Boeing will unveil the headquarters of its new Global Services company in Dallas, Texas, this July, creating a third leg of its enterprise by combining its existing commercial and defence aviation service companies.
Boeing announced its new operating division in November and will serve both governments and commercial ventures. The venture also leverages Aviall, Jeppesen and Boeing’s pilot training business. Global services’ new corporate facility in Plano, Texas, will start out with less than 100 people, Stan Deal, chief executive officer of Boeing Global Services, told reporters in May.
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“Between the defence and commercial, we really had two capabilities that overlapped,” Deal says. “In both market segments, we have a unique set of supply chain capabilities. We’re able to distribute parts around the world or have per hour flight agreements, whether it’s in any of those market segments: commercial, governments or business and general aviation.”
In addition to distributing parts globally, Boeing executes engineering, maintenance and modification as part of its services portfolio, which can repurpose an existing military or commercial aircraft for the customer. The company also has training and professional services, as well as a digital and analytics portfolio, which has seen growing demand in both the government and commercial market. After purchasing Jeppesen in 2001, Boeing added analytics capability to the company over time. Jeppesen eventually transformed into a software company and the analytics portfolio now includes navigation products, aircraft health monitoring, crew scheduling and dispatching capability.
“There’s a robust market and candidly we’ve probably underserved that market in the past,” Deal says. “There’s about a $2.5 trillion market estimated for services around aviation over the next 10 years.”
Looking at the product value, about 30% of the product is captured in manufacturing while the remaining 70% is left for the services side, Deal says. Boeing is planning to grow its services sector by leveraging its past acquisitions but is also eyeing future acquisitions, he adds.
Chief executive Dennis Muilenburg has mentioned an aspiration goal of growing Global Services into a $50 billion business by 2027, approximately three times the company’s services business today. Much of that growth will come from the commercial aviation side, but Boeing is taking on an aggressive campaign to target the defence market. With Lockheed Martin reaping the immediate benefits of the domestic fighter business with F-35 sales, it’s prudent for Boeing to attack the after-market.
“It’s certainly an opportunity we look at but it’s not the sole reason,” Deal says of the F-35 business. “The sole reason really gets back to being able to expand across our platforms with more services and be able to do it across those four channels, both government as well as commercial, it’s really an opportunity to better serve customers and create growth for the company long term.”
But intellectual property issues could pose significant hurdles for Boeing’s defence ambitions. Lockheed Martin owns the Joint Strike Fighter’s technical data package and a good portion of the sustainment system running through the Lockheed-controlled Autonomic Logistics Information System (ALIS). Deal told reporters while IP can create barriers, he sees it as an expansion opportunity for Boeing.
“Occasionally IP can be a barrier but I don’t see it as an insurmountable barrier,” Deal says. “The intellectual capital that you create by becoming very good at modifying your own airplanes, we can demonstrate, it translates to other people’s airplanes. And if you look around the market today, there’s good evidence third parties are winning business on other OEM [original equipment manufacturer] airplanes.”
Boeing also sees growth on the commercial side that was traditionally reserved for military and government sustainment. The company sees more commercial airlines demanding performance-based logistics contracts, as the military does, though Deal does not see that trend becoming ubiquitous in the commercial sector.
“As we’re organising, we’re putting all that performance-based logistics capability under a single operating infrastructure, so that we don’t duplicate efforts and so we harvest learning out of one market into the other,” he says.