Goal of Boeing to dominate Military Aviation Logistics
Anurup Pathak – The top executives of Boeing’s would like to talk more about its future as aviation logistics powerhouse and less about the company’s shrinking share of the combat aircraft market.
There is the no secret of the company that it intends to make a full-court press in military aviation support services and training, and that goal was made clear when it designate Edward “Ed” P. Dolanski president of global services and support, one of five major units of Boeing Defense, Space & Security.
The third of Boeing’s $30 billion defense business was makes up nearly by GS & S. The company employs 12,000 workers and operates in 28 country at 293 location.
The post of Dolanski was promoted in February after presiding over impressive growth at Boeing’s subsidiary Aviall, which provides aftermarket services to commercial aviation, aerospace and defense industries.
During his first interview since taking over GS&S, Dolanski mentioned services are now the “natural area of focus for growth.”
Much of the industry nattering about Boeing’s defense business has focused on the loss of the stealth bomber contract and the looming end of new fighter manufacturing. The lines of iconic fighter aircraft like the F/A-18 Super Hornet and the F-15 Eagle could be shutting down in the 2020s as orders wind down.
Dolanski mentioned that Boeing leaders are not dwelling on the past and are setting their sights on segments of the defense market where they see develop new opportunities, such as adapting commercial passenger jets for military missions and modernizing aging combat aircraft fleets.
“We aren’t having discussions inside the company about why we didn’t win the last fighter contract,” Dolanski mentioned. “That’s not in the debate. What is in the discussions now is that the opportunities to grow services are immense,” he added. “We doubled the size of Aviall over a nine-year period.”
Initiatives to capture more services contracts are getting especially strong promotion from the top leadership, he mentioned. Boeing President and CEO Dennis Muilenburg and Boeing Defense, Space and Security President Leanne Caret both have in recent years been in charge of the services unit. The defense sector in other segments besides aviation logistics, including space launch, satellites, helicopters, unmanned aircraft and “commercial derivatives” are the Boeing forecasting growth. These are passenger jets that are customized for military use, as is the case with 737s that are transformed into Navy P-8 maritime surveillance aircraft. The company also is building refueling tankers for the Air Force from 767 airframes.
The support services are far less glamours than manufacturing fighters, they almost certainly ensure profits over the long run. “If you look at the sale of the platform, 30 percent of the cost is the acquisition of the platform. The logistics tail is 70 percent,” said Dolanski. “It is a very long tail.” Military derivatives of commercial aircraft like the P-8 are “designed to fly a very long time,” he said. “So as a business leader you would naturally put your attention into services. That’s an annuity, fundamentally. Other companies have used it as an annuity. And it’s worked quite well.”
The plans of the Boeing to aggressively compete for support work not just for the aircraft it built but also for platforms made by competitors. The company currently does maintenance and upgrades of several aircraft that were not designed or made by Boeing such as the F-16 Viper, the T-38 trainer, the QF-16 aerial target and the A-10 Thunderbolt. It produces the technical manuals of all C-130 cargo aircraft variants, supports the Air Force Special Operations Command’s C-130 gunships and the B-2 stealth bomber under a contract from Northrop Grumman. Boeing also operates the F-16 mission-training center and oversees F-22 crew .
Possibly, Boeing could one day provide maintenance services for the F-35 joint strike fighter, made by Lockheed Martin. That is entirely plausible, Dolanski mentioned. “I don’t see any platforms in my mind that are off limits. We look and see if the customer has a need where we can help. And we want to be a part of that help.”
This agnosticism approach helped Aviall win new business, he mentioned. “We should be very good at serving the Boeing platform. But let’s think about the fleets that are out there that are not Boeing, about being able to utilize our supply chain practices, our advanced data analytics capabilities to serve those other platforms as well,” he added. “We don’t just think of services as the Boeing fleet,” he noted. However, “our focus is, number one, on being very good at serving our own platforms” and parlay that performance into other, non-Boeing systems.
The company is confident that its commercial knowhow can be a huge advantage as it competes for work in the defense services sector, mentioned Dolanski. “Our commercial platforms were engineered and designed for airline customers which means high turnover,” he noted. “You land, and 30 to 45 minutes later it needs to be ready to go again. So you need a high yield and low operating costs. … Our customers in the defense world can take advantage of that,” he said. “We have 4 million parts sitting on the shelf right now ready to serve both commercial and defense platforms.”
The executives of Boeing have been especially enthused about a Marine Corps contract to refurbish potentially dozens of F/A-18 Hornets that have come back from combat zones and some that are sitting at a boneyard near Davis-Monthan Air Force Base in Arizona. The company is rebuilding Hornets on an assembly line at Naval Air Station Cecil Field, in Florida.
The next immediate goal is to negotiate a deal with the Navy for the service life extension of the F/A-18 Super Hornet, which could involve the entire fleet of 580 aircraft. The details are still being negotiated, Dolanski noted. “We have the engineers, we have the knowledge, and our customer wants to extend the life of that fleet.” The sticking point is the cost and securing long-term funding.
“The customers need more value,” he said. “They need solutions that are innovative and creative. We’re not going to be able to serve this market the way it has been done in the past and expect the money to be there.”
As Boeing shifts more attention to logistics services, it now regards the Defense Logistics Agency as a vital customer. The company’s “performance-based logistics” contract with the DLA has grown from $500 million to $13 billion as more platforms have been added in recent years. Aviall this month was awarded a five-year contract to provide batteries and related parts to the DLA — battery cells, storage containers, covers and heaters.
Boeing is one of about 25 to 30 companies that the DLA selected for its “captains of industry” forum. The agency created the program in 2012 as a venue for DLA and industry executives to suggest ways to improve service and lower costs.
Dolanski’s experience includes 14 years with Wal-Mart, where he ran information technology and supply chain management programs. Like other executives who transition from commercial to defense businesses, Dolanski blames red tape for increased costs in government programs. Excessive regulations result in higher cost and less productivity, he said.
Strict rules that require the Defense Department to divvy up logistics work between the private sector and public depots are one case in point. “I would say that it does limit the synergy that you’re going to get out of industry because the more volume you put through industry, the more efficiency industry can drive.”
Those constraints are not seen in the commercial world, he said. “We have a synergy curve. When the curve starts flattening that’s when you stop. The depot policy doesn’t allow you to get anywhere near the top of the synergy curve.” These policies were created for a reason, he acknowledged, “but I truly believe there is opportunity for the customer to be more efficient, to make the money go further.”
Source: nationaldefensemagazine.org
