Airlines Step Up Pressure on OEMs’ Aftermarket Model

 - March 23, 2016, 3:42 PM

The International Air Transport Association (IATA) has become a complainant in an investigation by the European Commission’s Directorate General for Competition (DG-COMP) into alleged abuses of dominant positions by manufacturers of aviation equipment, the airline industry group confirmed Wednesday.

Last year the DG-COMP sent questionnaires to several industry stakeholders, including IATA member airlines, requesting information to back claims that manufacturers have abused their dominant positions in the sale of aftermarket parts and services.

“This is an area of deep concern for our members,” said IATA director general Tony Tyler. “There are relatively few equipment vendors and our members are frustrated that there is little flexibility in negotiations for aftermarket services. Airlines do not have the leverage to resolve these concerns individually. So IATA is fulfilling its role as their global trade association and representing their interests as a complainant.”

IATA said its complaint does not constitute claims for monetary damages or any other forms of compensation for past conduct.

“Our focus is on the future,” said Tyler. “Our members want to be able to negotiate contract terms more effectively and with more options than the OEM community will entertain today. Our aim is to help re-balance the relationship so that airlines and OEMs can work together as true business partners in a normal commercial relationship.”

Although it has not launched a formal inquiry, the EC has asked for more information from suppliers following the start of a preliminary investigation last year. Airlines have long complained that OEMs withhold repair information from third-party maintenance shops, thereby limiting competition and consequently allowing the manufacturers to increase prices.

OEMs have long relied on a model on which they often accept losses at the point of sale of their products in anticipation of profiting handsomely from aftermarket business. Now, the airlines have begun to push for limits on what OEMs can define as intellectual property, thereby opening the market to more third-party work.     

“OEM revenues are airline costs, so there is a natural tension on this issue,” said Tyler. “But airlines are and will continue to be important customers for OEMs. And we all have major common interests in our dedication to the continuous improvement of safety, efficiency and sustainability. Whatever conclusion the investigation comes to, at the end of the process there will be greater clarity on the rules of the game and how they should be applied. That will be a good development for all involved.”