Long-term agreements (LTAs) have been gaining ground for years on the engine aftermarket side, with fleet coverage of some current-generation models exceeding 90%. LTAs have been slower to emerge on the component side, but that could be changing.
UTC Aerospace Systems (UTAS) says dollar-per-hour agreements make up less than 20% of its $5 billion in annual commercial-aftermarket business--a figure that will approach $7.6 billion annually once parent company UTC combines UTAS and Rockwell Collins into an aircraft-systems conglomerate. But the push into analytics that has all suppliers--not just systems providers--investing in digital is changing the landscape, and fast.
"I see this continuing to move in that direction as a bigger percentage, especially with digital, because digital is such an enabler to these dollar-per-hour agreements," UTAS President Dave Gitlin says.
The more a supplier knows about how its products perform, the smarter it can be about pricing related services. Operators embrace LTAs because of the cost-certainty they bring; risk is transferred to the MRO provider. But if that provider doesn't have sufficient insight to price its services profitably but not too high, then LTAs are less attractive.
Gitlin says UTAS will grow LTAs both with airlines and aggregators that offer package deals. This includes deals with OEMs.
Boeing last week signed off on the UTC-Rockwell merger as part of a larger agreement with long-time key supplier. It's a good bet that the deal has at least some aftermarket flavor in it, to the benefit of both parties.