September 2014

ARSA works on behalf of the aviation maintenance industry through direct, ongoing contact with the government. The association writes letters and petitions, participates on advisory councils and drafts guidance documents; it is in consistent contact with regulatory officials and congressional leaders to impart knowledge, fix problems, improve resources and otherwise manage the intersection of business and government.

Preparing each letter or message is an immense and intense undertaking, but the biggest challenge is staying on top of the issue. Unlike a satellite being shot into orbit, “fire and forget” is not an option. Through constant attention, ARSA tracks every single matter and stays on target until the industry gets the right answer.

For example, the recently-promulgated TSA security rule was the culmination of a multi-year advocacy effort. Vision 100, which required the TSA to issue foreign and domestic repair station regulation, was signed into law in 2003. Over the next 10 years, the association testified at hearings, submitted comments and lobbied Congress in anticipation of and in response to a ban on foreign repair station certificates. When the final rule was issued earlier this year, the association worked with TSA officials on implementation issues and educated its members on means of compliance. We followed the process all the way by issuing updates to model manuals and writing editorials to ensure company processes and procedures were consistent with the new rule.

The decade-long effort illustrates industry’s perseverance through a tortuous process. The same persistence was and is demonstrated in the handling of other issues including the availability of instructions for continued airworthiness, the drug and alcohol testing rulemaking and limitations on issuance of repairman certificates, just to name a few.

Of course, new problems will always arise that need attention. Indeed, there is a never-ending supply of new regulatory targets. However, new challenges are never an excuse to ignore unfinished work; pulling the trigger is not a license to take your eyes off the target.

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Hotline Features

Hopes for FAA Reauthorization Flying High

By Brett Levanto, Director of Operations

On Sept. 16, policymakers, industry groups, airline representatives and aviation business partners gathered at the National Press Club in Washington, D.C. to explore “the future of flight” at The Hill’s Aviation Policy Summit. The full day of panels and speakers included many ARSA allies and customers as well as industry analysts, business leaders and lawmakers.

The summit embraced a broad range of topics, but certain threads spooled through every discussion. Specifically, the aviation world is looking ahead to the work of renewing the law governing its main American regulatory body – all have a stake in the process. “There are over a hundred industry groups with interest in FAA reauthorization,” said Lee Moak, president of the Air Line Pilots Association.

During his keynote address, Rep. Sam Graves (R-Mo.) noted the 23 extensions required when FAA policy was last set in 2012 and expressed “the last thing we want is another reauthorization like we had last time.” In general, the assembly was hopeful that such measures will not be necessary; the overall tone is positive as the 1-year countdown to the expiration of the current FAA Modernization and Reform Act begins Oct. 1.

“The next FAA reauthorization … should be transformational,” said Rep. Bill Shuster (R-Pa.), chairman of the House Committee on Transportation and Infrastructure. “We need to lay the ground work for the future of U.S. aviation.”

Rep. Bill Shuster (R-Pa.) Discusses FAA Reauthorization at 2014 Aviation Policy Summit

Much of this confidence stems from the summer’s passage of the Water Resources Reform and Development Act (WRRDA), which enjoyed overwhelming support in both chambers after months of legwork, listening sessions with interested parties and careful bipartisan negotiation. “We started very early [on WRRDA],” Shuster said, “reaching out to stakeholders, trying to listen to their concerns and their problems and their ideas.” Many are optimistic the blueprint will prove as effective for airways as it was for ports.

The key substantive issues highlighted by Chairman Shuster – delegation authority, regulatory burden, regulatory interpretation consistency – should sound very familiar to ARSA members. Reauthorization will be a top legislative priority for the association in the next year and should be on your radar from now until the day the president signs the new law.

Weren’t able to make the summit? You can experience it online at: http://thehill.com/217845-aviation-policy-summit-the-future-of-flight.

For more information on ARSA’s legislative program, including how your company can get involved, visit: http://arsa.org/legislative.

It’s a long time until next October. Stay tuned.

FAA Aims to Streamline Certification Processes

By Zach Bruckenstein, Law Clerk

On Sept. 17, the FAA announced new policy intended to streamline the Aircraft Certification Service (AIR) process. The new procedures prioritize U.S. aircraft projects and aim to afford increased predictability and improved response time. Under the now-obsolete project sequencing process, which began in 2005, the agency failed to provide certificate applicants with information concerning project timelines.

