Airlines combine procurement options
As an industry that has long toiled with on-going profitability setbacks, airlines across the globe have sought alternative measures to reduce their mounting level of expenses namely; the expansion of buying options for both spare parts and technical services has brought winds of change to the purchasing habits of airlines.
What was traditionally a market dominated by straightforward approaches to component acquisition has in turn harnessed a number of other key choices, including the possibility for outright purchase from OEM suppliers, power-by-the-hour (PBH) support, exchange and loan options, as well as the concession for airlines to combine a range of these selections in their maintenance expenditure plans. With such an abundance of choice, certain trends have been evidenced as airline operators seek to optimise their ever-changing maintenance overheads and reduce AOG-related expenses.
Created as an avenue to control the often exorbitant ancillary costs of aircraft engine maintenance, PBH support has seen budding popularity amongst a range of different airlines. Indeed, the market for PBH agreements has widened beyond mere engine maintenance to encompass a whole network of airframe, component and other support related functions. Although the system is nothing new, its increasing proposition by OEM suppliers has allowed wider assurance for carriers against the risk of unexpected maintenance costs. This is particularly relevant in the case of smaller airlines, whereby the financial outlay required during severe cases of unexpected maintenance can pose a catastrophic impact on the business.
Although PBH support may stimulate improved financial stability for smaller airlines, its overall advantage is subject to the conditions stipulated in each contract. Specifically, a number of airlines have been left in precarious circumstances due to irregularities in the details of a PBH contract, or through issues involving the reputability of the provider itself. Perhaps more poignantly however, is that while PBH allows one to hedge the risk of unexpected maintenance expenses, its function in remote AOG situations is far less tangible.
In addition to the drive for PBH support, airlines on the whole are placing less dependence on direct deals with OEM suppliers as they seek cost-advantageous alternatives. Rising expenses for OEM components has rendered a change in the market, with many airlines opting to source specific components from open market suppliers. However, the process is not entirely clear-cut. While open market suppliers are under the obligation to gain approval, the market continues to be plagued by a number of unscrupulous vendors. In response to this, some airline operators have employed quality assurance teams with the aim of ensuring no deviation from established safety guidelines.
Evidently, open market suppliers have procured a respectable share of the market, with airlines contracting with anywhere between ten and 300 approved vendors depending on their fleet size.