Services' new CEO, Paul McElhinney, talks to Aviation Week's Lee Ann Tegtmeier about how will have to innovate to ramp up to service 45,900 engines in 2020.
AW&ST: What are the biggest opportunities and challenges that you see for GE Engine Services?
McElhinney: We look at things in three-year increments, and we have three big priorities. The first is developing the next generation of products that will have lower maintenance costs for airlines. The second is looking at our existing offerings and trying to refresh them in terms of competitive, compelling value propositions from a customer's point of view. Solving customers' problems is something you will hear the GE company talk about generally. When you translate that into the aviation space, with 29,000 GE engines and partner engines in the fleet today, by 2020 we plan to have 45,900 engines in the fleet. We're at a point where we need to look at the offerings we have in the marketplace that support the 29,000 engines and ask, 'What do we need to do to ensure that when that number is 45,900 engines, we maintain a value proposition around our offerings?' We are looking at our offerings to solve customer problems in a way that is responsive to the growth in the industry and to the changing nature of the products that we're delivering.
The third is data. We do not lack data in the industry. I think what we have is a lack of analytical competency around what to do with the data that turns it into savings for customers, efficiency, productivity, profitability, avoiding schedule disruptions, avoiding unscheduled engine removals and avoiding surprises that are so disruptive to airlines and their passengers.
What is your plan to support that very different fleet?
We're a global company, but I think to be a great global company, you've got to be local. We spend a lot of time on establishing the right company presence around the world so localizing, delegating decision-making and decision authority, and empowering the regions is a big focus of ours. Having customer and online support people in all the right locations is part of that. Making every decision in Cincinnati is not going to make us as competitive as we need to be in a global market. There is a lot that we're looking at in terms of support for our customers in a broader context than we would have historically thought of as an engine business.
Can you give me an example?
Take our fuel and carbon products. My personal goal is that in the next three years, we deliver over $1 billion worth of fuel savings, and that is a fraction of what we could do. That's a product we didn't have three years ago. Three years from now, we will be more mature in the way that we go to market, in the way that we interact with our customers, in the way that we use data for customer efficiency, productivity and profitability. Once we've really established this business, the potential is enormous.
The largest pain point for the airline industry right now is fuel, and I think we have a compelling product with a very, very smart set of resources, which are mainly airline resources. We have deliberately hired experienced airline people from flight operations. We have our own internal group of airline pilots. We have done some acquisitions that add products to the portfolio, which we'll try and build out.
As you introduce new technology products that deliver enormous benefits to airlines, you can have inherent risk. How do we ensure that we work with the airlines and partner with them in a way that they can transfer a lot of that risk back to us? We can give them some very compelling lower maintenance-cost solutions.
In the time and materials (T&M) space, we're very focused on customer service levels. We're very focused on turnaround time. We're very focused on the type of guarantees, warrantees and customer value proposition ideas we can create around our T&M product. We've got some very exciting new products we're going to announce shortly.
In the whole area of repair, we are investing heavily—on the existing legacy portfolio, and we've already started to invest in repair capability for Leap. We have big repair investments for theand . So, we're continuing to do what we've done for a long time, in terms of delivering competitive cost-effective repair solutions for our customers.
How does Austin Digital play into your offerings? How are you integrating the different data pieces?
We're probably two-thirds of the way on our journey of deciding what our digital offerings are going to be around data for customer productivity. We have a lot of interesting products in the air traffic management space, performance-based navigation space, fuel and carbon space, myEngines, remote monitoring and diagnostics. I would say that we are being cautious about how we introduce new offerings and, therefore, I don't know that we're ready to talk about exactly what they are.
The industry has acknowledged that there is a real opportunity to build customer airline profitability around the use of data. We believe that we have the capability and the competency inside the company, both in terms of existing products, and new products we're developing, and new acquisitions that will really bring a compelling value proposition around data to our customers.
With the leased aircraft fleet growing and lessors looking for service package innovations, such as transferrable maintenance agreements, how do you see services evolving?
It's a key part of the market and given the capital-intensive nature of refleeting, and given the dynamics in the industry, the leasing companies provide a really key area of financing and flexibility to airlines that just is not going to go away. They are an important segment of the market that we have focused on for the last couple of years.