This new AIR Project Prioritization Process comes in response to recommendations from the Aircraft Certification Process Review and Reform Aviation rulemaking committee. While the certification process still incorporates existing criteria such as the project’s safety benefit, complexity and company experience to prioritize agency resources, AIR personnel must now communicate with applicants throughout the process. The policy includes strict maximum response times based on a project’s priority.

The agency hopes that these changes enable the industry to retain global competitiveness and improve product to market times. As the FAA implements this new policy, let ARSA know how it affects your business.

Your Word is Your Bond – Bonded Repair Size Limits Draft Policy

By Zach Bruckenstein, Law Clerk

A member has alerted ARSA to a draft policy from the FAA regarding Bonded Repair Size Limits that would require design approval holder (DAH) substantiation on any repairs developed by owners, operators, repair stations, Designated Engineering Representatives (DER) or engineering firms.

ARSA urges anyone affected by such a change to submit comments to the FAA before the Oct. 10, 2014 deadline.

The FAA cites unexpected failures of bonded repairs to noncritical structures as the impetus for the draft policy. The agency, without providing regulatory, engineering, technical or statistical references, “concludes that bonded repair of critical structure is a potential safety threat.” The draft includes further presumptions that there are no available nondestructive inspection (NDI) techniques that assure that viability of a bonded repair. The FAA has deemed that such uncertainty necessitates a limit to the size of bonded repairs for critical structures. Through comments, ARSA members have the opportunity to ensure the agency ensures its policy is grounded in the regulations and to produce documented proof and objective data to corroborate its assumptions.

Under the draft policy, the size limitations of the bonded repairs are based on the inherent constraints of the specific designs and those associated with the substantiating data used to meet relevant regulations under 14 Code of Federal Regulations (CFR) parts 21, 23, 25, 27, 43. The policy will impact the capabilities of owners, operators and repair stations to develop repairs on critical structures by creating reliance on substantiation data only from the DAH for specifying tolerances and size limitations.

The resulting uncertainty imposes unknown cost on industry members without additional benefit to safety. There are additional concerns that dependence only on the DAHfor repair substantiation—many of whom may not have sufficient maintenance experience—will drive the use of new, more costly parts in lieu of properly established repairs.

Examine whether this issue may affect your business. Stay informed, ask questions and submit your comments to the docket. Repair station involvement on these issues – which seem small but can have broad impact on the maintenance community – is essential to ensuring the government appropriately balances its responsibilities with the industry’s.

Washington to [Another] Washington – MacLeod at Airline E&M

By Brett Levanto, Director of Operations

SEATTLE– On Sept. 25, Sarah MacLeod showed the aviation maintenance industry how to safely navigate an increasingly-hazardous regulatory environment.

MacLeod, ARSA’s executive director and managing member at the law firm of Obadal, Filler, MacLeod and Klein, shared her regulatory insight at MRO Network’s Airline E&M: North America. She joined Nick Brohm, director of quality for Virgin America, for a panel discussion titled Regulatory Update: Staying Ahead of the Compliance Challenge.

Closing panel discussion at AEM North America on regulatory compliance with @VirginAmerica and @ARSAWorks pic.twitter.com/43SBCdB1B6

— Juliet Trew (@MRONetJuliet) September 25, 2014

The purpose of the panel was to update attendees on recent changes in regulatory requirements and assess their impact while providing operating guidance for airlines and repair stations. To accomplish this, MacLeod reviewed recent regulatory actions – a number of important proposed rules and, of course, the new part 145 – and described the association’s work as a roadmap for both compliance and business success.

MacLeod reminded the audience that MRO providers must develop long-term, engaged relationships with regulators. However, effective commercial systems should always be the centerpiece of ensuring compliance, productivity and profit. “Knowing the difference between a regulatory compliance issue and a ‘good business practice’ is essential, more so than a ‘robust’ government-dictated requirement,” she said.

If you couldn’t make it to Seattle, you can get a sampling of the experience by viewing MacLeod’s presentation slides. Need more? Visit ARSA’s training page to view recorded sessions or develop a private session for your staff and be sure to attend the 2015 Annual Repair Symposium.

