OEMs and Independent Shops Vie for Avionics Repairs

When US Airway's PSA Airlines needs avionics spares and service on its CRJ200 fleet, it relies on Rockwell Collins Aviation Services (RCAS)—not third-party MROs—to do the job. Under a ten-year Dispatch 100 contract with RCAS, PSA now leaves it to RCAS to ship and provide spares at multiple locations and to handle the repair and replacement of Collins avionics equipment onboard PSA aircraft, all for a single per flight hour price.

"[RCAS's] Dispatch 100 will provide PSA with world-class support and dispatch reliability while minimizing the capital investment for this rapidly growing fleet of aircraft," said Terry Petrun, vice president of administration for the US Airways Express Shared Services Organization, when the PSA-RCAS deal was announced on January 23, 2004. In plain English, RCAS will handle PSA's avionics repair issues, leaving the airline to focus on flying.

PSA Airlines isn't alone in asking this OEM for avionics maintenance, repair, and overhaul support. American Airlines, Southwest Airlines, and Pinnacle Airlines also rely on Rockwell Collins support. In addition, Rockwell Collins isn't the only OEM to offer such services to airlines; so do Honeywell and Thales Avionics.

Why are carriers turning to OEMs, rather than repairing avionics in-house or working with independent avionics shops? "There's a clear desire by the airlines to focus on their core business, which is the provision of service to passengers, and to subcontract other aspects to service providers such as ourselves," answered Mark Barclay, Thales Avionics managing director of avionics services worldwide.

"It's also difficult to keep in-house technicians up-to-date on servicing these LRUs [line replaceable units], when they rarely see them more than a few times a year," added Scott Gunnufson, vice president of business operations for Collins Aviation Services. "It's just more cost-effective to outsource such work to third-party facilities who deal with it every day."

But why are the airlines turning to OEMs rather than third-party MROs? "It's too expensive for MROs to buy the test equipment needed to thoroughly troubleshoot today's digital avionics and to stock the in-house spares needed to replace them," said Adrian Paull, vice president of customer services for Honeywell's Aerospace Electronic Systems Division. "For economic reasons, it makes more sense for MROs to perform generalized troubleshooting on avionics components, then send them to us for detailed analysis, repair, and replacement."

As with all aspects of commercial aviation these days, money is the dominant decision-making factor driving airline outsourcing. But cost isn't the only consideration: the airlines also want someone else to handle the logistics and management hassles involved and to convert the financial complexities of the process into a consistent, regularly recurring expense.

"Our airline customers want to see `spares, repairs, and logistics' as a service that they pay for on a cost-per-flight basis," said Paull. "They want to know how much they will have to pay for this service, and to be able to count on that price as well."

For the OEMs, the combination of these factors is opening up a vast new market. But it is an opportunity that comes with a hefty price tag, as any MRO could tell them. That price tag is the airlines' insistence on reliable service on a guaranteed schedule. Mindful of this fact, Rockwell Collins's Dispatch 100 program promises to have avionics components repaired and returned within four to five days, said Scott Gunnufson. "If we exceed this time line, we will supply them with a spare at no cost until the repair is done."

Given that avionics are only likely to increase in complexity, the trend of OEMs repairing and replacing them directly is likely to gather steam. Add in the expense for buying the equipment to troubleshoot these devices, keeping spare parts inventories, and the technician training costs associated with this troubleshooting, and one can see why MROs are also likely to send more work the OEMs' way.

This said, the trend of OEMs providing such repairs doesn't spell the doom of non-OEM MROs. Rather, it signifies a shift in who does what work in the aerospace sector. MROs—either airline-owned or third-party—will likely continue to perform generalized avionics trouble-shooting. Once they've narrowed problems down to specific components, they will pull the relevant part and ship it back to the manufacturer, obtaining a replacement at the same time either from consigned OEM parts on site or fast courier delivery. Ironically, this process of outsourcing work to OEMs may actually make MROs more competitive, because they won't have to invest millions in technology and training that would only get added to their customers' invoices. — By James Careless