Airframers Push the Envelope in Aftermarket Support

BoeingShanghai3When we hear that original equipment manufacturers (OEMs) are expanding in the aftermarket, we typically think of the engine makers, with their large share, or the component OEMs, with their rapidly growing share. But the airframers are busily scooping up business, as well, especially through packages that combine component maintenance and management at a fixed price per flight hour. Data analytics programs are also growing, as the aircraft manufacturers leverage their increasing volumes of operational information. Boeing has a large share of the commercial aftermarket. Its aftermarket revenues put it, year to year, in the top three—with Lufthansa Technik and General Electric—says Dennis Floyd, the airframer’s vice president for fleet services in the Commercial Aviation Services (CAS) organization. A lot of Boeing’s success is driven by its parts business, but its footprint also includes flight planning and navigation services, flight and maintenance training, aircraft modifications, analytics and even heavy and line maintenance. Fleet scale and an intimate knowledge of the airplanes they build help the airframers. Their position at the top of the food chain also enables them to cut long-term support deals when they are most attractive and timely—at fleet renewal. And from their position at the hub of the supplier network, they are well-placed to obtain attractive component and maintenance pricing. A third OEM advantage is data—not just design data but operational data. Through joint ventures and alliances with service providers, as well as through direct relationships with the airlines, the airframers are enjoying greater access to operational data and are using it to create valuable monitoring and analytics packages.  The OEMs intend to leverage their fleet-wide data to improve their position. The 787, A350 and A380 are all very data-intensive. The 787, for example, transmits 28 times more data than the 777, according to Boeing. And even the 747-400 is data-rich, the company says. However promising this area is, some basic questions remain to be answered. “A key debate today and in the future is who owns and gets to leverage the data on these aircraft—the OEMs and/or the airline MROs?” asks David Stewart, vice president of the aviation management consulting firm, ICF International. Beyond that, “Will independent MROs get access?” he adds. Boeing and Airbus also have dipped into heavy maintenance, and that is a source of data. Boeing has a 60 percent share in Boeing Shanghai Aviation Services, a JV with China Eastern Airlines. Airbus has a share in Sepang Aircraft Engineering, Malaysia, and EADS has a 20 percent share in Dublin Aerospace, Stewart says. Airbus also has a network of 18 MRO facilities.

Component Support A big trend is integrated component support, explains Kevin Michaels, the leader of ICF’s aerospace and MRO practice. These programs bundle component MRO and asset management with at fixed-rate, power-by-the-hour (PBH) –type pricing. They are an important element of Airbus’ Flight Hour Services (FHS) and Boeing’s GoldCare offerings. Component support will be increasingly important in coming years, Michaels says. “Probably as much as 50 percent of the decisions over the next five to 10 years could go [to integrated component support programs],” whether it’s the OEMs, independents or the airline MROs that get the business. “The airlines don’t want to own non-productive assets.” Component support is the fastest-growing area of the airframe OEM aftermarket offer because it gives the most value, Stewart adds.  “It allows airlines to avoid investment in inventory and reduces complexity because there is only one supplier to deal with. But it’s still immature, and the airframers own less than 5 percent of the components business.

ATR ATR is the OEM leader in air transport aftermarket product and service maturity, Stewart says. The company’s Global Maintenance Agreement (GMA) program is a materials solution that includes access to spares pools and management of rotable repair services, he says. ATR introduced GMA in the early 2000s to help sell airplanes, but since that time the program has come into its own, he says. ATR cites the advantages of a single interface, enhanced spare parts availability, performance efficiency and quality management. It describes GMA as a combined cash flow, time saving, operational and accounting lifecycle tool. ATR guarantees repairs and overhauls on a fixed-cost basis, covering both scheduled and unscheduled events on line-replaceable units (LRUs) and major elements, such as engines, propellers and landing gears, the company says. Low-value parts and consumables are not included. GMA business is growing along with the fleet. One-third of the some 900 ATRs flying in the world are covered by GMAs, says Lilyan Braylé, the company’s senior vice president of product support & services. ATR also is expanding its customer support network to be closer to operators. It recently established a new Customer Support Center in Sao Paulo, he says. The company also has formed a strategic MRO partnership with Fokker Services in Asia to meet the needs of the growing ATR fleet in that region.