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By Brett Levanto, Director of Operations

By Brett Levanto, Director of Operations

Repair stations, manufacturers and service providers need clear guidance on the obligations and rights pertaining to Instructions for Continued Airworthiness (ICA).

Since its inception, ARSA has worked to ensure essential information is made available at a fair and reasonable price to operators, maintenance providers and any other person required to comply with instructions from design approval holders (DAH). Notwithstanding the clear language of § 21.50(b), the FAA has been slow to enforce the DAHs’ obligation. On the other hand, the agency has vigilantly enforced the requirement that those performing maintenance do so in accordance with the ICA (see §§ 43.13, 145.51 and 145.109).

The association has taken numerous steps to combat this “double standard” of enforcement and will continue to encourage, influence, watch and report on the development of uniform ICA policy.

This month, we invite you to travel back to 2003, when the hotline provided “your action guide on instructions for continued airworthiness” by clicking the image below.

For more background on ICA, visit ARSA’s issue page at: http://arsa.org/regulatory/faa/design/ica-efforts/.

• If the FAA determines that the petition justifies the action requested, it will initiate the rulemaking process.
• If there is already an existing rulemaking on either the specific subject matter, or in a closely related subject area, it may consider the petition as a comment to those proceedings.
• The petition is tasked to the Aviation Rulemaking Advisory Committee (ARAC) for consideration.
• It will dismiss the petition and place it in a database for examination upon future rulemaking.

The FAA ultimately decides (within the parameters of its congressionally delegated authority) what petitions to address through rulemaking.

ARSA recently joined forces with several other trade groups to petition the FAA to correct an error in the new repair station rule set to take effect on Nov. 10, 2014.

A strong democracy requires participation, but with so many competing interests it can be difficult to participate effectively. ARSA navigates the increasingly complex government system to take action on industry’s collective behalf. It also equips its membership with the knowledge and confidence to act individually. The petition for rulemaking is merely one avenue for ARSA members to be heard.

For more information, check out ARSA’s resources on how to get involved in the regulatory and legislative processes.

Aviation stakeholders and lawmakers are once again gearing up for another round of Federal Aviation Administration (FAA) reauthorization lawmaking on Capitol Hill.

The current authorization, the FAA Modernization and Reform Act, expires on Sept. 30, 2015.  The reauthorization process, which should happen every few years, allows lawmakers to set funding levels and policy priorities for the agency.  As Congress crafts new FAA legislation, threats and opportunities abound, and undoubtedly, old ideas will resurface, many that are detrimental to the aviation maintenance industry.

ARSA and its industry partners scored major victories in the FAA Modernization and Reform Act of 2012; however, our success was based on preventing detrimental policies from enactment. While ARSA is already engaging lawmakers on the association’s top legislative priorities, the industry will once again be playing defense to stop recycled, anti-contract maintenance proposals and countering false safety and economic arguments about aviation maintenance companies.

ARSA fully expects efforts to curtail contract maintenance on U.S. air carriers, drug and alcohol testing of foreign repair station employees, and mandatory inspections to resurface.  Once a bad idea is unveiled in Washington it never disappears.  Through education and engagement, ARSA and its members have laid a strong foundation to counteract interests opposed to our industry.  However, those hostile to contract maintenance are well-funded, well-connected, and adept at swaying public perception.

Consequently, the aviation maintenance industry must remain engaged both with lawmakers and the media.  Below are five activities every ARSA member company should do to ensure favorable policy outcomes in the next Congress:

1.  Host candidates and elected officials to visit your facility. The most effective way for policymakers to understand the industry and see the role your repair station plays in the local community is through a company tour.
2.  Attend ARSA’s Legislative Day on March 18, 2015.  Stay tuned for Legislative Day/Symposium registration in the coming weeks.
3.  Learn more about ARSA PAC.  ARSA PAC is a special fund that enables the entire aviation maintenance industry to speak with a common voice in the political process and elect candidates who share its legislative goals.
4.  Vote on November 3. Participation in the democratic process is an important part of active citizenship. ARSA encourages its members to vote – it’s one of your most basic and important democratic rights. You can’t complain about your member of Congress if you don’t vote!
5. Engage the media.  Any opportunity you have to educate the media about contract maintenance’s excellent safety record and contribution to the local economy will help shape policy.

