Brookley also is home to an Airbus engineering center that is scheduled to be opened formally next month. The center will employ about 150 aerospace engineers designing commercial aircraft for Airbus.
The MAE contract "further cements Alabama's leadership in the aviation sector," Gov. Bob Riley said in an e-mailed statement. "MAE and FedEx are two great companies, and this contract will mean a lot not only to Mobile but all of south Alabama."