ARSA ANNUAL REPAIR STATION SYMPOSIUM WASHINGTON DC, 20 TH MARCH 2014 VINCENT DE VROEY GENERAL MANAGER TECHNICAL & OPERATIONS

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1 ARSA ANNUAL REPAIR STATION SYMPOSIUM CUSTOMER COLLABORATION: HOT ISSUES IN THE MRO FIELD WASHINGTON DC, 20 TH MARCH 2014 VINCENT DE VROEY GENERAL MANAGER TECHNICAL & OPERATIONS

2 AEA members: To the power of 30

3 AEA FACTS AND FIGURES 30 member airlines with 2,550 aircraft 10,000 flights/day 600 destinations in 160 countries 100BN TOTAL TURNOVER 400 million passengers 5,5 million tonnes of cargo 370,000 employees

4 EUROPEAN AIR TRANSPORT POLICY

5 HOT TOPICS IN THE MRO FIELD OEM MRO airline relationship & ICAs Lack of EASA equivalent to the FAA PMA rules Shortage of Qualified Personnel need performance based training Ageing aircraft lack of harmonization between EASA and FAA Performance based safety oversight REACH 5

6 OEM AIRLINE/MRO RELATIONSHIP Source: ICF SH&E Analysis, Airframer, Teal Group

7 Past: equal weight OEM AIRLINE/MRO RELATIONSHIP Airline MRO OEM Current: Unbalanced power Independent MRO

8 OEMS AIRLINES / MROS UNBALANCED POWER Restricting access to technical documentation and introduction of discriminatory pricing policies and conditions Restricting freedom of airlines in selecting the MRO of their choice (licensing agreements) Discriminatory pricing policies on spare parts and restricting freedom to use non-oem parts Prohibitive pricing policies on test and tooling equipment Retroactive support agreements Parallel with practices in car industry which have recently faced actions by the EU competition authorities

9 EASA PMA EU airlines can use FAA approved PMA parts through the EU-US BASA with some restrictions PMAs are essential to get an alternative to OEM sourced parts (lower price, equivalent safety) No real EASA equivalent exist (EASA rules too complicated) - competitve disadvantage for EU airlines and MROs AEA requests EASA to launch a rulemaking task to work on a real EASA PMA equivalent 9

10 SHORTAGE OF QUALIFIED PERSONNEL Increasing labor rates (concern) Overregulation based on outdated EASA requirements does not help. Performance based training and qualification needed make use of state of the art training methods AEA is actively engaged in the EASA rulemaking task on New Training Methodologies for Part- 66/Part-147 (EASA RMT281) 1 0

11 AGEING AIRCRAFT FAA rules on ageing aircraft published in Worldwide airline industry has complied to FAA rules as de-facto standard EASA rulemaking reinvents the wheel (NPA ) Lack of EASA-FAA harmonization will complicate transfer of aircraft between registers, regulatory burden not justified on safety grounds AEA urges EASA to harmonize with FAA 1 1

12 PERFORMANCE BASED SAFETY OVERSIGHT Industry and authorities are low on resources Implementation of SMS and industry standards (i.a. IOSA) Number of audits should be reduced for mature organization (risk based approach) Delegation of responsibilities to mature organizations (i.a. DOA) AEA is actively engaged with the EASA Management Board/ EASA / NAAs on this issue 1 2

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14 REACH FOR AIRLINE INDUSTRY ANNEX 14 VERSUS ANNEX 17 now: 73 near future: >> 200 now: 6 soon: 19 future: >>200 Registration Candidate list (SVHC) Prioritisation for Authorization Restriction unless authorised (Annex 14) or exempted (Annex 17) Registration ECHA List of Substances of Very High Concern List of restricted chemicals List of restricted chemicals Airline approach Control import amount Monitoring Prepare to find alternatives or change processes in cooperation with OEM Pressure on OEM Monitoring impact Comments to ECHA based on safety concerns Maike choise: Considering alternatives (with OEMS) and implement in time Preparation for Authorization with supply chain (via e.g,. Consortium) Temporary specified use (if authorised) goal Apply for authorisation Phase out substance Comply with regulation

15 REACH CONCERNS OF AIRLINE INDUSTRY Long and Complex Supply Chains Many products affected SMEs in the supply chain (low understanding) Information to mitigate concern (how?) Supply unpredictable, even if authorization is granted (minimum leverage aviation sector due to the demand of only low volumes) Uncontrolled Formulation/Product components change Authorization (if and as long as it is granted,) will only cover a single supply chain and its legal entities and their listed uses.

16 REACH CONCERNS OF AIRLINE INDUSTRY Safety may be compromised Reduced efficiency (more frequent maintenance?) Support to legacy products (in service) Long lead times for substitution versus short REACH deadlines Need to fulfil EASA requirements (airworthiness) verus REACH EASA in charge of aviation safety including airworthiness / European Chemicals Agency (ECHA) in charge of REACH but both affect aerospace products, components and processes! Current example: CrO3 (used in plating processes and coatings) already added to REACH Annex XIV (2017 sunset date). Other chromates (i.e. strontium chromate used in primer applications) to be added soon. Chromates are essential for corrosion protection: Corrosion protection is fundamental to product safety and service life 1 6

17 1. SCENARIO: ALTERNATIVE EXISTS Risks: To avoid authorisation: rushed development/implementation of alternatives by OEMs, resulting in Reduced performance of the alternative Lower safety standards Additional time needed for development, certification and industrialisation of alternatives High costs for changing procedures & possible recertification

18 2. SCENARIO: NO ALTERNATIVE AUTHORISATION NOT GRANTED Risks for European MROs: MRO services relying on REACH substances need to be relocated to outside EU Closure of European maintenance facilities Risks for European Airlines: Possibility to move base maintenance activities, but not line maintenance activities Normal operations would be impossible in Europe => Drastic implications for the entire aviation sector

19 3. SCENARIO: NO ALTERNATIVE AUTHORISATION GRANTED Risks: Disruption of supply chain resulting in non-availability of substances Too short review periods. Too high costs/administrative burdens associated with obtaining authorisation No solution for ad-hoc demand for an unexpected substance

20 AEA & REACH SUMMARY OF DIFFICULTIES Many chemicals used in MRO affected by REACH authorization Complex end users of (SVHC containing) chemicals Small SVHC quantities, but in multiple products and applications Authorization process is complex, time consuming & expensive, whereas Aircraft maintenance & repair tasks, including materials used in this process are EASA regulated. MROs cannot substitute without EASA approval. MROs do not have the expertise nor resources to find alternatives No added value of REACH EU MROs already comply with state of the art health & safety procedures (i.e. ISO). SIMPLER AUTHORIZATION PROCESS IS REQUIRED!

21 CONCLUSION We need a holistic approach, get rid of unnecessary regulatory burden and a level playing field REACH is a key concern for the EU MRO industry The OEM-MRO-airline relationship needs to be rebalanced Need for an EASA equivalent to FAA PMA EASA rules for ageing aircraft should be harmonized with FAA EASA rules & oversight should be performance based

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