Aftermarket parts manufacturer Heico has jump-started sales of FAA-approved PMA replacement parts to airlines with a new agreement it signed with British Airways in early May. Heico, with its subsidiary Seal Dynamics (Hall 2B Stand L14D), will not only sell PMA parts to British Airways but will manage the airline’s PMA parts buying activities. Until it signed the agreement with Heico, British Airways had avoided using PMA parts, and many PMA manufacturers have spent years trying to crack open the PMA parts-buying door at the flag carrier.
PMA parts are replacement parts approved by the U.S. Federal Aviation Administration made by entities other than the original equipment manufacturer (OEM) under FAA parts manufacturer approval regulations. Although the share of the parts market held by PMA manufacturers is slowly increasing, it remains relatively low in comparison to the number of parts sold into the aftermarket by OEMs. According to market-research firm AeroStrategy, PMA parts market penetration in 2006 was 2.1 percent of all airline parts deliveries. That number should nearly double by 2011, to 3.9 percent.
While this means that airlines will buy a lot more PMA parts in the next few years, Heico’s agreement with British Airways signals a move into a new way of tapping into the savings PMA parts offered. Heico’s management of British Airways’ heretofore nonexistent PMA parts buying means that Heico will act as the gatekeeper for PMA companies wishing to do business with the airline.
Many PMA companies, Heico included, said Robb Baumann, president of the company’s parts group, “have spent years and years calling on [British Airways], trying to convince them that PMA parts are not such a bad thing.” Like many airlines, British Airways has faced financial challenges and sees a benefit to PMA parts, which generally cost less than equivalent OEM parts (or force OEMs to match prices).
When airlines choose to use PMA parts, they set up an engineering team to evaluate their quality and applicability before installing the parts on their fleets. British Airways, Baumann explained, “doesn’t have the manpower to put together a PMA program.” And that’s where Heico comes in, to set up and manage parts evaluation, quality control and continued operational safety for the British Airways PMA parts program.
While most of the PMA buys will be Heico parts, Heico will also recommend parts made by other manufacturers that meet British Airways’ quality standards. “We’ve become the PMA arm for British Airways,” said Baumann. And Heico is already discussing setting up similar programs with other airlines that lack resources to run their own PMA programs.
In practice, the Heico team at British Airways will use a matrix to evaluate PMA parts and their makers. Heico places PMA parts into six technical classification levels, from parts that have a nuisance effect if they fail to those whose failure could cause an in-flight engine shutdown. Heico also rates PMA parts suppliers using similar criteria but also taking into account their insurance coverage, the size of the company, their quality control procedures and how well they support the product after it is delivered to a customer (for continued operational safety).
The six technical levels are ranged across the top of the matrix, and the supplier classifications along the left side of the matrix. Where beneficial intersections occur, Heico may recommend doing business with that supplier. A PMA manufacturer that scores high as a supplier, for example, and whose part won’t cause too much trouble if it fails will have an easier time persuading Heico to recommend its parts to British Airways. A lower classed PMA company with a highly critical engine part will likely not qualify for further consideration.
“All [PMA] suppliers that want to supply to British Airways come to us,” said Baumann. Suppliers interested in working with Heico to sell parts to British Airways will have to review an information packet from Heico then submit to an audit of their parts-manufacturing, distribution and support operations. Heico’s program representative will then submit parts that qualify to British Airways for final approval, Baumann said.
Heico hasn’t quantified the savings on parts costs that British Airways will achieve but it will be substantial, according to Baumann, amounting to millions of dollars. British Airways’ adoption of PMA parts adds new credibility to the industry. “They’ve been a coveted customer of the whole PMA world,” he said.
This development also underscores growth of PMA parts use by non-U.S. airlines. “Growth outside the U.S. has been dramatic,” Baumann said. Now non-U.S. PMA sales account for less than half of Heico’s annual PMA parts revenues. With the PMA management program for British Airways and the possibility of additional business like that from other airlines, Baumann expects that it won’t be long before Heico’s U.S. PMA sales drop to just a third of the total.