Thousands of new aircraft deliveries appear set to drive a worldwide surge in demand for PMA parts, which today play a relatively small but critical role in the market.
Experts say sales of airframe and cabin PMA parts will help fuel the growth, even as demand stagnates for engine components produced under parts manufacturer approval.
"PMA punches above its weight in cost control," says Richard Wysong, director of PwC's transportation and logistics practice. "If you only have one source of buying a part and there is a single supplier, there is no upward bound on what they can charge."
PMA parts are those made by companies other than OEMs. They can include parts found in engines, landing gear and wings, but are often high-volume, relatively simple parts such as those in aircraft cabins.
The parts are usually reverse engineered and can cost 20% to 60% less than comparable OEM parts, insiders say.
Though the parts are known as PMAs, the acronym actually refers to an approval granted by the US Federal Aviation Administration and covers both design and production.
In the USA, roughly 1,700 companies hold such approvals, though the industry's core players include 100 to 200 companies, many of them very small, says Jason Dickstein, president of MARPA (the Modification and Replacement Parts Association), a trade group representing the PMA industry.
Approvals exist for some 550,000 PMAs, and the FAA approves about 1,500 applications monthly, says consultancy Cavok Group, citing industry estimates.
Cavok pegs the global PMA market value at $958 million in 2015, comprising $526 million in airframe parts, $279 million in engine parts, $138 million in components and $15 million in line maintenance parts.
By comparison, Cavok estimates the global MRO market is worth $67 billion in 2015.
But Cavok predicts the PMA market's value will increase 5.7% annually for 10 years, reaching $1.7 billion by 2025. Sales will increase most in emerging markets such as Latin America and the Caribbean, Africa and the Middle East, and Asia-Pacific, Cavok says.
Much of the growth will result from demand for line maintenance PMA parts; that segment's value will reach $25 million by 2020, then surge to $373 million by 2025, Cavok says.
In particularly high demand will be cabin parts, like those in seats, tray tables, arm rests and overhead bin doors, Cavok vice-president David Marcontell tells Flightglobal.
Demand also remains strong for gears, seals and other parts in components like air conditioning packs and integrated drive generators, which generate electricity from engines, Marcontell says.
"These are parts that are seeing a fairly robust business, and that's where the growth is occurring," he says.
Cavok Group
But broader market forces lie behind the predictions, the most notable being the decision by carriers worldwide to acquire thousands of next-generation aircraft.
Deliveries of some, like the Boeing 787-8, 787-9 and Airbus A350-900, have already begun. Others, like the A320neo, 737 Max, 777X, Bombardier CSeries, Comac C919, Embraer E2 E-Jets, Irkut MC-21 and Mitsubishi MRJ are set to be delivered within three years.
Manufacturers will produce more than 38,000 new jets worldwide during the next 20 years, Boeing's 2015 Market Outlook predicts.
Because new aircraft have warranties, early deliveries will minimally impact PMA demand, experts say. Also, many carriers contract with OEMs to have aircraft maintained under long-term service deals, which can last a decade and often preclude airlines from using PMA parts, says Marcontell.
Roughly 10 years after entering service, aircraft types enter a period Cavok consultants describe as a "sweet spot" for PMA sales. That period lasts roughly 10 years, after which aircraft retirements create a glut of used parts, they say.
The sweet spot for some new-generation aircraft will begin around the end of this decade, says Cavok, which predicts PMA sales will climb 8.2% annually between 2020 and 2025.
Still, observers note that the PMA industry will remain small relative to the broader parts market, accounting for less than 2% of total global demand for commercial aircraft parts.
But PwC's Wysong says just a bit of competition – indeed, even the threat of competition – provides "check and balance to the overall cost of parts".
SLUMP IN PMA ENGINE PARTS
Consultants say sales of PMA engine parts will sag in the coming years.
"The engine PMA market is flat or declining," says Marcontell. "The engine owners and aircraft owners are not willing to accept PMA materials in their engines on aircraft that are new."
All those new aircraft have advanced engines designed to require less maintenance, and parts may be difficult to replicate, experts says.
Also, many new aircraft will be owned by lessors, which often prohibit operators from using engine PMAs – an effort to maintain aircraft values, insiders say.
"Appraisers will knock them very hard for having PMAs in the engine," says Marcontell, noting that lessors own 46% of the transport fleet and will likely own 50% before 2020.
Eric Mendelson, co-president of Hollywood, Florida-based PMA company Heico, tells Flightglobal: "Yes, there is a challenge in PMA parts for new engines."
He adds: "A lot of airlines are quite worried about options for new engines."
In response, Heico is urging airlines to appeal directly to lessors.
"It's critical that airlines are the ones that ultimately have the choice, and airlines have to go to leasing companies and tell them what they want," he says.
Mendelson says Heico's parts have saved some airlines $25 million in one year. "If they don't use PMA parts, they are at a competitive disadvantage," he adds.
Meanwhile, Heico has reduced its dependence on engine PMAs, which accounted for 90% of its PMA sales 15 years ago but now account for less than half, Mendelson says.
INTRICATE SYSTEMS
OEMs tell Flightglobal that their equipment is designed specifically to work with their parts.
