Strategic tools for the decision to outsource Maintenance activities in Moroccan airports

Ahlam Boutahar1, Mohamed Ben Ali 2 Mohammed Hadini3 Said Rifai4 and Zineb Edrissi5
1
PhD Student, LMPGI Laboratory, Higher School of Technology (EST), Superior National School of Electricity and
Mechanics (ENSEM),
Hassan II University of Casablanca, BP 8118, Oasis
Casablanca, Morocco
ahlam.boutahar@ensem.ac.ma
2
LMPGI Laboratory, Higher School of Technology (EST) of
Casablanca, BP 8012, Oasis,
Casablanca, Morocco
benali8mohamed@gmail.com

3
LMPGI Laboratory, Higher School of Technology (EST) of
Casablanca, BP 8012, Oasis,
Casablanca, Morocco
mohammed.hadini1@gmail.com

4
LMPGI Laboratory, Higher School of Technology (EST) of
Casablanca, BP 8012, Oasis,
Casablanca, Morocco
dptgmp@gmail.com

5
LMPGI Laboratory, Higher School of Technology (EST) of
Casablanca, BP 8012, Oasis,
Casablanca, Morocco
z.edrissi@gmail.com

Abstract. The outsourcing of maintenance has become crucial nowadays. In the airport industry, we find
mainly maintenance that requires special attention in terms of human, material, and financial resources. The
objective of this paper is to review the main characteristics of the growing trend of outsourcing and
summarize the existing research on the maintenance of airport facilities. The second part aims to present the
different tools applied to the study that managers will rely on to make a good decision for outsourcing
maintenance in the airport industry. We will use transaction cost theory, and resource theory, as theoretical
tools to demonstrate that this decision is moderated by the specific nature of the assets used to perform the
outsourced activity within the framework of the uncertainties surrounding it.

Keywords: Outsourcing- Maintenance- Airports Facilities-Maintenance Outsourcing-Airports.

1 Introduction
The growth of outsourcing practices is the result of an economic climate. In the early 1990s, it was discussed
both in academic business studies and in operational practice, as mentioned [1]. To cope with globalization,
which leads to increased competition in the market, Moroccan companies are seeking new approaches to
maintain and increase their competitiveness. They are gradually delegating some of their activities to specialized
service providers.

Outsourcing can be defined as the act of entrusting an activity usually performed internally to an external service
provider. According to [2], several firms have outsourced their non-core activities. The peculiarity of the current
wave of outsourcing is that it affects an ever-increasing number of support activities in the value chain. This does
not necessarily mean that the outsourced activity is less important for the company's performance, as mentioned
in [3] . Recently, many other functions across all industries have been actively outsourced, including information

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systems and technology, telecommunications, facilities management and maintenance, food services, and
management services. Among the forerunners of this new form of outsourcing are Eastman Kodak [4] and
Continental Bank [5], which were among the first to outsource their entire IT operations. In the Moroccan
context, this phenomenon is new. Indeed, many authors are working on the issue of outsourcing in all capacities.

As for maintenance outsourcing, the given definition is quite similar to that which is attributed to outsourcing in
general. Thus, outsourcing of maintenance can be defined as "the act of transferring some maintenance activities
or the maintenance of certain equipment that was done internally by the company, as well as the decision-
making responsibilities to external suppliers [6] .

The decision to outsource any major function, such as maintenance, should not be taken lightly, and careful
consideration of all major issues is vital. This decision engage in the long term and can only be taken by the
manager if he has the necessary strategic elements [1]. The problematics become much more numerous and
complex concerning the resorting of the airport industry to outsource maintenance.
Many outsourcing approaches or strategies have been developed, and various tools can be used; the challenge is
to integrate them in the right place at the right time, in order to avoid dissatisfaction and miss the benefits of
outsourcing. Even if there is little research on outsourcing activities in the Moroccan airport field, there is
abundant literature on the academic understanding of make-or-buy approaches, more especially a rich literature
on outsourcing synthesized by [7] who used transaction cost theory as the dominant paradigm [8], it has been
used in many empirical studies[9] , and also resource theory. The main conclusion of this work is that
outsourcing is justified when the level of contractual risk is low, and that outsourcing is justified by access to
resources and skills that are difficult to develop internally and more expensive.
2. Related Literature