We need your assistance to ensure recycled, bad ideas don’t become terrible laws.  ARSA’s legislative and communications team is standing by to facilitate your engagement with key audiences.

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By Steven E. Pazar, Attorney at Law, 11 Carriage House Lane, Boxford, Massachusetts 01921. © 2014 Steven E. Pazar ALL RIGHTS RESERVED

“We need to do a product recall.”  Whether you are large or small, the words “product recall”, precedes unexpected and often uncontrollable liability exposure. For the manufacturer this exposure is comprised of the direct cost of the recall plus the loss of company goodwill, loss of use of the product by upset end-users, and perhaps a precipitating traditional bodily injury or property damage claim.  Product recalls are a significant financial risk for all fabricators – witness the recent flurry of automaker recalls.

For a supplier who provided a defective part or component, the results can be more devastating. Typically there is just not enough profit margin in the supply of a part or component to cover the risks of a recall. Unlike a standard warranty claim remedy, the supplier not only has the obligation to repair or replace the defective part or component, but will likely be saddled with the costs of removal and reinstallation plus the other direct and indirect recall costs incurred by the upstream manufacturer and end-user. This exposure could be a terminal financial blow for many part and component suppliers.

Understanding the contractual risk exposure and planning for the possibility of a recall is the best survival strategy. Solid risk management starts upfront with good contract negotiation. This should be followed by the clear documentation of design decisions and approvals. Being able to track material and piece part inventories to end products is essential in mitigating a recall exposure. Lastly, verifying the extent to which your products liability insurance coverage will respond in the event of a recall event could make the difference in ultimate survival.

Consider the flow of the risk and the layering of insurance coverage. In recent years top-tier manufacturers have completed the transition to a procurement system that transfers most, if not all, of the recall risk to suppliers.  This “take it or leave it” approach has forced most suppliers to assume recall risks as part of the cost of doing business. Unfortunately for the supplier there has been little, if any, monetary consideration given in exchange for taking on this broader exposure.

So where does a supplier turn to help mitigate exposure? Apart from the internal tools mentioned above, the use of recall insurance may offer the best risk transfer tool. This coverage attempts to fill the gaps in most commercial general liability and products liability insurance policies. It may even serve as a useful limit on your liability in a well-crafted contract. If a recall occurs you can mitigate the overall exposure for the dollar amount between the deductible and the policy limit. While the recall coverage may not eliminate the financial risk it can make the difference between survival and dissolution.

Steven counsels businesses operating in high-risk industries – including aviation – he provides templates, tools and training that will improve contracting efficiency, close deals faster and control costs.

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Training

Personal Development – Financial Management

ARSA members strive every day to keep the world in flight and each should ensure that their hard work is working for them. The following lesson comes from CNN Money – the first of over 20 on the topic. Continue your education by clicking here.

Lesson 1: Goals for Setting Priorities

1. Narrow your objectives.

You probably won’t be able to achieve every financial goal you’ve ever dreamed of. So identify your goals clearly and why they matter to you, and decide which are most important. By concentrating your efforts, you have a better chance of achieving what matters most.

2. Focus first on the goals that matter.

To accomplish primary goals, you will often need to put desirable but less important ones on the back burner.

3. Be prepared for conflicts.

Even worthy goals often conflict with one another. When faced with such a conflict, you should ask yourself questions like: Will one of the conflicting goals benefit more people than the other? Which goal will cause the greater harm if it is deferred?

4. Put time on your side.

The most important ally you have in reaching your goals is time. Money stashed in interest-earning savings accounts or invested in stocks and bonds grows and compounds. The more time you have, the more chance you have of success. Your age is a big factor – younger people (who have more time to build their nest egg) can invest differently than older ones. Generally, younger people can take greater risks than older people, given their longer investment horizon.

5. Choose carefully.

In drawing up your list of goals, you should look for things that will help you feel financially secure, happy or fulfilled. Some of the items that wind up on such lists include building an emergency fund, getting out of debt and paying kids’ tuitions. Once you have your list together, you need to rank the items in order of importance (if you have trouble doing so, use the CNNMoney.com Prioritizer for help).

6. Include family members.

If you have a spouse or significant other, make sure that person is part of the goal-setting process. Children, too, should have some say in goals that affect them.

