A parts manufacturer approval

A parts manufacturer approval CHAPTER 1 : INTRODUCTION 1.1 Introduction Parts Manufacturer Approval (PMA) is a combined design and production approval for modification and replacement parts. It allows qualified sources that are not the original type certificate holder to design and manufacture replacement parts for commercial aircraft. The FAA (Federal Aviation Administration) approves materials, processes, appliances and other parts by other means like a Technical Standards Order (TSO) or in conjunction with a type certificate. The concept is pretty straight-forward: TheFAAsays that as long as you dont infringe upon someone elses patent, you can make a part or system of parts that someone can install on their aircraft in lieu of the original item. The FAA, specifically the ACO (Aircraft Certification Office) of the FAA, is responsible for approving any part design related to commercial aircraft. An OEM (Original Equipment Manufacturer) is subject to the same regulations to qualify and validate parts as a PMA holder is. An OEM does not approve its own pa rts. Order8110.42prescribes the approval procedures for FAA personnel and guides applicants in the approval process. Of course, for safetys sake, the FAA wants detailed proof that the PMA part is as good or better than the one made by the original equipment manufacturer, but thats 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. Today, airlines on every continent have an increasing demand for the PMA parts. The use of high-quality PMA parts has given airlines the cost savings that are translated into operational economy. Airlines are now working directly with PMA suppliers to develop replacement parts as a hedge against what they view as the monopoly pricing power of OEMs. 1.2 Problem definition Being first to the market is not as important as giving the customers what they want. Although being the major player in the industry, OEMs such as Boeing and Airbus have to take into considerations of how the customer feels about the cost-cutting value that the PMA part offers. The OEM might have paved the road in the industry, but PMAs are taking advantage of the situations that arise from it. At a time of weak revenue growth, the global airline industry has continued to seek more innovative cost containment strategies. Maintenance, which ranks second behind fuel as the largest cost line item for airlines, has huge potential for cost savings. Much of these savings can be realised through the use of DER repairs i.e. repairs approved by FAA Designated Engineering Representatives and parts manufactured under PMA by reputable sources other than the original OEM. (Andrew Farrant,October 2010). The battle between the original parts and the aftermarket parts have been a heated one, not only in the aviation industry but also from other businesses as well. We can see almost in every automotive workshops that aftermarket products are being sold widely to cater for the demand of the customers. Original manufacturers wants their customer to buy and use their products, whereas aftermarket products manufacturers is offering a cheaper alternative that can work as good as the original part. The OEM says theres plenty wrong in using aftermarket products, because if the OEM didnt make it, theres 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. A simple situation could explain all this. If in the event of an aircrash, the general public only hears that a particular model aircraft crashed, not the fact that an aftermarket part may have caused it. In the other hand, the PMA manufacturer says theres nothing wrong with their parts, especially since the FAA has to certify them as being equal to or better than the OEMs product before they can be sold to anyone. This is to prove that only a certified part can be used on an aircraft, thus keeping the standard of airworthiness. Use of such parts does not in any way affect the airworthiness of the aircraft. Such parts are identical in design specifications and part number to that of original manufacturer. Such parts are not bogus parts. They meet the drawing and material specifications and are manufactured under approval. Often, PMA parts are cheaper than the OEM parts as PMA holder does not have to make any investment on research and development. The PMA parts are identified by OEMs part number with either a prefix or suffix to differentiate it from OEM part number and to have traceability. It is almost identical, but with a lower price tag. The way that the OEM addresses this proble m is to say that once PMA parts is being used with their aircraft, the warranty for that particular aircraft, if still valid, is not accepted anymore. That is a big blow for the PMA industry, having a minority say in the situation.But like everything else in a free market, the victor is chosen by the customers, and for now theyre split, with some swearing by PMA parts and others swearing at them. In this battle, both OEM and PMA have their own strength. The OEM is armed with guaranteed compatibility and the PMA steps forward with compatibility, as well as lower prices and better availability. It is hard to see which side is winning the parts battle. It all comes to which part and what kinds of customers are being examined. 