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Boeing Edge And Its Impact On The Aviation Services Market

For a long period, Boeing’s commercial activities outside aircraft production focused on technical support and parts supply. In the late 1990s, however, the outsourcing bug took hold among airlines and Boeing’s customers began to ask what else it could do for them. The company has rapidly expanded its service portfolio, building a diverse spectrum of capabilities ranging from ATM to EFBs. Since 2012 that range has been grouped under one banner — Boeing Edge. Alex Derber reports.

Although it was launched barely a year ago, Boeing Edge is really the next step in the decades-long evolution of Boeing as a service provider. Not a brand and not a product, it is best described as a service mark that encompasses the four pillars of Boeing Commercial Airplanes’ non-aircraft manufacturing operation: flight services; fleet services; material services; and information services.

In fact, most of the products that form those pillars, be they electronic flight bags (EFBs; information services) or freighter conversions (fleet services) were offered by Boeing prior to Edge, which begs the question: why create the mark at all?

“Boeing Edge is an extension of everything we do at Boeing on the services side, which has 13,000 people working in it now,” says Darrell Hokuf, senior manager, brand and positioning, Boeing. “It’s an attempt to pull together the structure of our services portfolio in a logical manner and to show the growth we’ve had there.”

That growth will no doubt continue as Boeing adds to its menu of services, a process typically undertaken through the acquisition of specialist subsidiaries. Boeing’s numerous investments to that end have included its 1999 joint venture with Aviation Partners, which offered fuel-saving winglets for 737s; its acquisition in 2000 of Jeppesen, a leader in electronic flight charts and flight planning services; and its 2006 purchase of Aviall for $1.7bn — a deal which at a stroke made it the biggest parts supplier in the commercial market.

Deals like those have extended Boeing’s reach into almost every conceivable area of aviation, and Boeing Edge is a sign that the company wants to be as readily identified with services as it does with aircraft sales, even though the latter still account for about 85 per cent of its revenues.

Of course, few people within the industry need Boeing Edge to convince them that Boeing and other airframers are paying increasing attention to services. Their expansion into the aftermarket continued a trend begun by the engine manufacturers, who were forced to drive service sales in order to mitigate the effects of fierce competition for engine orders on equipment pricing.

“The opposite is true with Boeing — we are moving in the direction of the engine manufacturers, but it’s because customers have asked us to do more in certain areas,” Hokuf says. “During the economic downturn airlines were searching for the lowest cost and were going with just about any provider out there — some of those providers disappeared because they didn’t have the sustainability of a big company like Boeing.”

That Boeing Edge is a customer-driven concept is a point Hokuf returns to frequently. The demarcation of Edge services into four silos is, he says, the best way to align Boeing with the way its customers — the airlines — structure themselves, while the rapid expansion of Boeing’s product offering allows the company to provide holistic services and analysis to senior management.

The digital airline

On the service side, perhaps the most important of Boeing’s capabilities going forward will be those in IT. This is because recent systems and technology advances now allow all parts of an airline to talk to each other — from an aircraft automatically reporting a fault mid-flight, to procurement ordering a replacement part, to an engineer digitally signing off the installation of that part. In a wider sense, software advances mean that the data generated by those events and millions of others at either one or several carriers can now be analysed in order to glean future efficiencies. Thus the information services pillar of Boeing Edge has become crucial, because it is the one that will allow the three other pillars to talk to each other.

“CEOs or CFOs want to understand their businesses holistically and be able to look at them over time to see how they can reduce infrastructure and better align their use of data and information — that’s the holy grail in the aviation business right now,” says Hokuf.

As befits a "holy grail", the vision of a fully integrated, digital airline remains unrealised, though the rise of "big data" analysis firms in areas such as retail surely points the way forward. At present, however, Boeing’s information services are organised into discreet chunks, some of which can interact with each other, but each with their own specific function. These are: information management, comprising products such as digital parts catalogues and maintenance manuals; real-time operations, which covers technical monitoring, EFBs and radio tagging for inventory management; internet and e-commerce solutions such as MyBoeingFleet, which lets different aircraft operators share data; and aviation software solutions.

'GoldCare'

Although a fully integrated IT solution for airlines is still on the drawing board, Boeing’s 'GoldCare' is a product that does straddle all the pillars of Boeing Edge. Originally introduced for 787 customers, 'GoldCare' is a bundled package which offers aircraft operators maintenance, IT and parts coverage similar to that covered by engine aftermarket products such as Rolls-Royce’s 'TotalCare' and GE’s 'OnPoint'. 