7. Start now.

The longer you wait to identify and begin working toward your goals, the more difficulty you’ll have reaching them. And the longer you wait, the longer you postpone the advantage of compounding your money.

8. Sweat the big stuff.

Once you have prioritized your list of goals, keep your spending on course. Whenever you make a large payment for anything, ask yourself: “Is this taking me nearer to my primary goals – or leading me further away from them?” If a big expense doesn’t get you closer to your goals, try to defer or reduce it. If taking a grand cruise steals money from your kids’ college fund, maybe you should settle for a weekend getaway.

9. Don’t sweat the small stuff.

Although this lesson encourages you to focus on big-ticket, long-range plans, most of life is lived in the here-and-now and most of what you spend will continue to be for daily expenses – including many that are simply for fun. That’s OK – so long as your long-range needs are taken into consideration.

10. Be prepared for change.

Your needs and desires will change as you age, so you should probably reexamine your priorities at least every five years.

“Teaching You How to Fish” – ICA Primer

By ARSA Communications Staff

Access to regulatory, business and legislative knowledge is one of the key benefits of ARSA membership. We are standing by for your calls, questions, or clarifications. The association will go a step further, though, and give you the tools to build your own knowledge before the problem even arrives.

Our recorded webinars and training sessions are one way ARSA will “teach you how to fish.” They’re all waiting for you; you can start a session right now.

Featured Session – ICA Primer 1
ARSA General Counsel Marshall Filler provides an overview of the regulatory basis for ICA, including what documents are considered ICA and the obligations of design approval holders to prepare and make them available under 14 CFR § 21.50(b). It also covers the regulations that apply to repair stations and other maintenance providers regarding the use of ICA and their availability. Take an hour and make sure you’re current on this long-standing issue: click here.

This is the first of two sessions covering ICA. To graduate to session two, click here.

Regulatory Compliance Training

Test your knowledge on § 145.161 ratings – Records of management, supervisory and inspection personnel.

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Q: This repair station spends a lot time of and money ensuring that it possesses the latest revisions of maintenance documents needed to support our capabilities. We do not however get support from certain manufacturers—usually those that are not directly controlled by 14 CFR part 21. These accessory manufacturers state they do not have to comply with the requirements in the FAA Memo AIR-100-11-100-002 against inappropriate restrictions on the use and availability of Instructions for Continued Airworthiness (ICA). Most of the problems come from the term design approval holder (DAH) since the original equipment manufacturers (OEMs) do not feel that this term includes them. Do any other members have this issue? Do you know if the stance taken by these OEM entities has been challenged before and is so do you know the outcome?

A: Yes, other members run across “OEMs” that don’t know they are the DAH/PAH responsible for ICA. Equally, members don’t understand the DAH/PAH versus OEM distinction.

The person that is responsible under the regulations for complying with 14 CFR part 21 is the DAH/PAH.

If the “accessory manufacturer” does not hold a design/production approval from the FAA, you need to approach the one that does hold the certificate or approval responsible for ICA (and then you have to figure out whether the document you are seeking is ICA). For example, if the type certificate (TC) holder’s aircraft maintenance manual calls out a component maintenance manual for the appropriate method of performing work—the TC holder (say, Boeing) is responsible for creating and making that ICA available. If the contract between the TC holder and the “OEM” failed to address this regulatory requirement, the TC holder must provide the information required by part 21.

The first question is always “who holds the design approval?” If the accessory manufacturer is selling replacement articles directly to a repair station or air carrier, it must hold a design and production approval or be working under another design or production approval holder’s authority. So, who or what is that “person?”

If it is a Technical Standard Order Authorization (TSOA) holder, it is directly responsible for ICA (as defined by the TSO). Unfortunately, Parts Manufacturer Approval (PMA) holders may not need to provide ICA; nonetheless, they are responsible for evaluating whether separate ICA need be developed and made available. Additionally, if the TC holder’s manual references the PMA holder’s manual, the policy does apply even if it would be enforced through the TC holder relationship.

If your head isn’t spinning enough, let me just conclude by reminding you that parts 43 and 145 refer to the manufacturer—that means the DAH/PAH responsible for providing the maintenance data—not the OEM, which has no meaning under the regulations.

For more information on ICA please visit: http://arsa.org/regulatory/faa/design/ica-efforts/.