Airbus, Boeing fly into lucrative services sides of aviation market

The logo at the Airbus A380 assembly site in Blagnac, southern France. (AFP)
Updated 14 May 2018
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Airbus, Boeing fly into lucrative services sides of aviation market

  • Both companies are now eyeing a lucrative if rather less glamorous side of the aviation sector in their battle to dominate the skies — parts and repairs
  • Both Airbus and Boeing also have major pilot training centers in Singapore

SINGAPORE: Airbus and Boeing may have built their global success on the back of the transcontinental airliners but they are now eyeing a lucrative if rather less glamorous side of the aviation sector in their battle to dominate the skies — parts and repairs.
While booming demand for air travel across has seen the world’s top plane makers ramp up production, it is the multi-billion-dollar after-sales service market that is taking an increasing amount of their attention.
The aircraft titans are aggressively expanding their presence in the sector, which is dominated by maintenance, repair and overhaul of aircraft but also covers other services, from training to parts supply.
The European and American firms have long done some business in after-sales support, but they are now moving to win greater market share and take on other players like Germany’s Lufthansa Technik and US-based AAR.
“The services market is more lucrative than actual aircraft sales because it has more potential and it covers many different spectrums,” said Shukor Yusof, an analyst with aviation research firm Endau Analytics in Malaysia.
“Boeing and Airbus — they have to be part of it. When you sell an aircraft, it’s in your interest to have a full package of after-market services.”
Boeing predicts that the value of the approximately 41,000 planes that will be delivered worldwide over the next 20 years will be around $6 trillion — while the demand for services to support this fleet will be worth around $8.5 trillion.
In Singapore, Airbus’s wholly-owned subsidiary Satair Group has an 11,000 square meter (118,000 square foot) warehouse to house spare parts.
They are arranged on towering shelves in brown, yellow and orange boxes, and range from a main landing gear for an A380, the world’s biggest passenger plane, worth hundreds of thousands of dollars, to a washer worth one cent.
They can be dispatched from the warehouse — Airbus’s biggest such facility in Asia, and second-biggest in the world — within four hours of receiving an order, with plans to further slash the waiting time.
Airbus, whose revenues from services hit $3.2 billion in 2017, 18 percent higher than the previous year, plans to expand the facility by 8,000 square meters next year.
Both Airbus and Boeing also have major pilot training centers in Singapore.
The fierce rivals play up their intimate knowledge of the aircraft they produce as an advantage in providing after-sales support over others who could provide the services, including the airlines themselves.
“We know best our aircraft because we have designed it,” Airbus head of services Laurent Martinez told AFP.
“We have all the capabilities to support the airlines’ operations and to have the competitive edge in terms of spare parts.”
Randy Tinseth, vice president of marketing at Boeing Commercial Airplanes, said the US firm currently only has a seven percent market share in the sector, and there was plenty of room for growth.
“The products we have today can only address about 30 percent of this market,” he said at the recent Singapore Airshow.
“So if this market grows about five percent per year as we focus more on developing new products, we expect to see dramatic growth in our business.”
The Singapore Airshow highlighted the growing importance of the sector.
The largest deals at the show, the biggest in Asia, were not plane orders but contracts worth nearly $1 billion signed by Boeing’s dedicated global services unit, which was launched last year as its vehicle to expand into the after-sales market.
Both companies are focusing on Asia-Pacific due to explosive growth of the aviation sector in an increasingly affluent region where many people are flying for the first time.
Airbus’ Martinez said Asia-Pacific is expected to account for 40 percent of the services market over the next two decades, with the region’s aircraft fleet set to almost triple by 2036.
The fight for after-sales services market share between Boeing and Airbus will likely be every bit as fierce as their battle for aircraft orders.
Competition “is going to be very, very tough — very intense,” said analyst Shukor.


Lebanon’s Hariri calls for cabinet solidarity in budget debate

Updated 18 June 2019
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Lebanon’s Hariri calls for cabinet solidarity in budget debate

  • The PM said cabinet ministers need to be united and responsible
  • Lebanon’s debt is almost 150% of its GDP
BEIRUT, June 18 : Lebanon Prime Minister Saad Al-Hariri on Tuesday called for parliament to quickly approve the country’s 2019 budget and urged his coalition government to avoid internal disputes.
The cabinet this month agreed a budget plan that shrinks the projected fiscal deficit by 4 percentage points from last year to 7.6% by cutting spending and raising taxes and other fees.
“What I want during the debate is for us to be responsible and united, and not contradictory,” Hariri said in a statement, addressing cabinet ministers as to their comportment during the parliament debate.
Parliament’s finance committee is debating the draft budget and has suggested amendments, local newspapers reported. It will then put the budget to the full assembly to ratify it.
Parliament is mostly composed of parties that are also present in the coalition government and which supported the budget there.
Since the budget was agreed there have been fierce arguments between parties in the coalition over several subjects, though these have not targeted the budget.
Lebanon has one of the world’s heaviest debt burdens, equivalent to about 150% of GDP, and the International Monetary Fund has urged it to cut spending.
“We have held 19 cabinet meetings to agree on this draft budget and these sessions were not for fun, but for deep, detailed debate over every clause and every idea,” Hariri said.
“For this reason, I consider it the responsibility of each of us in government to have ministerial solidarity...to defend in parliament the decision that we have taken together,” he added.
After the 2019 budget is agreed, the cabinet must quickly start working on the 2020 budget and on approving the first phase of a program of investments toward which foreign donors have offered $11 billion in project financing. (Reporting by Angus McDowall, editing by Ed Osmond)