With an installed fleet of 32,000 aircraft globally, there is a lucrative aftermarket business for Hawker Beechcraft products worth almost $2 billion a year. Unfortunately for Hawker Beechcraft itself, it is failing to see much of that.
Last year, of the total Hawker Beechcraft after-market maintenance (engine and airframe inspections) spend of $1.8 billion, the company that makes the aircraft only won market share of 15%, or $264 million. The largest chunk, more than $1 billion, went to third-party aftermarket providers such as StandardAero and Blackhawk Modifications.
That is a problem Hawker Beechcraft chief executive Bill Boisture and his senior management team are out to change.
Under a campaign to take back market share, launched in May 2010, Hawker is attempting to increase maintenance, modification and other work to $760 million by 2015, up from $508 million in 2010 - an average growth rate of 8% a year. That is a three-point increase from the 5% average revenue growth rate the company experienced between 2004 and 2010.
The aftermarket strategy will mimic what is happening with aircraft sales, namely a larger focus on international markets. Hawker used to split the world into two segments - the Americas and everywhere else - a strategy that fitted a sales split of 70% domestic and 30% international, which held true as recently as 2010. Parts distribution and sales representatives heavily favoured North America. The company's Dallas depot held $190 million in parts, while a European hub in Liege held only $8 million - a split of about 96%-4%.
Sales in 2011, however, have flip-flopped, with the most recent figures showing 60% international and 40% domestic. The company has now split the world into three areas - the Americas, Europe, Middle East and Africa, and Asia-Pacific. It is also pushing to separate the Hawker and Beechcraft brands in terms of product support.
To support the international push, Hawker is growing its 25-employee international field service representative (FSR) team by double-digit percentages yearly, while upping domestic FSR numbers, currently 39 people, by 2%. Round-the-clock call centres are being set up in each of the three regions - there is currently only one, in Wichita.
International parts inventory is up 193% this year from last, with locations in London, Dubai, Beijing, Singapore and Johannesburg, where local representation has cut the time it takes to get parts through customs from three weeks to only three days. The Liege facility has been closed. Next year, Hawker will have inventory in Moscow, São Paulo and Mumbai as well.
"This will build our reputation and give people confidence to buy and recommend an aircraft to others," says Hawker Beechcraft executive vice-president Shawn Vick. "We've invested heavily in that part of our enterprise, recruiting seasoned sales leaders who also are working to build awareness of the products and building market share."
Aftermarket attention is only one part of a much broader company retooling that Boisture has set into play since joining in 2009. In addition to cutting hundreds of millions of dollars in operating costs and reducing the manufacturing footprint, the company is refocusing its engineering resources and boosting product quality, while drastically reducing the time it takes to build an aircraft.
"Our commitment to ourselves and to the business is to move from being Wichita-centric to being a company that has strong centralised standards and strong decentralised execution in order to be present in the markets [we serve]," says Boisture.
"That means a stronger sales presence, stronger field service, stronger dealer and agent relationships and it means having a very good company-owned or authorised service network in emerging markets."
Boisture shrugs off the recent slight downgrade in the company's debt rating by agency Moody's.
"No matter what game you're playing there's always a scorekeeper," he says. "In this difficult time, good companies are going to have, from time to time, conditions in their financial life that are going to result in ratings going down or up, or stock going up or down."
He says the main impact of the rating change is to assure suppliers and potential customers that its two owners, Onex and Goldman Sachs, are committed to the business beyond the short term.
"We're not pleased with rating, but we intend to continue for the long term," Boisture adds.
Source: Flight International
