Before the turn of the century Airbus focused almost exclusively on designing, building and selling airframes, branching out only to offer specialised engineering support to its customers when necessary. But in the last decade the company has expanded its portfolio of products and services to encompass maintenance packages, parts supply, training, digital solutions and aircraft upgrades. With Airbus making further strides into the aftermarket, some are naturally wary of the implications.
Alex Derber asked Tom Anderson, SVP services and customer support at Airbus, why he believes such fears are unfounded and how he thinks the company's service offerings will advance in the near future.
How has Airbus' service offering evolved and what has driven the changes?
TA: Ten years ago we were almost a pure support organisation that did very few services. Then, at the request of customers and the marketplace we concluded that we should start to get into services. In the course of that journey the breadth and the maturity of the services have improved and our skills and abilities at doing those things has improved. But services are still a very small portion of Airbus' turnover. At an EADS level we want 20 per cent of our revenue to be in services by 2020; it's a bit early to tell whether we'll reach that target but there's clearly an aspiration to do a better job of addressing the needs of our customers and giving them additional choices by being a provider of those services.
Are there any services that you don't offer at present that you would be keen to add in the near future?
TA: Until recently we offered pilot training through a partnership with CAE, but now you will probably see Airbus being more active at proposing training and integrated training solutions to customers. On the maintenance side that will mean training customers' employees to be Airbus designated authorised maintenance training people, which is essentially what we announced at the Paris Air Show with GMF Indonesia. On the pilot side, in the past we haven't operated training centres outside the ones in Toulouse and Miami, but I wouldn't be surprised now if we saw Airbus operating a training centre on behalf of a customer and an element of that would be the ability to do third-party training.
We're also active in doing flight-hour-type services. We're providing an outcome-based solution and managing all the activity including base maintenance, and although heavy maintenance is not an area that we've been active in, we'll see what the market demands.
To what extent does Airbus see the airframe business becoming more like the engine business in terms of tying in aftermarket deals?
TA: Firstly you have to look at the dynamics of the engine business. A very small part of the work happens on wing; the vast majority of the turnover of an engine heavy maintenance visit is parts and material that is proprietary to the engine manufacturer, and a small portion is labour. To a certain extent the engine business is very simple: you buy the engine, you buy the long-term care programme, and the vast majority of that work happens at a shop level. It's a bit of a leap to see the airframers getting into that type of arrangement. Having said that, we have customers who say they want an additional choice and there are elements of the airframe MRO puzzle that they want to source at the time they buy the aircraft. So, if you were to fast-forward 30 years, would the airframe business look more like the engine business? I don't think so, but in certain regards it might and it will be airline customers who will be the ones to determine that.
What's been the take-up of your Flight Hour Services offering?
TA: We're a niche player with 10 Flight Hour Services customers and it's a business that, with the right opportunities, we're looking to grow. We have something like 400 [aircraft] customers spread all over the world and it's a matter of sitting down with them, understanding their businesses, their goals and aspirations and then designing the right solutions. If we can be part of that and create some value it's great, but if not I'm much happier seeing them go with someone else and be in the type of relationship they want to be in. My job is to support the sale of the aircraft and if I am to enter into FHS deals with customers I need to be viewed as someone who's really aiding and adding value to their business, not just someone who's in a transactional relationship.
Beyond what it is obliged to give airframe customers, is Airbus more restrictive now with the data it shares with airlines or MROs than it was 15 years ago?
TA: We have supplier support conditions that define a variety of different elements in the relationships between component OEMs and airline customers, and those supplier support conditions haven't become any more restrictive than they were in the past. No doubt the technology is changing, but it's in our best interest to ensure that customers have access to the information they need to properly maintain and care for the aircraft.
As products like Flight Hour Services extend your reach into the aftermarket, is it complicating your relationships with certain customers?
TA: The repair and overhaul of airframes and components is something like a $40bn-plus business and within that you see almost every possible relationship, from incredibly collaborative to incredibly competitive business relationships, and much of the time with the same parties. It's understood and accepted in the marketplace and we find a way to navigate those relationships and find a way to make them fruitful for everybody.
To what extent does Airbus want to push its portfolio of services for operators of non-Airbus aircraft?
TA: Part of the reason we are in the services business is to give our airline customers an additional choice and help improve the performance of our aircraft. I wouldn't categorically exclude us doing work on another manufacturer's aircraft - on the engine side of the business you have General Electric doing work on non-GE engines and in our case we have Satair distributing parts that aren't exclusively for Airbus aircraft, but I wouldn't describe it as a major thrust of where we're going with services.
How important have Airbus' digital and cloud-enabled offerings become for monitoring and optimising fleet-wide performance?
TA: Five or 10 years ago we had a variety of software that we sold with aircraft, often literally a set of floppy disks and people installed a program on their personal computer. Today one of the services we offer is called AiRTHM [Airbus Real Time Health Monitoring] which is real-time health monitoring of aircraft. A variety of our A380 customers have bought that and as their airplanes fly around the world we are monitoring the technical health of the aircraft and that is not a software tool, it's a team here in Toulouse that is monitoring and doing that work 24/7. The customers that do use it are operating the aircraft at an improved level relative to those who don't.
Is there a case to be made for offering such products for free as the information generated can be used to refine the performance of future Airbus aircraft?
TA: The design, manufacturing and selling of commercial aircraft is largely the business of Airbus, Boeing, Bombardier, Embraer and others that aspire to do so. The services business is a very open, competitive business with lots of different parties in it, so when we enter that marketplace we're adding another choice for our customers and we have to be adding a choice that creates value and that they can be excited about.
How would you answer the charge that manufacturers such as yourself aren't just another market entrant, but one with considerable power to influence the market, for instance with how you share data?
TA: I would say that it's the [aftermarket] incumbents who have data on their side. Someone will probably write a thesis on who derives value from data, but as a practical matter everyone in the business has different sources of data and intellectual property and we all need to hopefully use it to improve the business to the benefit of the flying public.