Pratt & Whitney sees itself as "best suited to produce parts for very complicated gas-turbine engines".
P&W makes the PW1000 line of geared turbofans, which have been chosen to power A320neos, CSeries, E2 E-Jets, MC-21s and MRJs.
The engine maker declines to specify the value of its aftermarket sales, saying only that "a significant portion of our large commercial engines revenue comes from the overhaul stream".
However, P&W's aftermarket finance director Todd Johnson's LinkedIn profile says the aftermarket division generated $6 billion in annual revenue.
General Electric, which makes the GEnx line of engines for the 787 and 747-8, cites design and certificate differences as reasons owners and operators should use its parts.
GE does not release spare part financial figures, but it's commercial aviation services division, under which GE accounts spare-parts sales, generated $8.9 billion in revenue in 2014, company presentations indicate.
The division generated $7 billion in revenue and $3 billion in operating profit -- a margin of 43% -- in 2011, according to the LinkedIn profile of former GE aviation services chief executive and president Thomas Gentile.
Chief consulting engineer Jeff Conner says GE's engines must meet "direct" compliance with FAA certification standards while PMAs are certificated based on a "comparative" assessment against the OEM part.
GE believes those regulatory paths differ notably.
For instance, to meet "direct" compliance, GE engineers must complete a "failure mode and effects analysis" based on engine evaluation, testing and service experience, the manufacturer notes.
By comparison, GE argues, PMA assessments do not require the same evaluation, testing or accounting for service experience.
Conner also notes that GE designs parts so that they work together in "highly interactive systems" such as the fuel system.
Those systems can include so-called "life-limited" parts, which are those that must be replaced at set intervals because failures can subject the aircraft to hazard, Conner says.
Life-limited parts typically include disks and other rotating components.
GE engineers determine life limits by plugging conditions like load, pressure, temperature and vibration into "life models", Conner says in a GE video.
But other parts in the system contribute to those conditions, he says. For instance, high-pressure turbine nozzles direct cooling air onto life-limited parts.
"Cooling flow comes through the part on one side, out the other into the cavity to cool the disk or the spool or the shaft," Conner says in the video. "A slight change in airflow can be a big change in temperature."
Conner's bottom line: GE bases life limits on OEM parts, not PMAs.
"We have seen design features being changed that changed the way the cooling flow was provided to the next part," he says.
'IDENTICALITY'
Dickstein of industry group MARPA does not buy Conner's argument.
"From a physics point of view, his argument doesn't make sense," he says.
The FAA issues PMAs only when "every relevant detail", including the metallurgy, geometry and exact dimensions, has been reverse-engineered to a level known in the industry as "identicality", Dickstein says.
Parts that are identical "are not going to operate in a different way", he says. He sees GE's argument as essentially in conflict with the FAA's determination that PMAs are every bit as good.
"The FAA does not give anyone a free pass on this stuff," Dickstein says.
Also, PMA shops sometimes have more modern manufacturing equipment than OEMs, and tolerances of PMAs can be superior, Dickstein says. That is because PMAs are reverse-engineered from a relatively small sample of the equivalent OEM part – a sample that likely will not represent the OEM parts' full tolerances, he says.
"The real issue between PMA parts and a company like GE is competition," Dickstein says. "GE has always been known to be a fierce competitor."
Dickstein thinks GE should be more accepting of PMAs, and in the process better support carriers.
"There is room for GE to be more PMA-friendly, and set up relationships with PMA companies, and in the long run be more supportive of the PMA customer base," he says.
PMA companies also face an ongoing battle for acceptance, Cavok's Marcontell says.
"Some airlines have policies that they don't buy PMA material. That comes as a result of very, very effective marketing campaigns by the OEMs and aggressive pricing," he says.
Marcontell equates the PMA parts industry with its "quintessential" cousin, the generic drug industry, which must overcome perceptions that name-brand drugs are better.
Anecdotal reports of PMA failures have been "leveraged very effectively" by OEMs as evidence that "hey, this stuff's not as good", Marcontell suggests.
He believes that just as many anecdotal examples of OEM part failures exist and that evidence does not show PMAs to be inferior.
"This is all about emotion," Marcontell says.
Many PMA companies have meanwhile adapted to market changes by expanding into other sectors such as the MRO industry, says Marcontell.
"[Performing] actual repairs allows them to win both the maintenance work and it gives them an avenue to use their own PMA materials," he says.
Earlier this year, Heico expanded its operating and production "flexibility" by acquiring Dutch company Aeroworks International, which makes interior components, and Arizona-based MRO shop Harter Aerospace.
PMA companies are also increasingly producing parts directly for OEMs under licensing agreements, says William Li, senior aviation analyst and consultant at London-based market research company Visiongain.
"They come to the PMA industry and say: 'I will give you the design specs and you are my supplier,'" says Li. "There are so many [OEM] parts manufactured my PMA companies."
These PMA-made parts are the "high-market-penetration side of the business", Li adds. "This is how the PMAs will be growing."
Licensing deals can help OEMs save money and get out of the business of manufacturing older parts, observers say.
"If they can find PMA providers that can help them support operators, especially [for] products they don't want to keep in stock, that is good for everyone," says Dickstein.
Source: Cirium Dashboard
