Original Equipment Manufacturers are ramping up their focus on services to increase these as profit centers for company financial performance.
The news April 10 that Boeing will relocate its Commercial Aviation Services unit from Seattle to its fading facility in Long Beach (CA) is another example. After-market support services for all DC- and MD- models and the out-of-production 7 Series airplanes previously were relocated to Southern California. Now, support for the in-production 7 Series (except the 787), the 737-based P-8A Poseidon and the forthcoming KC-46A will shift to SoCal. The 787, 737 MAX and forthcoming 777X support will be in Seattle.
In 2010, Jim Albaugh, then-CEO of Boeing Commercial Airplanes, told employees that CAS contributed $1bn in profits to BCA. Boeing doesn’t break out this information in its financial reports.
BCA recently named Stan Deal, long-time head of its BCA supply chain, to lead CAS, succeeding the retiring Lou Mancini. Deal is expected to increase CAS’ business revenue and profit contributions to Boeing.
The trend by OEMs to increase services has been underway for years. Engine manufacturers have historically tied engine sales to after-market services and support. This trend increased dramatically in recent decades. GE Engines and its siblings CFM and Rolls-Royce have been particularly aggressive. More recently, Pratt & Whitney and its joint venture partner International Aero Engines announced programs intended to dramatically increase the PW/IAE services profile.
Boeing earlier announced a service contract with Air Canada.
The same day Boeing announced the CAS move, IAE announced three V2500 services contracts and qualifications with Volaris Airlines, Avianca Airlines and Cathay Pacific Airways.
We wrote about the IAE Pure V program last November. PW plans an engine service program for the Pure Power Geared Turbo Fan engine that will enter service next year with the Bombardier CSeries and the Airbus A320neo. PW plans an engine service program for the Pure Power Geared Turbo Fan engine that will enter service next year with the Bombardier CSeries and the Airbus A320neo.
Currently about 60% of the A320 family operators using the V2500 engines contract with IAE for services and about 80% of new customers will do so. IAE believes that residual values for the “A320V” airplanes will be enhanced by using OEM parts and maintenance, as opposed to PMA parts and third party or in-house maintenance. IAE is also extending the warranties for airlines contracting with IAE.