ANALYSIS: Is it time for Europe to change CAMO rules?

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EASA plans to permit airlines to fully outsource their continuing airworthiness management responsibilities, but carriers and authorities see clear advantages in keeping engineering expertise in-house.

Start-up airlines commonly subcontract part of their continuing airworthiness management duties to external specialists to keep overheads low and focus on flight operations. But as their businesses mature and fleets grow, some carriers move the office-based engineering jobs back in-house for greater process control and independence.

No matter whether or not tasks – such as maintenance planning or service bulletin and airworthiness directive reviewing – are subcontracted to external engineering bureaus, the airlines must still have a continuing airworthiness management organisation (CAMO) approval, as they remain ultimately responsible for their aircraft’s serviceability. The operators must ensure oversight of their MRO partners, keep technical records up to date and conduct all mandatory reporting to regulators.

However, EASA has been proposing a rule change for a number of years, which would allow carriers to contract all continuing airworthiness management responsibility – including all regulatory reporting – to external agencies. Airlines would not need to have a CAMO approval anymore, but would be required to implement control procedures to ensure that the contractors fulfil their obligations.

EasyJet in-sourced all continuing airworthiness management activities in February 2010, after a number of tasks had previously been conducted through the budget carrier’s MRO partner SR Technics. When the in-sourcing decision was taken in 2009, EasyJet had grown from an initial operation with two wet-leased Boeing 737s in 1995 to around 160 aircraft. This has since then further expanded to nearly 220 Airbus A320-family aircraft.

Today, the fleet technical management department comprises 42 staff members, who are conducting all continuing airworthiness management tasks, including maintenance planning, modification design, aircraft software control, and mandatory reliability programmes to prove that the airline’s MRO arrangements are effective.

In-sourcing continuing airworthiness management has clearly created costs savings for engineering projects, says Swaran Sidhu, EasyJet’s head of fleet technical management. But more importantly, he adds, building up the in-house capabilities has led to greater independence and process control, and created an appetite among the team for innovation, greater efficiency and continuously improving the technical operations. "We are master of our own destiny rather than having to rely on others to build up intelligence," he says.

For example, the duration of reviewing modifications, such as galley changes, has been cut from up to 100 days to around 20 days today due to lean production methods. The greater in-house engineering competence has also put EasyJet – which tenders most of its MRO requirements on the open market – in a much stronger position versus maintenance providers, because the airline can make better informed judgements about the contractors’ work.

Fleet growth and the urge for independence have been EasyJet’s main drivers to build up its fleet technical management capabilities. Continuing airworthiness management was initially outsourced, because the airline wanted to establish its network and brand. "It made sense to contract continuing airworthiness management out to specialised MROs, because they offered tailored [support] package solutions that we were looking for," says Sidhu. "It was also about keeping simplicity at the forefront and predictability of the cost base."

As the fleet grew in size, however, continuing airworthiness management became more demanding and outsourcing the tasks in question did not automatically mean greater simplicity anymore. "Managing outsourced products present different challenges, such as managing MRO oversight and influencing change itself and maintaining a lean cost base," says Sidhu. Ensuring adequate oversight became more difficult with the existing small team and the engineers wanted to have more control.

EasyJet’s growth thus prompted the executive team to undertake a strategic review of the airline’s technical capabilities, which led to the decision to sett up a full fleet technical management department in-house. The preparations took about a year, with the switchover being made in February 2010.

Robert Nyenhuis, vice-president aircraft engineering at Lufthansa Technik, agrees that as airlines expand their fleets and networks, they typically come to a point where the existing maintenance arrangements are reviewed. The German MRO provider conducts continuing airworthiness management services for a number of external customers and has had clients that later took the work in-house. When a carrier grows, the maintenance tasks are becoming more complex, often new IT systems need to be implemented, and the ways how the technical work is organised are changing, says Nyenhuis.

EasyJet took about a year to set up the required department and prepare the transfer of technical data from SR Technics to the airline’s Luton headquarters. Moving that information across was a central challenge, says Sidhu, especially as the airline and MRO provider employed different IT systems. But after extensive testing, the approximately 16 million datasets were transferred in one night with no adverse effect on the aircraft, he says.

Recruiting the required talent for the fleet technical management department was perhaps even more complex. Initially, the airline employed temporary contractors as it was not yet clear how many and what kind of specialists were necessary to look after the fleet. However, when Sidhu joined EasyJet in early 2010, he says, it became quickly evident that the core team needed to be directly employed on a permanent basis. "We need to replace the contracted workforce with our own people for two reasons: firstly to prevent the loss of intelligence when people leave the organisation [and] secondly to establish a harmonised culture that would deliver the objectives," he says.

"People come from different organisations with different cultures and thinking in their mind," he adds. For this to be adapted to the airline’s own environment takes time. As a result, EasyJet replaced all temporary staff with its own engineers by 2011, with about half of the contractors taking the carrier’s offer for permanent employment.

However, there are also airlines that continue outsourcing continuing airworthiness management tasks even when they become more established. Hungarian budget carrier Wizz Air, for example, has extended its fleet technical management agreement with Lufthansa Technik. Whether or not such co-operations are continued depends on its customer experience with the service provider, says Nyenhuis.

