PMA vs. OEM: The Business of Getting (and Keeping) Customers

According to the FAA, "Parts Manufacturer Approval (PMA) is both a design approval and a production approval. It is issued for the production of modification or replacement parts, which includes materials, parts, processes and appliances."

The concept is pretty straight-forward: The FAA says that as long as you don’t infringe upon someone else’s patent, you can make a part or system of parts that someone can install on their aircraft in lieu of the original item. Of course, for safety’s sake, the FAA wants detailed proof that the PMA part (sometimes just called a "PMA") is as good or better than the one made by the original equipment manufacturer (OEM), but that’s a hurdle that more than a thousand PMA manufacturers have jumped many, many times. The rewards for their efforts are the profits received from building what they feel are better products, less expensive products or both.

So, what’s wrong with that? Well, it all depends on whom you ask.

The OEM says there’s plenty wrong, because if the OEM didn’t make it, there’s no guarantee that it will perform as well as the original; a situation that could jeopardize lives and indirectly ruin the reputation of the aircraft builder. (After all, the general public only hears that a particular model aircraft crashed, not the fact that an after-market part may have caused it!)

The PMA manufacturer says there’s nothing wrong with their parts, especially since the FAA has to certify them as being equal to or better than the OEM’s product before they can be sold to anyone.

But like everything else in a free market, the victor is chosen by the customers, and for now they’re split, with some swearing by PMA parts and others swearing at them.

For years now, the OEM and PMA producers have been slugging it out in the aviation arena, like a pair of gladiators battling for their lives and, ultimately, the hand of the fair maiden: the customer.

Which side is winning the parts battle is hard to say and has everything to do with which part and what kinds of customers are being examined. But in their roles as warriors, each wields a powerful sword: The OEM is armed with guaranteed compatibility and the PMA steps forward with compatibility, as well as lower prices and (much of the time) better availability. And make no mistake about it, the battle between the two factions for customers has been heated for decades.

Compatibility, Price and Availability

"When we first started selling parts in the mid- 1990s the scenario was a lot like a guy holding a trench coat open: ‘Psssst! Wanna buy some PMA parts?’," joked Rex Kamphefner, co-owner and general manager of Aerometals, a California-based supplier of PMA parts for MD Helicopters. "There was a tendency to confuse PMA with the shady part of the market."

Other PMA parts manufacturers, like Larry Shiembob, president and CEO of Arizona-based EXTEX agree, and accuse the OEMs of implying to potential customers that after-market parts are incompatible, substandard and possibly dangerous.

"One of the big things you hear from the OEM is that if you install a PMA part you won’t have a warranty," said Shiembob, whose company builds parts for turbine engines. "...in reality, unless it’s a new engine, you don’t have a warranty anyway. If his part fails he has to warrant that product just as a PMA supplier needs to warrant their product. So, that’s a great scare tactic: ‘If you put in a PMA part your warranty will be void.’ That’s untrue and that’s probably illegal."

John Wicht is a project manager at Wisconsin-based Rapco, Inc., manufacturers of PMA engine, auxiliary power unit and brake parts. He actually agrees with the OEM’s opinion of PMA parts, at least to a certain extent.

"Lots of the OEMs like to say that PMA parts are not equivalent to the OEM design," said Wicht. "That’s true. That’s an accurate statement, they’re not. In almost all cases they’re superior to the OEMs."

Wicht supports his claim by explaining that PMA manufacturers have the benefit of monitoring the performance of the OEMs’ components, then focusing a greater amount of attention on improving that part than the original builders are able to provide.

"The regulations state [a PMA part] must be equal to or better than the OEM equivalent," Wicht pointed out. "I’ve been involved in an awful lot of PMAs and I can tell you the [FAA] Aircraft Certifications Office won’t buy off on ‘equal to.’ If you can’t definitively demonstrate that your part will exceed the performance of the OEM part, they’re just not interested in talking to you."

In addition to building a part that meets or exceeds the specification of its OEM counterpart, PMA manufacturers must also show a potential customer that the value of the after-market component — whether through its initial purchase price, durability or better operating efficiency — is more attractive than the OEMs’ offering.

"Our parts are frequently 40 percent cheaper than the OEM; and who doesn’t like that?" Kamphefner noted. "Our customers won’t cut us a break on quality, however. Just because the parts are less expensive and available today, our customer still insists on perfect quality and they don’t hesitate to call up Aerometals and raise a ruckus if they feel the part didn’t show the service life they expect."

PMA manufacturers are also proud of their inventories, boasting immediate availability on a variety of parts the OEMs have trouble keeping in stock. Although customers’ most frequent complaints are with engine OEMs, shortages can be found with everything from fasteners to landing gear struts.

Aerometals has a thriving PMA business based, in no small part, on the products of one specific OEM: MD Helicopters, Inc. (MDHI) of Mesa, Ariz.

