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Speaker 1: Final approach to the holiday, with thousands of flyers spending

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Speaker 1: another day stock stranded and frustrated. United Airlines pilots taking

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Speaker 1: steps to avoid to strike today, and Southwest pilots announcing

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Speaker 1: the potential of one this summer. Frontier Airlines and a

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Speaker 1: statement saying a customer had been asked to deplane after

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Speaker 1: quote two customers got into a verbal altercation.

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Speaker 2: In a letter to airlines, the Federal Aviation Administration citing

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Speaker 2: a severe lack of air traffic controllers could cause serious

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Speaker 2: delays and cancelations.

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Speaker 1: Ah the joys of flying despite the hassles, though commercial

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Speaker 1: air travel does have one big thing going for it.

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Speaker 1: It is the safest form of transportation, safer than taking

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Speaker 1: a train and much safer than going by car, which

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Speaker 1: is why today's story has raised alarms across the industry.

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Speaker 1: Bloomberg Sideth Philip and Julie Johnson report that thousands of

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Speaker 1: jet engine parts with falsified documentation have been sold to

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Speaker 1: some of the world's biggest airlines.

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Speaker 3: It's a whole host of bots, and they were safety

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Speaker 3: critical bots. All sorts of components really that are critical

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Speaker 3: to the functioning of the engine.

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Speaker 1: And some of these components were installed in the most

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Speaker 1: popular jet engine in use today.

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Speaker 2: It's the most widely used engine ever in the history

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Speaker 2: of aviation, and it's in most older Boeing seven thirty

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Speaker 2: sevens and Airbus A three twenties. These are the workhorse

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Speaker 2: planes that you step on to if you're flying.

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Speaker 1: I'm West Casova today on the big take airlines race

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Speaker 1: to replace bogus plane parts. Julie. Reading the story that

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Speaker 1: you and Sid reported with our colleagues Ryan Bean and

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Speaker 1: Sabah Mettings really made me think quite a bit about flying.

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Speaker 1: How widespread is this problem of falsified plane parts.

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Speaker 2: Nobody quite knows right now. And one of the fascinating

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Speaker 2: things in reporting this story is that I think we

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Speaker 2: kind of stumbled across an untidy corner of a highly highly,

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Speaker 2: highly regulated industry with an amazing safety track record. And

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Speaker 2: the parts distributors, the network of companies that move parts

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Speaker 2: into maintenance shops, into airlines, back and forth. It's this

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Speaker 2: back corner of the business that you don't hear that

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Speaker 2: much about. It's totally unregulated. It's self regulated to the

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Speaker 2: extent that companies can go out and get certified that

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Speaker 2: they meet FAA standards, but nobody quite knows how frequently

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Speaker 2: this happens. We stumbled across one obscure company that has

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Speaker 2: managed to spread thousands of engine parts throughout the world. China, Australia,

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Speaker 2: the big three US carriers have all found its parts

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Speaker 2: in their engines, and even the company that makes the engines,

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Speaker 2: which is a GE Saffron venture, has found these parts

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Speaker 2: in their own shops. And the affected engines are the

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Speaker 2: most widely flown on Earth. So at the scale of this,

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Speaker 2: really it's a bit of a mystery, but it is

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Speaker 2: quite stunning.

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Speaker 1: And Julie, how did you first discover that there were

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Speaker 1: these airplane parts working their way into some of the

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Speaker 1: most popular engines and airlines all over the world.

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Speaker 2: This literally fell into my lap. Somebody sent me a

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Speaker 2: letter that GE had just sent to its customers warning

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Speaker 2: them about suspect parts from this outfit that we'd never

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Speaker 2: heard of, and I passed on the news to sit

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Speaker 2: in some other colleagues, and they very quickly discovered that

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Speaker 2: regulators in Europe and the UK were looking into this,

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Speaker 2: and we were sort of off to the races from there.

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Speaker 1: And said, your story starts with some airplane mechanics opening

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Speaker 1: up an engine and seeing something that didn't look quite right.

