Page 21 - AAA MARCH - APRIL 2019 Online Magazine

E jet customers sign on for the company’s maintenance
programmes. It is an area that the American company
has invested heavily in recently as it plans to expand its
annual revenue almost threefold to $50 billion.

Airbus Takes the Lead
The joint venture can’t come soon enough for Boeing
as Airbus has found instant success with the A220 air-
craft, which was known as Bombardier C Series before
the Airbus and Bombardier announced their C Series
partnership in October 2017. However, giving too much
of an early lead to Airbus and the A220 in the small jet Difficult Times for Suppliers
market would hurt Boeing’s prospects in the segment The JV between the two companies makes sound busi-
and nullify the success that Embraer has had with U.S. ness sense for both but will make life even more difficult
regional airlines, says experts. for suppliers who have seen profit margins erode after
Worryingly for Boeing, the aircraft variants - the 220-100 Airbus and Boring started squeezing them for cost sav-
seats 100 to 130 passengers, and the 220-300 seats 130 ings. Over the last few years, Boeing and Airbus have
to 150 – seem to have particularly impressed American been working assiduously to cut into the 15-20 percent
carriers. Delta, which had ordered 75 C Series jets profit margins that component suppliers have traditionally
before Airbus took over the program, has since ordered enjoyed. Boeing was the first to makes its move, intro-
15 additional A 220s. In July 2018, JetBlue ordered 60 ducing its Partnering for Success (PFS) initiative in 2012,
A220-300s while a new airline, which JetBlue founder one that forced suppliers to either reduce costs by about
David Neeleman plans to launch in 2021, will also have 15 percent or risk losing business.
at least 60 A220-300s in its fleet. UTC’s Aerospace Systems (UTAS) segment had to
pay the price for choosing the brave path and refusing
Eyeing the Asia Pacific to lower its price on landing gear assemblies for Boeing’s
While gaining supremacy in the American smaller jets 777X aircraft – Boeing chose to go with a smaller com-
market will be a matter of pride for Boeing, the real battle pany - Héroux-Devtek – as the supplier. Significantly,
will be fought elsewhere. Both Airbus and Boeing will be both UTAS and Rockwell Collins have signed new sup-
eyeing the Asia Pacific, which is expected to account for plier deals under Boeing’s PFS 2.0 initiative, the second
two in every five aircraft deliveries over the next 20 years. phase of its PFS initiative that seeks to cut supplier
According to Boeing’s 2018 Commercial Market Outlook, costs by 2 percent a year. Unable to bear the brunt of
the size of the global fleet is projected to almost double the cost-cutting all by itself, UTAS has introduced “PACE,”
to 48,540 by 2037. The single-aisle segment will see the a cost-cutting program for Tier II suppliers.
most growth over the forecast period, with a demand for Taking note of the success Boeing had with its PFS
31,360 new airplanes. Of the 42,730 new airplanes that initiative, Airbus came up with SCOPe and SCOPe+,
will be delivered during the period, as many as 16,930 will A320-focused initiatives that forced suppliers to reduce
be in the Asia Pacific. Embraer expects airline operators prices by at least 10 percent. The plane maker has also
in the region to order 3,010 new aircraft in the segment launched another initiative for, its long-range aircraft pro-
for up to 150 seats over the next 20 years, represent- grammes, called “LR COP.” Unlike Boeing and Airbus,
ing 29 percent of the world’s demand for the category. Bombardier and Embraer had a much happier relationship
Success in the region will decide which among the two with suppliers, but with the two aviation giants now firmly
aviation giants end up dominating the smaller-end of the in control, experts expect the tough times to continue
aircraft market. for suppliers.

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