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Canaccord: OEMs Noise About Aftermarket Shakes Industry

Original equipment manufacturers (OEMs) continue to “make noise” about entering the commercial aerospace aftermarket (AM) marketplace, “representing a structural shift in their approach to the commercial AM,” a Wall Street analyst said in a widely anticipated report ahead of a major industry conference.

Canaccord Genuity analyst Ken Herbert said April 20 in his MRO survey ahead of Aviation Week’s MRO Americas conference that the OEM servicing push is accelerating, due significantly to aircraft giant Boeing’s formal move in this direction.

“Boeing has contributed to the discussion through its substantial goals for its services business, and through its direct actions and push into the commercial aftermarket,” Herbert wrote. “In this survey, MROs viewed the OEM push into the aftermarket as the industry headwind that grew the most in importance from our fourth-quarter 2016 survey. While much of this is from the engine OEMs, which have also gotten much more aggressive in their AM push, we believe part of this as well reflects the recent actions by Boeing.”

About 70% of survey respondents agreed with the poll choice, “Yes, I believe the OEM push into the aftermarket is here to stay and represents a structural shift in the market.” Two other choices that included “no” saw only 15% agreement.

Last November, Boeing unveiled plans to establish a new business unit called Boeing Global Services (BGS), to be headquartered near Planao, Texas. The unit embodies Boeing’s aspiration to triple its services business to about $50 billion by the middle of the next decade. BGS is led by Stan Deal, formerly  head of Commercial Airplanes customer services. It combines about 20,000 employees who support commercial, military, and space aftermarket efforts, is set to be formally operational around mid-year.

After the OEM AM push, survey takers listed vertical integration of leasing companies and airlines as a major headwind, as well as increased use of surplus material.

According to Canaccord, the survey captured responses from more than 45 commercial aerospace MRO providers. Research was conducted mostly April 1-18, but in addition to collecting survey responses online, Canaccord spoke to more than 20 industry contacts.

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