In this section, a literature review is provided on Outsourcing of maintenance, its drivers, motivations, and
benefits. In the face of globalization which leads to increased market competition, organizations are increasingly
aware of the economic importance of maintenance [10] . Maintenance is becoming a major concern for decision-
makers, its role within organizations has been radically transformed and it is an indispensable strategic element in
achieving company objectives [11]. According to Maggard and Rhyne (1992), maintenance can account for up to
40% of the percent of the production cost in a company, and [12] has estimated that the total cost of maintenance
in Sweden is close to 200 billion SEK per year. Moreover, bad maintenance either due to bad planning, or bad
management of financial and material resources can have serious consequences, according to [13], the third of
maintenance costs are spent unnecessarily.

Companies under commercial continuous demand to meet higher levels of performance with lower costs. Their
objective is to reduce operative costs to improve their competitiveness. By outsourcing maintenance,
organizations can benefit from the latest techniques and technologies and better skills. This results in cost
reductions, knowledge sharing through training, and the outsourcing of the management of spare parts, expensive
measuring equipment, specific tools, etc. According to a survey conducted by CEGOS observatory [14], France
represents the 2nd largest European outsourcing market i.e.,82% of French companies have outsourced a part of
the business.

Like most businesses, airports are also outsourcing. The airport industry is very sensitive to developments in
technology and changes in the world. For this reason, it must keep up with all changes in general. In doing so, it
tries to do as much as possible without significantly impacting costs. At the same time, it is very important for
each unit in the organization to focus on their own business and to work in a safe way. The areas where airports go
to outsourcing can be listed as ground handling, catering, cleaning, fuel, cargo facilities, and maintenance of
airport facilities. In May 2004, when the growing importance of private equity and market-driven decisions began,
a project was launched to outsource handling, which includes all tasks related to the embarkation, disembarkation,
transit and land transportation of passengers, this was entrusted jointly by the State to ONDA and Royal Air
Maroc, following a directive of the European Commission, relating to the management of the European sky
("Open-Sky" to which Morocco is associated), recommending the introduction of competition in the handling
activity.

The Moroccan airport’s authority currently manages a network of 25 airports including 19 international ones. The
Mohammed V airport is one of the six main airports with air traffic of more than 1 million passengers and
manages 41% of total traffic in 2019, followed by the airports of Marrakech (26%), Agadir (8%), Fez (6%),
Tangier (5%) and Rabat (4%) [15].Due to the rapid improvement of technology and complexity of installations,
the airport industry has been re-engineering its perspectives toward operation management and seek to cut costs to
improve efficiencies, the idea of considering good maintenance management and outsourcing maintenance

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activities has become a chosen method to realize the full benefit [16].However, the airport industry is a highly
regulated sector in which decisions about the process of outsourcing maintenance must be evaluated not only on
the basis of cost, according to airport maintenance managers, the main purpose of a maintenance service is to
ensure passengers and users by ensuring safety, security, quality , and maintaining optimal performance for all
airport installations.

