Rampant consolidation has dramatically reshaped the face of the aerospace industry. Some familiar names have disappeared - others endure but change almost beyond recognition. BFGoodrich is one: 10 years ago a collection of small component businesses with $300 million in sales, today the company is a "nose-to-tail" aerospace business worth $3.6 billion a year.
BFGoodrich Aerospace has grown through 35 acquisitions, the largest being the $1 billion buyout of Rohr in 1997 and the $2.2 billion merger with Coltec in 1999. The company is still on the acquisition trail. "We have learned that you never get out of the acquisition business," says president Marshall Larsen. Rumours, last month, of merger talks with the UK's TIGroup, owner of aerospace supplier Dowty, confirm this.
For Charlotte, North Carolina-based Goodrich (the BF is likely to be dropped next year), consolidation has reinforced the company's ability to ride out the aviation industry's inevitable cycles by strengthening both the equipment and aftermarket sides of its business. For the airlines, the company's increased depth, breadth and strength mean new product and service offerings from Goodrich with the promise of reducing costs.
About 40% of Goodrich's aerospace business is with Airbus and Boeing, 45% is aftermarket and service and the rest is in the regional, business, space and military sectors. It is a mix the company hopes will see it through the next cycle. "We grew through the last downturn in aircraft deliveries because we had an aftermarket business," says Larsen. "This cycle will not take us down."
Like many US suppliers, Goodrich is already seeing its top line affected by declining production rates at Boeing. It still does twice as much business with the US manufacturer as it does with Airbus, but the European consortium is ramping up production and Goodrich is hopeful of increasing sales. Goodrich now has growing regional airline and business aviation sectors.
But it is in aftermarket products and services where Goodrich sees the growth, and the benefits, of consolidation. "Our aftermarket business is growing, both because of fleet growth and because our market share is increasing," says Larsen. However, while the company's component overhaul business is doing well, he says, the heavy maintenance side is losing money. "The market has changed," Larsen says. "After ValuJet, there is much more scrutiny. There is also the shortage of mechanics." Goodrich's Everett, Washington, facility continues to be the USA's largest independent maintenance centre, but its focus is being shifted towards aircraft modifications, such as passenger-to-freighter conversions and business jet completions. "The value added is higher," he says.
Boeing relationship
Part of Goodrich's plan is to cultivate a closer relationship with Boeing's growing aviation services business. The Everett Aviation Services facility is already part of the manufacturer's network of partners to perform cargo conversions on a whole range of Boeing aircraft. The company's Aerostructures group has Boeing contracts to make parts for out-of-production 737s, and its Fuel and Utility Systems division has teamed with the manufacturer to install explosion-proof fuel gauging systems on 737 and 747 Classics.
Goodrich is to offer new aftermarket services to exploit its expanded product range. An example is its landing gear exchange alliance with Boeing Airplane Services, launched at the Farnborough air show in July. Under this 15-year alliance, Goodrich will own and control a pool of overhauled Boeing 777 landing gear. Operators will be provided with overhauled gear in exchange for unserviceable units, which will be repaired and placed back in the pool. This offers airlines an alternative to buying spare landing gear costing $6-8 million per set.
Goodrich demonstrated its strategy to lever its position as both equipment and aftermarket supplier in a deal struck earlier this year which will see American Trans Air equip its new Boeing 737-800s and 757-300s, and retrofit its in-service 757-200s and Lockheed L-1011s, with the company's wheels and brakes, which Goodrich will then service. "We are seeing more tailoring of the balance between aftermarket and original equipment," says Larsen. "The key is to provide flexibility for the customer."
At Farnborough, Goodrich announced its intention to join the MyAircraft e-commerce joint venture as an equity participant along with founding partners Honeywell and United Technologies (UTC). The company looked at "30-40" businesses before selecting MyAircraft as the centrepiece of its e-commerce strategy, citing its technology, neutrality and the investment already made by Honeywell and UTC, as well as the product breadth the site will represent. "Together, the three companies provide at least 50% of the components and services an airline needs," says Larsen.
Goodrich elected to take an equity stake so it can have a say in the running of MyAircraft. "We are not in it for the IPO [initial public offering], we are in it for the long haul," he says. Similarly, as a company that has played a role in the consolidation of the aerospace industry, "we want to take part in the shake-out of the e-commerce industry".
Source: Airline Business