1.3 Objective of research The objective of this research is to determine the acceptance of PMA usage within the aviation industry in Malaysia. There is always two sides on a coin. Some may say that PMA is really the way to go especially in this dire economic state that the aviation industry is facing, while others may opt for the guaranteed OEM parts. According to Jason Dickstein, president of the Modification and Parts Replacement Association (MARPA), the attitude toward PMA parts was very different in the 1990s than it is today. He says that as some larger companies recognized that PMA parts could be a viable threat to their business, people became more reluctant to accept them. Efforts to try to disadvantage PMA parts ensued in the Aviation Rulemaking Advisory Committee (ARAC). â€Å"I think that there has been some anti-PMA sentiment in the past,† says Dickstein. â€Å"People who didnt understand PMAs were averse to PMAs because they represented an unknown quality. Over the last decade or so, MARPA, the PMA parts manufacturers themselves, and even some of the government agencies have done a good job cooperatively of better educating the public, particularly the public within the industry, about what a PMA part is. In response to OEM concerns, the FAA put its Aviation Safety (AVS) Repair, Alteration, and Fabrication (RAF) Team to work. Its task was to â€Å"provide recommendations to close any gaps existing in both current and in-process regulations, policy, and guidance necessary to ensure an acceptable level of safety commensurate with the criticality of affected parts.† â€Å"What they concluded was that what the FAA has been doing is safe, that PMA parts are safe, and a lot of the OEM concerns are competitive, rather than safety-driven,† says Dickstein. 1.4 Research scope This research will be targeted mainly on the two biggest airline operators in Malaysia, which are Malaysia Airlines System and Air Asia. The scope of the study will only be concentrated in the maintenance and financial field. * Maintenance the practicallity of PMA parts to be the substitude for OEM parts (how they perform,do they fit easily,the availability of parts etc) * Financial the pros and cons in terms of monetary value, both in short and long term aspects (how much difference does PMA parts offers in terms of savings, to what extend does PMA parts affect the warranty of an aircraft etc) This research will only cover the perceptions and opinions of people who are involved with the aviation industry, particularly on PMA issues. The outcome from this research could possibly help both airlines in deciding whether to go for or against PMA parts. There are a few big names working together with the PMA manufacturers. Names such as British Airways, Delta Airlines, Pratt Whitney are now enjoying the benefits that the PMA parts offers, both to them and also to their customers. Airline operators in Malaysia must have their stand on the PMA issue in order to be on par with the big names. CHAPTER 2 : LITERATURE REVIEW 2.1 Introduction PMA parts have been produced for 50 years, beginning with the demand for replacement parts for World War II-vintage aircraft. At that time, companies other than the original manufacturers were allowed to design and make spare parts for aircraft under a PMA to help a large number of military aircraft sold to civilian operators to fly again. However, even after 50 years of usage throughout the industry, arguments between the airlines, the OEMs and the PMAs are still highly debated. This is due to the questionable quality and safety concerns used by Original Equipment Manufacturers (OEM) to challenge PMAs, whom they take as a big competitor in the market. 2.2 Certification According to the FAA, PMA means the design and production approval for modification and replacement parts. It allows a manufacturer other than the OEM to produce and sell these parts for installation on type certificated products. Without the PMA, aircraft parts would be designed and manufactured exclusively by the OEM, granting them a monopoly in the replacement parts market. The FAA requires that companies or individuals that produce parts for sale for installation into type certificated aircraft may only sell approved parts. These approved aircraft parts, other than hardware, are parts that are approved by TSO, PMA, a type certificate, or a production certificate. To receive a TSO or PMA approval for a part, the manufacturer of the part must demonstrate to the FAA that the part will operate just like the original part, as intended in an aircraft environment and will be manufactured