We announced earlier this year a portable maintenance and service product offering that has been met with some strong interest from the leasing companies. Their interests are aligned with the airlines, which is, 'how do you lower maintenance costs in a reliable way?'
How will GE and's CFM partnership support Leap?
All of the services around Leap will be performed by CFM Services, so GE and Snecma will not separately serve the Leap market. CFM Services will serve it. It's a fantastic relationship and a fantastic joint venture. The plan will be to go to market through CFM Services. Once we moved to the next generation of CFM products, the plan was to have CFM handle not just the engine side, but that we would go to the market on the service side as well.
In the next three to five years, how do you think lifecycle costs will change, and what are you hearing from customers, suppliers and partners on this subject?
Lower maintenance costs and increased time-on-wing—you've got to do both. Over the last six years, our products are up 30% for time-on-wing. Customers are very focused on making sure that we continue to deliver that level of time-on-wing performance—and on shop visit costs, making sure we don't impact time-on-wing and deliver a very competitive maintenance suite of products that allow customers to manage shop costs.
Our products provide not just risk transfer but predictability of cash flows, guaranteed availability, support. That's why for our new products, Leap and GEnx, the level of demand for our OnPoint Solutions contracts is significantly higher than we've seen for our legacy products. The value proposition inherent in those OnPoint agreements is really compelling because ultimately, customers will make the decision. There's a lot of competing products on the market. Customers decide, and they're deciding pretty decisively right now for OnPoint Solutions.
You said that you run a global business, but you rely on local support. Can you tell me more about that approach?
We have our own dedicated internal on-wing support team that literally supports customers around the world 24/7. We also have a network of repair shops—including a big and expanding footprint in Asia. We have a big footprint in Europe, and we have a big footprint in the Americas. We're pretty well-balanced in terms of geographic support for customers, so that when a customer says, 'Latin America,' our customers in Latin America love Celma. Customers in Southeast Asia love Malaysia. Customers in Europe love Caledonia Wales. We're pretty well-balanced in terms of footprint, customer products support, field service engineering and on-wing support. We're pretty well-diversified in terms of geography with our shops.
Do you have any concerns about finding the right technical staff to support this growing global fleet?
You want to be careful not to sound too arrogant, but we have a fantastic group of engineers in this business, on the design, manufacturing and aftermarket sides, so I believe we've got some really strong resources. The great thing about this business is we have a lot of people who have great experience, so there are people in the business with families who have been here for generations. They have been here for their entire careers, and that includes globally as well as here in the U.S.
Do you have any concerns across your supply chain, including about materials that are becoming harder to acquire?
We do a pretty good job of sourcing well in advance where it is appropriate, but for sure, we spend a lot of time focused on our supply chain—focused on making sure that we meet our commitments to the airframers because the order activity and the delivery commitments on new products from all of the airframer OEMs is at an unprecedented level. Our line-of-sight to the materials we need and the production rates we need is pretty tightly controlled.
Is there going to be a quantum leap that makes engines last even longer, or are they going to go the other way, and only be designed to last for 15 years because it is not as cost-effective to insert technology and repairs?
The technology leap that you're seeing on the new engine, both in terms of advanced materials and material properties, just flows directly into the aftermarket. That technology leap exists in the repair investments we're making today, such as repairs for ceramic matrix composites. Nobody has ever developed repairs for CMCs. We're doing that. I think you'll see that level of technology advancement, which has manifested in engines being driven straight into the aftermarket in terms of the products that we're going to offer through the services' businesses. The industry seems to be going through a period of significant change. The products we are producing are a technology leap, and that's the challenge in services. Our customers like our products today, but we need to take the next leap in service offerings.
In Paul McElhinney's first formal sit-down interview with the press, he tells Aviation Week's Lee Ann Tegtmeier about how GE will have to change and innovate to ramp up from servicing 29,000 engines today to 45,900 in 2020.
President and CEO, GE Aviation Services
Role: Assumed current position in May 2011. He is responsible for the MRO of GE's commercial engine fleet and oversees GE's services organization that includes 8,000 employees at 17 locations around the world.
Education: Honors Degree in Law, Trinity College, Dublin
Career: Joined GE Capital Aviation Services in Ireland in 1992 and was promoted to executive VP and general counsel in 1998. He switched to GE Aviation in 2004 as VP legal, and added responsibility for business development in 2010.
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