* Planemakers beef up services to help improve margins
* Boeing services chief looking for bolt-on acquisitions
* Airbus services head says data alters maintenance business
* Services deals jockey for attention with air show orders
By Tim Hepher and Victoria Bryan
PARIS, June 23 (Reuters) – Airbus and Boeing leave this
week’s Paris Airshow with plans for ambitious growth in aviation
services, as flattening demand for new jets and pressure to
raise profit margins encourages planemakers to deepen their
exposure to airline operations.
The two largest planemakers set out their stalls at the
world’s biggest air show in a series of announcements that could
set them in competition with some of their suppliers and even
some of the airlines that have ordered jets in recent years.
The overlap reflects the complexity of the aviation market
as it matures, leaving a large fleet of aircraft to service or
upgrade and tens of thousands of people to train – all services
that could in turn become tools to help sell even more jets.
“Many customers are now looking for fixed cost per flight
hour with assured outcomes on part availability. It is the
(airline) CFO’s dream to get costs out and management risks
under a third party,” Stan Deal, head of Boeing’s newly created
global services division, told Reuters.
“The future state we want to get to is that we can support
every element of a day of operations on the airplane.”
For years, air shows were all about “moving the metal,”
winning as many orders as possible.
Orders are still buzzing, but higher-margin services have
taken a prime time slot for the first time with a volley of
announcements from each company.
“Would you imagine having your Mercedes car without the
associated services? It makes no sense,” said Laurent Martinez,
head of ‘Services by Airbus’.
“We are definitely the best placed to serve our aircraft
because we know the aircraft nose to tail,” he told Reuters.
Boeing’s newest division starts up on July 1 with a
mandate to roughly triple Boeing’s commercial and defence
services to $50 billion in 10-15 years. The existing commercial
unit will also keep its own services sales team to support the
Airbus said the worldwide aftermarket services
business for jetliners will double to $3.2 trillion over the
next 20 years.
The overall services market is worth an estimated $100
billion a year: almost as much as building and selling jets but
yielding fatter margins.
“We are definitely on a major growth plan,” Martinez told
Reuters. “In 2017, we will see double-digit growth.”
Both companies are ready to look at modest acquisitions to
expand their services businesses.
“I would characterise them as bolt-on acquisitions to
accelerate our position in the market,” Deal said.
Competitors include the major maintenance and repair
organisations (MRO) such as Air France Industrie and
Lufthansa Technik, though there are partnerships with
such firms too.
“The market is growing fast. … We see more and more
airlines that are concentrating on their core business and want
to have all their operations subcontracted,” Martinez said.
Norwegian Air Shuttle , which had selected Boeing
over Lufthansa Technik to maintain its fleet in Boeing’s biggest
commercial services deal last year, returned to the show to sign
a new deal for Boeing to take charge of flight training.
As fleets age, upgrades are lucrative too.
United Parcel Service last month signed a deal with
Airbus and Honeywell to upgrade the cockpits on 52
elderly A300-600 freighters, and arrived in Paris this week with
a deal for Boeing to convert three second-hand 767 jetliners to
Powering the expansion in services is a transformation in
the way data can be used to connect aircraft, pepper them with
sensors and predict upcoming maintenance problems.
Airbus launched such a platform with four airlines, powered
by analytics firm Palantir Technologies.
“We are able to define the weak signals for components and
… change the component before it fails. This is the future of
maintenance,” Martinez said.
Data can also be used to optimise a flight trajectory,
saving fuel by 1-2 percent, Airbus said. Boeing offers to manage
airlines’ fuel demands, even if their jets were made by Airbus.
In a further step, services are being baked into the way
planes like Boeing’s proposed mid-market jet are designed.
The switch demands a different culture from the measured,
highly regulated process of building a plane for public
transport. That will stay in place wherever safety is an issue.
“Part of standing it up separately (as a new services
division) is to break the shackles of that, recognising that we
are going to be a fast-paced innovator with short sprints of
incremental innovation and some big-bang innovation,” Deal said.
(Editing by Mark Potter)