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Speaker 3: This spring engineers at top which is Portugal State around airline,

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Speaker 3: they huddled around the CFM fifty six engine, which is

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Speaker 3: the engine at the heart of this scandal. They handle

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Speaker 3: hundreds of engines every year, and this engine that was

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Speaker 3: out the paths that they were meant to replace. The

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Speaker 3: documentation for the part said it was brand new and

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Speaker 3: fresh on the factory, whereas the part in the hand

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Speaker 3: looked worn and didn't look brand new. And the engineer

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Speaker 3: sort of stopped and said, hey, the documentation doesn't quite

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Speaker 3: match up with the condition of the part. And that's

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Speaker 3: really what sort of triggered this worldwide probe, which is

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Speaker 3: the fascinating story that we've been following since early August.

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Speaker 1: Exactly what kind of parts in these engines were found

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Speaker 1: to be misrepresented.

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Speaker 3: So it's a whole host of parts, and they were

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Speaker 3: safety critical parts, and so they are exposed to extreme temperatures.

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Speaker 3: The parts are spinning at more than ten thousand rpm,

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Speaker 3: and they range from low pressure turbine blades, seals, nuts

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Speaker 3: for the ROTA assembly, bushings and all sorts of components

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Speaker 3: really that are critical to the functioning of the engine.

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Speaker 1: And is there any evidence that any of these engines

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Speaker 1: failed or had any kind of problem as a result

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Speaker 1: of having these faulty parts.

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Speaker 3: We haven't seen any evidence of any flight emergencies being

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Speaker 3: called due to engine malfunctions, but it does highlight a

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Speaker 3: risky gap in the system, especially one that's basically very

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Speaker 3: safety critical industry.

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Speaker 1: And was it only engine parts or have they found

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Speaker 1: these parts in other places on the planes?

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Speaker 3: So far, they've only found them on the engines, and

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Speaker 3: that's because we've seen records from CFM and Saffron and GE,

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Speaker 3: but we haven't really seen other components being supplied. But

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Speaker 3: I mean, it's anyone's guess at the moment, and we

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Speaker 3: already have to look into it and see what other

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Speaker 3: parts come out from it.

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Speaker 1: Tell us about the company that makes this engine.

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Speaker 3: The company that makes the engine is a joint venture

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Speaker 3: called CFM that's owned by General Electric and Saffron, which

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Speaker 3: is a French company, and they've been working on CFM

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Speaker 3: engines for decades. And since it's such a widely used engine,

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Speaker 3: there's thousands of suppliers making parts, supplying parts, and essentially

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Speaker 3: the whole aviation industry revolves around this and so there's

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Speaker 3: workshops repairing the engine, there's brokers selling parts for the engine.

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Speaker 3: There's also a sort of separate issue of manufacturers actually

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Speaker 3: making those parts for the engine, separate from CFM and

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Speaker 3: Saffron and Julie.

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Speaker 1: Once these mechanics that TAP discovered a problem with this

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Speaker 1: engine part, what happened from there?

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Speaker 2: So THP alerted Safra, which is one of the two

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Speaker 2: partners in this engine venture, and they had it back

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Speaker 2: and forth. Saffran verified, yes, this is forge, and urge

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Speaker 2: TAP to go through its records and start to dig

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Speaker 2: up every part that they had along with a certification

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Speaker 2: from this little company. So sure enough, more suspect documents

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Speaker 2: popped up, and that's when Saffran turned to CFM. The

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Speaker 2: engine maker put out a letter and alerted all its customers, like, hey,

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Speaker 2: take a look at any parts that you have, go

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Speaker 2: through your records. And something that's really important to point

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Speaker 2: out is that we're talking actual paper records for documentation

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Speaker 2: for these engine parts. Every part has a story that

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Speaker 2: is carefully documented that goes onto an aircraft, and it's

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Speaker 2: the repair history, whether it's airworthy, how long it can

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Speaker 2: remain in use, depending on the type of this is

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Speaker 2: all documented.

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Speaker 3: So documentation is at the heart of aviation safety, and

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Speaker 3: unlike other industries, paper documents in the aviation industry are

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Speaker 3: sort of what rule the roost, and so documentation that

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Speaker 3: accompanies aircraft parts are typically paper records, so they're actually

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Speaker 3: typewritten with a typewriter or handwritten by pen and essentially

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Speaker 3: they're meant to signify that documentation is intact, the part

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Speaker 3: is what it says it is, because a lot of

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Speaker 3: the record keeping is basically down to just those papers,

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Speaker 3: and so when you buy an aircraft part, you also

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Speaker 3: inherit a sheaf of papers that adds to the value.

