AerospaceBusiness 2 Business

Breaking News Breaking News Breaking News

February 10, 2000

Big GE Unit to Offer Services,Sell Parts on a New Web SiteBy MATT MURRAY Staff Reporter of THE WALL STREET JOURNAL

General Electric Co.'s largest single unit, GE Aircraft Engines, plans Thursday to unveil a new business-to-business Web site that will enable commercial airlines and military customers to buy parts, among other

functions, via the Internet. The site launch is the latest flowering of GE's company wide move to integrate the Internet into its daily operations in

an effort to speed transactions and reduce costs.

Kyriakos Leonidou, Francis Montet, Linda Moya,

Ridzwan Nordin, Andrew O'Shaughnessy, Priscilla Pang

February 16, 2000 2

The Aerospace Industry

• “Aerospace” term coined in the 1950’s, when the space race was heating up

• Impetus for growth was war and the Cold War• Since the demise of the Cold War, companies have found it necessary to

merge with or acquire competitors• Since 1989, downsizing and cost-cutting have been rampant

– streamlined operations, cut R&D, reduced inventories, employment slashed by 50%

• Today Aerospace is a $1B industry. Major players are the following plus Airbus Industrie - a European consortium expected to go head-to-head with Boeing:

3 February 16, 2000

Major Players and B2B Players

Parts Suppliers Intermediaries Manufacturers Customers

Military / Government

Airbus Industrie

Boeing

Lockheed Martin

Northrop Grumman

Raytheon

Current Online B2B

CommercialCarriers

AARCorpSita

BF Goodrich

GE Aircraft

Honeywell

United Technologies

Aerospacemall.com

Aviabid.com

Partsbase.com

February 16, 2000 4

What They Do

Parts Suppliers• Aircraft engine sales &

leasing and overall• Aircraft overall• Made-to-order equipment

systems• Auxiliary power units• Commercial avionics• EGPWS warning systems• Flight control systems• Environmental control

systems• Landing systems• Interior and exterior lighting

Intermediaries• Portal for aerospace, aviation and

industrial information• Auction community to buy and

sell aviation parts, aircraft, services, and equipment.

• Career brokering

Manufacturers• Short, medium, long-haul aircraft

(military and commercial)• Defense electronics, systems

integration, military aircraft systems, commercial aircraft assemblies

• Business aviation and special mission aircraft, engineering and consultation

February 16, 2000 5

Where They Do Business

Parts Suppliers• AAR – North America, Europe and Asia• BF Goodrich – North America, Europe and Asia• GE Aircraft – North America, Europe and Asia• Honeywell – North America, Europe, Asia• United Technologies – Worldwide

Intermediaries• Primarily North America

Manufacturers• Airbus– Europe, North America, Middle East/Africa, Far East/Asia/Pacific, Latin America

• Boeing – United States, Asia, China, Europe, Oceania, Africa and Western Hemisphere

• Lockheed Martin – Government and commercial customers around the world

• Northrop Grumman – primarily US• Raytheon – primarily US

February 16, 2000 6

Who are the Customers?

Parts Suppliers Intermediaries Manufacturers

• International markets

• Commercial markets

• Military, defense, civil, government markets

• Aircraft leasing companies

“Our Space and Aviation Control business serves customers that range from aircraft manufacturers and business aircraft operators to prime space contractors and the U.S. government” Source: Honeywell SEC –10K, March 1999

• Airplane OEM

• Small parts companies

• Aviation consumers and professional buyers and sellers

• Aviation professionals looking for a job

• Air carriers looking for airplanes

February 16, 2000 7

What is the Value Proposition of Online B2B?

