Service structures have remained mostly unchanged up until now for most nonengine OEMs, mainly because the airlines’ operating structure has been fundamentally unchanged. But today’s highly reliable aircraft and engines are altering how airlines depend on OEMs and how OEMs support the airlines.
Thus do the operators still need comprehensive technical staffs, and how large should they be, especially when there are fewer and fewer technical issues? Airlines with minimal technical capabilities are operating safely all over the world, and at the same time, legacy carriers have come under pressure over the years to reduce their maintenance capabilities.
Additionally, how can an individual airline perform effective surveillance and analysis when there are very few anomalies—and in some cases, none—for specific carriers?
This creates a quandary for airlines with technical capabilities that need less OEM support yet have costly technical infrastructures, because they are competing with lower-cost operators that need more OEM support. Should the OEMs offer the same level of support for both?
Highly reliable new-generation aircraft are fundamentally changing airlines’ dependence on their own data and operational experience, which are diminishing as problems become less frequent. This challenges the heart of the current ways of handling data because now operators must depend on other data sources. This dependence beyond internal sources diminishes some of their autonomy and independence from OEMs for a variety of services.
Boeing and Airbus are capable entities that can create a coherent aftermarket network. If they cannot, then my bet would be on an Amazon or Google or another large Silicon Valley venture. For one simple reason: Providing valuable services is all about knowledge, which is all about data. And controlling the data leads to control over all the other aspects of airline operations such as maintenance programs, inventory, planning, and even back-office processes.
Boeing and Airbus—unlike the engine OEMs—are primarily integrators of design, supply chain and aircraft manufacturing. Engine OEMs, for the most part, control the whole product from design to manufacturing. As integrators, nearly all data is available to, but they don’t control it. This has to change if one expects Boeing or Airbus to create a meaningful aftermarket business.
Today many companies are offering connectivity, analytics and diagnostics, but these efforts can create chaos yet can only improve specific issues—not provide coherent and comprehensive value across the board for operators. If the necessary information is dispersed across multiple providers over multiple systems, this will create unnecessary complexity for the user, especially at the interface of various systems. And yet airlines are predicted to spend millions on connectivity. Do they know what they’re getting? If connectivity focuses primarily on reducing delays and cancellations, and reliability is already over 95%, how big is the benefit?
While connectivity can provide many benefits, improvements in less sexy-sounding areas such as the following can also provide large cost savings:
1. Inventory. Major legacy airlines have $1.5-2 billion of inventory that turns at fewer than 1.7 times/year.
2. Aircraft out of service. On average, airlines have as many as 10% of their aircraft on the ground due to scheduled maintenance, technical reasons and modifications and reconfigurations. That’s some 2,000 aircraft daily.
3. Heavy hangar maintenance. For every scheduled heavy-check hour, there is another unplanned labor hour due to findings, engineering, waiting for parts, reviewing manuals and other inefficiencies.
The examples above are just some of the areas where airlines would welcome an improvement from the exponential proliferation of data and data systems.
The real questions are: Would Boeing and Airbus be keen to use all this data to help airlines reduce inventory and aircraft out of service? And will the airlines be willing to hand over more control of data and how it is used to OEMs and give up some autonomy? That is, and has been, the fault line between airlines and OEMs