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Aircraft MRO & PMA Pricing

Paul Bewell
Former Program Manager at Safran Nacelles

Learning outcomes

  • How MRO shops price the overhaul for airlines in the aftermarket
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Executive Bio

Paul Bewell

Former Program Manager at Safran Nacelles

Paul has over 25 years of experience in the aerospace supply chain. He started his career at Goodrich Aerostructures designing and building the nacelle for the A321 in 1996. In 2000, he moved to Safran Nacelles as Program Director before moving to Airbus in 2006 as a Director responsible for airline customer support. In 2009, Paul joined Parker Aerospace as Programme Manager in Toulouse before moving to GKN in 2015. Read more

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Interview Transcript

How does the pricing work in the overhaul MRO network?

Typically, there are two sets of prices. Firstly, from the OEM, the price is the price. Then there is also the aftermarket. These are parts that have been inspected and are still good for use. They could be brand new, but because they’ve been sitting on a shelf for a while, they won’t be sold at a brand-new price. Then there is a market in spare parts. There are brokers who sell parts, all around the world, who buy old engines – not necessarily such old ones – and strip them for parts.

Let’s say I’ve got a CFM56 engine on my aircraft. I own the aircraft and I’ve got a contract with the MRO provider that we agree on the overhaul. Do I then have to state whether I would approve of taking PMA parts or OEM parts? As an airline, do I know how much I’m going to pay for each?

For the work package for an engine, the shop will, typically, say right, there is a standard work package. For that standard work package, this is the price. That price includes the necessary spares, as required. Anything that is out of the work scope, is then presented to the customer. We found this was damaged or worn beyond expectations; this is outside the agreed work package. We need to replace this. We can source you a used one, which has still got enough life on it, at this price. Or I can order one from Safran or Rolls Royce, at this price. What do you want to do?

As an airline, I would get a big invoice of one package, which is the overhaul, for the engine. Would it have line by line itemization of all those parts?

Yes.

Then they would give me an option as to whether it was an Airbus part or the PMA part and I would choose between the two?

Yes. There is the work package, which is the standard work, this is what we’re going to do and this is what we’re not going to do. Here are things that sometimes happen. So if this happens, this is what it’s going to cost. Anything else will be discussed on a case by case basis.

What’s your view on the level of pricing of those parts, between the OEM and the PMA? You mentioned that, obviously, there has been reports and discussions, not only around the PMA parts providers ramping up the price of the parts, but also the OEMs overcharging for certain parts.

The OEMs have a catalogue of spare parts that is published every year. Airlines and engine overhaul shops go through these catalogues, whenever they are published, to see if there are any significant changes. The prices have been established for many years. The opportunity to increase the price of a part is rare. When there is an engine out of production, the OEM can, justifiably, say we’ve got no more of this part on the shelf. We’re going to have to make a bunch of spares, but we’re only going to make 20. A low volume production run is always more expensive and, therefore, the price is now up here.

The other option is when the engine changes and there is new technology put in the engine, then the OEM can justifiably turn round and say, well, this was a relatively simple part before. Now it’s a much more complicated part. It has, by virtue, a lot more value in it and it’s more expensive to make. Therefore, the spares price is going to be higher. Apart from standard C-class parts, such as nuts, bolts and washers, clamps and the like, pretty much everything else on the engine, is bespoke. An actuator for a CFM LEAP engine is going to be unique to that engine. You won’t find it on a Pratt & Whitney geared turbofan or a Rolls Royce Trent. So you haven’t really got much choice but to pay the price the OEM asks for.

However, when you look at the LEAP, even as a bystander, if you see an A320neo, with a LEAP-1A on it, parked next to an A320 classic, with a CFM56-5B on it, you open up the engine cowlings and you look at it, you can see that one is more complicated than the other. There’s more wiring and more plumbing on the LEAP than there is on the CFM56. The average person would say, yes, the LEAP must be more expensive because there is more stuff on it.

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