Boeing GoldCare Boeing illustrates the trends toward fixed-price, integrated component support and data analytics. GoldCare is meant to be fixed price—by the hour or the month, for example. Over the years it has evolved from a comprehensive support program to a more flexible model, including material management, and has expanded from the 787 to all models. Depending on their circumstances, some airlines may want a parts program or an engineering program, but some want the “full meal deal,” Floyd says. Norwegian Air Shuttle, for example, signed on last year for the full-up “enterprise” level of GoldCare support. TUI receives inventory technical management and parts support. Singapore Airlines Cargo, meanwhile, has signed up for fleet technical management on its 747-400s, including the management of maintenance planning, dispatch reliability and aircraft availability, Floyd says. “We teamed with SIAEC, which does the heavy and line maintenance. We manage the reliability program and aircraft configuration,” including such tasks as keeping track of components, looking at trends and optimizing the maintenance program.

ATR-3321Component Support Airbus currently has more customers than Boeing does in the new integrated component support programs, analysts say. Airbus has six for FHS—China Southern, British Airways, Singapore Airlines, Vietnam Airlines, THAI and Sichuan Airlines. Component support for the A380 is one thing—it’s a niche aircraft with expensive rotables and relatively small fleets, Michaels says. But Airbus is beginning to move into the A320, which is another matter, he adds. Boeing counters that a lot of that is semantics. If the company counted PBH-type component support programs not branded as GoldCare, it would have almost 40 customers. The Component Services Program (CSP), for example, which supports 777s and Next-Generation 737s, is quite large. Airlines sign long-term contracts and pay a fixed rate per flight hour for potential exchange of hundreds of LRUs. The CSP program, executed jointly by Boeing and Air France Industries KLM Engineering & Maintenance, includes customers such as Skymark Airline for the 737; Air New Zealand, Aeromexico and LAN Cargo for the 777; and TAAG Angola Airlines for the 777 and 737. Boeing also offers PBH-type component services and rotable exchange programs to support the 717, 747-400F and 787 models. Customers have access to a pool including high-value items, such as flight control surfaces and electronic units. Boeing is responsible for repair, modification, and testing as well as the record keeping. Boeing has made some inroads with its Integrated Materials Management (IMM) program, Michaels observes. Focusing on consumables and expendables, IMM “[provides] a lot of value creation to the customer in consolidating purchases from a very disparate and fragmented base of suppliers.” “The cost of purchase orders, alone, if you do it in small quantities, is very expensive to airlines,” Michaels says. “So if a consolidator can come in and not only alleviate the administrative burden, but also alleviate the asset management burden—where they come in and in essence stock the bins—that can be quite helpful to the airlines.” SAS Technical Services (STS), the Swedish carrier’s MRO, signed an IMM contract with Boeing back in 2008. Other IMM customers include Cathay Pacific, All Nippon Airways, Singapore Airlines and SIA Engineering.

Data Products Boeing also is leveraging its data, something it’s been ramping up since the late 1990s. The company has about 13,000 airplanes in service and “has access to a considerable wealth of operational data,” Floyd says. Boeing collects operational data from airlines as part of reliability improvement programs, service requests that come in, and various other aftermarket offerings. Real-time information about airplanes has been provided to customers via the Internet since 2004, adds John Maggiore, Boeing’s leader of fleet and maintenance solutions. This data gives Boeing an advantage, Floyd says, because “we can aggregate over a larger set of data and, using sophisticated tools, we can find ways to optimize for individual customers.” Because of its knowledge of the customers’ operations as well as their route structure and environment, Boeing can customize their maintenance program to “drive unscheduled work to become scheduled work” and also to reduce the amount of scheduled work, he says. “The whole data angle is not a big, high-ticket item,” Michaels says, but it is an enabler that can improve dispatchability and increase the attractiveness of the product. However, prognotistics—predicting failures—could be a different story, as the engine OEMs have proved. And who better than the OEMs to interpret data snapshots and recommend possible fixes— because of their bigger databases. “In that sense it’s a natural fit for the OEMs.” But the proof is in the pudding, and the challenge is to show that it’s worth the price. The most prominent Boeing analytics tool is Airplane Health Management (AHM), which collects real-time performance data and forwards it to maintainers via data link or satellite communications. They then access it through Boeing’s Web portal, When problems occur, AHM provides probable causes and recommended fixes. Based on historical data, AHM can tell an operator that a certain fix has worked, say, 65 percent of the time for other operators, Floyd says. Although airline data sharing is discretionary, many who had said, no, then changed their minds, Maggiore says. The key is that people understand the value of aggregating fleet data, he says, and are very keen to compare their performance against a larger data set. According to a recent count, there were 53 AHM customers worldwide, including about 1,900 airplanes. There are real-time aspects, as well. The performance monitoring module provides automated monitoring of parameters such as fuel consumption and CO2 emissions. Customized alerts can notify engineers 24/7 if some threshold, such as fuel mileage has been crossed and warn of developing problems. Real-time monitoring and customized alerting are available to operators of 777s and 747-400s as well as 787s. AHM is not free—it’s available on a consumption basis—but the value is quite compelling, Maggiore says. In less than a year one customer reduced delay minutes by 62 percent, an “amazing improvement” in so short a time. “It’s a catalyst to manage equipment failures in a real-time way.” AHM also is a prognostics tool. It helped to detect foreign object debris blockage of a 787’s air conditioning vent, which could have led to failure of the air conditioning fans. Based on a customer-set alert, Boeing detected an unusual temperature trend in the air conditioning system. The Boeing operations center monitored the alert, found that it was repeated by the same aircraft on another flight, and recommended a maintenance inspection, at which time the problem was corrected. Boeing also offers the In-Service Data Program, which collects participants’ data, de-identifies it and then provides access to different slices of the data, by user account, and standard trend reports through The program began with the 777 but has expanded to all Boeing models. It gives operators “the chance to get aggregated data over larger fleets and benchmark their performance,” Floyd explains.

