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MROs Face Deadline For Signing Airbus’ Royalty Fee Proposal

Airbus' proposed royalty fee structure for MRO invoice has aftermarket providers around the world very concerned.

Airbus’ proposal for a royalty fee on airframe maintenance providers’ gross invoices has MROs very concerned.

The fee would apply to any airframe MRO that performs maintenance on Airbus aircraft for third parties and uses the OEM’s technical data via Airbus World, the company’s platform that houses data needed to support Airbus aircraft.

This means that all of the largest MROs—including ST Aerospace, HAECO, Lufthansa Technik, AAR and others—will be hit with this royalty fee if Airbus imposes it. The OEM says that about 250 MROs access Airbus World.

MROs have five big concerns. First, it appears the royalty fee would start at 1.25% of gross invoices in 2020, increase to 1.5% in 2021 and then be an undisclosed figure in 2022. Airframe MRO is a low-margin business (see related Viewpoint, page MRO 54) and “a percentage of revenue will kill the MRO business because it operates with single-digit margins,” said one MRO source.

Second, while MRO personnel with whom I spoke think it is fair to pay an annual fee to access information in Airbus World if the royalty fee structure goes ahead, some expressed concern that the fee would dissuade some MROs from seeking the latest technical data from Airbus. “MROs need the data and drawings for safety,” said one MRO source, and having to ask airline customers for it “is not a best practice.” Several sources have suggested that the International Air Transport Association is concerned about Airbus’ action and is collecting information from members, but this has not been confirmed by the association.

Third, MROs were told that Airbus would have the discretion to audit invoices—to verify their accuracy, according to the sources. Airbus told Aviation Week on Oct. 7 that “We do not plan to audit MRO invoices. We will ask the respective external auditor or certified public accountant of the MROs to provide us with the revenue which the MROs have generated on Airbus aircraft maintenance. We will request only one figure, one value, which will be classified as confidential and will be used for the sole purpose of the invoice.”

Fourth, industry sources have said MROs affected by the royalty fees have until Oct. 31 to sign an agreement with Airbus or risk losing access to the OEM’s technical data. Several MROs have expressed their concern to Airbus but have not had a response other than receiving a link to a webinar addressing frequently asked questions. This is making MROs feel “stonewalled.”

Fifth, because the royalty fee will be based on an MRO’s gross invoice, it will include parts and engineering services an MRO might have purchased from Airbus—so aftermarket companies feel like they are being double-billed.

About the fees, Airbus says: “The new commercial policy covers the usage of Airbus technical data and its intellectual property [IP].”

Because it invests significantly in data updates and digital solutions that benefit MROs, the OEM says: “Airbus’ strategy is to collect remuneration for the usage of its IP by the users and the MRO organizations, which are the main beneficiaries of its IP.”

The company also explains that “Airbus has determined that the current situation is not sustainable, so it has decided to launch this initiative,” adding it is “not the first such player in this industry to implement such a business model.”

While money is clearly a factor, this seems like an IP battle that MROs and airlines are not taking lightly.

TAGS: Airframes
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