aeronautical repair station association annual repair...

Aeronautical Repair Station Association

Annual Repair Symposium

2016

1

121 North Henry Street Alexandria, VA 22314

Tel. 703.739.9543 Fax 703.739.9488

www.arsa.org

What We Have Done Lately

ARSA’s Work for the Aviation Maintenance Industry

Sarah MacLeod Christian A. Klein

Steven W. Douglas

http://arsa.org/


• Regulatory Advocacy & Compliance Assistance.

• Legislative Advocacy.

• Industry PR: The Voice of Aviation Maintenance.

• Building the Aviation Maintenance Workforce.

• Training Services.

• Industry Conferences and Networking.

How ARSA Works

March 17, 2016 Copyright © 2016 Obadal, Filler, MacLeod & Klein, PLC

703 299 0784 • http://potomac-law.com 3


• Work instructions. • Continue-in-service determinations. • FAA/EASA MAG Change 5 & § 21.137(o) early compliance. • After securing legislative language giving repair stations a TSA

Aviation Security Advisory Committee (ASAC) seat, D. Fisher appointed by administrator to serve.

• Working Away Advisory • Contract Maintenance Rule References/Tools • “Overhaul” Interpretation Content and Training • Audit Survey Results

arsa.org/arsa-works

Regulatory Advocacy – Agency Engagement



http://arsa.org/part-43-and-repair-station-work-instructions/



http://arsa.org/continue-in-service/





http://arsa.org/wp-content/uploads/2015/09/ARSA-MAGChange5-20150910.pdf





http://www.ecfr.gov/cgi-bin/text-idx?SID=f0e861a4993db1c939bb0429cf611c3d&mc=true&node=se14.1.21_1137&rgn=div8




http://arsa.org/working-away/





http://arsa.org/contract-maintenance/







https://potomaclaw.inreachce.com/Search?q=overhaul&searchType=1





http://arsa.org/arsa-works





• Audit Survey Results – 35 companies responded

• 121 national aviation authority audits • 146 internal audits • 59 customer audits • 19 commercial certification audits (ISO, NADCAP, etc.)

– 144 findings • 57 from national aviation authorities audits • 64 from internal audits • 9 from customer audits • 14 from commercial certification audits

http://arsa.org/regulatory

Regulatory Compliance - Industry Resources



arsa.org/audit-survey

arsa.org/audit-survey

http://arsa.org/regulatory


• Of the 144 findings, with more than one choice given:

– 59% were administrative (e.g., typographical errors, etc.)

– 31% were contradictory (i.e., different opinions on what constitutes compliance)

– 23% were duplicative

– 4% concerned commercial requirements (i.e., contractual or business obligations)

Regulatory Compliance - Industry Resources




• Housing requirements for airframe component facilities.

• Documents incorporated by reference in ADs.

• MAG Change 6 and an update to ARSA’s supplement.

• Major and minor guidance for air carriers, general aviation and repair stations.

• Singapore supplement.

Regulatory Advocacy and Compliance – In the

Works




• Alternative Parts – Great example of association “defense” on specific initiative. – Proves we have power. – Legislative team learned of effort to include language in FAA

reauthorization mandating rulemaking regarding alternative parts. – In July, ARSA led coalition of six other trade associations in letter to

congressional leaders. – As of now, effort to include mandate language has been abandoned.

• FAA Modernization and Reform Act – Worked with Congress & FAA to ensure air carrier contract

maintenance requirements have minimal industry burden (final rule effective March 4).

– Ensured lawmakers respected national sovereignty and bilaterals when dealing with foreign D&A testing (ANPRM stage).

Legislative Advocacy




• FAA Reauthorization

– Multi-year blueprint for FAA funding is opportunity for Congress to direct aviation policy (new legal mandates, new regulations).

– ARSA and member engagement is critical or more bad things will happen (e.g., TSA security rule and subsequent ban on new foreign repair station certificates).





• FAA Reauthorization.

– General advocacy goals:

• Educate about economic impact of aviation maintenance.

• Demonstrate the harm of burdensome mandates on aviation businesses.

• Ensure agency has adequate resources.

• Protect/promote bilaterals.

– Current law extended through March 2016 (its 1st extension).

– House T&I Committee has passed bill, Senate has unveiled bill.





• FAA Reauthorization – Problematic provisions in 2016 House and Senate bills:

• Drug and alcohol testing: Congress wants to rush previously mandated D&A testing rule for foreign RS employees.

• Expanding background investigations of RS employees beyond what TSA has deemed necessary.

• Risk-based inspection provision: valid approach but redundant and duplicative based on current FAA powers.

• Automatic adoption of foreign-authority ADs.





• Technical Education Policies – General advocacy goal:

• Sharpen focus of federal education programs to support life-long technical skill development from early/secondary education through advanced training.

