They’ve Got to be Kidding...
I’ve been involved with various aspects of purchasing aviation parts and products for 35 years. Costs of these products have increased astronomically over the years. Some are understandable and are due to market forces beyond the control of OEMs, PMA holders and others in the parts supply chain. Sometimes when I see the prices we pay for some items, I get blasted out of my chair, thrown across the room and need to pick myself up and dust off. I understand that it might not be valid to compare ourselves to other industries that use parts that need to be manufactured with expensive materials, sophisticated machining, extensive engineering and testing. We need to pay for the mining, refining, metallurgists, design engineers, machine shops, quality assurance and testing, more assembly testing, and on and on. The automotive industry is often used as a comparison, but there are lots of reasons why nothing else is quite like aerospace. We build earth-bound devices that must be carefully crafted due to their critical natures (think nuclear power plants) — but aerospace has a thing about weight, and we can’t just make things a little beefier because that costs fuel and speed. Automotive engineers are more concerned with weight and aerodynamics but their design constraints aren’t as tied to these factors as they are in aerospace. The automobile industry still builds relatively heavy and unnecessarily large passenger vehicles. Compared to automotive units produced, the aviation market is tiny. There are more than 60 million cars built per yearin the world. The number of aircraft built in the world annually is less than 500,000 (with about 60,000 of them being helicopters). Aircraft have never been mass produced. One result of this, making fewer parts that have more stringent requirements on them, is that the price per piece goes way up.
To the point — there is expensive, there is jaw-dropping expensive and there is so expensive that we cannot use the same business model we’ve used for the past 40 years. If you had to absorb the replacement costs for every part of your next airliner trip, your seat would remain empty and you’d probably take the train. It’s only because of the tens of thousands of passengers that an airliner carries over its lifetime that makes each seat available at a reasonable price.
My head almost exploded this week. I received a quote for the repair of an accessory that had a line item listed for a cost of $8,400. I thought there must have been a mistake when I saw it was for a single bolt that is part of this on-condition assembly. When I called to ask about this, I was told we were lucky because that was last year’s price and that to replace it at the current price was in excess of $14,000 — for a single bolt! Granted, the bolt is a special bolt, probably made specifically for this purpose and not used anywhere else, but it is not part of something that you would look at and think, “Yes, that bolt is super critical and will be very hard to make.” I suspect it is made from standard materials. It doesn’t spin around really fast, get very hot or have enormous stress put on it. We were fortunate that a serviceable bolt was available for a reasonable cost. I’m being purposely vague because I don’t want to poke one particular OEM.
The industry is rife with other examples. I’m not concerned with the $100 bolt or even the $1,000 bolt. (I can’t believe I said that but I am somewhat inured to high aviation prices.) No matter how small the demand for this bolt, how on earth can it be that the OEM could not make a profit by charging one quarter of this amount? It makes no sense, and I know that many of you out there have seen the same sort of completely unexplainable pricing on some parts. That is part of the reason why many of us are unable to use the high retail mark-ups that other types of retailers use. The stuff is just too expensive even for customers who are being given a measly 10-percent markup.
To compound my confusion, I looked up the price that the U.S. government, which still stocks this part, will sell it for to any public agency, local, state or federal if they are of a mind to buy it that way. For those of you who don’t know, any local or state agency can buy certain aircraft parts from the Defense Logistics Agency if they operate public use aircraft. This actually helps the government leverage its purchasing power. It takes some paperwork and it is normally done through a state office where the local agency can place an order. These are only parts that one or more branches of the federal government actually have a need for having in their inventories.
Sometimes the savings are minimal but sometimes there are significant savings to be had, thereby saving us (the taxpayers) some real money. You can only get parts for aircraft that the military has marked as available to these agencies, so don’t go thinking armament or avionics. How does the same bolt for $19.65 sound, in stock, and you could get it in a week? That is 700 times less expensive and the traceability (cage code) goes back to, you guessed it, the same OEM.
This is my challenge. Someone who works for any OEM (and you know who you are) who reads this, please tell me what goes into determining the price of a part like this. I want to talk to the person who actually says, “Yes, this is a good price for this part based on what it costs us to have made, the demand over time and a reasonable fat profit for us.” Year after year I hear people say, ”Oh, they try to recoup their liability costs by the price of their spares.” There might be some truth in that but I doubt that is a major factor in deriving a price for a part. It’s more likely that they simply make things up from time to time, misplace a decimal point and nobody ever catches it. Maybe they just get greedy because they know you will only ever have one source for this part and you will have a need for it eventually. The demand is very low, “So let’s make some real money each time we dosell one.”
What a wonderful world it would be
In an ideal world, in order to have good customer support, every part possible would be in stock, no matter how occasional the order for it might be. That means that despite forging/casting companies and other fabricators going out of business, zero demand for some parts across many years, and the not-unreasonable expectation that some parts should outlast even the most optimistic projections as to how long a model will be in service, it simply isn’t reasonable to keep everything on the shelf. (Do we really expect McDonnell Douglas to be making DC-3 airframe parts after more than 70 years?) We have many wonderful aftermarket companies that take on PMA’d parts manufacturing for things that remain in demand but they can’t be looked to for making all the low-demand bits. Even if they get the specification or reverse-engineer a low-demand part, no company would say it makes economic sense to make something that you mightbe able to sell enough of to recoup your production cost and make a decent profit.
Nonetheless, if an OEM is still willing to support an airframe or engine by providing manuals, revisions to those manuals, technical support or parts (such as they are), they then have an obligation to provide parts in a reasonable way. This means prices proportionate to the actual expense of making and stocking a part or keeping up with finding new vendors for fabrication when a source goes out of business or simply says, “Sorry, we won’t make that for you any more”. Sometimes an OEM part has a lead time of more than a year. It might be because they know they have to go find and approve a new vendor to make it or their current vendor simply can’t put them on the schedule until then.
As an FAA repair station we have to perform vendor audits, make sure our vendors have proper approvals for what they do for us, have traceability for our parts and myriad other costly things, and we only maintain the OEM product. How often have you felt stuck between a rock and a hard place when the warranty is over and lead times and costs are astronomical? This is also the background for those companies that have become successful as inventory purchasing organizations that warehouse and sell parts that they are able to purchase. Their existence, although useful, is as middlemen. It might make the parts more expensive than they once were.
I would be impressed if an airframe manufacturer said, “Buy our product because, everything else being equal, our spares are much less expensive over the 20 years you will probably have this platform in service,” or, “We will prorate our warranty for 10 years instead of our usual two years as long as the original purchaser is still operating the aircraft.”
I could go on (and often do) because it is easy for me to run the world from my laptop in my spare time. All I’m asking is for the people who price our parts to use real economic forces to price their spares and not have it be the hidden “real” cost of what we do. We all know the exact cost of a new or used aircraft but until you are deep in the beeps you sometimes don’t know what it will cost to maintain. Leaving the ground and returning safely will never be inexpensive beyond what the airlines already do so well. Beat me up with carry-on baggage fees, departure taxes and checked bag fees. Do whatever it takes but please don’t ask me to pay $14,000 for a bolt.
I’m waiting for the news that the Star Trek “replicator” has been invented and all you do is walk up and say, “Computer, please give me six each, P/N 1-700-645-07 unobtanium bolts. Oh, and don’t forget the 8130 and a packing slip.”
Jon Robbins has been an A&P mechanic for 33 years. He holds IA and private pilot and instrument airplane ratings. He supervises the helicopter maintenance program at CAL FIRE. Send e-mail to firstname.lastname@example.org.