, which has struggled to cash in on the massive aftermarket support market its aircraft generate, is designing the 737 MAX and soon-to-be-launched with an eye on grabbing a greater share of the maintenance work the models will need, the company’s top executive says.
“We are mindful of the lifecycle costs and revenues associated with decisions we make on these programs,” Boeing President and CEO James McNerney told analysts on an Oct. 23 earnings call. “We are thinking harder about that issue, and leaning forward more than perhaps we did on the 787.”
Boeing’s Edge program, which includes the maintenance-focused GoldCare offering, will be at the center of its effort. GoldCare includes options for engineering support, IT support, materials management, or an all-encompassing “enterprise” program, and it is being tested by Boeing’s newest in-service model.
, a 787 GoldCare customer, has had its patience tested by the aircraft’s shaky reliability. A series of technical problems led Norwegian to ground one of its two several times in recent weeks and lease two -300s to fly in the Boeing twin’s place, incurring costs of about 100 million kroner ($17 million) in the process.
Boeing says it is making progress on boosting the 787’s reliability, which is at 97% across the 96-plane, 16-customer fleet, it contends.
While the 787’s challenges have forced Boeing to put unplanned resources into aftermarket support, the company says it is encouraged by customer response to the GoldCare product line across all models.
“We have a number of our customers that we now have on the program and others we’re in discussions with,” McNerney says. “And we’re trying to be sure to execute well with GoldCare. So we’re going one customer at a time as they need it.”
While engine manufacturers likeand have grabbed large shares of their products’ aftermarket work—particularly on newer- technology models—airframe makers have struggled to grow aftermarket revenues. The absence of margins in high-touch labor work like heavy maintenance is part of the problem, leaving little profit to share between manufacturers and needed MRO partners. The spare parts side has felt increasing pressure from a surge in surplus parts availability, as well as advanced pooling and rapid-response logistics services that help airlines cut down on the number of parts needed on their shelves.
With traditional aftermarket revenues eluding their grasp, aircraft manufacturers are leveraging their proprietary property, like reliability data and technical information, and wrapping services around them aimed at improving customer operations. One recent example: Boeing’s recently launched mobile maintenance apps for Apple’s iPad. The apps combine technical documents with features like the ability to add notes and photos to records and sync everything across an entire organization.
The market has been slow to embrace such bolt-on services, however. An aftermarket product that added radio frequency identification (RFID) tags to track components, developed by Boeing and Fujitsu and tested with, has been scaled back to focus on emergency equipment, like rafts and slides.
Despite the spotty track record, Boeing is betting that customers will warm to data-driven services that support real-time decision-making.
McNerney says he sees no reason that Boeing’s aftermarket can’t grow “at least” at the rate of Commercial Airplanes division’s “base business” of moving new metal, which boosted revenues 15% in the third quarter and was up 10% through 2013’s first nine months.