– Specific policy initiative:

• Align career and technical education policies with workforce resources through reauthorization of the Carl D. Perkins Act.

• Support industry sector partnerships as tool to build skills needed by businesses.





Resources




• Launched AeroJobs.org, an aviation maintenance-focused online recruitment tool.

• Joined the STEM Education Coalition Leadership Council.

• Signed coalition letter demanding Congressional action to reauthorize the Perkins Act.

• Requested revision to Standard Occupational Classification (SOC) aviation maintenance personnel definitions.

Support for Aviation Maintenance Workforce



http://www.aerojobs.org/

http://www.stemedcoalition.org/

http://www.stemedcoalition.org/

http://arsa.org/technical-workforce-development/

http://arsa.org/soc/





• Launched new online training program in

September 2015

– Regularly scheduled live sessions.

– On-demand recordings.

• Topics selected to complement existing

resources (e.g., issue pages, publications) and

inform on key issues (e.g., MAG change 5, legal

interpretation on “overhaul” definition).

Training Services



http://arsa.org/training-2/arsa-training/


• Aircraft Parts (Series)

• AC 43-210A Listening

Session

• Effectively Engaging

Lawmakers

• International

Regulatory Law (# 1)

• Major/Minor

• Overhauling Overhaul

• Part 145 (Series)

• The FAA, EASA &

MAG Change 5

Online Sessions – Available On-Demand







• Agencies

• Antitrust

• Audit Activism

• Contract Functions & Vendors

• D&A Testing

• Election Law

• ICA in 3 Parts

• International Regulatory Law (#2 and more)

• Part 21

• Public Aircraft

• Political Engagement

• Recordkeeping

• Rulemaking

• Security Issues

Online Sessions – 2016 Subjects




• Topics responsive to member and

regulatory needs.

• What training sessions would be valuable

to you? Send a note to the teacher.

• For specific needs, tailored programs can

be designed.

arsa.org/training

Developing Training



http://arsa.org/training


• 2016 ARSA Strategic Leadership Conference – High-level meeting for maintenance and airlines

execs.

– No longer “invite only”; limited space available.

– In Montreal Oct 5 & 6.

– Hosted by IATA.

– Opportunity for high-level international engagement.

– Registration opens late summer.

Industry Conferences & Networking




• Currently in the field – initial announcement sent to every primary contact.

• Reminder email sent just now. Are you the primary contact? Find out who is…

• Responses improve ARSA strategy, enhance member services and support advocacy efforts.

2016 Member Survey




• Use AeroJobs.org. • Use You Can’t Fly Without Us video. • Register for SLC. • Use ARSA Training. • Host congressional facility visits. • Communicate with Congress. • ARSA PAC. • Engage the media. • Respond to member survey (invites sent to primary POC). • Bring us new members. • Sponsor meetings.

Helping Us Move the Ball Forward



http://www.aerojobs.org/

http://arsa.org/documentary/

http://arsa.org/news-media/events/slc/

http://arsa.org/training-2/

http://arsa.org/legislative/get-involved/

http://arsa.org/legislative/get-involved/

http://arsa.org/legislative/advocacy/

http://arsa.org/legislative/about-arsa-pac/

http://arsa.org/legislative/about-arsa-pac/

http://arsa.org/news-media/media-kit/

http://arsa.org/membership/members-getting-members/

http://arsa.org/news-media/events/


About the Presenter – Steve Douglas



Steve Douglas is a vice president with CAVOK. Over his 38 years of experience, he has extensive expertise in maintenance program philosophy and methodology, the FAA rulemaking process, exemptions and deviations, strategic change management and development of international programs.

http://www.cavokgroup.com/

© CAVOK

Steve Douglas Vice President

CAVOK, a division of Oliver Wyman

720 Whitley Road | Keller, Texas 76248

Office: +1 817-380-2939 | Mobile: +1 682 444 1597

[email protected]

MARCH 17, 2016

AVIATION MAINTENANCE INDUSTRY OUTLOOK AND ECONOMIC IMPACT

Global Fleet and MRO

Market Forecast

1

25 © CAVOK

$0

$100

$200

$300

$400

$500

$600

$700

$800

2010 2011 2012 2013 2014 2015F 2016F

Revenue Expenses Net Profit

0

20

40

60

80

100

2010 2011 2012 2013 2014 2015F 2016F

Available Freight Tons Freight Tons

0

1,000

2,000

3,000

4,000

5,000

2010 2011 2012 2013 2014 2015F 2016F

Available Seats Revenue Passengers

Global Air Transport Passenger Volume

by Year

Amid weakening economic conditions, the global airline industry is achieving record passenger volumes, record cargo volumes, and record net profits

Millions of

Seats

The North American operators are, by far,

delivering the strongest financial performance

Global Air Transport Industry Financial Performance

by Year

$0

$100

$200

$300

$400

$500

$600

$700

$800

2010 2011 2012 2013 2014 2015F 2016F

Billions of

US Dollars

Global Air Transport Cargo Volume

by Year

Millions of

Tons

26 © CAVOK

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

$4.0

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

$4.0

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

$4.0

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Jet Fuel Brent WTI

Crude Oil and Jet Fuel Spot Prices per Gallon

by Year

Record net profits are due in large part to the glut in the oil market. As oil prices are expected to remain low over the short term, many are concluding that operators will delay retirements, and defer new aircraft.

