*

Report by IATA and Oliver Wyman counts cost of supply

disruption

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IATA head calls for more competition in the aftermarket

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Says there is a case for looking at new competition

challenge

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Says Airbus and Boeing ( BA ) have improved transparency on

delays

By Tim Hepher and Joanna Plucinska

PARIS/LONDON, Oct 13 (Reuters) - Global airlines face

more than $11 billion in extra costs from supply chain

disruption this year, a leading industry group said on Monday,

in a report likely to rekindle debate over competition in the

$250-billion aerospace industry.

The study by the International Air Transport Association,

produced with consultants Oliver Wyman, marks the first attempt

to quantify the impact of a five-year supply chain crisis that

has driven up fares and led to flight cancellations.

IATA Director General Willie Walsh said he was surprised by

the extent of the findings and told Reuters there may be grounds

to revisit whether airlines are being subjected to

anti-competitive practices by suppliers, after dropping a

previous complaint in 2018.

"Even if you halve the number, it's still a massive drag on

the industry," Walsh said in an interview.

REPORT DETAILS COST OF BOTTLENECKS

Researchers found the largest impact stems from $4.2 billion

in extra fuel as airlines keep older planes in service.

Additional maintenance is expected to cost $3.1 billion,

while leasing engines to replace those stuck in queues for

maintenance adds another $2.6 billion.

Holding more spare parts to cushion delays is projected to

cost airlines $1.4 billion.

Planemakers and their suppliers have waded through a mire of

setbacks, from shortages of labour, materials and parts to

mounting delays at repair shops, particularly for engines.

There is also a growing tug of war with the defence industry

for capacity as governments increase military spending.

"There's now going to be continuing competition for the

limited supply that is there," Walsh said, adding that supply

chains would be an issue for the rest of the decade.

He questioned the influence suppliers exert over parts

pricing and called for "additional competition in the

aftermarket, which clearly has seen significant consolidation."

PROFIT GAP

IATA has previously called for greater competition in

maintenance, including improved access to independent parts

known as PMA.

In 2016, it filed a complaint with the European Union

against CFM International but withdrew it two

years later after the engine maker agreed to maintain an open

and competitive market.

A similar agreement was reached with Rolls-Royce in

2021.

Walsh said there were no plans to launch any new challenge,

but did not rule it out.

"We have been evaluating it, but we'd have to do a lot more

work," he said, noting that airlines have confidential

agreements, so digging deeper involves teams of lawyers.

"It's a complex piece of work, but I think there could be

merit in us looking at that again."

He pointed to the gap between airline operating margins,

forecast at 6.7% this year, and margins of some engine makers

and suppliers in the mid-20s as a source of concern.

"How is it that they can make such massive margins from an

industry that makes margins that are wafer-thin? It just doesn't

add up," Walsh said.

Engine makers argue they are entitled to adequate returns

given the risks involved in developing new technologies and

offering insurance-style contracts to cover repair costs.

Airlines are expected to spend $120 billion on repair and

maintenance this year, rising to $150 billion by 2030, IATA

said.

Walsh softened his tone towards Airbus and Boeing ( BA )

, saying they were becoming more transparent about jet

delays. In June, he accused planemakers of "failing badly".