HELEN MASSY-BERESFORD/LONDON & GRAHAM WARWICK/WASHINGTON DC
Boeing is moving to take a greater share of the aftermarket with the agreement last week to acquire Dallas, Texas-based independent parts distributor Aviall for $1.7 billion. In tandem, for its new 787, the manufacturer is developing an “expanded services programme that would take care of a lot of the aircraft”.
With a growing share of sales going to low-cost airlines that outsource support of their aircraft, Boeing’s move makes sense to many in the industry. But it was greeted warily by those suppliers that support their airline customers directly – and by those carriers that make money providing third-party support to other airlines.
There were similar reactions when Boeing acquired flight information services provider Jeppesen, and ventured into training services through its Alteon subsidiary. But acquiring Aviall is a logical – and large – step along a path on which Boeing is already embarked with its plan to provide most of the services needed to support its new 787.
“We would be interested in having Aviall join the Boeing family independently of the programme we’re developing on the 787,” says Boeing vice-president and general manager Commercial Aviation Services (CAS) Lou Mancini. But although it “is not the prime reason, [acquiring Aviall] will help” with the GoldCare support programme the manufacturer plans to launch in the coming months.
The programme is expected to see Boeing managing maintenance and parts supply for the aircraft, its systems and equipment, co-ordinating a global supply chain and maintenance network. Some areas, like engines, will be excluded from the service, Mancini says, as these are covered by their manufacturers with other “total care” packages. “We have no intention of moving into that space,” he says.
Boeing is in negotiations with six airlines on GoldCare, and aims to sign the first customer by year-end. It hopes to initiate a pilot project in February next year, and will roll the offering out across its current production types as well the 787.
Mancini says the primary reason for the Aviall acquisition is to augment Boeing’s integrated materials management (IMM) programme. Under this scheme, Boeing takes responsibility for managing the logistics of parts supply, forecasting customers’ needs and passing on cost and efficiency savings to them. The Aviall acquisition will allow Boeing to increase the range of parts included under IMM.
Eight airlines have signed up for IMM, and the move “accelerates our participation in this market”, says Boeing CAS sales and marketing vice-president Dan da Silva. “Airbus and Boeing had $50 billion in combined revenues last year, while in one year airlines spend $62 billion on operating their aircraft – 40% of which is spent just on maintaining their airframes. This is an attractive business.”
The manufacturer currently does little distribution of third-party parts, but this will change with its acquisition of Aviall, the largest distributor of aftermarket parts to the aerospace industry. The deal is expected to be completed by the third quarter.
“Boeing’s strategic logic is that customers are looking for more turnkey solutions in maintenance planning and logistics and in some cases maintenance itself,” says Kevin Michaels, principal and co-founder of consultancy AeroStrategy. The manufacturer’s goal of providing this kind of service for 787 customers faced “a major competency gap, namely logistics”, which the acquisition fills, he says, adding: “Aviall is the crown jewel of distributors.”
The acquisition also widens Boeing’s market reach into the business and general aviation and military aircraft sectors. “Aviall’s a well-positioned company and Boeing’s challenge will be to allow it to maintain its agility and entrepreneurship – the things that make it successful,” says Michaels.
“The aviation services market offers us tremendous opportunities to profitably grow our business, internally and externally, to better serve our commercial and military customers,” says Boeing chairman, president and chief executive James McNerney. Because he was formerly with General Electric, which has led the manufacturing industry’s move into the services business, few are surprised by the Boeing/Aviall tie-up. “This acquisition is uniquely powerful in that it leverages the strong and growing services units of both our commercial and military businesses,” he says.
Source: Flight International
