Boeing’s appointment of former GE executive Kevin McAllister as its new CEO of Commercial Airplanes marks the latest and most decisive step in its aftermarket evolution.
As head of GE Aviation Services since 2014, McAllister oversaw the engine manufacturer’s cash cow, and Boeing now wants him to mastermind rapid expansion of a new business unit, Boeing Global Services.
This unit will be headed by Stanley Deal, the former CEO of Boeing Commercial Services, which is to be rolled into Boeing Global Services along with Boeing’s defense and space support business.
According to Reuters, the company wants to increase its services revenue from $15 billion to $50 billion in the next 10 years, with a new “emphasis on generating life-cycle value” from its products.
Within its commercial aircraft business, Boeing has never delineated services sales, but it does do so for defense. Services on that side totalled roughly $9 billion in 2015, which means that commercial services were worth about $6 billion – or roughly 10 per cent of total Boeing Commercial Airplanes Revenue.
The big engine manufacturers, in contrast, derive about half their revenues from the services, so there is plenty of scope for expansion.
However, expanding into the aftermarket is a delicate task for manufacturers, as it means that many customers also become their competitors.
Boeing often claims that its move into services is at the behest of airlines and lessors, though it does also admit to complications, especially when an operator also runs a big maintenance unit.
“We give [airlines] 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,” a Boeing executive told MRO Network in 2013.
At the time, Boeing was trying to consolidate its commercial services under ‘Boeing Edge’, a concept that appears to have been quietly dropped in the intervening period.
McAllister’s appointment, however, marks a more aggressive move into the aftermarket, and one that may be pursued with or without its customers’ blessing.