The PMA parts industry is in its strongest-ever position, having been boosted by the major deals that have taken place over recent years. With the increasingly urgent need for potential customers to find ways to reduce costs and the FAA’s recent, empathic, stance on the legitimacy of PMA parts, the future is looking rosy. Jason Holland investigates.

On August 8, 2008, the FAA issues Special Airworthiness Information Bulletin (SAIB) NE-08-40. This bulletin was significant – particularly if you are a PMA parts company. In effect, it appears to establish the validity of PMA parts by crushing the negative rhetoric of competitors who were questioning. FAA-approved PMA parts. It provides what might be hoped is a final statement that PMA parts are just as good as OEM parts and that using them can help operators reduce cost, while at the same time maintaining safety.

The SAIB was a result of research conducted in a Repair, Alteration and Fabrication Team (RAFT) study, which was set in motion by the FAA after it found that OEMs were starting to put information in their maintenance manuals and instructions for continuous airworthiness that was anti-PMA. The SAIB also re-affirms that primacy of the FAA-it effectively asserts that the aviation industry must respect the authority’s approvals, and that it is not up to the engine manufacturer to say that the installation of a PMA part is wrong or invalid.

According to the Modification and Replacement Parts Association (MARPA), the SAIB appears to directly answer an industry marketing campaign, in what it terms a “high unusual” situation. MARPA states mechanism for communication safety information that is valuable, but that falls short of the requirement for issuing and Airworthiness Directive. It explains: “SAIBs are meant to alert, educate, and make recommendations to the aviation community. Normally, SAIBs are issued about specific technical concerns that the FAA has identified.”

Certain manufactures have issued commercial statements, which appear to have been designed to undermine public confidence in PMA parts, and it is this, which the FAA has objected to. The authority notes that some engine manufactures “responded to the FAA’s approval of PMA and STC for parts involving their type design engine models by telling customers that support of their products could be limited if such parts are installed” and “have included language in the FAA-approved airworthiness limitation section (ALS) of their engine instructions for continued airworthiness (ICA) stating that the ICA was developed only for the use with their parts”

Kate Schaefer, SVP – sales & marketing at HEICO, comments: “Certain PEMS have been waging and incredibly clever and well thought-out marketing campaign against PMA and DER. Over the last three years we have seen aggressive presentation material, misleading ads and a lot of ‘veiled’ threats in relation to warranty and maintainability. During this same time period repairs have slowly been disappearing from the manuals and spare parts pricing has continued to increase annually between six and 15 per cent.

“The focus on PMA and associated actions proves beyond and shadow of doubt that the OEMs now take PMA very seriously indeed ¾ it is now completely clear that PMA is here to stay and is becoming a vital activity for most of the world’s largest airlines. Through the publication of the RAFT report and the SAIB the FAA made it clear that they would not allow the commercial self-interests of the OEMs to become blurred with regulatory and compliance issues, nor would they allow the OEMs to renege on their responsibilities to support their product in the field, regardless of whether other FAA- approved parts have been installed.”

As a result of the FAA’s emphatic statement, it seems that anti-PMA rhetoric will at the very least become less visible. This should in turn boost the general perception of the PMA parts industry. Whether the SAIB itself surprises anyone or changes opinions remains to be seen. Dave Kvasnicka, Aviation Component Solutions (ACS) president, concludes: “This is not exactly news to the many operators that have been using PMA parts for years, [but] we certainly appreciate the FAA’s statement in light of all of the misinformation generated by the OEMs regarding PMA parts.”

Quietly efficient

The PMA industry also received a boost when a 10-year, $1bn plus agreement was announced between Chromalloy and Delta Airlines in 2007 ¾ the largest PMA agreement in airline industry. Tony Charaf, SVP of Delta TechOps, the airline’s technical division, said at the time: “This is a significant development for the future of out industry and one that signals the dynamic, out-of-the-box strategy for which Delta TechOps is know. Chromalloy already has extraordinary capabilities in PMA development and by working with them, Delta TechOps will be well positioned in the marketplace to better compete and, in turn, offer greater flexibility to our more than 100 customers worldwide.” Chromalloy is developing PMA alternatives for a number of parts commonly used in the CFM56-7 and CFM556-5 engines, including several life-limited parts.

Since this news though, there has not been a massive amount going on in terms of similar deals. But the industry has certainly not been standing still, and is in fact in rather good health. Kvasnicka notes: “2008 may have been a bit light on major PMA announcements, but I don’t believe that the lack of news reflects a change in the long-term trend toward increased use of PMA parts. Our experience and expert opinion indicates that the market share of PMA parts will continue to increase over the next several years.”