ATR-1444Bombardier “As an OEM, we provide all the services required to operate aircraft, particularly around the aftermarket on the service side,” says Todd Young, Bombardier’s vice president of customer services and support for commercial aircraft. Aftermarket revenues are now at about $1.5 billion, with growth expected this year. The company has a network of Bombardier-owned facilities in North America that provide heavy maintenance, and it also offers line maintenance capability. It further partners with 60 Approved Service Facilities worldwide. Bombardier is well-positioned in North America, with a majority of the maintenance work on the CRJ fleet there. The Q400 business is growing as well. The company, for example, has inked a heavy maintenance pact with Republic Airways. Since 2007 Bombardier has been developing a network of Regional Support Offices (RSOs) staffed by representatives, such as structures engineers and in-service supplier/managers. RSO service is free of charge and is meant to build stronger local relationships with operators. There are currently six commercial RSOs, with a seventh slated to open this year in South Africa. Bombardier offers a PBH-type rotable components support program called Smart Parts. It also provides very flexible Smart heavy maintenance programs. North American operators can leverage the company’s large depot in Chicago to avoid stocking their own inventory on-site, Young says. The airframer also provides a Failure Reporting and Corrective Action System (FRACAS), which collects in-service data from both commercial types and outputs a monthly report. The company also has a knowledge-based system that allows operators to troubleshoot issues. This helps them to arrive at the root cause sooner, minimize removals and reduce downtime, Young says. The FRACAS database is part of it, “but it’s also based on the fleet knowledge that we’ve gained over the years,” he says.

Embraer Embraer supports its fleet of more than 1,000 E-Jets with company-owned facilities in Europe and North America and a network of 12 authorized service centers and 21 qualified independent maintenance providers. “We see partnerships as a route to growth,” says Luiz Hamilton Lima, vice president of services and support for commercial aviation. Material support is also key, as evidenced by the company’s flight hour-based Spare Parts Pool program. Embraer manages the repair process and customers have access to a large and reliable stock, Lima says. Among the benefits are optimized availability, predictable cash flow and savings of up to 80 percent of the upfront investment, compared with use of the standard-operation recommended spare parts list over a 10-year period, he says.

Boeing Shanghai

Boeing Shanghai Aviation Services, the Boeing’s majority-owned heavy maintenance facility in China, would seem a departure from the norm for the U.S. airframer. “Our goal is not to … build a lot of MRO facilities all over the world,” says Dennis Floyd, vice president for fleet services in the Commercial Aviation Services (CAS) organization. But Boeing does have a considerable customer base in China, which probably factored into the decision to start up the facility. While heavy maintenance is not a high-margin business, Boeing doesn’t see it as a loss- leader. “We see added value [at the Shanghai facility] higher up the food chain in doing things like GoldCare and modifications,” Floyd says. Right now the unit is completing a 737 passenger-to-freighter conversion, he says, “so it’s moving up into more complex engineering.” Passenger-to-freighter conversions are generally a higher-margin business than heavy maintenance, particularly if the P-to-F intellectual property is internally owned. The Chinese facility, along with Boeing other units, was also instrumental, in executing a service for SAS, Floyd says. The airline needed some 737s, and Boeing helped to line up some used 737-700s to bridge them over until they could get new aircraft. Since the planes were coming from different sources, SAS needed to bring them up to a common airline standard. The Boeing modification business designed a package of 26 service bulletins, and Boeing Shanghai did a lot of the installation work.


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