The Aerospace & Defense Forum Los Angeles Chapter May 19, 2017 Airline Supply Chains. Strategies to Win May 19, 2017 CONTENTS � About ATBD � Airlines - big picture � Airline requirements � Examples of success � Pitfalls to avoid � Summary 1
The Aerospace & Defense Forum Los Angeles Chapter May 19, 2017 Introducing ATBD � Santa Monica, California, since July 2002 � 1,000+ yrs airline, lessor & OEM experience � Provides contract & advisory services to: � Airlines, suppliers, lessors and others � 40+ Professionals & 3 support staff � Technical, commercial, financial, legal expertise � 30%-70% of business international � Providing contract airline management expertise ATBD Typical Customers Start-up, small/med size airlines Airline suppliers Aircraft lessors Attorneys Consulting groups 2
The Aerospace & Defense Forum Los Angeles Chapter May 19, 2017 ATBD People experience by the numbers � 20+ start-up airlines � 50+ smaller/mid-size airlines � 100+ Aircraft transactions � 80+ Aircraft mod. programs. 25+ other programs � 52+ countries, 7 languages spoken � 60+ FAA qualifications � 40,000+ air transport pilot flight hours � COO, SVP, VP, Director, chief pilot levels Airline Supply Chain – The big picture Fast-paced 24/7 environment High aircraft utlization 2,500-5,000 hours/yr 15-35 year useful aircraft life High-performance products, services Safety. Sched. airlines safest transportation Reliability. 98.5%+ is industry standard Efficiency. Ruthlessly competitive industry 3
The Aerospace & Defense Forum Los Angeles Chapter May 19, 2017 Airline Supply Chain Requirements � Safety/Reliability/Efficiency � Supplier integrity, support and longevity � OEM one-stop support to a la carte � Once above satisfied, commercial deal � Quantitative and qualitative best deals Examples of Success Owning the supply chain, cradle to grave. Less hassle airlines, more OEM profit using: Spare parts and repairs Training Product upgrades PBH (Power By the Hour) Product disposition Works with engines/galleys/seats/avionics 4
The Aerospace & Defense Forum Los Angeles Chapter May 19, 2017 Examples of Pitfalls Underestimating: product support required product integrity in airline world unknown/unknowns Not: thoroughly testing in-house using friendly launch customers responding quickly to problems There are different airlines types Different airlines types – mean different supplier selling strategies: 5
The Aerospace & Defense Forum Los Angeles Chapter May 19, 2017 Different Types of Airlines: 1. Major Network Carriers 2. International Carriers 3. Low Cost Airlines 4. Regional Airlines Major Network Carriers: • Examples: United, American, Delta. • Business Model: Full service, fully integrated, leveraged frequent flyer programs and alliances • Route Network: Mostly hub and spoke. Some point to point • Fleets: Many aircraft types serving small short-haul to large long-haul markets Supplier Issues: These airlines need customized products. • High, volume, higher risk, higher rewards. 6
The Aerospace & Defense Forum Los Angeles Chapter May 19, 2017 International Carriers: • Examples: British Airways, Singapore, Lufthansa • Business Model: International Flag carriers, full service, fully integrated, alliances are important • Route Network: International point to point, regional service sometimes done by subsidiaries • Fleets: Many aircraft types serving small short-haul to large long-haul markets Supplier Issues: Foreign exchange rates and long • shipping lines. Ditto Major Network Carriers. • Low Cost Airlines: • Examples: Southwest, Ryan Air, Allegiant • Business Model: Low cost and low price, serving leisure markets. • Route Network: point to point • Fleets: One fleet type for all routes for low cost. Supplier Issues: Low cost means low margins. However, • simplified supply chain. 7
The Aerospace & Defense Forum Los Angeles Chapter May 19, 2017 Regional Airlines: • Examples: Skywest, Mesa, Republic, Trans States • Business Model: Connect small markets for network carrier, Independent operators – dependent on network carriers for revenue • Route Network: feed large hubs with regional traffic • Fleets: Regional aircraft – less than 110 seats Supplier Issues: BFE (Buyer Furnished Equipment) v. SFE • (Seller Furnished Equipment). Opportunity to test market/products /services in lower risk environment. Summary 1. Knowing airline customer in-depth pays off. 2. Healthy dose of paranoia helps. 3. Flexibility and willingness to change helps. 4. Experience/new sales methods invaluable mix. 8
The Aerospace & Defense Forum Los Angeles Chapter May 19, 2017 Dave Hopkins & Doug Sutton Thank you…… your questions and comments are welcomed 9
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