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Aircraft Parts

Air Carrier Instability and the PMA Marketplace

Some economists are predicting that air carriers – particularly US air carriers – are doomed. But we believe that the PMA industry can play an important role in supporting and protecting the air carrier industry from threats of destruction.

PMAs to the rescue

It is no secret that many air carriers have turned to PMA parts as a safe and cost effective tool to help offset increasing fuel prices. Along with other aggressive cost-cutting strategies, it is one of the elements of a robust cost-cutting scheme for many air carriers … including some air carriers who used to say that they would never try PMA parts. Price is an important feature in the decision to rely on PMA parts, but price alone is not enough to sway an air carrier – air carriers demand that the less-expensive option still provide an equivalent (or better) level of safety. So PMA parts manufacturers have worked closely with the FAA and other airworthiness authorities in recent years to make sure that PMA parts are held to the same high airworthiness standards as any other aircraft parts.

One of the important features that makes a PMA part acceptable to an air carrier is the engineering that lies behind the part. The FAA will not permit a manufacturer to fabricate and sell a replacement or modification part for a type-certificated aircraft unless that person has first demonstrated to the FAA’s satisfaction that the part will keep the aircraft safe.

How Dire is the Situation?

In their Summer 2008 Air Carrier Ratings Report, Fitch Ratings took a very pessimistic view of the air carrier industry, stating that air carriers are experiencing a “cost shock that cannot be addressed entirely through capacity reduction and downsizing.”

Fitch goes on to day that “Looking ahead to 2009, Fitch believes that unsustainable cash flow trends and eroding liquidity positions will significantly raise the probability of a major carrier liquidation.”

What is MARPA Doing to Help?

MARPA recognizes that PMAs will be an important element of any air carrier’s future sustainability program. But we have already lost a substantial numbers of air carriers to bankruptcy in the first half of 2008. Fitch ratings may be right, and we may be looking at the loss of a major carrier to liquidation in 2009. With this in mind, it is important to have a sound strategy for protecting your accounts receivable.

MARPA has formed a strategic alliance with Greenberg, Grant & Richards, a collection firm that specializes in holistic solutions to credit and receivables management. They have an excellent record as a collection agency and they have pledged to provide discounts to MARPA members, as well as making available their Aviation Industry Debtor Awareness Program.

MARPA President, Jason Dickstein, has also been speaking at various industry functions about the need to establish sound foundations through contracts, security agreement, and other mechanisms that will protect your “right to get paid.” To learn more about the economic future of the PMA parts industry, and to learn about how PMA parts can help save the air carrier industry money, be sure to attend the 2008 MARPA Annual Conference in Las Vegas, Nevada on October 14-16, 2008.

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About Jason Dickstein

Mr. Dickstein is the President of the Washington Aviation Group, a Washington, DC-based aviation law firm. He represents several aviation trade associations, including the Aviation Suppliers Association, the Aircraft Electronics Association, the Aircraft Fleet Recycling Association and the Modification and Replacement Parts Association.

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