Premium #193 – The EC Investigation of the Aircraft Engine Aftermarket – What it Means

Last week reports surfaced regarding an investigation being conducted by the European Commission (EC) regarding a competition probe in the aviation maintenance sector. According to reports, it centers about provisions in engine service contracts, and both Rolls Royce and SAFRAN shares tumbled when the two companies were named as targets of the probe. We understand that approximately 40 companies received the EC questionnaire, centered on the aftermarket. Since we have not seen the questionnaire, we cannot speculate about its exact content and are relying on published comments from knowledgeable individuals in that regard.

The key question of the probe is whether airlines are being forced to enter into anti-competitive contracts with OEMs to keep their aircraft flying as equipment makers seek a larger slice of the maintenance market. The initial focus of the probe appears to be engines and APUs, and we have confirmed that CFM International (a SAFRAN/GE joint venture), Rolls-Royce and Honeywell have received questionnaires from the EC.