During the summer of 2003, owners of MDHI’s helicopters noticed a dramatic decline in the availability of OEM parts. It wasn’t long afterwards that everyone realized the company was in the grips of severe cash flow problems, resulting in angry suppliers refusing to deliver new components to the factory floor until outstanding debts were paid. As a result, sales of MDHI’s line of popular, light single-engine MD500s and twin-engine Explorers plummeted behind hangar talk that MDHI was months away from bankruptcy. Meanwhile, MDHI aircraft around the world were on the ground with timed-out parts and some very angry operators.

Aerometals, which had been selling PMA parts for MDHI (then Hughes Helicopters) since 1983, was perfectly positioned to exploit the predicament of the OEM and sell tons of products to MDHI’s anxious customers. And even though the health of MDHI has greatly improved since its acquisition by Patriarch Partners investment group in 2005, customers still call on Aerometals for a wide variety of components.

"We tend to have 95 percent of our product line available for same-day shipment," said Kamphefner about Aerometals. "Whereas our OEM competitor has many items back ordered for six months or more. Aerometals has experienced a huge upsurge in sales simply because we have the items in stock and the OEM doesn’t."

Even some of the healthy helicopter manufacturers have had trouble filling orders. Since the terrorist attacks of September 11, companies like AgustaWestland, Bell and Eurocopter have seen orders for new aircraft come in at a record pace. Public safety agencies, who never before had the financial wherewithal to buy helicopters, now had grant money from the Office of Homeland Security to spend, and the Pentagon was placing orders for new military rotorcraft to fight the war on terrorism in the Middle East.

The boom in orders at the helicopter manufacturers still have their assembly lines running at maximum capacity, with the wait for a new Bell or Eurocopter product hovering around two to three years. The ripple effect of those sales has overwhelmed the engine manufacturers and other OEM subcontractors in the chain as well, leaving the door open for PMA manufacturers to step in with parts ready for immediate shipment to aircraft already in-service.

Customer Bases

With guaranteed compatibility, better prices and plentiful supplies, PMA parts manufacturers believe they have everything it takes to make the flying community happy. But as with any other industry, there are subcategories of customers, each of which has a different take on how PMA parts fit in with their operation.

The Airlines

Airlines operate in one of the most competitive business environments in the world, with profit margins so razor-thin, every dollar has to be treated as if it was worth a million. That is why big and small carriers alike look closely at the potential savings offered by PMA parts. The question is: What do they see?

Of course, the airlines see the lower price of PMA parts, most of which are engine parts that must be replaced on a regular basis throughout the life of the powerplant, but what scares them is the OEMs asking the billion dollar (literally) question: "Are you willing to risk lives, law suits and ruining your good name because you decided to buy cheap parts?"

In response to not knowing who to believe — the people who say PMA parts are safe and inexpensive or the OEMs who say PMA parts are unsafe because they’re inexpensive — some airlines commission side-by-side evaluations. A few samples of an OEM part and its PMA equivalent are run in controlled tests to evaluate their performance. Many airlines that conduct their own tests end up selecting certain PMA parts, while keeping some OEM components.

The buzz around the airline industry is that British Airways does not use PMA parts at all, but in his presentation at the 9th Annual Gorham PMA Conference, Michael Barnes, who serves as BA’s design assurance manager, said the UK’s largest airline does use PMAs, albeit in a limited number, aboard its 230-plus aircraft.

"Our leadership team is behind the PMA process," said Barnes. "We have an internal approval process we’ve had running for 20-25 years." He added that BA is looking for more, longer-term PMA relationships.

David Linebaugh is an engineer with Delta Airlines, and the only full-time engineer specifically assigned to PMA parts there. He described his airline’s reliance on PMA parts during a presentation to the Gorham Conference attendees.

"We need to know what you did and feel good that you did this part right," Linebaugh said to the PMA representatives present at the annual gathering. "We have to do what’s in the best interest of Delta Airlines."

In fact, according to Linebaugh, Delta approves 95 percent of the PMA parts they look at, mostly because if they find a deficiency in a component’s design, they send it back to the PMA producer and ask for some modifications. Considering the size of Delta’s fleet — more than 500 aircraft at any given time — the PMA manufacturer is just as interested in producing a high-quality, cost-effective part for the big carrier as Delta is in buying it.

Linebaugh also said that more than 90 percent of the PMA "packages" they receive only need administrative review from Delta, as opposed to a full in-house technical review. He attributes that number to the detailed and conscientious efforts of the PMA companies to build a quality product and provide strong, verifiable technical data to support the airworthiness of the component.

Delta’s trust in a PMA outfit is not automatic, however. "I’m willing to take a chance on a window shade with a new vendor," Linebaugh admitted. "But I’ll look at a landing gear part much harder. We want to know how [the manufacturer] reverse-engineered the part. That’s the guts of the matter."