according to the FAA standards. The FAA regulations states that it is the responsibility of the person installing the parts on an aircraft to ensure the parts meet the appropriate airworthiness standards. The Technical Standard Order (TSO) is one of the procedures that the FAA uses to establish standards for aircraft parts. TSOs have been established for many types of aircraft parts such as landing gear parts, engine parts and many avionics equipments. TSOs are divided into d ifferent categories and the testing required to cover a wide range of environmental conditions such as heat, temperature, altitude, vibration, etc must be established. If a TSO is available for a part, a manufacturer will test the part in an FAA-approved laboratory to meet the requirements as per the TSO. If the part successfully passes all the tests, then the manufacturer will be granted a letter from the FAA stating that the part is approved per the TSO. This TSO approval letter means the part can be used for installation in any aircraft via an STC (Supplemental Type Certificate) or TC (Type Certificate) as long as the operating environment of the part in the aircraft is within the TSO criteria. If there are no TSO categories established for the part that the manufacturer wants to produce and sell, the manufacturer can still get the approval from FAA by testing the part in the actual aircraft type where it is designed to be used. To achieve this, the part must be conformed to the design drawings by a FAA-designated inspector to ensure it meets the type design. Then it will be installed and tested in accordance with a FAA-approved test plan. Upon completion of the tests, submittal of the appropriate documentation, and verification of a FAA-approved manufacturing system for the part, the FAA will issue a letter identifying the part as eligible for installation under PMA for the specific aircraft type in which it was tested. The PMA part may then be installed in the specific aircraft via STC or TC. If the part manufacturer wants to use the part in another aircraft type, additional documentation and testing may be required. In any case, a PMA part can only be installed in an air craft types where it has specifically been approved. Airliner who manufacture parts for their own use, do not require a PMA for the manufactured parts since they are not being sold to another party. The parts, however, still must be approved and manufactured according to the FAA standards and installed using a STC or other FAA-approved installation procedure. The regulations states that a PMA part must be equal to or better than the OEM equivalent. John Wicht, a project manager at Wisconsin-based Rapco, Inc pointed out that the FAA Aircraft Certifications Office wont accept on ‘equal to parts, according to his involvement in many PMAs. He also said that â€Å"If you cant definitively demonstrate that your part will exceed the performance of the OEM part, theyre just not interested in talking to you. 2.3 Safety issues The FAA or EASA have no statistical evidence for safety concerns with PMA parts. It is as if they are turning a blind eye on the matter, which is definitely not a good news for the OEM. For them, anything will do as long as all the required procedures are being followed accordingly. To achieve certification, PMA manufacturers must prove to the FAA that a part that they manufacture is the same in all respects to a design in a type-certificated product or, through test an computation, that the part is the same as, or better than, the one it seeks to replace. â€Å"You have to prove that the quality assurance system is adequate before you get production approval, just like the OEM products are proven,† says Jason Dickstein, president of the Modification and Replacement Parts Association (MARPA). As people begin to see what the regulatory structure surrounding PMA parts before it is being approved, those people begin to accept PMA parts. Many air carriers are now starting up programs to identify and purchase PMA parts because they believe that the PMA parts are safe and that, because they represent competition, PMA parts would bring prices down. British Airways had been on the opposite of the PMA parts until representatives from Heico International Inc., a maker of hydraulic cylinders, sat down with them to explain the benefits of PMA parts. After the presentation, British Airways had turned around 180 degrees and begin purchasing PMA parts. Air carriers are now being more acceptance towards PMA at the purchasing and quality assurance levels because they have conducted investigations prior to the actual usage of it. Air carriers had to investigate the usage of PMA to figure out whether or not they represent a good economic value. What the carriers found out was that not only were they a good economic value, but theyre also safe. A PMA may be obtained for replacement parts for TSO articles that are approved as part of a product