Operators contract Lufthansa Technik not just to outsource certain continuing airworthiness management tasks, he says, but, crucially, to tap into the MRO group’s knowledge pool from handling a number of different carriers. "Due to many customers, we are relatively large and provide a great depth [of engineering experience]. This is a benefit for smaller airlines which, even if they wanted to conduct all CAM [continuing airworthiness management] in-house, they could not achieve this [capability] depth themselves. Building that up and employing the necessary staff would be too expensive," Nyenhuis says.

Small airlines almost always look for partnerships to fulfil their continuing airworthiness management duties. "There are virtually no low-cost carriers that try to start up and do everything themselves," he says. But as airlines try to reduce their costs, also larger operators evaluate the benefits of external specialists against their own engineering teams, even if outsourcing is only considered for individual tasks or projects, he adds.

A further benefit of using external engineering consultants is to gain independent advice in negotiations with original equipment manufacturers. The OEMs are building up their product support businesses and trying to control the aftermarket by, for example, gathering operational data from their equipment and restricting access to technical information. However, aircraft maintenance is "very dynamic" and frequently brings up surprise issues that demand quick solutions, says Nyenhuis. If airlines are left to deal with the OEMs on their own – when the manufacturer is responsible both for the cause and remedy of a problem – the situation becomes difficult for the operators. He says: "The question always comes up who represents the airlines before the OEMs, when the operators have neither a critical solicitor nor own [technical] competence anymore?"

The central challenge of a fleet technical management partnership is to set up an interface between the airline and service provider that allows appropriate levels of control and transparency. The relationship is not limited to the engineering bureau completing certain technical tasks, which the operator takes in turn to the regulator for approval. The airline must instead have oversight its engineering partner, as the carrier remains responsible for its fleet’s airworthiness. All relevant technical data must thus be directed to the airline in real time so that the carrier can verify that its aircraft are in good operating condition ahead of departure.

The objective is to give the operator "active control through direct involvement" with the engineering partner, says Nyenhuis. "The art is to organise this [interface] in such a way and make it so transparent that the airline can fulfil its responsibilities." But if that is not achieved, there is likely to be trouble between the carrier and regulator, and the airline will seek other solutions such as in-sourcing, he says.

EASA has been facing strong opposition to its proposed rule change that would allow commercial air transport operators to outsource all continuing airworthiness management responsibility, including all dealings with authorities. Airlines would need no own CAMO approval anymore, but instead be mandated to implement supervisory measures – under a new continuing airworthiness control exposition manual – to ensure that their external service providers fulfil their responsibility.

A key driver behind the new rules have been the aircraft manufacturers, as the change would allow the OEMs to include continuing airworthiness management services in their aftermarket programmes. But much headwind has come from some of Europe’s national aviation authorities, which interpret EASA’s proposal differently. Germany’s LBA, for example, pursues a strict line of the present regulations, where airlines need to remain fully responsible for their aircraft’s airworthiness.

The rule change could help small carriers which "may find it difficult to have the full in-house expertise" to manage the continuing airworthiness of their fleets, the European authority says in its notice of proposed amendment from July 2010. Another advantage would be that operators – which are dry-leasing aircraft for a short-term period – can outsource the necessary continuing airworthiness management work to a specialist, if the type in question is not covered under the airline’s existing CAMO approval.

EASA argues that the new regulation will improve the current situation where a number of operators have been found to subcontract continuing airworthiness management services with "inadequate oversight resources and with no active control of the contracted activities".

The new regulation would improve authority oversight of continuing airworthiness management service providers, claims EASA. Today, an airline can subcontract tasks to external engineering agencies which do not need to have a CAMO approval of their own. However, if a carrier outsources all continuing airworthiness management services under the new rules, the service provider would need to be certificated and audited by the authorities. Meanwhile, airlines will still have the option to conduct conventional fleet technical management under an own CAMO approval.

Nevertheless, the rule has not been approved, because doubts remain among national aviation authorities and airlines whether the new regulation will guarantee adequate CAMO control. "There will really be a split of responsibility" between operators and their continuing airworthiness management service providers, says Jorge Leite, vice-president quality and safety at the maintenance arm of Portuguese flag carrier TAP. "It is more like an oversight of the CAMO rather than in-house quality management" that airlines would need to conduct. Yet, some of the proposal’s splitting and sharing of responsibilities are not clear, he says.

Leite agrees that small carriers with limited resources could benefit from the rule change. But he is convinced that the ability to manage aircraft airworthiness is a central part of an airline’s business and having that engineering capability in house pays dividends both operationally and in customer perception terms. "People don’t like the word outsource, because it almost gives a sense that you are discharging your responsibility. For a medium or large airline that can afford to have the CAMO [activities] inside, I think it is a benefit for the business and image… This is really a proof of control," he says.

Lufthansa Technik is in favour of the EASA proposal – unsurprisingly, given that it is a third-party continuing airworthiness management service provider based on the engineering department for its parent fleet – but Nyenhuis nevertheless says that the regulatory change is very complex. "There is much emotion involved. But I firmly believe that it will come. On the one side, this is based on industrial reasons, because the OEMs have a keen interest in it and are strongly pushing for it. On the other, operators have the possibility to further strengthen their technical competence and save money," he says.

Nyenhuis is also convinced that the proposal does not need significant further revising to overcome any prevailing reservations. "The proposal has now a maturity degree that doesn’t requiring much more finessing. Either it goes through the normal European legislative cycle – which perhaps takes a year or two – or they decide that the time has not yet come [and] we put it on ice. I don’t think we need to go around in circles much more."

EASA, meanwhile, declines to comment on the new regulation’s progress.