Could a Silicon Valley company, Google or Amazon create a coherent aviation aftermarket network?
FAA, Boeing, Airbus, industry– already heavily integrated as to data
Initial Integration as to Aftermarket
By Ray Valeika
One of the airline industry’s recognized experts in maintenance has written an article questioning the future structure of and participation in the Aftermarket. The essay is republished below:
Service structures have remained mostly unchanged up until now for most nonengine OEMs, mainly because the airlines’ operating structure has been fundamentally unchanged. But today’s highly reliable aircraft and engines are altering how airlines depend on OEMs and how OEMs support the airlines.
Thus, do the operators still need comprehensive technical staffs, and how large should they be, especially when there are fewer and fewer technical issues? Airlines with minimal technical capabilities are operating safely all over the world, and at the same time, legacy carriers have come under pressure over the years to reduce their maintenance capabilities.
Additionally, how can an individual airline perform effective surveillance and analysis when there are very few anomalies—and in some cases, none—for specific carriers?
This creates a quandary for airlines with technical capabilities that need less OEM support yet have costly technical infrastructures, because they are competing with lower-cost operators that need more OEM support. Should the OEMs offer the same level of support for both?
Highly reliable new-generation aircraft are fundamentally changing airlines’ dependence on their own data and operational experience, which are diminishing as problems become less frequent. This challenges the heart of the current ways of handling data because now operators must depend on other data sources. This dependence beyond internal sources diminishes some of their autonomy and independence from OEMs for a variety of services.
Boeing and Airbus are capable entities that can create a coherent aftermarket network. If they cannot, then my bet would be on an Amazon or Google or another large Silicon Valley venture. For one simple reason: Providing valuable services is all about knowledge, which is all about data. And controlling the data leads to control over all the other aspects of airline operations such as maintenance programs, inventory, planning, and even back-office processes.
Boeing and Airbus—unlike the engine OEMs—are primarily integrators of design, supply chain and aircraft manufacturing. Engine OEMs, for the most part, control the whole product from design to manufacturing. As integrators, nearly all data is available to, but they don’t control it. This has to change if one expects Boeing or Airbus to create a meaningful aftermarket business.
Today many companies are offering connectivity, analytics and diagnostics, but these efforts can create chaos yet can only improve specific issues—not provide coherent and comprehensive value across the board for operators. If the necessary information is dispersed across multiple providers over multiple systems, this will create unnecessary complexity for the user, especially at the interface of various systems. And yet airlines are predicted to spend millions on connectivity. Do they know what they’re getting? If connectivity focuses primarily on reducing delays and cancellations, and reliability is already over 95%, how big is the benefit?
While connectivity can provide many benefits, improvements in less sexy-sounding areas such as the following can also provide large cost savings:
- Inventory.Major legacy airlines have $1.5-2 billion of inventory that turns at fewer than 1.7 times/year.
- Aircraft out of service.On average, airlines have as many as 10% of their aircraft on the ground due to scheduled maintenance, technical reasons and modifications and reconfigurations. That’s some 2,000 aircraft daily.
- Heavy hangar maintenance.For every scheduled heavy-check hour, there is another unplanned labor hour due to findings, engineering, waiting for parts, reviewing manuals and other inefficiencies.
The examples above are just some of the areas where airlines would welcome an improvement from the exponential proliferation of data and data systems.
The real questions are: Would Boeing and Airbus be keen to use all this data to help airlines reduce inventory and aircraft out of service? And will the airlines be willing to hand over more control of data and how it is used to OEMs and give up some autonomy? That is, and has been, the fault line between airlines and OEMs
The FAA’s heavy reliance on data as part of its SMS, ASAP, FOQA, SMS and VDRP has also inspired all sectors of the aviation manufacturers to design devices to capture more and more of the numbers generated by the aircraft’s systems and components:
· BOEING COMMERCIAL SE
Perhaps, Mr. Valeika’s subtle point is “whether the airline/customer wants its manufacturer to know all that this data would reveal.” For example and not an example drawn from the aviation OEM sector, a hypothetical company, which is privy to a customer’s internal information, could increase its price because of the buyer’s need. On the other hand, knowledge that Customer A has recently used a high % of its inventory might allow the seller to check to see if it has enough of that part to meet the demand.