Since 2013, ONDA has begun to outsource certain airport facility maintenance activities such as EDS equipment.
The reason for this wave of outsourcing is purely based on cost criteria. Other factors then reinforced this
phenomenon, notably the lack of in-house capacity to provide these services. Outsourcing then gained ground to
reach all types of terminal equipment. Within the framework of the ONDA strategic plan and more particularly
the rationalization of expenses and the improvement of maintenance performance (corrective and preventive
maintenance), a new maintenance policy has been adopted, based on the outsourcing of the maintenance of airport
equipment and facilities by launching complete maintenance contracts (labor and spare parts) of the Service Level
Objective (SLA) type [17] .
This new strategy of outsourcing the maintenance of airport equipment has been adopted to overcome:
 The complexity of airport equipment and technical installations
 Human resources and their qualifications
 The criticality of equipment and advanced technologies related to the airport activity
 The difficulties and constraints of spare parts supply
 Regularity, safety, and security issues
3.Theoretical Tools
There is no unified conceptual framework to address the issue of the outsourcing decision [18], nevertheless, the
two classical approaches Transaction Costs (TCT) and the Resource-Based View (RBV) are used to understand
this phenomenon .Our study aims to analyze these two theoretical frameworks (TCT and RBV) and which can be
used to understand the phenomenon of maintenance outsourcing in the airport industry. The analysis of its
classical tools raises several questions: What activities can be outsourced? Why do organizations make this
decision? How does maintenance outsourcing of airport facilities? Public companies outsource their support
functions to optimize resources, access unavailable know-how, and respond to the changing environment.
The theory of transaction costs (TCT)
The theory of transaction costs (TCT), essentially developed by Williamson [19], is considered by many authors
as a "dominant" paradigm in the study of organizations [20] It has focused on vertical integration. Applied in
academic work to explain the decision to outsource [21], although it leaves out two significant themes which are
the core business and the triggers for outsourcing, it provides an adequate argument to the key issue of the
company in an outsourcing process of equipment maintenance, which is to minimize production and transaction
costs. The Resource-Based View comes to fill these gaps [7].
This section presents a proposal for the decision to outsource the maintenance of airport facilities considering
transaction cost theory (TCT). The analysis suggested by this theory allows determining whether specific
activities related to airport maintenance should be performed internally or externally, using the market.

Coase in 1937 the father of transaction cost theory [22]; [23] established the existence of transaction costs and
revel that the existence of the firm as a result of the inability of the market to fulfill its role, he puts forward the
"market-failures" [24]. From the 1970s onwards, Williamson developed a whole vision on the economy,
undertook a "renewal" of TCT based transaction costs, and identified the “attributes transactions” to help to decide
why and when we occur to outsourcing. Moreover, he describes through this theory the contrast in governance
structures between markets and firms. Each form of governance uses an organizational structure: price for the
market and hierarchy for the firm, however, it is sometimes more rational to adopt the hybrid form [25]. The
choice of optimal structure is the main paradigmatic issue in TCT; thus, many empirical studies have sought to
explain forms of governance through Williamson's determinants. Overall, the choice of governance is a matter of
optimization with respect to transaction costs.

In fact, saving is the major concern of economic organizations. Williamson explains that the firm prevails over the
market when it reduces the transaction costs of the market. To put it simply, when applied to the problem of
outsourcing, the hierarchical organization is considered as an alternative solution when it reduces information
costs (costs of finding a partner), although it reveals other organizational costs of supervision or control costs
related to bureaucracy and supervision of long-term contracts (The costs of negotiating and concluding contracts
and the costs resulting from incompleteness or default of the contract in addition to the opportunity costs
represented by the immobilization of certain assets to ensure compliance with the terms of the contract (the
bond ...).

Several studies have shown that transaction costs can be considered as an indicator for the outsourcing decision.
More precisely, it is recommended to outsource an activity when the transaction cost is low. These costs are

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determined by three attributes of the transaction, which are asset specificity, frequency (occasional or not), and
uncertainty (future supplier behavior, environment). Williamson (1996) gives prominence to asset specificity
(geographic specificity, physical specificity, human specificity, dedicated assets, site-specificity, and temporal
specificity). Therefore, the higher the specificity of assets, the less desirable outsourcing is and vice versa.

Conclusion: Although TCT is thought of as the transition from a vertically integrated governance structure to
another optimal governance structure based on the three attributes [26] .There are different dimensions involved
such as the losses in terms of time and energy to develop and manage a relationship with suppliers, and which
have a significant impact on the calculation of transaction costs and therefore the decision to outsource [27] .The
TCT theory then allows finding an association between the attributes of transactions and the governance structure
(between the market and the hierarchy). In order to carry out an analysis, it is necessary to combine the human
factors which are bounded rationality (borrowed from H. Simon) [28] and opportunism: to protect the outsourcing
company from the possible opportunism of the service provider through the implementation of monitoring
systems for the follow-up of the relationship, which generate costs [26].

In terms of the maintenance of airport equipment, based on these considerations we can deduct from the TCT that:
- The higher the specificity of the assets (equipment), the less desirable outsourcing is and vice versa
- The more uncertainty there is, the more control is needed over the maintenance service value chain. If there is
uncertainty surrounding the performance of a provider, it is recommended to insource because the impact of the
provider's underperformance can be very damaging to the outsourcing organization [7] but for technological
uncertainty, it is the opposite [29].

