Boeing has for the first time named a non-Boeing employee to head its commercial aeroplanes division and announced a new services unit, in moves to capture more of the profitable market for parts and repairs after a jet is sold.
The changes are “a big and important step” toward Boeing’s goal of increasing annual services revenue to about US$50 billion in 10 years from about $15bn currently, said the Boeing chief executive Dennis Muilenburg.
“We’ve always said growing services is a core part of our strategy, and now you see us emphasizing and investing accordingly,” Muilenburg said.
Boeing tapped the former General Electric executive Kevin McAllister to lead its $66 billion commercial airplane business, succeeding Ray Conner. The appointment of Mr McAllister, effective immediately, will be the first outsider to lead Boeing Commercial Airplanes since the unit was formed in 1965.
Mr Conner, who started as a Boeing mechanic nearly 40 years ago, will serve as the vice chairman through 2017 to help with the transition, the world’s biggest plane maker said.
Mr McAllister has been with GE’s aviation unit for nearly 30 years and knows Boeing and its customers well, Mr Muilenburg said.
Boeing also named Stanley Deal to head the new services unit, to be known as Global Services. Mr Deal had been the senior vice president of Boeing’s Commercial Aviation Services business.
Mr McAllister has been the chief executive of GE’s $8bn aviation services business, a unit that earns much of its revenue from contracts servicing GE aircraft engines. Airlines generally pay a fee for every hour they run the engines, which covers service and maintenance.
Last year, Mr Muilenburg named Leanne Caret as the head of the defence business. She had run Boeing’s defence services business.
Now, Mr Muilenburg said, “the leaders of all three of our business ... all have depth of understanding of services”.
He said the new division headed by Mr Deal would combine about 20,000 employees from the customer services groups within the company’s existing commercial airplanes and defense, space and security businesses. It will have a small headquarters near Dallas, but most of the work will remain where it is, he added.
The changes do not alter plans for developing new aircraft, but there will be “emphasis on generating life-cycle value”, Mr Muilenburg said, referring to gaining more revenue throughout the decades-long life of the plane.
Since Mr Muilenburg took over as chief executive in July 2015, Boeing has been steadily building up its services business, moves that have irked some of its partners.
This year it ended an agreement with one of its largest suppliers, Spirit AeroSystems, effectively taking away manufacturing of profitable spare parts used in aircraft repairs.
It also began bringing some parts production in-house to gain control over repairs, and sifting its databases to help airlines predict when planes will need service.
Engine repairs make up nearly half of the service market, but those are largely beyond the reach of Boeing or Airbus. Engine makers such as GE and Pratt & Whitney locked up their aftermarket more than a decade ago.
Still Boeing’s aftermarket sales growth is outpacing the 4.5 per cent growth of the broad aftermarket, said Dennis Floyd, the vice president of services strategy and business development at Boeing.
“That means we’re taking market share.”
* Reuters
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