More than two years after filing a complaint with the European Commission (EC) about the control that OEMs hold over the support and repair market, IATA has struck an agreement with a major engine supplier that it says will lead to greater competition for MRO work.
IATA announced July 31 it had entered into an agreement with CFM International (CFM), a 50/50 partnership between GE Aviation and Safran Aircraft Engines.
Under the agreement, CFM has adopted a set of “conduct policies” that will enhance the opportunities available to third-party providers of engine parts and MRO services on the CFM56 and the new LEAP series engines that power Airbus A320neos, Boeing 737 MAXs and COMAC C919s.
IATA also noted in its statement July 31 that GE has agreed to apply the conduct policies to other its own commercial engines. GE produces large turbofans, including the GE90 and GEnx, for widebodies such as the Boeing 777 and 787. IATA and GE spokespersons separately confirmed to ATW that GE will apply the conduct policies to all of its commercial engines.
The CFM agreement arises from a formal complaint that IATA lodged with the EC in March 2016 on behalf of its airline members. In doing so, IATA became one of a number of complainants in an inquiry conducted by the EC’s Directorate General for Competition (DG-COMP) into alleged abuses of dominant positions by manufacturers of aviation equipment.
IATA made no claims for monetary damages or any other forms of compensation for past conduct, but said it wanted more MRO service options and a “re-balance” of the relationship between airlines and OEMs in the aftermarket sector.
ATW understands that CFM, which has a dominant position in the narrowbody engine market—and is the sole supplier to power the Boeing 737 and the 737 MAX—was one of the manufacturers that the EC DG-COMP was looking into along with at least one other OEM.
With the new agreement, IATA has dropped its complaint to the EC against CFM.
Engine suppliers have placed a strong focus on aftermarket contracts for many years, and the practice has spread to the other OEMs, including the aircraft and avionics makers. This has led to concerns among third-party MRO providers about being squeezed out of the market. Many airlines are themselves MRO providers.
“Airlines spend a tremendous amount of money on the maintenance and repair of aircraft and engines to ensure we are always operating to the highest levels of safety and reliability,” IATA DG and CEO Alexandre de Juniac said in a statement. “This milestone agreement with CFM will lead to increased competition among the providers of parts and services related to the servicing of CFM engines. We expect increased competition will reduce airline operating costs and help to keep flying affordable. And we hope that this agreement will be an example for other manufacturers to follow.”
Asked by ATW whether IATA would seek similar agreements with other OEMs, a spokesperson said: “IATA is hopeful that other OEMs will review this agreement and see how it can be applied to their own aftermarket activities. We have not ruled out any pathways in terms of supporting our members in their efforts to ensure a vibrant and competitive market for MRO services.”
In its statement, CFM president and CEO Gaël Meheust said, “This agreement reflects CFM’s strategy to promote competitive MRO services and its continuous commitment to customer satisfaction.”
Among the elements of the agreement, CFM has agreed to:
* License its engine shop manual to an MRO facility even if it uses non-CFM parts;
* Permit the use of non-CFM parts or repairs by any licensee of the CFM engine shop manual;
* Honor warranty coverage of the CFM components and repairs on a CFM engine even when the engine contains non-CFM parts or repairs;
* Grant airlines and third-party overhaul facilities the right to use the CFM engine shop manual without a fee; and
* Sell CFM parts and perform all parts repairs even when non-CFM parts or repairs are present in the engine.
CFM said it was committed to maintaining and fostering “robust and open competition within the MRO market, as well as the competitive nature of its MRO model, which serves as a reference in the jet engine industry and has been a key element in the ongoing success of the CFM product line.”
This article was originally published on Air Transport World.