US Dollars

New gen narrowbody aircraft are

more profitable than current gen

New gen widebody aircraft are

more profitable than current gen

Jet Fuel Forecast Scenarios

To date, operators have not shown signs of significantly altering fleet plans.

OEM order backlogs continue to grow, and new aircraft deliveries are at an all

time high.

Jet

Fuel

Brent Crude

Oil

WTI Crude

Oil

Cone of

Uncertainty

27 © CAVOK

Transferred to a

commercial operator

8

Completed freighter

conversion

49

Unknown prior exclusion

59

Removed from storage

419

New aircraft delivery

1,633

Storage for conversion

into a freighter

(3)

Transferred to a

non-commercial operator

(18)

Involved in an accident

(28)

Formally retired

(166)

Sent to storage

(1,198)

2,168 Aircraft Additions (1,413)

Aircraft Removals

Year Over Year Changes to the In-Service Fleet

by Transaction Type

Over the past year, status changes to 3,581 aircraft have lead the in-service fleet to experience a net growth of 755 aircraft, representing a 3.2% annual growth rate

3.2%

23,785 2015 In-Service Fleet

24,540 2016 In-Service Fleet

28 © CAVOK

LINE $12.8B

COMPONENT $13.1B

AIRFRAME & MODS $16.1B

Translating the fleet dynamics into MRO, we forecast the 2016 global commercial MRO market to be $67.7B

ENGINE $25.7B

Engine MRO continues to be the driver of growth in the market

2016 Global MRO Market Forecast

by MRO Segment

29 © CAVOK

20,000

25,000

30,000

35,000

40,000

45,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

20,000

25,000

30,000

35,000

40,000

45,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 202620,000

25,000

30,000

35,000

40,000

45,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Brent

20,000

25,000

30,000

35,000

40,000

45,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Fleet

Global In-Service Fleet Forecast

by Year

While the fleet is growing at a healthy rate, and the industry is reveling in historic net profits, uncertainties surrounding economic growth, interest rates, and oil could disrupt the delicate balance we are enjoying today

Number of

Aircraft In-Service Fleet Forecast Scenarios

Taking all economic factors into consideration, we forecast the fleet will

increase by nearly 9,900 aircraft by 2026, representing an average annual

growth rate of 3.4%

24,54

0

Historical

Fleet betterinsight™

Forecast

Likely Alternate

Scenarios

Best/Worse Case Alternate

Scenarios

30 © CAVOK

40

50

60

70

80

90

100

110

120

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

40

50

60

70

80

90

100

110

120

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 202640

50

60

70

80

90

100

110

120

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Fleet

40

50

60

70

80

90

100

110

120

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Fleet

Global MRO Market Forecast

by Year

As the MRO Market is a function of the fleet, economic uncertainties affecting the fleet will also materially impact the MRO market

Billions of

US Dollars MRO Market Forecast Scenarios

We forecast the $67.7B MRO Market to grow at an aggregate rate of 3.9% per

year for the next 10 years, topping out at just under $99B by 2026.

$67.7B

Historical MRO

betterinsight™

Forecast

Likely Alternate

Scenarios

Best/Worse Case Alternate

Scenarios

North American Fleet and MRO

Market Forecast

2

32 © CAVOK

2016 PASSENGER TRAFFIC (RPK) GROWTH

4.4%

2016 CURRENT FLEET

7,491

4,400+

2016-2025 AIRCRAFT DELIVERIES

4,000+

2016-2025 AIRCRAFT RETIREMENTS

+0.7% 2016-2026

FLEET CAGR

Passenger traffic continuing to pick up; however, the fleet growth will be limited over the next 10 years as most deliveries are slated to replace aging aircraft

33 © CAVOK

$4.5 $4.1 $4.2

$5.8 $6.2 $7.8

$4.3 $4.0

$4.2

$3.3 $3.4

$3.6

$17.9 $17.8

$19.9

-1.7%

1.3%

-1.3%

0.9%

0.1%

4.7%

1.1%

1.2%

-0.8%

3.0%

-0.1%

1.0% -0.1%

2.2% 1.0%

$0

$5

$10

$15

$20

$25

2016 '16-'21CAGR

2021 '21-'26CAGR

2026 '16-'26CAGR

Airframe Engine Component Line

2016-2026 Global MRO Market Forecast

by MRO Segment

With most of the new deliveries forecast to replace aging aircraft, the North American MRO forecast is virtually flat.