Thus, the Valeika thesis may be that a 3rd party Integrator, such as Amazon or Google, would have no such potential for a conflict. As the middleman, a Silicon Valley company’s sole incentive is only the efficiency of the supply chain.
The FAA has taken extraordinary steps to increase the trust with the certificate holders that the data will not be misused.
The Valeika idea could be modified to better interface with the FAA regulatory requirements mandating CASS. That is an air carrier quality assurance system. CASS provides air carriers with the necessary information /data needed to make decisions and reach their maintenance program objectives. CASS becomes an inherent part of the air carrier’s way of doing business and helps promote a safety culture within the company. CASS monitors various programs, primarily the air carrier’s Continuous Airworthiness Maintenance Programs (CAMP), which includes inspection. All air carriers have a CAMP to ensure that their aircraft are properly maintained. The primary function of CASS is to ensure that each air carrier’s CAMP is effective. A working CAMP prevents premature failures while increasing aircraft and parts reliability and overall safety. In an ideal world, the air carrier’s CAMP would ensure that there were no events between scheduled aircraft checks. Each CAMP must be continually adjusted to move towards this objective. An effective CASS should identify elements that are detrimental to the overall effectiveness of the air carrier’s CAMP and correct those deficiencies before they become systemic problems. To achieve these goals, the CASS collects data and analyzes that data from several elements of an air carrier’s CAMP. These data can be classified into routine, audit, and other data, depending on their source. In Ray’s model that data would be collected and managed by a 3rd party. The key point is how does Ray data model meet the FAA CAAS requirement and ensure the operator has the right data?
Already, Boeing, Airbus and other airline suppliers have access to much of the relevant data. Already, those same OEMs have vertically integrated with the acquisition of companies like Aviall. Mr. Valeika has extensive experience with Airbus, Boeing and other OEMs. His real point may be that
- integration is inevitable;
- information is already shared;
- the OEMs should initiate measures to increase the trust with their customers!
Vertical integration is always a difficult market transition; so, even though there may be substantial safety benefits, the OEMs entry into the Aftermarket may not work.
 Mr. Ray Valeika is a Member of the Boards of Directors of Safety and Reliability Board of Carnival Cruise Lines. He was a Management Affiliate at MidOcean Partners. Mr. Valeika worked with MidOcean to evaluate opportunities in the airline maintenance industry. Prior to the formation of the ATL Fund, Mr. Valeika was a MidOcean Management Affiliate from 2006 to 2014. He serves as Member of Executive Board at ATL Partners. Mr. Valeika has significant leadership experience in the airplane maintenance sector having served as the Senior Vice President of TechOps at Delta Air Lines Inc., where he directed a worldwide maintenance and engineering staff of more than 10,000 professionals maintaining a fleet of nearly 700 aircrafts prior to his retirement in 2004. Mr. Valeika launched the aircraft maintenance and repair initiative at Delta TechOps. At Delta, he launched and led Delta TechOps. During his 40 years career, Mr. Valeika also worked for Continental and Pan Am and provided leadership for many of the industry’s technological innovations where he led the maintenance operations. Mr. Valeika served as a Director of Noranco, Inc. and SRT. He served as the Chairman of the Air Transport Association Aging Aircraft Task force. He has also served as a Director of AerCap, Inc. Mr. Valeika also served as General Chairman for the SAE Aerotech and Chaired the Engineering Maintenance and Material Council of the ATA. Mr. Valeika also has served as General Chairman of the SAE Aerotech Congress & Exhibition and NASA’s Aeronautics Space and Engineering Board (ASEB); and has chaired the Engineering Maintenance and Material Council of the ATA. In addition, Mr. Valeika has served on the Board of Directors of AerCap Inc. In 1996, he was honored with the ATA’s Nuts and Bolts award for his leadership and achievement in advancing safety and quality standards in the commercial aviation industry. Mr. Valeika holds a B.S. degree in Aeronautical Engineering from St. Louis University, Parks College.
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