Just at a time when there is a prime focus on PMA parts approval by the FAA to lend sanity to parts prices, it seems that there appears to be a quiet effort by at least one engine manufacturer to rein-in the use of PMA (Parts Manufacturing Approval) parts and DER (Designated Engineering Representative) approved repairs in their repaired and overhauled OEM engines. This is of course a relatively small effort considering that the PMA market is projected to reach $750 million by 2017, but maybe that is just the point …
This program, so far, by a single major airline engine manufacturer, provides its own method to identify individual engines that contain only their original new or repaired parts. Obviously, it is attempting to provide a specialized value-added service which it claims can better support its engines which have only factory-provided internal parts. Therefore, it says it is in a far better position to evaluate its own engines’ configuration and content. It also claims it has the technical data to better evaluate the internal condition of its engines that contain its own factory parts.
Well, everybody knows that PMA parts are usually lower in cost than so-called original OEM parts, keeping in mind, of course, that many OEM parts are also manufactured outside of the OEM facility, many times in far removed remote locations, and at lower cost than their domestic OEM produced parts.
How it works
Once the manufacturer signs up the customer for its value-added program, it will simply examine an incoming overhaul candidate and its records to determine if it contains any PMA parts and if so, the price to overhaul the engine (by the OEM) will suddenly rise or it simply rejects the engine for inclusion in its value-added program. The manufacturer will say that the value of the engine however will increase if all the ersatz (PMA) parts are replaced with OEM parts. (What happens to the PMA parts that are removed is of course probably open to price negotiation.)
It claims that the program is especially useful to leasing companies that intend to resell their aircraft when a lease is up. The idea is that the engines with a lot of PMA parts and or components and DER type repairs will be worth less than the engines with all factory original parts and or factory repairs. The factory parts and repairs would be valued at a higher rate than engines that contain PMA parts and thus the planes should bring a higher price on resale by the lessors.
Some have suggested that this type of program and any others that attempt to force a customer to use only OEM parts and repair services, is simply a way to increase revenue. They say that the expected rise in the use of PMA parts is simply being attacked at the factory level in order to protect their market. Of course there are those that argue otherwise and that it is a good program that gives added value to the purchaser. But the question continues to come up … if PMA parts are equal in quality and airworthiness to that of OEM parts (FAA says so ...) then why should engines with PMA parts be treated any differently than engines with OEM repair parts?
And, what about airlines? In many cases they have their own maintenance and repair facilities to take care of their engines. FAA and EASA around the world approve PMA parts and repairs for airlines. Virtually all of the top airlines in the world gladly use PMA parts and DER or their own repair procedures. The savings has to be huge considering the costs of factory parts that we all know about. Even a leasing company has to carefully weigh the costs involved with the purchase, at factory prices, of engines, aircraft parts, and factory repairs. It seems clear that if they are willingly paying the increased costs for engine repairs then somebody is going to pay for it … namely the lessee — user. They may have to think twice about who they are dealing with and attempt to discount any increased leasing fees that are designed to offset increased costs for engine repairs.
Furthermore, a PMA parts supplier many times has more efficient resources than the OEM provider and can provide a genuine service alternative. The PMA provider may have superior support service for its product and provide more on the spot technical representatives to the user.
Henry Ford on spare parts
Henry Ford has been quoted as saying. “I’ll give you the car for nothing if you agree to buy all your spare parts only from me ….” In other words he looked to the long-term relationship with the customer to sustain his business. This kind of service and parts for the life of the car and the parts was fundamental to Ford’s success. Likewise, to the PMA market here in the USA and overseas. Most of the major PMA suppliers attempt to follow this rule to the letter with the same kind or in some cases better support than the OEM. But, of necessity, it is limited.
OEM providers, on the other hand, say they provide one-stop service with extended new part warranties, DER, and factory type repairs and of course complete engine overhaul and have all the technical data to do so. Like Henry Ford, they also are seeking that long-term relationship that guarantees the use of higher priced parts.
Presently, recent reports on global PMA parts sales say the market is projected to reach $749 million by the year 2017. But, an engine program like this one does not tend to increase the PMA market. Rather, some would say that it would clearly not support the continued growth of the PMA market and in fact would curtail any further expansion.
Will it grow?
Will this type of factory program expand to the general aviation sector? Engine and airframe OEMs? Many would say that it probably will not … but it is interesting to speculate. It appears that such a program is more suited to the large commercial field of airlines and leasing companies, where there is a huge financial factor to consider. However, many leasing companies will still continue to allow the use of PMA parts as long as the major OEMs continue to raise their spare parts prices. With the current state of the economy it seems logical.
There is no question when it comes to whether or not factory OEMs have a virtual legalized monopoly on the sale of their factory parts and services. After all, it’s their product and they built it. Through the years attempts to challenge their status has produced little results.
You can be assured that the legal department of the company inaugurating this type of preferential treatment for some has carefully set it up so as to avoid any suggestion of disparate customer handling, or a preferential pricing structure, which might violate some federal or state statute. Nevertheless, there can’t help but be the lingering scent of a pricing struggle.
You can expect to see and hear strong objections to any attempt to disparage or down-value PMA parts. The PMA parts manufacturers associations are most likely drafting strong positions on the issue. Modification and Replacement Parts Association (MARPA) in particular, will discuss this and other threats to the use of PMA parts, at an upcoming PMA parts gathering in London, UK, this November. According to the schedule, it will specifically bring up the issue as it applies to leasing companies and others, and on how they can effectively deal with manufacturers who attempt to encourage the removal of PMA parts from their products.
The threat of some sort of legal proceeding by imaginative lawyers may well be in the future where a theory could be advanced to discourage such attacks on PMA parts. As it now stands, most would agree that such a step is not necessary. Also, there does not seem to be any violation of any federal or state laws where there is only an incentive to remove PMA parts from products.
Stephen P. Prentice is an attorney whose practice involves FAA-NTSB issues. He has an Airframe and Powerplant certificate and is an ATP rated pilot. He is a USAF veteran. Send comments to firstname.lastname@example.org.