type design, provided that installation eligibility to that product can be shown. Approval of a part that would result in a major design change to the TSO article cannot be done under a PMA and would require a new TSO authorization. Even critical components can be ‘PMAed, given that it is in compliance with the specific FAA guidance. When there is a PMA on a critical part, chances are that the critical part has gone through a whole lot of FAA scrutiny that the OEM part didnt go through. This means that a PMA part is being more thoroughly checked. The FAA has to witness all the tests being carried out to the most critical components. These will never be delegated to a DER (designated engineering representatives). The FAA has to perform its own analysis of all the data and make the individual regulatory compliance findings themselves. The draft for FAA Order 8120.2F also states that once a PMA part has passed through a PMA holders quality system, the holder must establish a procedure to report any failure, malfunction, or defect of the part to the FAA. 2.4 Cost savings By using the PMA parts, airlines all over the world can also save a lot of money. The economic imperative for airlines to minimize maintenance costs means the savings offered by PMA parts, when compared to OEM catalogue prices are a big advantage. DER repairs and PMA parts programmes that specifically focus on gas path components can result in savings of more than US$500,000 per shop visit, or over 50 percent of the typical OEM catalogue pricing. These alternative parts and repair programmes not only represent a great opportunity for savings, I believe they represent the only form of competition available in this specialised market. [ Andrew Farrant, 2010 ] As mentioned earlier, British Airwaysis clearly showing a very high interest on using PMA parts. They are now looking to make massive savings through the extensive use of PMA parts instead of sourcing them from the OEM. Speaking at The Great PMA Debate event at the Royal Aeronautical Society in London, Ameet Bhalla, British Airways technical manager, airframe systems, explained that the strategy follows on from a deal signed with Heico, the worlds largest independent designer, manufacturer and distributor of FAA and EASA approved replacement parts for jet engines and aircraft components. This will see that Heico will be managing BAs alternative parts programme while at the same time helping the airline maximise savings through using alternative aircraft parts. Through this deal with Heico, we will actively seek PMA opportunities going forward. We will no longer be the cash machine for OEMs, said Bhalla. Contrary to popular belief, PMA parts have been used for many years within BA. There has been an approval process since 1997 and hundreds of PMA parts are now in use. In 2006 alone, 28 new PMA parts were approved, he added. These are not bogus parts but approved by the very same regulatory authorities that approve OEM aircraft parts. BA reviews all applicable PMA parts and approves each one on a case-by-case basis. Once installed, the parts are monitored for any defect trends and we note failure modes of PMA parts to check that they are similar, if not the same, as their OEM equivalent, he says. Bhalla also said that BA are now looking on to exploring the potential of 95% of Heicos inventory that are non-critical items. There has been no overall financial saving target set but we have said that we will openly entertain the PMA concept and w ould consider putting non-critical PMA parts on any of our aircraft, he says. James Bennett, Heico European sales director, told Flight International: Historically BA, while not anti-PMA, could not be said to be advocates either. They are well known as being extremely conservative as an airline but the move byLufthansa, which isa stakeholder in Heico, was seen in the industry as an extremely successful move to keep the OEMs in check. BA must certainly be looking in the region of saving between 30-40% off OEM list prices and will be focusing on high-cost items. Heico will head that PMA management process and review together with BA where further PMA applications can be used. We will be the fulcrum for BA to explore PMA. 2.5 Availability PMA manufacturers are also proud of their inventories, having the ability to supply immediate availability on a variety of parts that 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. During the summer of 2003, owners of MDHIs helicopters noticed a dramatic decline in the availability of OEM parts. It wasnt 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 MDHIs light single-engine MD500s and twin-engine Explorers plummeted and there are rumours 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, a California-based supplier of PMA parts, which had been selling PMA parts for MDHI (then Hughes Helicopters) since 1983, was perfectly positioned to take advantage of the problem with the