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Speaker 3: And without those papers, the part is worthless because you

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Speaker 3: can't really identify the part. You don't know how many

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Speaker 3: hours it's done, you don't know where it's been, what

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Speaker 3: the origin is, and so it's just treated as bogus.

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Speaker 3: So unless you have the right documentation, the part is

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Speaker 3: absolutely useless. For the aviation industry.

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Speaker 2: There's a safety aspect to this because without the records,

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Speaker 2: you don't know if the part was scrapped at one

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Speaker 2: point were determined that it was not safe to fly.

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Speaker 2: So that's a really important part of the safety net.

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Speaker 1: And yet as you say, the documentation that this entire

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Speaker 1: industry relies on turns out to be pretty easy to fake.

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Speaker 3: It's a really surprisingly simple scam. I mean, you can

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Speaker 3: literally tick an existing certificate and just slap on new

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Speaker 3: details onto it, and unless someone actually goes back and

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Speaker 3: checks with those people who had the original certificate or

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Speaker 3: the manufacturers, essentially it's as good as saying that the

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Speaker 3: spot is good to go.

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Speaker 1: And really, were the parts that they found that weren't

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Speaker 1: right in these engines? Were they just use parts marked

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Speaker 1: as new? Were they fake parts marked as genuine? What

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Speaker 1: were they.

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Speaker 2: That's something we'd love to know as well. We know

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Speaker 2: for sure that there were parts pawned off as new

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Speaker 2: that we're used with forged documents, but there's a lot

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Speaker 2: we still don't know, including where these parts came from,

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Speaker 2: what their history.

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Speaker 1: Was said has really said? These letters went out to

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Speaker 1: airlines warning them that this was a problem that they

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Speaker 1: had found. Do we know how many planes around the

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Speaker 1: world have been found to have these parts in their engines?

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Speaker 3: Saffran has said that bogus spots have been found on

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Speaker 3: about one hundred and twenty six engines. Most CFM fifty

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Speaker 3: six equipped planes have two engines on them, so we

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Speaker 3: don't really know how many aircraft are affected with because

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Speaker 3: some may have won on both engines affected. But it

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Speaker 3: is one hundred and twenty six engines so far and

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Speaker 3: they're still looking into it, so we could see more

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Speaker 3: come to light as this sort of drags.

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Speaker 2: On, and from industry insiders, it's certainly the largest investigation

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Speaker 2: to come along in many years, dating back to the

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Speaker 2: nineteen ninety.

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Speaker 1: After the break the company behind these falsified parts, Julie

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Speaker 1: As Airlines and Mechanics, began looking at their engines to

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Speaker 1: spot fake parts. You write that what they found is

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Speaker 1: all of them seemed to originate from a single company.

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Speaker 1: What is that company?

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Speaker 2: Well, the company at the center of this investigation is

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Speaker 2: a little known London based parts distributor called AOG Technics

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Speaker 2: Limited and founded in twenty fifteen. AOG is aviation shorthand

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Speaker 2: for aircraft on the ground. And there's some irony because

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Speaker 2: this company unintentionally has caused some grounded aircraft as engines

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Speaker 2: have been replaced to weed out parts that came from AOG.

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Speaker 3: So AOG Techniques is a little known company that nobody

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Speaker 3: already knew about until we wrote about it and we

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Speaker 3: set up about eight years ago by a entrepreneur part

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Speaker 3: time DJ from Venezuela called Jose Alejandro Zamora Iala. So,

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Speaker 3: before Zamora got into the industry, he dabbled in professions

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Speaker 3: from music to real estate and he spun tunes under

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Speaker 3: the stage name Santa Militia in Venezuela, Italy and Spain.

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Speaker 3: Zamora said that techno is his passion on his SoundCloud account.

