Boeing set to profit from lift-off in after-market services

BOEING is doubling down on its landmark new strategy designed to muscle-in on the business of maintenance providers by making its next jet the laboratory for in-house services that could radically alter the global business model for selling planes.

Unlike Boeing’s previous all-new design, the 787 Dreamliner, its proposed new mid-market plane will not bring a flood of revolutionary technical designs to the drawing board, but it will give the world’s largest plane-maker a chance to test its new business approach of designing the plane so that it generates lucrative services revenues for Boeing, while offering efficiencies to airlines during the aircraft’s decades-long lifespan.

Along with production costs, the new approach could help Boeing to decide whether to invest the $15 billion (R176bn) or more in development needed to build the jet. “If we decide to launch, it’s a big investment, and it’s an investment that has to contemplate not only the product itself but all of our other strategic objectives,” chairperson and chief executive Dennis Muilenburg told Reuters. “So you can imagine we would want to look at this airplane through the lens of lifecycle value as we are growing our services business,” he said.

Until recently, Boeing and Europe’s Airbus sold planes with little involvement in the way they were operated and maintained. Instead, that work was carried out by their suppliers or third-party shops.

Heavy outsourcing on jets such as the 787 expanded the trend by leaving suppliers in command of key components. – Reuters