Boeing Wades into Parts Business

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Jon Ostrower, Boeing Boosts Push into Plane-Parts Arena; Company moves to cut costs and secure new source of revenue beyond building aircraft.
http://www.wsj.com/articles/boei ... business-1461317403

Quote:

"In the past, airlines could purchase parts directly from one of Boeing’s largest suppliers, Spirit AeroSystems Holdings Inc [based in Wichita, Kansas] * * * But in late February, Boeing quietly stopped Spirit from selling parts such as engine thrust reversers and other large parts directly to airlines, according to both companies [Boeing and Spirit]. Boeing said it also stopped granting new licenses to suppliers to sell proprietary [this means Boeing designs and owns patents] parts to its airline customers.

"The initial sale of a jetliner is a comparatively smaller portion of the revenue that aircraft will generate during their multidecade life. The greater proportion of revenue on any single plane comes from the lifetime maintenance and parts that range from fire extinguishers and seat belts to on-board computers and landing gear shared across hundreds of companies.  These parts at airlines and maintenance facilities can fetch up to 4.5 times [throughout the years, suggesting the same parts may be replaced several times] more than what Boeing pays for the parts during initial production, according to one supply-chain official.

"Spirit will continue to manufacture the spares but will have to sell them through Boeing, with the plane maker taking a cut. A Spirit spokesman said the license was a 'small component' of its overall business and airlines would still need parts it manufactures.

"And nothing prohibits Boeing from expanding its business model to emulate engine-makers and business-jet manufacturers, which have tightly controlled that lucrative pipeline with its customers.

Note: A few years back, the Economist said the same about elevator makers, whose major revenue came from maintenance rather than the initial sale.