Emma Kelly
E-commerce was a buzz phrase at Farnborough 2000, but while large aerospace exchanges came to the show armed with flash names and branding, what they had to say lacked substance.
Boeing, BAE Systems, Lockheed Martin and Raytheon promised the most when they announced their mega industry exchange in March, but delivered little at the show. The top executives of each partner - BAE Systems' John Weston, Boeing's chairman Phil Condit, Vance Coffman of Lockheed Martin and Dan Burnham of Raytheon - briefly appeared at a press conference to launch branding for their Exostar exchange. They were reluctant to answer questions, however, with only Burnham staying on for a short time to respond.
Since the initial announcement, the partners have made "amazing progress", claims Condit. They have signed a definitive agreement, under which each partner will take equal ownership in the exchange; they have branded it; and activated a web site which will become Exostar's site for future transactions.
But they have not achieved what Exostar needs most, which is to secure customers and new partners. Large aerospace companies have not rushed to join Exostar as the partners originally envisaged, but they are still eager to add new partners. "Every member of the defence and commercial aerospace industry is determining which exchange to join. Exostar is the obvious choice," says Burnham.
Exostar's service introduction has already slipped from the original mid-year date, with roll-out in a phased approach starting with non-production purchasing now planned from September. Further services, including purchasing of parts, auctions, collaboration services, management tools and financial services will be added later.
Unlike Exostar, SITA/AAR's Aerospan.com does have an initial system operating with a single customer. Beta testing with an unidentified airline was launched last month, with "several other customers ready to roll out", according to Hal Chrisman, senior vice-president marketing and business development. The exchange is building up a "critical core of customers", he says. Just two unidentified spare parts suppliers have joined Aerospan.com to date. Aerospan.com is "trying to be responsible in the way we roll out the product" and its initial focus has been on technical procurement because of the "significant inefficiencies" and "huge opportunities" locked up in inventories, says Chrisman.
The third major exchange, Honeywell and United Technologies' MyAircraft.com, aims to be "the first to market with leading technology", believes Scott Clements, the exchange's vice-president. The exchange will launch trading and e-procurement in the middle of this quarter, with supply chain management solutions to be added at the end of the quarter. While MyAircraft.com continues to have "extensive discussions" with airlines on using the exchange, it has yet to sign up customers. Unlike Exostar, it has gained a new equity partner in the form of BFGoodrich, which selected MyAircraft.com because Honeywell, UTC and technology partner i2 Technologies are "well on their way to offering a complete B2B marketplace", says Marshall Larsen, BF Goodrich's president and chief operating officer.
Like Exostar, MyAircraft.com is keen to add partners. "We want to have ownership that represents the industry. We are not just looking for cash, but strategic partners," he says.
The large aerospace exchanges' efforts to recruit customers have been hampered by the rash of exchanges appearing, not least those established by the airlines themselves. The "flurry of [e-commerce] announcements" has delayed airlines in selecting exchanges, says Clements. "There's been confusion because of all of the announcements so it's taking operators a few months to understand them. We've used this time to develop technology," he says.
Exostar claims not to have been taken by surprise by the large numbers of exchanges appearing. "Earlier this year, investment analysts predicted hundreds of exchanges would form, but we should expect to see consolidation fairly quickly and that is already happening," says Chris Bade, vice-president strategic planning and business development at Raytheon, and an Exostar board member.
Some of the smaller, independent e-commerce ventures appear to be flourishing, meanwhile, supporting the view that neutrality is key to the success of any business-to-business (B2B) initiative. Seattle-based Avolo, for example, says it has 40 airlines using its initial service, with 300 suppliers signed up. Launched at the end of May, Avolo initiated services with a request for quote service which allows airlines to locate required parts through online bidding. In the first two weeks of live operations, more than $1 million in transactions were conducted using Avolo. Additional functions including capability listing, auctions, catalogue services, MRO software and maintenance scheduling will be introduced "as fast as we can", says Phil Dupuis, business development manager. Formed by aerospace and IT executives, with a site built on airline input and perceived as neutral, Avolo's customer base is growing far quicker than that of its larger exchange counterparts.
Despite their slow progress and increasing competition in the aerospace B2B market, the large industry exchanges still predict great potential. "We absolutely believe it's going to be the wonderful market that we originally thought. There's room for three or maybe four e-marketplaces to be viable and Aerospan will be one of these," says Chrisman. Aerospan has not revised e-business' cost-saving potential - estimating 26% cost savings - while MyAircraft.com envisages similar savings.
E-commerce is "not a passing fad. It will change the way we do business", says BFGoodrich's Larsen. It might just take longer for the large aerospace exchanges to change the industry's business practices than they originally expected.
Source: Flight International
