European regulators are investigating whether airlines are being forced to enter anti-competitive contracts to keep their 24,000 aircraft flying, as equipment makers seek a slice of the $60bn a year maintenance and repair market.
 
The European Commission has written to airlines and aircraft component manufacturers, asking for information about the provisions being written into service contracts — terms that could restrict choice when servicing everything from engines to wifi networks.

“They are looking at the third parties that manufacturers licence for maintenance and at the data and information they share with those third parties,” said one airline, which recently received a detailed questionnaire from Brussels and preferred to remain anonymous.
 
News of the inquiry comes as the airline industry shells out record sums for next-generation passenger and cargo aircraft, to help meet soaring global demand for air travel. Over the next 10 years, the global fleet is expected to grow from 23,927 in 2015 to more than 34,000.

However, carriers have complained openly about increasingly restrictive service contracts and constraints on the choice of equipment that goes on an aircraft.

Willie Walsh, chief executive of airline group IAG, this summer warned of possible legal action after expressing concern that limited competition might be keeping prices for aircraft, engines and maintenance services high.
 
The European Commission refused to comment on the inquiry, which is at a very early stage and is not yet a formal investigation. However, commission spokesman Ricardo Cardoso acknowledged the industry’s concerns. “The European Commission is closely monitoring competitive conditions as regards maintenance of engines and components for large commercial aircraft,” he said.
 
Its inquiry is focusing on two specific products, including the CFM56 engine, which is the only choice on the Boeing next generation 737 single aisle aircraft and is made by General Electric and Safran’s CFM joint venture. CFM could not be reached for comment.
 
Rolls-Royce, which provides the only engine for Airbus’s new wide-body, the A350 XWB, has also been approached by the commission. “We can confirm we have received a questionnaire from the European Commission and are working on our response,” it said.
 
Honeywell, whose power units are widely used to keep the lights on when an aircraft is on the ground, confirmed it too had received a questionnaire. “Honeywell ... is working to respond. We will co-operate,” the group said in a statement.

The commission’s preliminary inquiry is expected to take several months before a decision on whether to launch a formal investigation is made. Companies will have roughly a month to reply, and further questionnaires could still be sent out.
 
The maintenance, repair and overhaul market is set for robust growth over the next decade thanks to the unprecedented number of new generation aircraft coming into service. Aerospace consultancies such as ICF International and Technavio estimate the market will grow from $60bn this year to more than $80bn by 2025.
 
Maintaining and repairing an aircraft accounts for roughly 10-13 per cent of an airline’s operating costs and the complex job of servicing the roughly 30,000 components on an aircraft is often outsourced to a third party.

However, as aircraft manufacturers such as Boeing and Airbus demand that suppliers share more risk on the development of new aircraft programmes, original equipment makers are seeking to recoup some of that investment by expanding in the high-margin business of servicing their products. （Peggy Hollinger, Tanya Powley and Christian Oliver）