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Speaker 3: And what we do know is that he had previously

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Speaker 3: worked in the aviation industry. Zamora began his career around

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Speaker 3: twenty ten as an account manager at AJW known as Walters,

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Speaker 3: which is one of the biggest maintenance players in the

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Speaker 3: aviation industry. Thereafter he worked for a company called Getalysis,

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Speaker 3: which is again one of the biggest maintenance shops in

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Speaker 3: the world. And soon after Gatalysis, he went and set

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Speaker 3: up AOG Techniques on his own and it sort of

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Speaker 3: had this viny respectability. It had a very professional and

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Speaker 3: slick looking website which is now deleted, which sort of

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Speaker 3: boasted an office in London near Buckingham Palace. It boasted

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Speaker 3: of warehouses in Miami and Frankfort and London and Singapore,

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Speaker 3: and at the sort of heart of it all is

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Speaker 3: really a tiny company with a single entrepreneur who claimed

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Speaker 3: to have multiple employees, who had these offices everywhere, but

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Speaker 3: actually just the guy sitting at his laptop working on

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Speaker 3: a website called ils, which is where the aviation industry

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Speaker 3: buys and sells aviation parts.

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Speaker 1: Julie, how was this one person able to get all

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Speaker 1: these parts to sell to major airlines around the world.

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Speaker 2: Yeah, we don't know. That's a really good question. And

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Speaker 2: for the first three or four years of its existence,

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Speaker 2: AOG was just a bit player. Were just you know,

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Speaker 2: a few thousand pounds up to about twenty thousand pounds

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Speaker 2: at the start of twenty nineteen, and then over the

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Speaker 2: next year the sales just exploded into the millions of pounds.

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Speaker 2: So that's one of the questions is where did the

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Speaker 2: parts come from? You need funding to buy use parts,

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Speaker 2: where did that come from?

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Speaker 3: When we started looking into the company, we sort of

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Speaker 3: looked for the people playing on who worked at the company,

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Speaker 3: and we sort of throw LinkedIn and we found a

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Speaker 3: number of employees who claimed to be working there, and

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Speaker 3: just on a hunch, we did a reverse image search

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Speaker 3: on one of the people, a guy called Michael Smith,

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Speaker 3: and he's now deleted his LinkedIn profile, but at the

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Speaker 3: time he said he was a quality assurance manager at

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Speaker 3: AOG And we did a reverse image search on his

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Speaker 3: profile picture on LinkedIn and we found that it was

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Speaker 3: on a stock image site where they described him as

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Speaker 3: a confidence senior and a white T shirt. And for

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Speaker 3: some reason, that same force potograph is also really popular

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Speaker 3: among medical professionals. It also features on the websites of

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Speaker 3: a Wisconsin cardiologist, an Oregon dentist, and a Barcelona ecal surgeon.

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Speaker 3: So we don't really know if Michael Smith exists or not,

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Speaker 3: but definitely his profile picture isn't who he claims to be.

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Speaker 3: And he's one of the signatories listed on some of

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Speaker 3: the fake documents, and we don't really know who he is.

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Speaker 3: And there was another couple of documents that were signed

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Speaker 3: by someone called Jeffrey Shardak, who shares a last name

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Speaker 3: with the French president, and we don't really know who

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Speaker 3: he is, or we haven't been able to identify him.

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Speaker 1: Julie. At the height of this company's business, how many

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Speaker 1: airlines was he supply.

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Speaker 2: We don't know. That's one of the items that ge

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Speaker 2: and CFM have been trying to get from AOG in

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Speaker 2: the lawsuit that they filed in late August, right as

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Speaker 2: we were working on our first story, and so they've

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Speaker 2: requested and they've foreseend sales records from this company and

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Speaker 2: so hopefully should help track down the parts that have

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Speaker 2: spread around the world. What we do know just from

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Speaker 2: calling airlines is that United, Delta, Southwest American, the biggest

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Speaker 2: US airlines, have uncovered these parts. AOG certainly looked the part.

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Speaker 2: They were certified by one of the parts industry accreditation

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Speaker 2: agencies as following the FAA's guidelines around quality, and this

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Speaker 2: might have helped them infiltrate an industry where people tend

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Speaker 2: to do business with people that they know, so I

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Speaker 2: think that's an important thing to mention. The other is

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Speaker 2: that post COVID, the engine world has just been in

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Speaker 2: an extreme crunch for maintenance for spare parts, and I

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Speaker 2: think that might have caused people to lean more heavily

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Speaker 2: on online tools like clearing houses to find companies, even

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Speaker 2: obscure companies in London that provide the spare parts that

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Speaker 2: they need to do these engine repairs.

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Speaker 1: Sid Once these airlines and the engine maker discovered that

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Speaker 1: there were these parts being sold by AOG. What did

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Speaker 1: they do?

