Thursday, January 1, 2009
PMA Challenges and Opportunities
The Parts Manufacturer Approval (PMA) business continues to grow, as demand for economically priced replacement products increases, but issues remain as the industry matures and original equipment manufacturers (OEMs) try to win back lost ground. A new regulation also has generated intense debate — it’s either a (well-disguised) blessing or an utter disaster for the industry, depending on one’s point of view.
PMA companies cite quality as well as price to account for industry growth. For FAA approval, the components need to have been tested and proved to be equal or better than the OEM part they are competing with.
"The name of the game is better performance, lower price and product in stock," asserts John Wicht, FAA project manager with Rapco, which manufactures vacuum pumps, pneumatic filters, brake disks and other PMA parts. PMA is more relevant now than ever because of the economic situation, he adds.
This replacement part industry focuses on outperforming the OEMs. Rapco, for example, added a feature to all of its new PMA-approved vacuum pumps (see image lower left). It incorporated an inspection port in the side of the vacuum pump cavity, Wicht explains. After 500 hours of service, operators are required to inspect the vane wear of the pump, using the inspection port and an inspection tool, as outlined in its FAA-approved instructions for continued airworthiness. The OEM’s requirement for the same vacuum pump is, after the same interval, to remove the pump from service. "We learned that there is valuable service life after 500 hours on the average vacuum pump," he says. "All Rapco did is give them the tools to inspect the vacuum pump properly." Since then, Rapco has learned that other OEMs have followed suit. The company also plans to introduce a dry seal into the drive end of certain vacuum pumps to help prevent pump failures caused by oil or solvent intrusion.
Moving Up the Value Chain
"We believe the PMA parts market will continue to grow and eat into the OEMs’ market share," asserts Nate Dalton, VP of marketing and business development for Wencor. OEMs "get complacent and don’t want to carry inventory, [which] is a sore spot with repair shops and airlines," Dalton says. And since Wencor is a distributor for other PMA companies, OEMs, TSO and mil-spec parts, the company has functioned as a gateway for other PMA suppliers in dealing with Delta Airlines, he notes.
PMA is also moving up the value chain. "The higher-cost, more complicated parts are the opportunities," Dalton says. Wencor, for example, is moving into hot section parts, such as blades and stators, for smaller turbine engines in the general aviation (GA) market. The company currently offers PMA parts for commercial aviation auxiliary power units (APUs), which are roughly the same size as turboprop engines. Through its Dixie Aerospace division, Wencor has also developed main shaft bearings for turboprop engines. Wencor also is developing parts for pneumatic systems, such as the air cycle machine on the Boeing 777. These developments, Dalton points out, remain within the company’s core competencies.
Global Filtration, on the other hand, is a specialist, with around 100 PMA parts, most of them filters and kits, O-rings and gaskets, according to Rick Caouette, company president. He attributes the growing success of the PMA market to economics. Customers save 30 to 80 percent on Global Filtration’s parts, he claims. The company plans to introduce O-rings, fuel nozzle gaskets and hot section gaskets for the Pratt & Whitney PT6 engine.
Although PMA parts are essentially intended for commercial aircraft, they sometimes are found in military aircraft. In past years the U.S. Air Force has courted the PMA industry, with the intent of using PMA technical data as the basis for an independent process known as a source approval request (SAR). Although the Air Force’s interest waxes and wanes as military personnel rotate through air logistics centers, the military sector is still a potential growth area. It accounts for 51 percent of the $117-billion MRO market today, says Jonas Murby, an associate consultant with AeroStrategy.
According to Kitco Defense, Wencor’s sister company, the Air Force, in part because of turnovers at the logistics centers, currently appears to be less open to using flight-critical PMA parts. The Defense Department also lacks a system comparable to the FAA’s PMA process, where the civil agency "evaluates not only the engineering work you have done," but "looks at your company to determine whether you have processes that are repeatable and design standards that ensure consistency and safety," according to Ray Hoschouer, Kitco product development manager.
This cyclical variation of the barriers to entry means that Kitco currently competes in the military market mainly on price. There are still numerous business opportunities, but they may not be PMA. Kitco recently supplied a brake kit, for example, that was designed to the military’s own data.
Commercial carriers, the biggest users of PMA products, are wringing out their supply chains and cutting the number of their suppliers. Management may want to increase the use of PMA, but there may only be one or two people handling it at a huge airline, Murby says. FAA certification offices, as PMA’ers frequently point out, are overworked and understaffed. With a growing number of parts, it can take one to two years to get a PMA through the agency, Caouette notes.
Aircraft lessors are another PMA challenge. A big part of the equation is the calculation of the residual value of an engine, for example, at the end of the lease period, Murby says. In many economic models, residual value is calculated as the sum of the parts, which means that lessors assume a risk if lower-priced PMA parts are used.
Business is good for larger suppliers who can offer a broad scope and high-value product line. Murby points to the deal between HEICO and British Airways announced last year. "HEICO handles everything vis-à-vis PMA," he says, including supplier qualification. "They are the gate keeper for all the PMAs."
Consolidation is also a factor. Timken recently announced the acquisition of EXTEX, which added nearly 600 PMAs to its existing inventory of more than 1,400. The deal expanded Timken’s PMA offerings in APUs, PT6 engine parts and military parts, says Tony Smith, general manager for Timken Aerospace Aftermarket Services.
PMA players are also facing pushback from the OEMs. One tactic is to move to a licensed service center model, Murby explains. He cites General Electric’s agreement with Aveos, formerly Air Canada’s Technical Services division. Aveos becomes one of GE’s engine overhaul shops, but in return they will source their material from GE, he says. OEMs can also introduce more frequent engine upgrades, which raises the cost of entry for PMA companies. And long-term trends to greater complexity — such as the "more electric aircraft" — and integration, will make the task still harder.
OEMs also protect their market with "power by the hour" deals with materials and services contracts, Dalton says. But Wencor, for example, has made parallel alliances with aftermarket players. Dalton cites a relationship with Triumph Accessory Services, a Part 145 repair station, which works with the major airlines. In order to compete, Triumph offers power by the hour-like services, and is supplied by Wencor to the extent of the latter’s product line.
Timken counters OEM support programs with asset and material management programs in the GA space through its engine shops, Smith says. For example, the company can support an engine shop through a multiyear deal, where Timken manages material required for replacements or repairs.