However, in order to benefit from the TCT results, it is necessary to ensure that: airport maintenance managers are
aware of the internal costs (production and transactions) and external management costs, the evolution of the
specificity of their assets (airport facilities) (technical nature and benefits) as well as the internal production costs
and the total acquisition cost, and are aware of the needs of the airport equipment maintenance department in
terms of nature, depth and volume over the same period planned for outsourcing.

The Resource-Based View (RBV)

The Resource-Based View (RBV), which is often discussed as complementary to the TCT. It justifies the fact that
some firms generate profits in a sustainable way and identifies the factors that define the competitive advantage of
firms [30]. Barthelemy indicates that there is a certain analogy between the two theories (TCT and RBV) at the
level of rent formation, except that for TCT the firm exists to control opportunism ("avoider of a negative"),
whereas for RBV it is seen as a means of generating services that could not be generated by simple recourse to the
market, especially owns valuable resources that increase the value to the organizations. ("generator of a positive")
[31].
In terms of outsourcing decision-making, the resource theory based on strategic management is much more
refined in its internal analysis because of considering the quality of internal resources and skills compared to those
available to the best providers in the market, whereas the TCT based on economics is particularly useful for
dealing with the relational aspects [32].The contribution of this theory lies in the fact that companies can benefit
from flexibility and coordination capacities, and it deals with two major themes: the core business and the triggers
for outsourcing. it is important to know that companies that wish to separate to concentrate on their core business,
outsourcing can be used to "fill a gap" between the desired skills and the actual skills [33], it’s involving great
risks such as the transfer of resources and skills, and consequently a loss of accumulated expertise and knowledge
(Prahalad and Hamel, 1990). [34] underlines that companies vertically integrate activities for which they possess
capacities that are superior to the eventual supplier. Indeed, the key competencies must be protected and
controlled in a rigid way [2] [35], and the peripheral activities which do not offer any competitive advantage in the
long term, don’t expose the firm to leakage of proprietary information that can be outsourced.

The Resource-Based View (RBV) argues that resources are the key to the performance of the firm mainly and that
is valuable, scarce, inimitable, and non-substitutable (VRIN) [36]. Maintenance must be practiced at a high level,
which contributes to economic value as part of the overall performance of the firm [37], because it is not only
tactical and strategic [38].

In the light of these theories applied in the airport sector where maintenance has an important and valuable
character because it exercises a certain control over the service, bad maintenance can cause downtime of
equipment or critical facilities (EDS, STB, air conditioners ....) which can be very damaging for safety, security,
and quality. Therefore, the decision to outsource the maintenance of airport facilities must consider the value and
inimitability of RBV, in other words, the outsourcing organization must simultaneously increase, renew and adapt
its capabilities [39].

Several configurations can be used if the scope is well defined, i.e. after having determined the objective
following a diagnosis and observations, if for example the company is too diversified to be able to invest and

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continue to develop all the key competencies, and therefore wishes to focus on the core business. Strategy or
performance matrices, depending on the company's needs and orientation, will then help you think about all the
impacts, including operational ones.
4.conclusion
This literature review constitutes a body of knowledge on maintenance outsourcing in the airport domain, it also
gathers a large number of papers on the evolution of the business environment in the airport sector which has
recently changed dramatically and is becoming more and more unpredictable, thus forcing organizations to re-
evaluate their different strategies for resource optimization and better management. We have highlighted a set of
tools that constitute a decision-making framework that will help to understand the phenomenon of outsourcing
maintenance in airports and that will serve as a basis for airport managers to define the activities to outsource for
their organizations.
The transactional perspective developed in this paper, which considers asset specificity, frequency, and
uncertainty as the most relevant determinants of the transaction, has proven to be very useful in evaluating the
maintenance outsourcing process because it addresses the economic dimension of the outsourcing decision.
However, the complexity of the airport industry makes its implementation difficult for simple business decisions.
To this end, we have established an analysis that addresses resource theory that focuses on the value of resources
and the strategic importance of activities, which can be complementary to TCT. The next article will focus on an
empirical study through surveys and questionnaires to complete a quantitative evaluation of these theories.

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