The creation next year of a separate operating segment that consolidates most of its current services work for commercial and military customers will help Boeing [BA] increase its market share and significantly grow its services work, the company’s chief executive said on Monday.
The company’s long-term, “aspirational” goal is to triple its current services business over the next five to 10 years to about $50 billion annually through market share gains, organic and inorganic investments, and by taking advantage of a growing global market for services work, Dennis Muilenburg, Boeing chairman, president and CEO, told reporters on a conference call Monday evening. He said this is an “aggressive” goal and a “high bar target.”
Boeing currently has a 7 percent share of the commercial aircraft services market and a 9
share of defense services market “so we have ample room to grow and this targeted organization change is designed to help us grow share and take part in a robust and growing services market,” Muilenburg said.
Boeing’s Global Services & Support (GS&S) business, which is part of the company’s defense segment, posted $9.2 billion in sales. The GS&S business will be combined with Boeing Commercial Aviation Services to create the new Boeing Global Services segment. Boeing doesn’t break out sales for Commercial Aviation Services.
Organic investments are favored over acquisitions with growth objectives in Boeing’s traditional business such as high value spare parts, low-cost modernization and upgrade work for customers, new services models, performance based logistics, and information services that take advantage of data analytics and other digital solutions, Muilenburg said.
Boeing said the market for commercial and defense services is estimated to be worth $2.5 trillion over the next 10 years, which is the timeframe the company hopes to aggressively triple its current business here.
Muilenburg said the new organization, which is in the formative stages and will be formally stood up during the third quarter of 2017, is a “concrete” step and “key enabler” for helping Boeing reach its market share and growth objectives in services.
Muilenburg said that Boeing has been targeting growth in services for a while, adding that its one of the company’s “primary strategies.”
In its commercial aircraft segment, Boeing in 2000 spent $1.5 billion to acquire flight information services company Jeppesen and in 2006 spent $1.7 billion to acquire Aviall, the largest independent provider of new aviation parts and related aftermarket services in the aerospace industry.
Muilenburg said the company’s history of acquisitions in the services business have been “good” for Boeing, adding that it will look for deals that complement its capabilities here and fit well with its organic investments.
Boeing named Stan Deal as president and CEO of Boeing Global Services. Deal previously ran the company’s Commercial Aviation Services business.