CFM56-MRO-LHT.jpg Lufthansa Technik
Lufthansa Technik Philippines. Replacement Nose Cowl A340 300, CFM54-5C Engine. Manila, den 18.08.2010

What Does the CFM-IATA Deal Really Change?

The agreement, which came into effect earlier this year, has been largely welcomed by the industry.

It’s now almost a year since CFM signed up to a set of "conduct policies" with IATA, thereby ending the latter’s complaint to the European Commission about alleged abuse of a dominant position.

Since then, many MRO companies and engine lessors have said they welcome a boost to competition in the CFM aftermarket, which is what IATA said its deal would provide.

However, it is far from clear that the deal will provide any significant liberalization.

First, this is because CFM insists that the majority of what it signed up to was already company policy. The only real changes, CFM says, were lower fees for third-party maintenance providers and an agreement, in very limited circumstances, to re-install serviceable PMA parts its engineers encountered during overhauls.

Second, the CFM56 overhaul market (the deal also covers LEAP engines, but these are still too young for major shop visits) already was quite diversified, with more than 40 different overhaul shops. And while the current squeeze on engine maintenance capacity may spur others to join the market, there was little to stop them doing so before the IATA deal.

“It’s always been the case that we provide licenses to anyone who wants them,” says Bill Dwyer, marketing leader for GE Aviation Services. He adds: “The only restriction is that you are certified by your local regulatory agency.”

This highlights the somewhat paradoxical nature of IATA’s original complaint: to enhance competition in the aftermarket, it addressed what was arguably the most competitive segment already.

A more logical starting point would be the Rolls-Royce aftermarket, where the OEM’s domination ticks up with every new generation of engines.

Asked whether it is pursuing a complaint against Rolls-Royce, as well, an IATA spokesperson says: “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.”

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