Working the Solution
A few companies have taken the approach suggested in this paper. They understand that their own success is linked in a very direct manner to the success of the companies upon whom they depend. These companies provide proactive guidance and support to their suppliers, or conversely, they listen attentively and adapt to their customers. These companies make compromises in what they expect from one another so that each partner in the relationship can be successful. Just as in a successful marriage, companies that build successful partnering relationships share with the partner. Information, resources, needs, limitations, concerns, problems and, of course, successes are all a part of this sharing.
The development of this concept is far from mature however. In comparison to the relationships established in manufacturing industries, MRO partnering is truly in its infancy.
Where does outsourcing go from here? There will always be traditional outsourcing relationships built around buying a service in a competitive manner. But as partnering customer/supplier relationships become more common, the groundwork will be laid for the next development in outsourcing – risk sharing. Just as manufacturers have found it helpful to reduce their capital investment and overall exposure by sharing the profits of production with suppliers, airlines may well recognize the possibility of reduced overall maintenance costs by sharing operating revenues with suppliers based on a full time commitment to supporting the maintenance of the aircraft.
The Star Alliance is heading in that direction now. The AirLiance technical services company formed by United, Lufthansa and Air Canada initially to provide spares support is likely to be the forerunner of a similar venture in MRO services. But these developments will not be limited to airline conglomerates. Existing MRO providers will enter into the mix as well. In some cases, the suppliers may be bought in part or outright by their customers. But the larger suppliers will be able to stand on their own and offer a joint venture kind of support that many carriers will probably prefer.
Today, such a relationship seems a bit far-fetched. Revenue sharing (outside of the employee plans) for the airlines is probably quite a ways off and may initiate through agreements with aircraft lessors rather than with service providers. It may also arise in smaller and start-up operations long before the established carriers acknowledge its potential (although the higher risk to the supplier may make these relationships unfeasible). But ultimately, it is an idea which will be tried and perhaps tried successfully.
Paul Kerpoe - Aviation Consulting