Billions of

US Dollars

North American MRO will be impacted by less maintenance intensive HMV

work and honeymoon periods of engines and components.

25% 23% 21%

33% 35% 39%

24% 23% 21%

18% 19% 18%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2016 2021 2026

Airframe Engine Component Line

2016-2026 Global MRO Market Share Forecast

by MRO Segment

Share of

MRO Market

34 © CAVOK

Supply

Demand Africa

Asia

Pacific China

Eastern

Europe India

Latin

America

Middle

East

North

America

Western

Europe

Africa 43% 8% 2% NEGL NEGL NEGL 6% 3% 38%

Asia Pacific NEGL 57% 5% NEGL NEGL NEGL NEGL 7% 31%

China NEGL 22% 42% NEGL NEGL NEGL NEGL 18% 17%

Eastern Europe NEGL NEGL 2% 10% NEGL NEGL 2% 9% 75%

India NEGL 46% NEGL NEGL 17% NEGL 1% 4% 33%

Latin America NEGL 3% NEGL NEGL NEGL 36% NEGL 27% 34%

Middle East 1% 10% NEGL NEGL NEGL NEGL 21% 7% 61%

North America NEGL 5% 1% NEGL NEGL 3% 2% 68% 21%

Western Europe NEGL 2% 1% 1% NEGL NEGL 1% 7% 88%

Note: Left column indicates region demand is generated in (region of operator). Top row indicates region

maintenance is supplied/performed in (region of MRO). NEGL = Negligible

• 68% of this demand

is met by MRO

providers in North

America

• Approximately $4.0B

of MRO demand is

performed in regions

outside North

America

• An additional $3.3B

is conducted for other

regions

• This results in a total

of $11.8B of MRO

supplied by North

American providers

North American operators currently generate $12.5B in airframe, engine, and component maintenance demand per year

$0

$5

$10

$15

$20

$25

Thus, North

America is a

net importer

of MRO

services 68%

U.S. Civil MRO Employment and

Economic Impact in 2016

3

36 © CAVOK

273,813

Part 145 184,551

Part 121 21,664

Parts Mfg/Dist 67,598

$43.1B MRO

$20.1B Parts Mfg/Dist

$23.0B

Civil Aviation Employment

by Firm Classification

The US civil aviation maintenance industry employees nearly 274,000 people and generates $43.1B in economic activity. MRO accounts for 75.3% of the total employment in the US with 206,215 employees.

MRO generates over 46.5% of the economic activity or $20.1B. With 24.7% of

the total employment, parts manufacturing and distribution, accounts for 53.5%

of the total economic activity or $23.0B.

Economic Activity

by Firm Classification

37 © CAVOK

0

100

200

300

400

500

600

700

CA

FL

TX

OH

AZ

GA

OK

NY

WA

KS

CT

MI

ILP

AC

ON

CN

JA

LM

A INM

OM

NT

NW

IO

RV

AA

KA

RK

YS

CL

A IA NV ID UT

MD

NM

MS

MT

NH

PR

ME

ND

SD HI

NE

WV

VT

DE

WY RI

GU

MP VI

US Repair Stations

By State/Territory

California, Florida, and Texas combined are home to nearly 40% of the repair stations in the United States and its territories

Delta Air Lines, United Airlines, American Airlines, Boeing, and AAR are the

largest employers in the United States and its territories

38 © CAVOK

$0

$1

$2

$3

$4

$5

CA

AZ

WA

TX

CT

KS

GA

FL IA

OH

NY MI

OK IL

VA IN NE

NJ

NC

AL

PA

TN

MN

MA

LA

MD

WI

OR

CO

UT

MO

SC

AR

NV

ME

DE

MS

VT

WV

KY

NM

NH HI

AK

SD ID ND RI

MT

PR

WY

GU

MP VI

US Economic Activity ($USB)

by State/Territory

US Employment

By State/Territory

California, Texas, Washington, Georgia, Florida, and Arizona combined represent 48% of the total U.S. civil aviation maintenance employment with an estimated 130,244 employees.

0

10,000

20,000

30,000

40,000

CA

TX

WA

GA

FL

AZ

OK

CT

KS

OH

NY MI

IA IL AL

NC

NJ

VA

PA IN

MN

MA

TN

NE

LA

WI

CO

OR

MO

SC

AR

MD

NV

ME

DE

WV

UT

KY

MS

NH

NM H

IA

K ID VT

MT

ND RI

SD

PR

WY

GU

MP VI

California and Arizona generate the most economic activity followed by

Washington, Texas, Connecticut, and Kansas; together, these six states

generate nearly 50% of the total economic activity.