Rolls-Royce, IATA Finalizing Aftermarket Competitiveness Deal

Rolls-Royce and IATA are finalizing an aftermarket policies agreement that clarifies the manufacturer’s positions on using third-party alternatives such as parts repairs on its engines, and what, if any, ramifications such cost-saving moves have on warranties and other services.

Talks with “a very large engine manufacturer” have resulted in a preliminary deal similar to one announced in 2018 between IATA and CFM International, IATA Assistant General Counsel and Chief Counsel, Antitrust Daniel Kanter said during the 2021 Modification and Replacement Parts Association Spring Virtual Event May 19. 

Kanter declined to identify the engine manufacturer, but multiple industry sources confirmed to Aviation Week that it is Rolls.

“Without saying too much, I am convinced that this represents a significant shift [and] lays the foundation for something that hopefully will be transformational and historic,” Kanter said. 

Kanter said 18 months of “open, friendly, collaborative, and productive” talks have led to a preliminary agreement on the deal’s language. The document is being reviewed by management within both organizations, and a formal announcement could come within a few weeks.  

Rolls did not immediately respond to an inquiry.

An agreement with Rolls would be the next significant step in IATA’s effort to ensure airlines are clear about the options they have for maintaining their equipment, and that original equipment manufacturers (OEMs) are not attempting to use monopolistic policies to freeze out independent service providers. IATA started the process in 2016 by filing a formal complaint with the European Commission Competition Directorate against CFM, alleging the GE Aviation-Safran joint venture was using anti-competitive practices in the lucrative CFM56-series aftermarket space. 

The two sides then spent 18 months hammering out a deal that resulted in CFM releasing a 41-page “conduct policies” document and related implementation guidance in 2018. IATA dropped its formal complaint.

Both parties lauded the deal, and it has received support from some suppliers it was designed to help. CFM said the document clarified and explained more than it changed. GE Aviation signaled its approval by agreeing to apply the policies, which went into effect in February 2019, to its entire commercial engine line.

While the deal included some new policies, such as waiving fees for using engine maintenance manuals and introduction of a formal dispute-resolution process, the real benefit seems to be clarity for industry. Before, some airlines worried that options such as using third-party repairs or non-OEM parts manufacturer approval-produced parts would negate warranties or result in other draconian penalties. Without visibility into other customers’ contracts or a single, public source that explained CFM’s policies, many airlines and maintenance shops were left guessing at what was acceptable. The agreement changed this by clearly spelling out the options CFM operators and service-providers have, and they are beginning to take advantage of their enhanced understanding. 

“Airlines and independent MROs are starting to benefit from this agreement,” Kanter said. “While it’s exceedingly difficult to measure, particularly given the decreased maintenance need during COVID-19, we are starting to see moderate interest in the use of alternative repair solutions by airlines, and independent MROs are less constrained by previously onerous contractual provisions.”

While Rolls was not targeted in a formal complaint, perceptions of a closed overhaul network and limited use of alternative parts, used serviceable material, or third-party developed, designated engineering representative (DER) repairs has generated years of complaints. The company has responded by pointing to its steadily expanding menu of services that provide options such as custom work scopes, as well as a broadening network of overhaul partners.  

With the Rolls deal set to join the CFM agreement, IATA is looking for more. A formal complaint against Honeywell filed in 2016 on auxiliary power units has not borne fruit, but Kanter said IATA is not giving up.

“I don’t have anything specifically to say today but rest assured that Honeywell is certainly on IATA’s to-do list,” Kanter said. “IATA is in the process of educating members and airlines about the benefits of third-party parts and DER repairs, and that these are approved by airworthiness authorities.”