The rising MRO costs continue to be the reality of aircraft operators all over the world. According to IATA, over the past decade airlines have experienced an annual increase in spare parts prices of around 3-5% per annum. As a result, today maintenance materials and parts account for about 4% (roughly a total of $120 million) of total air carriers’ operating costs.
Unsurprisingly, managing budgets when it comes to spare parts supply remains one of the key issues for the market players. However, with OEMs getting an increasingly tighter grip over the aftermarket, is there a way out?
According to IATA, as concerns maintenance costs in the aviation industry, purchased parts account for about 30% of all costs (most of the remainder is spent on labour). This is especially true in such segments as aircraft engine repair or refurbishment services, which account for up to a third of the entire MRO market. For instance, in 2004 the cost of High Pressure Turbine (HPT) blade in CFM56-7 engine was $6600 and in 2014 it became $10660 (the cost of the set of 80 HPT blades grew up from $528k to $852k or 61% increase). This is significant cost when we talk about the parts which are often changed during an engine shop visit.
According to Modification and Replacement Parts Association (MARPA), historically, OEMs have long held a strong monopoly on the sale of replacement parts. It has enabled them to maintain an increase in spare part prices on the order by approx. 5% per year. However, a growing confidence in such alternatives as surplus, teardown parts and PMA products has had a rather strong effect on the OEM market. As a result, OEMs have been forced to think of new ways to adjust their pricelists.
“In the aviation industry worldwide maintaining cost efficiency is critical for all airlines. Not surprisingly, more and more operators have started searching for alternative sources of spares, as the prices offered OEMs have continued to rise. As a result, recently airlines have been becoming increasingly interested in the use of PMA parts,” shares Alexey Ivanov, the VP Engine Management of FL Technics. “Our experience shows that airlines may save up to 15% on engine repair cost with subject to strategic material supply and repair solutions. Additional 5-10% savings can achieved via optimal engineering,”
It has been proven that in certain cases by tapping into the PMA market MRO providers can offer way more cost efficient solutions. According to the MARPA statistics, the use of PMA parts can bring about savings ranging from 25% to 45% (compared to the option of using OEM parts). Therefore, PMA solutions can help carriers to increase their competitiveness in the cut-throat aviation industry. As a result, it should come as no surprise that over the past 10 years the PMA market has acquired a momentum of growth. Some industry experts believe that the commercial aircraft PMA segment will attain a value of approx. $1 billion in a short-to-middle term perspective. The total share of PMA parts on the market is anticipated to grow up to 5%.
Despite the apparent benefits of using PMA parts, some aviation players are still hesitant about their quality, not to mention the issues related to availability. However, they fully comply with the original manufacturers’ parts drawings. In practice, there have even been cases when by the end of the contract with the main airplane manufacturer (first-tier OEM), the second and third-tier OEM chose to apply for a Parts Manufacturer Approval and, upon its receipt, continued the production of certain components (though not under the original manufacturer’s brand). “There is a great pressure from the side of the OEMs for the PMA manufactures and aviation authorities but all the market experts are common in the opinion that it’s more driven by commercial factors rather than technical ones,” says Alexey Ivanov.
“We have observed the industry’s gradually growing interest in such alternatives as PMA parts over the past 10-15 years. Today, industry players in Europe account for up to 35% of the entire PMA market (almost double the share 20 years ago), while North America still remains the main buyer of such components with approx. 50% share. However, due to the latest developments in the aircraft aftermarket – more surplus materials, tear down parts and other relevant OEM-produced options available than ever before – the PMA industry has found itself in a position where it has to fight even harder for its recognition within the global aviation community,” comments Gediminas Ziemelis, the Chairman of the Board at Avia Solutions Group.
Certainly, OEMs still remain very strong in the spare parts market. However, airlines should not be intimidated and remain firm while negotiating their right to choose non-OEM products and services. “At the same time, one should bear in mind that neither PMAs nor DER repairs are a magic wand which will make 20% of your maintenance costs disappear. The utilization of these alternatives requires a thorough evaluation and long-term planning. Firstly, one must consider all the existing obligations to OEMs and aircraft owners. Secondly, operators should always keep in mind that in some cases it may end up being even more expensive than using original solutions. In either case, today the MRO industry offers a variety of spare parts supply options. Each and every one of them has its specific pros and cons. Unfortunately, not every airline has the right experience and adequate resources to opt for the best approach when it comes to their fleet and MRO strategy,” concludes, the Chairman of the Board at Avia Solutions Group.
Source and image: FL Technics