Arun Sivasankaran

When Boeing CEO Dennis Muilenberg set Boeing Global Services (BGS) a $50 billion annual revenue target in five to ten years, there were many who thought that getting close to the goal, let alone reaching it, would take some doing.

Less than 18 months since BGS was launched last July, the group has made such inroads into the services market that Stan Deal, President and CEO of the group, says what started out as an aspirational goal has now become an attainable one.

It is the numbers that BGS that racked up that makes Deal confident. After ending 2017 with US$16.5 billion in orders, the group carried the momentum into 2018, announcing more than US$900 million in new orders and agreements at the Singapore Airshow. At the Farnborough Airshow, it went one better, with $2.1 billion worth of new agreements.

Comfortably Ahead

According to Boeing’s 2018 20-year Commercial Market Outlook unveiled at Farnborough, the global services market will grow at an annual rate of 4.2 percent over the forecast period. Boeing expects to grow at a rate of about nine percent year-over-year.

“We outpaced the market comfortably last year,” Deal tells Asian Airlines & Aerospace in an interview. “Our current growth rate is about 11 percent. It has been a very good first half of the year and we want to make the second half great as well. We had US$16.5 billion in orders last year; I’d like to soundly beat that this year. We are on a very good trajectory.”

Boeing currently has 7% aftermarket share on the commercial service side and about 9% on military aircraft. “We are second or third in each market but the largest services provider overall; most companies concentrate on only one market,” says Deal. “As we get to the US$50 billion goal, we want to be in the double digits range.”

Eyeing the Asian Market

With as many as 16,930 new aircraft expected to fly in Asia Pacific during the next 20 years, the region’s services market is forecast to double in size over the next ten years, and be worth US$3,365 billion by 2037, far outstripping North America, the second biggest market with US$ 1,850 billion. It is a market that Deal believes BGS can make major inroads into.

“It is a very dynamic commercial market; most of the growth markets are in the Asia Pacific,” says Deal. “India, China and Southeast Asia are all evolving markets with a lot of potential. On the defence side, we have had quite a bit of success in Asia and the Middle East, in countries such as India (The Indian Navy is the first international customer for the P-8 aircraft and is the largest international customer for C-17), Singapore, Japan, Kuwait and Saudi Arabia. Performance-based logistics contracts are quite popular there.”

The commercial side of the market is expected to grow at a faster pace than the defence segment, Deal said. “The rate of growth for defence is 1 to 1.5 percent, compared to 3.5 to 4 percent for commercial, but we are starting to see a slight pick-up in defense spending. It is still a very U.S-centric market on the defence side, but we are starting to see more spending by NATO allies and friends. We have started to see a shift in percentage of revenue outside of the U.S.”

The business unit has four core service capabilities – supply chain; engineering, modifications and MRO; digital aviation and analytics; and training/professional services. Deal’s strategy for the company involves vertical integration, mergers and acquisitions, as well as promoting organic growth by investing in innovative ideas such as the 737-800 Boeing Converted Freighter, delivered in April this year to GE Capital Aviation Services (GECAS), and the Jeppesen FliteDeck Pro 4.0 app.

Joint Ventures, Acquisitions

One of the two joint venture companies announced since BGS was formed is Adient Aerospace, a joint venture between Boeing and Adient, a company that specializes in automotive seating. The new company, announced in January this year, will develop, manufacture and sell aircraft seats that can be installed on new aircraft or retrofitted on aircraft produced by Boeing or other manufacturers. In June this year, Boeing announced its intention to form a joint venture with French engine manufacturer Safran, which produces engines for Boeing 737 Max, to make auxiliary power units.

In May, Boeing announced that it was acquiring aerospace parts distributor KLX Inc. for US $4.25 billion. The company, which is also a leading supplier of chemical composites, will be fully integrated with Aviall once the acquisition process is complete. In July, the company set up AvionX, its avionics manufacturing division, which will develop and produce avionics systems for navigation, flight controls and information systems.

There is more to come, says Deal. “We are on an expansion path and are always looking to provide more competitive solutions for our customers.”

Betting on Digital Innovation

Digital software solutions that improve performance of aircraft and reduce operational costs will continue to be a big focus area for the company, says Deal. “We offer a broad portfolio of software tools that are designed to make the total eco-system more efficient. We think that it is an area that could grow by a factor of ten over time.”

In June last year, Boeing launched Boeing AnalytX and immediately announced agreements with companies such as Delta Air Lines, China Airlines, AirBridgeCargo, Korean Air and Turkish Airlines. This was followed later in the year by deals with seven other customers, including Biman Bangladesh Airlines, Japan Airlines, Qantas, MTU Aero Engines and United Airlines.

The company provides a variety of data analytics tools to its customers, including crew scheduling, digital navigation, management and maintenance of leased airplanes and engines, management of parts inventories, flight optimization software, flight planning tools, optimized maintenance programs and fuel efficiency tools. At MRO Americas this year, the company announced the introduction of five new products and services, including Self-Service Analytics by Boeing AnalytX.

In June, Singapore’s Defence Science and Technology Agency (DSTA) and Boeing announced that they had signed a deal to jointly develop an information management tool that leverages data analytics to identify trends and insights on aircraft performance. The tool will be used to analyse flight and maintenance data for the Republic of Singapore Air Force (RSAF)’s F-15 and AH-64 aircraft.

Expanding its Reach

BGS will also focus more on offering competitive solutions for airplanes made by other manufacturers. ”Most of our customers have mixed fleets; they keep telling us that they need  solutions across the fleet to take full advantage of the services that we provide,” says Deal. “In the past, we have done work on C-130 and F-16. We are doing more now. We are also pursuing new contracts.”

Apart from offering a pool of pilots that customers can lease to fill short-term demand, BGS also offers a pilot development program, simulator solutions as well as flight and maintenance training. “We continue to work on investment in technology that will shrink the training footprint required to become pilots,” says Deal.

Success is not measured merely by numbers, says Deal. “I want to ensure that we deliver everything that we have promised to our customers. It has been a great start, but this is not a sprint; it is a marathon.”