However, there are two major differences between 'Goldcare' and the engine solutions: firstly, Boeing does not push it as aggressively onto customers as the engine manufacturers, who are far more reliant on aftermarket revenues; secondly, Boeing is not as prescriptive about where the maintenance work is performed.

“Once we have a 'Goldcare' contract it’s a three-way process between us, the airline and the MRO [maintenance, repair and overhaul] companies. The MROs compete for the business from the airline and the airline actually has a big say in who that MRO is going to be,” explains Boeing spokesman Bob Saling.

Since its introduction, 'Goldcare' has been extended to the 747-400 and 737NG, and Boeing is canvassing demand among airlines about extending it to other types. Until now, however, only TUI Travel and Norwegian Air Shuttle have signed up for 787 'Goldcare', a small customer base that Hokuf attributes to the heavily delayed introduction of the Dreamliner.

“It’s also a specific type of customer that will look at a long-term solution rather than at piecemeal costs,” he adds. Airlines that might only opt for specific services will usually be the ones seeking to fill gaps in their own support arms, whereas a low-cost carrier that chooses to outsource is a likelier candidate for packaged solutions such as 'Goldcare'. Boeing also sees the leasing industry as a great opportunity for bundled, OEM-provided services.

“There is a huge advantage in having configuration management of an airplane as it passes through customers and we are still trying to figure out what that model is, but it certainly benefits the operator as they can be certain that they can return an aircraft  that won’t attract penalties,” says Hokuf.
 
Boeing’s place in the aftermarket

The introduction of 'Goldcare' and Boeing’s rapid expansion into services has alarmed many independent MROs and parts suppliers. Some fear that Boeing could start dictating terms of maintenance through 'Goldcare'-type contracts, or restrict the flow of proprietary parts to its own distribution channels. Hokuf believes such concerns are unfounded, and points out that it’s in Boeing’s interest to ensure a steady supply of parts worldwide. As for a squeeze on maintenance providers, it remains to be seen what traction 'Goldcare' achieves with aircraft owners, but even if more do sign up, the aforementioned collaborative approach to selecting providers should ensure that MRO companies retain real independence.

“The concern in the industry about us putting MROs and parts suppliers out of business has been around now for about 10 years and the fact of the matter is that it isn’t an issue — it’s not something that we’ve actively gone after,” comments Hokuf.

Perhaps the biggest current worry, though, is about exchanges of technical and operational data. With Boeing’s move into services this has become a hugely complex issue as some of Boeing customers are now also its competitors as well as its business partners. In some cases this necessitates a labyrinth of Chinese walls within organisations that relies as much on trust as it does on contracts.

“Take Air France-KLM,” explains Hokuf. “We have them as an airframe customer, as a competitor in the services business and we have a team that helps them figure out how to sell component service programmes to other airlines. We give them all of the data that we are contractually obligated to when we sell them an airplane, but we must ask them to erect a wall between their services so they do not capitalise on information we give them as a sales arm.”

Of course, information flows in both directions, and MROs and airlines also control how much of the reams of technical and fleet data that they generate gets shared with Boeing, which offers a product, MyBoeingFleet, specifically for that purpose. “Some airlines are very forthcoming because they see how the amalgamation of their data benefits them in the end, but different customers will have different levels of trust about how that information will benefit them,” says Hokuf.

Boeing edges onto Airbus aircraft

Although many Boeing Edge services have been designed around Boeing aircraft, plenty can also be used by operators of other manufacturers’ models. Such cross-functionality is something Boeing wants to pursue, both due to customer demand and to its appreciation for all-encompassing solutions.

Jeppesen flight charts are an obvious example of an airframer-agnostic product, but Boeing also wants to sell its 'Airplane Health Management' ('AHM') and 'Maintenance Performance Toolbox' solutions to Airbus operators, subject to certain conditions.

“Airlines see the landscape changing underneath them, and they are asking how digital products can help them across their entire fleets. For example, why would a customer want two separate systems for monitoring the health of their airplanes just because they have a mixed Boeing and Airbus fleet?” asks Hokuf. “So we’re looking at how things like crew scheduling and helping our customers in the cockpit translate not just to Boeing airplanes, but to Airbus’, Bombardier’s and Embraer’s too.”

It is here that the ambition and potential scale of Boeing Edge becomes apparent, which should be a concern for Airbus. For even as it maintains the delicate duopoly in large aircraft manufacture with Boeing — or even outsells its rival in a given year — it could find itself horribly outflanked on the services side. That point will be reached if Boeing can confidently view every Airbus sale as a possible new revenue stream for itself.

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