Alternative-parts manufacturing specialist Heico Corp. is cautiously optimistic that the recent settlement between CFM International and the International Air Transport Association (IATA) will open up competition in the engine aftermarket, and could provide it more opportunity to sell engine parts.
"I do think that one of our largest unrecognized opportunities would be...the engine PMA business," said Eric Mendelson, president of Heico's parts-making Flight Support Group division. "The airlines want a choice. So if the manufacturers heed this warning and basically cut out these anti-competitive...practices, then I think that is probably the Flight Support Group's greatest opportunity."
IATA and CFM ended a two-year dispute over what some airlines charged were anti-competitive aftermarket practices by the engine-maker--a GE Aviation/Safran joint venture. Among the alleged tactics: penalizing operators for using Parts Manufacturer Approval (PMA), or non-OEM, parts. IATA took its complaints to the European Commission Competition Directorate.
IATA and CFM hammered out a deal that saw CFM publish a Conduct Policies (CP) document that details how the maker of the most popular commercial engine, the CFM56, will handle all aspects of aftermarket demand--from parts sales to warranties. GE Aviation agreed to adopt the policies for its engines as well. In exchange, IATA dropped its complaint.
Included in the CP: clarification that any FAA or European Aviation Safety Agency-approved part can be used on CFM engines, and the "mere use or presence of non-OEM parts and repairs does not render void CFM warranties."
Doubt over these practices is one reason that engine PMA sales have not been higher. The PMA market is projected at about $600 million, but some 95% of the FAA-approved PMAs are for Airbus, Boeing, and Bombardier airframe and component replacement parts, an ICF International analysis shows. Heico develops hundreds of new PMA parts every year, and it calculates that it supplies about 2% of the demand for jet engine replacement parts.
"The engine space, over the last 10 years, has become very difficult," Mendelson said. "And from our perspective and from what the airlines have taught us, some manufacturers have been extremely anti-competitive and have basically threatened their customers and told them that if they used alternative parts, they're not going to support it. That's been a real headwind for our business."
While the CP's language should remove any doubt about whether PMA parts can be used on CFM and GE engines, it does not necessarily mean PMA suppliers will see demand increase. PMA makers rarely develop parts on spec, but rather wait until they have customers lined up before investing in product development and certification. Airlines that are PMA-shy may continue to steer clear of using alternative parts until the CFM agreement--and any others that may result, as IATA hopes that OEMs will step up and clarify their own policies just as CFM and GE have done--has been put to the test.
"I think it is a good opportunity, but I just caution you to not get overly excited about it until we see some of the results," Mendelson said.