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Will CFMI deal change MRO landscape?

Posted 23 January 2019 · Add Comment

CFM International has agreed, under pressure from the International Air Transport Association (IATA), to open up the market for third-party parts and maintenance, repair and overhaul (MRO) on its best-selling engines. Chuck Grieve explores the reasons why and asks whether it could it be the start of a sea change in aftermarket practices?

News of CFM International’s agreement with IATA to loosen its grip on the aftermarket for its CFM56 engines has been cautiously welcomed by airlines, lessors, parts suppliers and MROs.
IATA described the deal as a set of 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.
Those who stand to gain from CFMI’s revised approach are generally adopting a “wait and see” attitude.
“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,” Eric Mendelson, president of parts manufacturer approval (PMA) supplier Heico’s parts-making division, was quoted as saying.
The CFM56 is acknowledged as the most successful aircraft engine of all time with more than 30,000 examples delivered over four decades. About 13,400 variants are currently in service, mainly powering Airbus A320 and Boeing 737 narrow-bodies. The GE/Safran joint venture’s investment in developing its engines over that time is substantial.
A CFMI statement said the deal “reaffirms its commitment to maintain and foster robust and open competition within the MRO market”, as well as the competitive nature of its MRO model.
The question some in the industry ask is why did it take a complaint to the European Commission, filed in 2016, for CFMI to act?
MRO sources in the Middle East and Africa, where CFM56-powered aircraft are abundant, point to the predicted logjam in CFM56 shop visits in the next 3-4 years and the difficulties already being experienced in sourcing parts as incentive for the original equipment manufacturer (OEM) to bow to airline pressure.
A source, who spoke on condition of anonymity, said MROs are now asking for advance notice of repair work; previously material could be sent and it would be processed on receipt. Typical lead time for CFM56 engine components is now 20 days or more. “This level of delay is unsustainable if the current level of demand persists, so it was only a matter of time before a permanent solution was needed.”
Another contact suggested the deal is a direct consequence of the Southwest Airlines Flight 1380 tragedy in April, when the failure of a fan blade led to a passenger’s death. The subsequent emergency airworthiness directives (EADs) on the CFM56-7B fleet affected an estimated 3,700 engines on aircraft of US registry alone.
That highlighted a problem with the availability of parts from the OEM. “CFM doesn’t have the capacity to produce as many as they need,” said the source. CFM was aware of the problem, he said, and “obviously” was putting measures in place to boost its manufacturing output. But, meanwhile, “all parts providers are having difficult times getting these parts to meet customer requirements”.
Some observers suggest just getting the policies down on paper may be the deal’s most significant outcome. The conduct policies codify “an opaque set of guidelines” that contributed to what IATA alleged was an “anti-competitive marketplace”.
Jim O’Sullivan, Heico’s vice-president sales and business development in the Middle East, said: “We see this as a first step to reverse the longstanding restrictive practices by engine manufacturers that have resulted in higher costs for the industry and, therefore, the flying public. We expect that IATA, its airlines and suppliers alike, will be closely watching the implementation and results.”
In his statement, Alexandre de Juniac, IATA’s director general and CEO, said: “We hope that this agreement will be an example for other manufacturers to follow.”
It remains to be seen if other OEMs will take the hint.
GE already has by promising to apply the principles of the conduct policies to its own engine programmes. Honeywell has not – despite being the one OEM that might have been expected to, given that its market-leading auxiliary power units (APUs) are the subject of a similar ongoing IATA complaint. “Honeywell believes that our practices are fair and in compliance with all relevant laws,” a statement said. “We have and will continue to cooperate with the European Commission’s preliminary inquiry.”
The MRO industry watches with interest.
 

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