By 2027, Boeing will be an aviation and aerospace aftermarket juggernaut, controlling as much as 20% of the global market, or twice the market share claimed by GE Aviation, the biggest player today.
That’s the vision that Dennis Muilenburg, Boeing chief executive, outlined on 21 November anyway.
Boeing’s leadership position in Muilenburg’s 10-year vision is not the real surprise. After all, Boeing already boasts the second-largest aftermarket business in the industry, with a 7% share in commercial and 9% in defence. That ranks slightly below GE and slightly above Lufthansa Technik and United Technologies.
More shocking is Muilenburg’s 10-year revenue target for the newly created Boeing Global Services (BGS). He has called for it to become a $50 billion business by 2027 in a market he forecasts will average about $250 billion in revenues annually over that timeframe.
That represents a compound annual growth rate (CAGR) of 12-13% over the 10-year period. Compare that with Boeing’s impressive expansion from 2006 to 2015, when it grew from a $61.5 billion business to a $96.1 billion behemoth. That was one of the fastest periods of growth in the company’s history, but represented a comparatively modest CAGR of less than 5%.
Hitting that target will not be easy. In the defence sector, law and policy in the USA reserves 50% of support services for government-owned supply depots, blocking Boeing in its most accessible market.
The commercial side of the business presents even more challenges. There is nothing like a comfortable duopoly presiding over the aftermarket: the sector is instead splintered into thousands of providers.
Aside from the structural differences, the aftermarket demands a very different style of support than an OEM may be used to providing. Prices must be lower – much lower. Response times must be faster. It is one thing for a small, dedicated company to meet those demands, but quite another for a $100 billion corporation to operate in a lean and flexible fashion.
Boeing has made encouraging moves in that direction. Its Seattle distribution centre added 35,000 parts last year, increasing on-demand inventory for urgent requests, and lowered prices on 24,000 components.
Boeing Gold Care may provide a useful case study. It was launched as a one-size-fits-all offering that airlines almost universally rejected, then relaunched two years ago as a flexible menu of services that swiftly attracted more than 60 customers. That’s the kind of flexibility and learning BGS faces over the next decade.
Source: FlightGlobal.com