OEM and sell tons of products to MDHIs 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. Aerometals tend to have 95 percent of their product line available for same-day shipment, whereas the OEM competitor has many items back ordered for six months or more. Aerometals has experienced a huge rise in sales simply because they have the items in stock and the OEM doesnt. Even some of the healthy helicopter manufacturers have had trouble filling orders. Since the terrorist attacks of September 11, companies likeAgustaWestland, Bell andEurocopterhave seen orders for new aircraft come in at a record pace. The increase in orders at the helicopter manufacturers still have their assembly lines running at maximum capacity. A new Bell orEurocopterproduct will have to wait around two to three years before it can be delivered. 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. 2.6 Wider acceptance Acceptance comes with maturity. And where there is acceptance, market potential could grow from it. This statement briefly concludes the PMA parts in aviation world today. Every year, more businesses discover the advantage of buying PMA parts. As a result, the aerospace industry has witnessed a continuous rise in the usage of PMA parts on a global scale. But their acceptance by the airlines has escalated only recently. PMA parts acceptance among airlines was pretty low just five years ago, says Hal Chrisman, a principal at the Ann Arbor, Mich.-based management consulting firm, AeroStrategy. North American airlines have long used PMA parts, but their interest in their cost-cutting value has increased noticeably since 9/11 and the resulting economic downturn. PMA parts provide the irresistible cost advantage of 30 percent to 50 percent, says Kirti Timmanagoudar, research analysis at the consulting analysis company, Frost Sullivan, San Jose, California. Equally important to industry p otential is the emerging interest coming from Europe and Asia. Europes growing use of PMA parts is being supported by an improved industry structure and by major third-party MRO providers that are encouraging airlines to switch to PMA parts, according to a Frost Sullivan survey of European maintenance trends. The increased use of PMA parts in Europe is in tandem with the continents growing number of low-cost carriers (nearly 50 of the more than 80 carriers, according to Frost Sullivan) and the trend to outsource maintenance, which has brought the rapid increase in numbers of third-party MROs. Ironically, despite this growing demand for PMA parts (made in the United States and approved for acceptance in other countries through bilateral agreements), Europe has virtually no parts manufacturers other than the OEMs. This escalating interest in PMA parts led to a two-day meeting of airline maintenance officials in Seattle in late January 2006, the purpose of which was to better understand PMA parts and theFAAparts approval process for the airlines. They want to, first, find out how each of the attending airlines handle PMA parts and, second, find ways to expedite, and perhaps standardize, the use of PMA parts. Before, the airlines apparently didnt talk much to each other [about PMA parts processing], according to Gloria Nations, president of the Modification and Replacement Parts Association (MARPA) and attendee of the Seattle meeting. Spearheaded by Alaska Airlines, the meeting included presentations by invited association, government and industry officials. Airlines like United, Delta, Air Canada, Japan Airlines and, most recently, British Airways have struck strategic partnership deals with Heico, reputedly the worlds largest independent designer, manufacturer and distributor of FAA- and EASA- approved alternative parts for aircraft and jet engines. American Airlines has a joint venture with the company to manage its alternative parts, while Lufthansa Technik actively encourages the development and production of PMA parts through its 20 percent stake in Heico. Carl Pedersen, president and CEO of Cimber Air Support, a passionate advocate of PMA, told delegates that PMA will become more relevant than ever as operators are forced to cut cost without jeopardizing safety. Yet, whenever the use of PMA parts is put up for discussion, said Pedersen, the individual who tables the issue is often looked upon as the bad guy of the movie which, to my mind, indicates that the subject of PMA is not fully understood.