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Aerospace Big GE Unit to Offer Services, Business 2 Business Sell Parts on a New Web Site
February 10, 2000
By 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

The Aerospace Industry

Aerospace term coined in the 1950s, 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:
60,000

Revenue $ millions

50,000 40,000 30,000 20,000 10,000 0 Boeing Lockheed Martin United Technologies Raytheon Northrop Grumman B.F. Goodrich

February 16, 2000

Major Players and B2B Players

Current Online B2B Parts Suppliers AARCorp Sita BF Goodrich GE Aircraft Northrop Grumman Honeywell Raytheon United Technologies Intermediaries Aerospacemall.com Aviabid.com Manufacturers Customers Commercial Carriers

Airbus Industrie
Boeing Lockheed Martin

Partsbase.com Military / Government

February 16, 2000

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
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February 16, 2000

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
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Who are the Customers?

Parts Suppliers
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

Intermediaries
Airplane OEM Small parts companies Aviation consumers and professional buyers and sellers Aviation professionals looking for a job Air carriers looking for airplanes

Manufacturers
International markets Commercial markets Military, defense, civil, government markets

Aircraft leasing companies

February 16, 2000

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

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)
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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)
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February 16, 2000

Sample Online Value Added Web Pages

Online training offered by Honeywell

Auction community / marketplace to buy and sell aviation parts, aircraft, services and equipment
February 16, 2000

Airbus memberbased service: check parts availability, interchangeability, excess material, prices
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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

February 16, 2000

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Online Value Added Intermediaries

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

February 16, 2000

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Online Value Added Manufacturers

Market status update / stock quote Online publications THE LINK, quarterly newsletter, Above & Beyond magazine Photo or Video gallery Kids page Gift store Philanthropy
Education, grants, scholarships, donations to not-for-profits

EDI interconnection for online ecommerce Latest multimedia technology (FLASH) Small business relations (women and minority owned)
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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

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Online Opportunities (cont.)

Opportunity Purchase contract negotiation via the web
Password protected work area where account executive and customer can negotiate terms

Benefit Customer access to information on their terms

Access web Call their account representative

Ongoing communications via the web

1:1 Bboard between customer and account executive History of all online conversations
February 16, 2000

More powerful communications than paper or e-mail

Can be secured Version control Common history of business relationship
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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.

February 16, 2000

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