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Speaker 3: So they went to CFM and they told him about

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Speaker 3: these parts, and CFM then wrote to AOG technique saying

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Speaker 3: that hey, we've got these documents that aren't quite real.

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Speaker 3: Can you please get in touch with us and tell

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Speaker 3: us how they came about. And according to the legal documents,

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Speaker 3: Zamora told Doug Hensley, who's the regulatory counselor GE Aerospace,

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Speaker 3: on August second that he was out of the country

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Speaker 3: on vacation. However, he would stop selling the parts as

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Speaker 3: a courtesy, and that triggered this whole back and forth

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Speaker 3: where Saffraan and GE went to a London court and

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Speaker 3: asked for documents basically giving them every single sale that

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Speaker 3: they've made. And they've actually got them on the fourth

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Speaker 3: of October, and that might actually give us more insight

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Speaker 3: into what AOG did where they got the parts, from

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Speaker 3: what they did to sort of sell them on. But really,

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Speaker 3: I mean the heart of it is that the fact

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Speaker 3: that these documents they have to be manually checked and

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Speaker 3: looked at, and it's going to be a time consuming process.

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Speaker 2: And in this lawsuit by the engine makers, one of

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Speaker 2: their attorneys described this deception as being on quote an

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Speaker 2: industrial scale with thousands of suspect parts.

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Speaker 1: And what does Zamora, what does AOG Techniques have to

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Speaker 1: say about this?

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Speaker 3: So we briefly reached Zamora on the phone. We've been

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Speaker 3: trying to contact him over multiple days and multiple attempts

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Speaker 3: in all sorts of ways, and we briefly reached him

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Speaker 3: on the phone, but then as soon as I said

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Speaker 3: I was a journalist with Bloomberg, he hung up on me.

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Speaker 3: And we also reached out to Zamora's wife, who said

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Speaker 3: that Bloomberg had been trying to paint him to be

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Speaker 3: a bad person or something and he didn't want to

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Speaker 3: speak to anyone because the information was fabricated.

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Speaker 1: And you also reached his lawyer. Is that right?

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Speaker 3: Yeah, we reached out to his lawyers, but they haven't

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Speaker 3: really responded to attempts to seek a comment from them

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Speaker 3: about what this sold's all about.

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Speaker 1: And said, what I have Saffron and ge said about this.

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Speaker 3: So the Saffron CEO said that it's a bit strange

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Speaker 3: that a phantom company could be allowed to supply spare

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Speaker 3: parts with false documents, and they said that they don't

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Speaker 3: know who they sold the paths to, and whether all

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Speaker 3: the airlines have done their checks. They have no responsibility

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Speaker 3: and no rail connection to AOG techniques, but they are

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Speaker 3: trying to find out information about him.

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Speaker 1: And Julie. You said earlier that one of the problems

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Speaker 1: here is that this distribution side of the business isn't

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Speaker 1: as highly regulated as much of the rest of the industry.

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Speaker 1: What do the regulators have to say about this.

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Speaker 2: Well, you know, the regulators has been quick to point

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Speaker 2: out that this part of the industry is not regulated

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Speaker 2: to the extent that there is any oversight. It's with

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Speaker 2: companies choosing to get accredited by you know, agency that

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Speaker 2: follows guidelines set by the FAA, the US aviation regulator.

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Speaker 2: But in reaching out to folks in Europe, US and

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Speaker 2: the UK, it's not clear who is taking the lead

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Speaker 2: and tracking this down. I mean, they've all issued warnings

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Speaker 2: to operators, but it's a little bit of a quagmire.

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Speaker 1: When we come back. What can be done to stop

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Speaker 1: this from happening again. Surely you write in the story

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Speaker 1: that this sort of thing has happened before.

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Speaker 2: Yes, it has. And Mary Chiavo, who are colleague ran

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Speaker 2: Bean interviewed for the story was an inspector general with

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Speaker 2: the Transportation Department in the nineteen nineties and really went

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Speaker 2: after these fogus parts that had infiltrated the supply chain

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Speaker 2: and I think put more than one hundred people into

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Speaker 2: jail through her investigations. Her actions spurred hearings by Congress

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Speaker 2: and caused the FAA to really zero in on these cases.