• Intermediaries provide “level playing field” for small and medium parts suppliers with large parts suppliers

• Parts Suppliers B2B and Intermediaries B2B enable reduced costs for Manufacturers– Reduced procurement staffs and costs– Reengineered procurement process

• Eliminate manual paper process

– Common history of business transactions between buyer and seller

• Intermediaries provide Manufacturers up-to-date product comparison information across suppliers

• Intermediaries broker effective relationships between aviation professionals looking for jobs and aerospace companies

• Intermediaries provide Airline Carriers opportunity to by airplanes, through auctions for example, “comparison” shop across manufacturers

February 16, 2000 8

Online Basics

• Computer Sciences Corporation recently conducted a study of the e-business strategies of the major players in the aerospace industry. All the IT executives of these companies “said they had Web sites, however 55% said those sites were strictly informational, with 18% interactive, 18% able to deliver information and 9% percent able to make transactions.”Source: AerospaceOnline http://www.aerospaceonline.com (November 1999)

• Parts suppliers– Generally provide company and product information as

educational content– More advanced sites have capabilities to

• place orders (GE, AAR)• search products, track orders, check inventory availability,

technical support, customized pages for customers and other suppliers (GE, AAR, Honeywell, United Tech)

• purchase online (GE)

February 16, 2000 9

Online Basics (cont.)

• Intermediaries– Information about the aviation market– Revenue plan

• Free registration• Commission based• Advertising commission

• Manufacturers– About the company (all)– Company history / milestones (all)– Meet the executives (all)– Company financial information (Boeing)– Career opportunities (all except Airbus)– News and events (all)– Product information (all)– Online procurement processes (Airbus, Boeing, Lockheed Martin)– Supplier relations information (Boeing, Lockheed Martin)– Investor relations information (all except Airbus)

February 16, 2000 10

Sample Online Value Added Web Pages

Online training offered by Honeywell

Airbus member-based service: check parts availability, interchangeability, excess material, prices

Auction community / marketplace to buy and sell aviation parts, aircraft, services and equipment

February 16, 2000 11

Online Value Added – Parts Suppliers

Personalized pages E-mail subscription to news and new

product information 1 hour guaranteed delivery at select

airports View pictures of ongoing repair work Online training Options to either exchange or borrow parts

AAR

BF G

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E

Honey

well

Unite

d Te

ch

February 16, 2000 12

Web design consulting services Discussion boards Personalized pages - account status, monitoring

auction items, end an auction early, edit personal information, feedback

Auctions allow members to set their own price

Escrow payment services Multiple auction schemes - English Auction|

Dutch Auction, Japanese Auction, Sealed Bid Multiple shipping options Allow search for parts and aircrafts Aviation news

Aerospace

Mall.com

Aviabid.co

m

Partsbase

.com

Online Value Added – Intermediaries

February 16, 2000 13

Online Value Added – Manufacturers

• Market status update / stock quote• Online publications THE LINK, quarterly

newsletter, Above & Beyond magazine • Photo or Video gallery• Kid’s page• Gift store• Philanthropy

– Education, grants, scholarships, donations to not-for-profits…

• EDI interconnection for online e-commerce

• Latest multimedia technology (FLASH)• Small business relations (women and

minority owned)

Airbus

In

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ing

Lock

heed

Mar

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February 16, 2000 14

Online Opportunities

Opportunity• Multilingual interfaces

• Attract undiscovered customers

• Recruitment of smaller carriers and private owners

• Provide tools for EDI to B2B transformation

Benefit• Increased global reach

• Increased revenues

• Cost reductions, enlarged supplier & customer network

February 16, 2000 15

Online Opportunities (cont.)

Opportunity• Purchase contract

negotiation via the web– Password protected work

area where account executive and customer can negotiate terms

• Ongoing communications via the web– 1:1 Bboard between

customer and account executive

– History of all online conversations

Benefit• Customer access to

information on their terms– Access web– Call their account

representative

• More powerful communications than paper or e-mail– Can be secured– Version control– Common history of

business relationship

February 16, 2000 16

Industry Issues

• Transfer of design and technology base– This does not necessarily mean giving up the most advanced

technology. It could involve something as simple as showing foreign workers how to operate a particular piece of equipment. To maintain technological and informational superiority, companies restrict what they make available online.

• Government involvement in the industry– In the international arena, the US aerospace industry is competing

against companies that are directly or indirectly owned by foreign governments. Asian and European governments have a strong influence in the aerospace industry and this is a barrier of entry for US companies trying to increase their market share.

• Some European countries condone bribes for solicitation of contracts, this is some thing US companies cannot offer.

• Trade barriers and sanctions also limit international transactions.