Elsewhere, HEICO has for the last year focused on delivering on its promises to British Airways (BA) after signing a major deal with the airline in June 2007 (the significance of which was covered in detail in ATE&M June-July, Issue 88). Schaefer states: “We choose our strategic partners very carefully and we go to great lengths to ensure that we live up to their expectations. For the last year we have been very focused on delivering what we promised to BA and that has meant investing heavily in new areas that we hadn’t previously considered. It’s been a fabulous learning experience and has led to some very exciting new product lines for HEICO. BA has been a wonderful and supportive partner over the last year and I think that both sides are happy with the considerable savings achieved in such a short time period.” Nevertheless new deals are a possibility in the new year. Schaefer reveals that the company is currently discussing a number of different projects with “several very high-profile airlines”. She says: “It is important for us to choose wisely and only commit to a partner ship where we can provide maximum benefit to the airline concerned. Stay tuned in 2009!”

Nathan Dalton, VP of corporate business development at Wencor, notes that most of the US major airlines got “on board” a few years ago, thus explaining the sporadic nature of recent news. PMA parts continue to be developed and sold, but this does not necessitate massive exposure. The OEM issue is more troubling to him. He states: “What does concern me is that the some very profitable OEMS are funding lobbying efforts at the FAA so they can hide behind certification as a tools to price parts unchecked by competition. This slows the process down. The PMA parts industry will continue to grow and it will provide competition to OEMS that fail to provide quality MRO support at a reasonable price.”

Economic impact

Very few topics can be discussed at the moment without being placed against the current climate of economic crisis. For Knasnicka, today’s economic situation can be seen as a doubles-edged sword. He comments: “On one hand, we expect to see softness in the broad, spare parts marketplace. On the other hand, we’ve already seen increasing interest in PMA parts from airlines that have, in the past, used little or no PMA parts.” The second part of this equation represents a major opportunity for PMA companies. Schaefer concurs: “With everybody now acutely focused on costs, PMA really is becoming a standard avenue for even the most conservative of airlines to explore. The current focus obviously provides a huge opportunity to PMA supplies that are capable of diverting significant resources into new product development to meet that demand.” A PMA company’s opportunity to tap into these markets will depend on its ability to provide the type of service, support and financial stability offered by the OEMS whilst offering consistent savings and product development. A recurring trend in the industry is that airlines are looking for savings across the board, and Schaefer notes that they are looking for their PMA suppliers to “demonstrate a value proposition that encompasses a systems approach to provide maximum penetration on a particular unit or in a targeted ATA chapter”.

Dalton also sees an opportunity for that PMA industry. He explains: Airlines and MRO shops are still very interested in PMA to the extent that an airline has not taken advantage of available PMA parts could quickly incorporate them into their maintenance programme. But, PMA parts still represents a small percentage of total material expenditures for an airline. The big OEMs still control the majority of this and those prices just keep going up. Aircraft operators need to get on board with reputable PMA companies and provide support in the development of more PMA parts.”

But as in any industry, there will always be winners and losers in an economic downturn. The trend of consolidation is likely to continue and it will be the companies with no debt (as debt becomes increasingly difficult to use for financing), financially strong ownership, and solid relationships ion the financial community, that will be bet positioned to make acquisitions over the next few years. For Schaefer, it is also and issue of airlines’ increases expectations of support, as PMA becomes a mainstream activity. PMA providers must be able to support their products both technically and commercially in the same way that an OEM would, including technical support, continued operational safety programmes, and high levels of warranty and liability support and insurance. Currently, there are only a handful of PMA companies capable of providing this level of support ¾ and so not all of the rest will be able to continue as they are in the future. Inevitably, this will lead to mergers and acquisitions.

The use of PMA has traditionally been thought of as being a Phenomenon, but this state of affairs is also changing. HEICO, for instance, records an equal level of sales in Europe and the US. Indeed, Schaefer states that much of the pressure from the company’s customers to move into new product lines is now coming from Europe rather than the US. In Asia, the level of acceptance is rapidly increasing, even though the traditional response has been of a very conservative nature. (Although Schaefer notes that HEICO’s airline customers in Japan have always been “staunch supporters”). Kvasnicka adds that ACS’ experience is of some airlines taking many years to finally make the decision to use PMA parts, but sees a uniform acceptance of PMA parts across he globe, albeit at different speeds. He says: “ We therefore spend a fair amount of out sales and marketing resources on educating potential customers about the many advantages of using PMA parts.”

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