As OEMs eye sleeker supply chains at the front end and bigger slices of the aftermarket pie at the back, component makers find themselves uncomfortably in the middle.
Efforts like Boeing’s Partnering For Success (PFS), which seek lower costs on new parts and, in some cases, aftermarket-sales rights from beholden suppliers, have many suppliers wondering if there is room left for them to boost revenues.
Meggitt, which supplies everything from brakes to smoke-detection systems for civil and military aircraft, believes it has a plan. The company last year stood up its Customer Services and Support (CSS), a dedicated aftermarket organization covering all of the company’s aerospace products. While it will honor that scope, its business development focus is in three areas: control systems, sensing systems, and the commercial part of its polymers and composites business, which draws interest from manufacturers looking to trade metal for lighter, aerospace-grade materials.
These, explains CSS President Lorraine Rienecker, are the areas “that have been most impacted by recent headwinds,” notably the rise in used serviceable materials (USM) demand and component pooling. Meggitt has been holding its own; its commercial aftermarket revenues totaled $750 million last year, up 5.4%.
But Reinecker believes the company can do better still, and a focused CSS strategy holds the key. Among the objectives: boost its surplus-parts business to claim a 25% share of the Meggitt USM market, and cut itself in on long-term component support deals that airlines are craving. Meggitt has two agreements with Airbus to support the OEM’s Flight Hour Services programs, and recently struck long-term deals with Emirates, Air France and VietJet, with more agreements poised for signatures.
Meggitt also is eyeing deals with third-party integrators, "including how we can work together to help the airlines improve their operations and explore new commercial relationships,” Reinecker says. The supplier would like at least three such deals, and reports that one is at the MOU stage.
"This is not only an important aspect of supporting our customers and finding new ways of improving operational efficiency, but it is also important revenue and cost-saving opportunity,” she told analysts at the company’s recent capital markets day. "By getting closer to our end customers, the airline operators, we're gaining better insight into their operations and access to the performance of our products in the field.”
The near-term upshot: 4-6% growth for the group's commercial aftermarket, Reinecker says. Down the road? “A [growth] level sustainably above that of the wider components market.”
Airbus and Boeing probably know more than anyone about the products they build. But it’s easy to forget that those products feature many complex systems designed by suppliers.
Meggitt’s is particularly well-postioned: it has content on nearly every aircraft flying (including multiple systems the Comac C919), generates 75% of its revenues from sole-source, life-of-program offerings, and has a balanced 55%-45% revenue split between original equipment and aftermarket.
Combining this sort of knowledge with a focus on the most important commercial customer base of all—the airlines—could present too much opportunity for even PFS to snuff out completely.