Airbus aircraft operators will soon have another company bidding to offer them maintenance, repair and overhaul services — and the aspiring new MRO vendor’s name is Boeing.
Last November, Boeing laid out an “aspirational” goal to conquer the aviation aftermarket business by grabbing a 20% market share by 2027 worth $50 billion annually, but provided few details of the new business plan.
Six months later, a central element of the plan is now clear. The mission for Boeing Global Services — the new, Plano, Texas-based business unit that launches in the third quarter — is to expand the company’s portfolio of aftermarket services beyond its own aircraft. BGS will seek to meet its ambitious revenue growth targets by offering aftermarket services for other aircraft manufacturers, including Airbus.
“We are determined to sell services across all airplanes, not just Boeing airplanes. Because if you look at the world’s airlines, very few people fly just one kind of aircraft. So we have to do that,” says David Longridge, Boeing vice-president of sales for Commercial Aviation Services.
That strategy positions Boeing with annual revenues approaching $100 billion in competition with full service, independent MRO companies, which often double as subsidiaries of customers for Boeing commercial aircraft, such as Lufthansa Technik and Delta TechOps. It also opens a new competitive front with the commercial aircraft manufacturers, including Airbus, Bombardier and Embraer, which are themselves seeking to increase aftermarket revenues from their own fleets.
For Boeing, the full-service approach to the aftermarket is an obvious step to take as the company seeks to overtake GE Aviation’s 10% share of the aircraft services market, which is built largely on servicing engines made by GE and joint venture partner CFM International. By targeting a 20% share of the aftermarket, Boeing must adopt the approach taken by independent MRO service providers.
“Airlines don’t want an Airbus solution, an Embraer solution and a Boeing solution. They want a service solution,” Longridge says, addressing a panel at MRO Americas on 27 April. “The rise of independent of MROs is proof of that.”
Boeing has already been working to consolidate control over aftermarket services on its own aircraft. For example, Boeing decided not to renew a license agreement that expired last year with Spirit AeroSystems for making spare parts, allowing the manufacturer to supply those parts directly to customers.
Other suppliers, such as Triumph Aerostructures, has taken the hint and developed a strategy to avoid direct confrontation with Boeing’s new assault on the aftermarket.
“There's a reason why Boeing has stood up a third product line for global support. With all of these aircraft going into service, they've got to be supported,” Triumph Group chief executive Dan Crowley said on an quarterly earnings call with analysts in February.
“It's my view that you either get in line and work with them, and become a service provider within the OEM's overall sustainment model, or you're on the sidelines,” he says.
Indeed, Boeing expects to deliver many new aircraft off its own assembly lines in the Seattle area and South Carolina. Orders in firm backlog today include about 670 787s and 3,703 737 Max aircraft, Longridge says. Boeing also has 340 orders and commitments for the 777X, which are scheduled to begin deliveries in 2020.
In many ways, the 777X design embodies Boeing’s new focus on the aftermarket. One of the lessons Boeing took to heart from the disappointments of the 787 outsourcing strategy was the loss of access to so much of the lifecycle value. With design authority for the wings and fuselage sections distributed across the supply chain, Boeing’s aftermarket stake in that programme is diminished. Boeing reversed several such decisions on the 777X, aiming to increase the product’s revenue potential after the delivery milestone.
“We've selectively brought in some capability, things like building the all-composite wing for the 777X, the propulsion center that we stood up in Charleston where we're building new cells, the actuation capability that we have in both Portland and with the new stand-up in Sheffield, as examples of building targeted verticals that will further enhance our parts lifecycle business,” says Boeing chairman, president and chief executive Dennis Muilenburg, addressing analysts on a first quarter earnings call on 26 April.
Boeing also is embedding systems in new commercial aircraft that directly contribute to the aftermarket strategy. In the earnings call, Muilenburg pointed to Advanced Health Management Systems (AHMS), which are now installed in more than 2,200 aircraft operated by about 90 customers.
The AHMS is the result of a decades-long evolution of product support within Boeing. Until the arrival of the 757 in the early 1980s, system faults were discovered and diagnosed only after an aircraft had landed. The arrival of the 757 and 767 ushered in the Engine Indicating and Crew Alert System (EICAS), which informed the pilots in-flight about non-safety-critical system faults based on about 3,000 parameters but was unable automatically to inform maintenance staff on the ground, Longridge says. The installation of the central maintenance computer on the 747-400 finally connected the aircraft in-flight to maintenance and engineering staffs on the ground, who could troubleshoot the problem and prepare to fix it as soon as the aircraft landed.
By 2004, Boeing was ready to take the next step by introducing AHMS on the 777-300ER with the processing capability to monitor more than 100,000 performance parameters onboard the aircraft during each flight, says Longridge. The arrival of the 787 in-service in 2011 increased that metric by about 50%.
“One of the things that grew with this was the amount of data coming off the airplane,” he says. “Data is all very well. But what airlines needed is the ability to turn that data into actionable knowledge.”
The AHMS was fielded with an online portal that tracked system faults on each aircraft, diagnosed the problem and recommended a likely fix. It represented a leap in diagnostic capability, but is limited to fixing systems after they’ve already broken. Boeing’s new goal is to enable the aircraft’s maintenance computer to predict when systems are going to fail, order replacement parts and schedule the installation, Longridge says.
“Our goal and our dream,” he says, “is an airplane that doesn’t maintain itself, per se, but schedules its own maintenance, orders its own parts and arranges its own procedures.”
Source: Cirium Dashboard