The Cargo Carriers

Major cargo carriers have slightly different issues from airlines when it comes to PMA parts. First of all, cargo operators have much smaller fleets, which prevents them from enjoying certain economy of scale benefits large fleets have available to them. Second, they tend to have better profit margins than the people movers. Together, these issues make the financial consideration of PMA parts just a little less pressing than in the airline’s corporate office.

The availability of parts, however, is extremely important when it comes to moving cargo. Smaller fleets can mean less spare aircraft to press into service. Mechanics need to get broken equipment back into the air as quickly as possible, making availability of the needed part the key issue that evening, not price. If the OEM has it, fine. If not, they’ll get the PMA on the line.

The Military

If there’s one PMA customer with a deeply vested interest in saving money on parts, it’s the Department of Defense. In fact, many people credit the Air Force with making the PMA industry as successful as it is.

Back in the 1970s, government insiders leaked stories of $6,000 hammers and $2,000 toilet seats to the press, sparking public outrage. Taxpayers demanded better accountability in military spending and an immediate stop to paying outlandish prices for seemingly simple items just because a contractor made it specifically for the government.

Today, the Air Force is a world leader in the use of PMA parts, but all U.S. military aircraft rely heavily on them. That’s a substantial number, considering 29 percent of everything flying above the 50 states belongs to the Department of Defense. Best of all, complaints of paying excessive prices for parts have been greatly reduced.

The Commercial and Business Operators

Commercial air operators come in many sizes, with each one looking at the PMA world from a slightly different point of view.

With the ever growing popularity of fractional ownership programs, the people who buy time with them are more than happy to relinquish the whole OEM vs. PMA parts issue to the program managers. And a formidable problem it is, too.

New Jersey-based NetJets is the largest fractional operation in the industry, flying 700 aircraft more than 370,000 miles per year. All of that flying means frequent visits to the shop to replace timed-out components and fix all of the unexpected problems associated with aircraft that are, by organizational design, kept very busy.

With those many repair cycles, a fractional operation has to limit downtime in order to maximize profits. PMA manufacturers boast immediate turnaround on orders, which fractionals love to hear. It doesn’t hurt if the price is good, either, because even though aircraft availability is very important, competition is still out there. Corporate accountants, while concerned about having an aircraft on the tarmac when the boss needs one, aren’t willing to spend more money than they have to for that service.

As it turns out, whether or not PMA parts are used is sometimes out of the hands of the fractional managers. Most contract their maintenance out to various shops selected for their skill, pricing, turnaround history and strategic location. Contracts between the fractionals and their repair depots can dictate which, if any, OEM parts can be replaced with PMA items, but it still doesn’t end there. There’s a little matter of resale value.

Fractional plan aircraft come and go out of the fleet frequently, as older planes are dumped in favor of new ones, or at least ones that have a reasonable amount of time left on them before they too become liabilities.

For the most part, potential buyers are fine with knowing the airplane they’re looking to buy is 100 percent OEM-equipped, but some people — the kinds the OEMs want everyone to think like — get nervous if they see a PMA component in the log book. That can give the fractional operator at least some incentive to use OEM parts.

Some fractionals play both ends against the middle, opting to use PMA parts while an aircraft is in the program, then switching back to OEM parts as the time to sell off that aircraft approaches. The past presence of the PMA part will still be memorialized in the maintenance logs, but a potential buyer with anti-PMA sentiments will take solace in knowing that the plane is all OEM again.

As for the expensive business jets that are wholly owned and operated by one company, holding the cost of their upkeep to a minimum while simultaneously maximizing availability is extremely important.

The OEMs’ position is that using their parts may not be the cheapest, but they say they are the most reliable, and will fetch a better price when the time comes to trade the plane in. But up in the accounting office, the belief is that an FAA-approved part that’s available today for a lower price trumps the OEM offering nearly every time.

Corporate pilots, who are interested in safety and keeping the company’s aviation department from going belly-up (in that order), are all for anything that will hold down prices, plus keep the executives flying. The price of PMA parts, and their availability to a one or two-plane operation, plays into those priorities.

The GA Community

Whether a weekend aviation enthusiast out for a day of sightseeing or a small flight school trying to turn a profit, PMA parts are right up their alley.

The vast majority of GA aircraft owners purchased their pride and joy used so an OEM warranty is not an issue when it comes to replacing a part.

Money is the overwhelming force that drives the private owner’s parts selection. The difference in price between a PMA component and an OEM offering can literally make the difference between whether Mr. Smith’s 20-year-old Cessna Skylane gets fixed today or has to wait until April when his tax refund arrives.

The Battle Wages On

The war between the PMAs and the OEMs is a heated one. And even though there seems to be revenue enough to go around today, more contenders and products enter the market every year, causing everyone to worry about their own market share. Ironically, there are even some cases of combatants defecting.

"It is very interesting however, that Pratt & Whitney went and got 55 PMAs against GE engine parts," said Kamphefner. "The OEMs have tried mightily to vilify the PMA industry, but now they are joining us; Pratt & Whitney is one of us PMAers. I anticipate seeing more activity along this line from the big guys."

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