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Speaker 2: So the sad news is that it's a little bit

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Speaker 2: of deja vous all over again for some of the

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Speaker 2: people who've been around and ga Tellusus also said that

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Speaker 2: the spotlight from this will probably spur more hearings and

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Speaker 2: maybe this time regulators will take another look at what

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Speaker 2: they can do to shore up the safety net.

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Speaker 1: Since this has happened in the past, why is it

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Speaker 1: that regulators didn't become aware that this was a problem

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Speaker 1: and do something to prevent it from happening again.

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Speaker 3: Had a voluntary program back in nineteen ninety six for

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Speaker 3: part sellers to agree to audits and checks, and the

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Speaker 3: idea was that it would address the lack of documentation

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Speaker 3: and traceability without the FAA having to actually deploy its

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Speaker 3: own resources into it. But as we found in the

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Speaker 3: story that despite AOG being certified by a company called

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Speaker 3: Transtonic Aviation Consultants, which is one of the handful of

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Speaker 3: organizations that FA has allowed to confer this certification. It

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Speaker 3: was still able to get away with the action that

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Speaker 3: it did.

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Speaker 1: And what did Transonic say about this?

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Speaker 3: Transonic said that they had hired a subcontractor to audit

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Speaker 3: aog's operation, and the subcontractor said that everything was in order.

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Speaker 3: And Transtonic stripped AOG of its accreditation in early September

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Speaker 3: after it said it learnt about the alleged forgeries, and

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Speaker 3: they said that they were already bamboozled by the allegations

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Speaker 3: against Zamora, and they said, there's no type of inspection

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Speaker 3: to find out if people are bad.

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Speaker 1: So now all these airlines have discovered these parts in

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Speaker 1: their engines, what's going to take to fix all of them?

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Speaker 2: Well, if they have to take the engine off the

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Speaker 2: wing and start to pull out parts, at a minimum,

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Speaker 2: that's three hundred thousand dollars. So the repairs will be

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Speaker 2: interesting to watch. We don't know if it's just going

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Speaker 2: to be you know, one hundred plus engines that are

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Speaker 2: involved or substantially more. So that's definitely part of the fallout.

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Speaker 3: You also have the airlines that are stuck with their

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Speaker 3: planes on the ground, unable to tap the demand. Aircraft

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Speaker 3: manufacturers are struggling to produce new airplanes. That means there's

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Speaker 3: a huge surge of demand for older aircraft with sort

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Speaker 3: of chick circles. Back to this thing where older aircraft

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Speaker 3: are kept in the air with bots which they buy

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Speaker 3: from a variety of sellers, and AOGU is one of them.

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Speaker 1: How do these airlines know that the new parts they're

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Speaker 1: buying are themselves legitimate? Since this documentation can be.

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Speaker 2: Forged, we might see a return to more focus on

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Speaker 2: visual inspections of parts as they come in and less

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Speaker 2: faith than just the paperwork that accompanies them.

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Speaker 3: Yeah, we may also see regulators sort of cracking down

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Speaker 3: on it and demanding better certification and auditing.

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Speaker 1: And is there any concern that aog is just the

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Speaker 1: company that you happen to find out about that there

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Speaker 1: could be others also doing the same thing.

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Speaker 2: Oh? Absolutely, And as one of the people we interviewed

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Speaker 2: in the story points out, right now, there's huge money

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Speaker 2: in engine repairs and engine parts, and where there's money,

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Speaker 2: there's fraud.

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Speaker 1: Sid Julie, thanks so much. For sharing your reporting.

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Speaker 3: Thank you, Thanks so much for having us on.

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Speaker 1: Thanks for listening to us here at The Big Take.

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Speaker 1: It's a daily podcast from Bloomberg and iHeartRadio. For more

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Speaker 1: Email us questions or comments to Big Take at Bloomberg

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Speaker 1: dot net. The supervising producer of The Big Take is

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Speaker 1: Vicky Bergolina. Our senior producer is Catherine Fink. This episode

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00:25:15,760 --> 00:25:19,640
Speaker 1: was produced by Sam Gobauer and Christine Driscoll. Kilde Garcia

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Speaker 1: is our engineer. Our original music was composed by Leo Sidrin.

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Speaker 1: I'm west Kasova. We'll be back tomorrow with another Big Take.