Boeing, on a new drive to boost substantially its income from aftermarket services, is actively reversing its yearslong course of extensive outsourcing.
In the latest sign of a new approach, Boeing announced internally Monday it is setting up an in-house unit called Boeing Avionics to “pursue the development and production of avionics and electronics systems.”
Avionics are the core electronics used to manage aircraft systems including flight controls, communications, navigation, sensors and warning systems, and flight-deck displays.
In a company memo to employees, Boeing Chief Executive Dennis Muilenburg referred to the move as a “strategy to build targeted vertical capability.”
That’s business-speak for a company doing more of the work itself rather than handing it off to outsiders, and a term that must worry current systems suppliers such as Rockwell Collins and Honeywell — which may get less avionics work on Boeing’s next new airplane.
Setting up Boeing Avionics is tantamount to an admission that Boeing made a mistake 14 years ago as the 787 Dreamliner program was launched.
That’s when Boeing dissolved an in-house organization created in the 1980s called Boeing Commercial Electronics, dispersing 1,200 engineers in Everett who designed electronic controls for all its airliners and selling off a plant in Irving, Texas, where another 1,200 people built the hardware.
The move, part of a broad handoff of control to airplane-systems suppliers, was intended to cut Boeing’s costs.
Dwight Schaeffer, a former senior manager at BCE, said Boeing tried on the 787 to cut the one-time cost of developing its new airplane by outsourcing work to “get someone else to pay for it.”
The result was “a disaster,” he said.
Schaeffer and other former BCE managers traced some of the early systems problems on Boeing’s 787 — including the overheated batteries that grounded the fleet worldwide in 2013 — to a loss of control of systems design and the disbanding of BCE.
But for future airplanes, Boeing is now hungrily eyeing the profits made by its systems suppliers, who collect money long after an airplane leaves Boeing’s factory by maintaining and updating the avionics throughout the jet’s service life.
The launch of Boeing Avionics signals the jet maker wants a bigger piece of that aftermarket pie.
It’s one more step toward Muilenburg’s stated goal of growing the company’s overall services business from $14 billion today to $50 billion within five to 10 years.
According to the internal Boeing announcement, the new avionics unit will develop systems for all of Boeing, not just the commercial side.
It will “focus on avionics systems such as those designed for navigation, flight controls, information systems and other core avionics” and will develop such systems for future airplanes, targeted for entry into service in the next decade.
Look for more in-house avionics on the so-called middle-of-the-market airplane, referred to by many in the industry as the 797, that Boeing is expected to launch within a year for entry into service in 2024.
