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Outsourcing - The relentless trend for the aviation material services

News   •   Sep 11, 2017 09:42 CEST

The aircraft material services market was approximately US$42 billion turnover in 2016 and is projected to grow strongly to over $62 billion by 2025.

Serving this market with parts and materials for airline customers’ maintenance organizations and Maintenance Repair and Overhaul (MRO) organizations are a multitude of enterprises ranging from Original Equipment Manufacturers (OEM). Many of these entreprises are our core business partners.

Supporting both ends of this complex market are the outsource specialists - such as Satair Group - who cover the full material value chain processes to connect suppliers and customers in the most efficient way possible by using economies of scale and scope.

In this fast-developing market Satair Group is in the pole position to identify and respond to emerging trends. One of these trends is the increased outsourcing from both customers and suppliers leading to integrated offers and consolidation in the market structure.

Airlines increasingly want to focus on their core flying operations. They have to ensure the highest aircraft operational availability.This means having a high material availability which is especially important for critical, unscheduled, and unplanned maintenance events.

Cost and schedule reliability pressures are obsoleting the old ad-hoc methods of procurement and operations will become increasingly unaffordable. Similarly, their desire to limit their financial exposures means less capital commitments for inventory.

Airlines need enhanced expertise and capabilities in this complex global material services support sector they need access to leading and innovative technology, solutions and networks. They want flexible value chain designs that take into account the specific airline networks and regional requirements with variability of the cost base.

Jörg Rissiek, Head of Corporate Strategy and Projects comments: “The solution, increasingly, is that airlines outsource their material management to qualified partners who are dedicated specialists in global value chain management, to give efficiency gains and reduce operating costs. This is exactly what we want to provide to our customers!”

A similar outsourcing trend can be seen on the supplier side. They want to focus on their core research, development and production business of high-technology aircraft parts. Paul Lochab, CCO of Satair Group adds: “They want less capital to be tied-up in an in-house distribution set-up while requiring excellent parts distribution from us to the market.”

Satair Group believes that this trend will lead to integrated offers, covering a very wide range of parts in all material categories. Such an outsourcing strategy with its long-term performance and service commitments requires flexible, extended term contracts, high-risk control and a trustful customer relationship with open information exchange. As the airline grows, changes fleets, develops new routes and markets, so the integrator adapts its service offering in a supportive, collaborative way.

Over recent years Satair Group has responded to this growing trend with a variety of different integrated product offerings such as Airbus Managed Inventory in 2010, its Integrated Purchasing Program and Airbus Flight Hour Services.But the focus now is on the growth of its Integrated Material Services (IMS) program as its comprehensive material offering,” Lochab ends.

This totally collaborative, customized and modular program covers all part number demand as requested by customers, currently for a range from 4,000 to more than 40,000 part numbers. IMS offers a competitive advantage as it reduces the total cost of ownership significantly at a guaranteed performance level and it can include other add-ons such as parts repair, maintenance tools and customized modification kits.

Keeping up with Satair Group’s strategy of collaborating (co-creating) with the customer and providing what they want, not all customers who have chosen IMS have opted for the fully integrated solution. However, there is a clear trend towards a more comprehensive range of parts covering several material categories.

Distributors are becoming material integrators and becoming bigger and better at improving their offerings along the value chain. Satair Group believes due to this, further market structure consolidation will have to take place over the next decade. The need for this consolidation is to bring down value chain costs, realize significant economies of scale and scope, and transaction cost reductions.

Satair Group aims to be the leading player in this market transformation.

By Jörg Rissiek Head of Corporate Strategy & Projects and Paul Lochab, Chief Commercial Officer

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