† EASA will only grant approval to a PMA part today if its not a critical component, it has been manufactured under license or if any minor changes or more major supplemental type certifications meet specific EASA approval. But now, Pedersen said, EASA has plans in place for a European PMA equivalent to the FAA under the banner of an EPA part, for which a tender for review has been commissioned but not yet finalized. It could be argued that design and manufacturing procedures are already in place under EASAs Part 21, said Pedersen, but creating a recognized European equivalent will put European operators and MROs on an even footing with their U.S. counterparts, eliminating the unfair trade limitations we have today†. To this end, he said the issue of PMA might yet be included in the imminent EU/U.S. Bilateral Air Safety Agreement which, reportedly, currently is embroiled in the politics of fees and charges. Yves Morier, EASAs head of product safety, confirmed EASA is discussing with its FAA counterparts how best to cooperate on PMA rulemaking. Currently, there is no statistical evidence for safety concerns with PMA, said Morier. But the overall experience may not be sufficient to draw definitive conclusions. Chris Carter, who manages the FAAs Certification Procedures Branch, had a definite view. PMA is here to stay, he said. Its deeply embedded in our system, and theres an ever-growing demand, especially now that Pratt Whitney is entering the market, he said. Moreover, in terms of PMA product quality, he confirmed the FAA has no better than or safer than criteria. The only bar required is the absolute safeguard of industrial regulation. Any latent risk in PMA has more to do with the financial standing of the PMA manufacturer than the PMA part itself, and, in his view, some PMA manufacturers are attaining the scale and stability of many OEMs. Looking ahead, he told the delegates that the FAA will continually improve its processes and work very closely with MARPA (Modification and Replacement Parts Association) on upcoming policy and new changes. Were also expanding delegation as the industry matures its capabilities and responsibilities, he said. Indeed, the U.S. has signed its first PMA bilateral agreement with Australia, which now has its own PMA approval processes, he said. The greatest supporting fact that PMA is now being accepted is the defence from the FAA on the side of PMA. In an attempt to counter anti-PMA safety concerns, the FAA released Special Airworthiness Information Bulletin (SAIB) NE-08-40 on Aug. 8, 2008. There have been a few wording in some OEM manuals that drove the FAA to issue the bulletin as a closing statement in an ongoing argument about the validity of PMA parts. According to Jason Dickstein, president of the Modification and Parts Replacement Association (MARPA), the SAIB was driven by the FAAs dismay at the fact that some OEMs were using safety documents for competitive purposes. A MARPA release from Aug. 10, 2008, states that some manufacturers have made commercial statements designed to demoralize the publics confidence in PMA parts. OEM decisions cannot override the word of the FAA. â€Å"If the FAA approved a PMA part to be used, the OEM is in no position to tell you that the FAAs approval is invalid,† says Dickstei n. MARPA says that the FAA expects the industry to treat its approval of PMA parts with the respect to the FAA decision. â€Å"We are an extremely risk-averse industry,† says Dickstein. â€Å"Many industries will go with a new product as long as they dont see anything wrong with it. Our industry wont go with a product unless we see everything is right with it.† 2.7 Different views As a customer, the airline industry comprises of many different subcategories. Each of them have a different approach on the PMA issue and whether they best fit into their operation or not. 2.7.1 The Airlines It is in a very competitive business environment that airlines are operating, with profit margins so small, every dollar has to be treated as if it was worth a million. That is why all airlines are very interested at the low cost that PMA parts do offer. Most of the engine parts that must be replaced on a regular basis, needs to be changed periodically and the cost of sustaining such activity are directly proportional to the usage of the engine. This means that the more the engine is being used, the more maintenance that it has to go through and the more money needs to come out from the pocket of the airline. Maximising the usage of the airlines resources, in this case the aircraft itself, is very crucial in keeping the airline in business. Obtaining the less expensive part such as the PMA parts to cater to the demand of the ever increasing cost in maintenance is a very good move. The airlines are trying to control the amount of money that comes out from their pocket in order to oper ate efficiently. They cannot control the price of fuel, so the next best thing that they can control is the price of maintenance activity. But what scares them is the OEMs asking the billion dollar 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 which part to be in, whether going to the people who say PMA parts are safe and inexpensive or the OEMs who say PMA parts are unsafe because theyre inexpensive, some airlines conducted evaluations. Samples of an OEM part and its PMA equivalent are run in controlled tests side by side 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 airl