BASA Should Lower MRO Compliance Cost

Industry groups this spring were encouraged that the FAA and European Aviation Safety Agency (EASA) took the initial steps to implement a long-awaited Bilateral Aviation Safety Agreement (BASA). The agreement formally took effect on May 2, and one of the first orders of business was to lay the groundwork for maintenance.

The BASA enables FAA and EASA to validate each other’s work, cooperate and harmonize on regulations. Industry officials have said the agreement creates a “one-stop shop” for certification and other approvals.

“The entry into force of the new BASA between the U.S. and the European Union is great news for the U.S. and European civil aviation industry that serve customers on both sides of the Atlantic,” says Aeronautical Repair Station Association Executive Director Sarah MacLeod. “The BASA will enhance efficiencies for government and industry, reduce regulatory duplication and lower compliance costs, all while ensuring effective oversight and allowing our members to build on their outstanding safety record.” ARSA believes this is particularly important as the global civil aviation maintenance market topped $50 billion in 2008. Maintenance is a major export for North America with a positive $2.4 billion trade balance, the association says.

The implementation got underway as ARSA released its study on the importance of BASAs to the repair station industry. The study was the third prong in the association’s Positive Publicity Campaign, designed to educate the public and decision makers about the repair station industry and its impact on the economy.

Released in mid-June, the study’s findings basically confirm that BASAs have a substantial impact on repair stations that do work on foreign aircraft or in foreign locations, says ARSA Executive VP Christian Klein. “The reality is this is a global industry, and for U.S. companies to compete, we must have a level playing field,” Klein says, adding that’s what BASAs create.

The study included surveys of about 30 different companies—both large and small—that hold about 65 different repair station certificates worldwide. In general, the study finds that the cost of obtaining foreign certification is roughly two to three times greater when no bilateral exists. An average FAA certificate costs a U.S. company about $15,000 to obtain. The addition of certification from Europe, where a bilateral is in place, would cost an average of $11,000. But certification from China, where there is no bilateral, would cost $30,000.

When companies operate on thin margins, the impact of a BASA has a greater impact on the percentage revenues that must go toward certification renewal. FAA certificate renewal would cost companies an average of 0.02% of revenues. European renewal would account for about 0.04% of a company’s revenues, while Chinese renewal would take up 0.16% of revenues, on average. Renewal at other civil aviation authorities where there is no BASA in place would cost 0.41% of revenues.

This disproportionately impacts small businesses. For a company with a few million in revenues, certification costs could reach 0.5%, compared with a fraction of that for a company with hundreds of millions in revenues. “While the percentages are small, it’s very significant for small businesses,” says Michael Holland, associate consultant for AeroStrategy. “BASAs are extremely important to promote the wellbeing of the maintenance industry, particularly in the U.S.”

The implementation of the U.S./Europe BASA follows two years of sometimes tenuous negotiations between officials from both regions. The completion of the BASA was threatened by U.S. dissention over EASA fees and charges, along with Europe’s objections over a proposal in past House FAA reauthorization bills that would have required two annual inspections of foreign repair stations. But the House language was dropped, and on March 15, FAA and EASA were able to sign the long-awaited agreement.

In implementing the BASA, FAA and EASA first turned their attention to maintenance. On May 3, the agencies released the Maintenance Annex Guidance (MAG), the underlying document that will direct U.S. and European approvals for maintenance.

The 153-pg. document details the actions required for a repair station in the U.S. to receive EASA Part 145 approval, as well as for a repair station in the European Community to receive U.S. Part 145 approval. The MAG also acknowledges differences between U.S. and EASA Part 145s and cites them as special conditions. And it permits FAA and the EC to rely on each other’s surveillance systems “to the greatest extent possible,” the MAG says, adding “FAA and EASA have agreed to conduct surveillance of each other’s compliance with the special conditions.”

The MAG is broken in to three sections dealing with the authority interaction, the certification process for U.S.-based repair stations and the certification process for EC-based MROs. The agreement will be phased in over two years for repair stations. Regulatory authorities will train on management and oversight during the phase-in period.