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ANALYSIS: Maintenance providers see big wins from CFM-IATA deal

Maintenance and spare-parts providers have welcomed the agreement CFM International has struck with IATA to open up the market for third-party engine support of the manufacturer's engines.

A third-party MRO company tells FlightGlobal that the accord will have a "huge effect" on its business and improve the market position of independent maintenance providers versus the OEM.

"The playing field will never be level, but at least they have done so much… to take some of the bumps out," says the company. It argues that CFM's pledge to abandon fees for using its engine-shop manual will notably reduce costs for overhaul shops, and be particularly relevant for MRO facilities not affiliated with airlines.

However, CFM's concession entitling operators to install non-OEM material in their engines represents the most fundamental change in the manufacturer's aftermarket policy. In the past, several suppliers – including Pratt & Whitney – developed PMA parts for older CFM56 variants. But on later models, CFM restricted the use of such material – as did other manufacturers, for their engines.

For DER repairs, overhaul shops have had an option to apply to CFM for an approval to complete certain repairs. The manufacturer can then issue a customer-dispatch record to say it has no technical objection against the procedure. But such approvals are at CFM's discretion and only cover specific engines; they are not transferable to others.

"Right now, I keep away from DER repairs and PMA parts, even though some customers want them," says the MRO company, citing concern over the possibility of jeopardising both its customer's and its own relationship with CFM.

Noting that "some, not all" customers are interested in the use of PMAs, the MRO argues that the possibility of supplying alternative solutions to OEM services represents a key role of third-party maintenance providers. Being able to offer "options" is central to the business because it enables the company to "give something back to the customer", it says.

This is echoed by a source at SR Technics. The Swiss maintenance provider's overhaul shop specialises in CFM56 and Pratt & Whitney PW4000 support. The source says SR Technics sees its role as a being able to offer customers "flexible solutions" and that PMAs for select parts are an option to deliver savings for operators. The MRO provider has good experience with installing a range of PMAs, including high-pressure turbine blades for PW4000s, the source says. It believes that the CFM-IATA accord will spur development of PMA parts for new CFM models.

Eric Mendelson, co-director of PMA supplier Heico, tells FlightGlobal he is "hopeful" the agreement will result in a "more open" playing field and in greater availability of alternative material and repairs to OEM solutions.

He says that, in the past, the US company supplied airlines with "hundreds" of PMAs for CFM56-3, -5A and -5C engines – which power 737 Classics, early Airbus A320-family jets and first-generation A340s, respectively – as well as other manufacturers' engines.

For CFM56-7Bs and -5Bs – which power Boeing 737NGs and the majority of A320ceo-family jets, respectively – Heico developed "a series" of PMAs, and gained customers for that material, Mendelson says. But he adds: "Due to CFM's – what I would term – anti-competitive behaviour, it has been very difficult to sell [these parts]."

He foresees business growth for Heico as a result of the CFM-IATA deal, but does not believe the agreement will lead to structural change in PMA markets or the arrival of new competitors. "While it is a very attractive business to be in, the OEMs don't cease market share easily. They fight very hard… and if a company goes out and tries to develop a PMA part, it is very difficult [to sell it] once the OEM responds with various predatory acts or pricing decreases," he says. "At Heico, we figured out how to navigate that," he adds.

FlightGlobal understands that, before the IATA-CFM agreement was disclosed in July, established parts manufacturer and DER repair specialist Chromalloy had already started the process of developing PMAs for CFM56-5Bs and -7Bs, likely as a result of a maturing fleet for these powerplants and an increased number of operators seeking alternative solutions to OEM material and repairs to keep their equipment in service.

Chromalloy declined to comment on the IATA-CFM deal.

Mendelson thinks "a lot of OEMs" are monitoring the agreement between IATA and CFM – and the association's separate complaint against Honeywell – because the manufacturers "recognise that airlines want competition and they [OEMs] need to permit it". He says: "The market is getting bigger and they [OEMs] are still going to be able to do very well. But they need to be able to provide some alternatives as well, or else they face the same kind of scrutiny."

IATA says its complaints – filed in 2016 – covered CFM and Honeywell. But in 2015, the European Commission sent out questionnaires to airlines and manufacturers as part of a previous preliminary investigation to assess conditions in service agreements. And that probe covered additional OEMs.

Rolls-Royce received a questionnaire from the Commission at the time. Chief executive Warren East said in August that the UK engine maker had heard nothing about the inquiry since it returned the questionnaires.

In the context of the CFM-IATA deal, GE says it will "voluntarily" apply to its own commercial engine programmes the new conduct principles relating to third-party maintenance. GE says it is "not a party to the agreement between IATA and CFM", but adds that it will apply the new policies to the CF6, CF34, GE90 and GEnx models.

The SR Technics source says that it has set its sights on CFM's Leap engine as a potential follow-up type to its CFM56 maintenance business, it is "not waiting" for the IATA-CFM deal. As its parent HNA Group has ordered aircraft powered by both Leap and PW1000G-series turbofans, the MRO provider considers itself in a position to establish capabilities for either engine in future, the source says.

Nevertheless, the source acknowledges that the CFM-IATA accord could simplify access to know-how and accreditation for Leap engines and describes the deal as "good for competition in general".

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