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Thursday, April 1, 2004

Airbus's New Support Strategy Values Customer Service

James Careless

Airbus is building a new support strategy where customers pay for a significant portion of purchased services with data collected during operations. In a press briefing last December at the aircraft manufacturer's headquarters in Toulouse, France, executives from Airbus's customer services team explained that rather than becoming a standalone business unit, integrated customer support can help make Airbus airplanes more attractive. In addition, they outlined plans to create a network of MRO (maintenance, repair, and overhaul) providers, and gave an extensive description of Airbus "e-solutions" for maintenance.

Patrick Gavin, executive vice-president for customer services, sees the emergence of low-cost carriers as one of the structural changes in the air transport industry that are influencing his business. "Low-cost carriers, with their single-type operations, push for standardization," Gavin explained. This implies that Airbus has to look carefully at the existing differences between older and current airplane models. Although improvements are available, some changes are costly for an airline that operates dozens of aircraft of the same type but of different ages. "We analyze what the differences are and whether they are disruptive, we then try to improve the situation," Gavin said. This push for standardization now also comes from major airlines.

Most airlines are outsourcing more maintenance and engineering tasks. Many have passed the non-return point, Gavin added, but airlines are still seeking the right balance. Paradoxically, Airbus support people are concerned that engineering tasks are being transferred to aircraft manufacturers. "Diminishing engineering resources at the airlines will impact dispatch reliability," Gavin said.

Another structural change is the growing number of small, very specific carriers, such as cargo haulers, VIP airlines, etc. "A small carrier is not a small customer; think of JetBlue a few years ago!" Gavin said. Therefore, Airbus people are aware they have to adapt to each market.

Airbus has defined its new customer services policy around a basic but essential statement: "Airbus's core business is manufacturing and selling aircraft." Services come after. The bulk of the firm's profits come from aircraft sales, not services. This is another reason services will not be a standalone business.

Services should be…

That was the definition of what services are not. Now for the definition of what they should be, according to Airbus customer services executives. They have assigned themselves three missions: safety, customer satisfaction, and contribution to airlines' profitability. In other words, satisfaction at the bottom line and not only in operations. As an Airbus spokesman put it, "customer service is not a deal maker but it can be a deal breaker."

Gavin believes this policy is consistent with the fact that airlines operate mixed fleets, with Airbus and Boeing aircraft. "We have to provide our customers with services for all their aircraft types instead of trying to force them to accept an Airbus service for their Boeing jets," he added. For example, to provide training services, Airbus has formed a partnership with CAE. "We do this when we know the partner will accept Airbus standards," Gavin said. This definition of a new policy came after Gavin and his team analyzed Boeing's policy. "We believe they tried to force customers to accept Boeing services, such as in the joint venture FlightSafety Boeing. But it did not work as expected," Gavin summarized.

As a result, Airbus develops services on two distinctive guiding principles. First, services are considered as an integral part of support. "New services come in addition to traditional ones in the support envelope," Gavin clarified. Secondly, the policy is to "make or buy." Services based on Airbus's core competencies are developed in-house. The others are developed in partnership with a supplier.

Designing in improvements

Airbus has launched what Gavin said is "a major improvement program." It ranges from "lease-loan tools" schemes to the AIRMAN (aircraft maintenance analysis) software tool, plus flight operations monitoring, customized spares logistics, and A380 Services. On the latter, Gavin noted that Airbus wants to take into account specific types of operations, both long haul and with a high number of passengers. "This implies that our system–Airbus and its vendors, such as engine manufacturers–has to be very reactive," Gavin said.

On the A380, more than ever (even more than on the A340), the customer services team is involved in the design of the aircraft. Customer services people even have a veto right on suppliers and equipment manufacturers. In case of poor performance on an existing program, a company will not be authorized to join the A380 program, even though its offer sounds good to the people in charge of procurement.

Roger Lecomte, senior vice-president for technical support and programs, said that product improvements and services to airlines should optimize, respectively, maintenance and operational costs. "This will make our aircraft even more attractive to customers," he said.

The first way to optimize maintenance costs is to continue maintenance check escalation. For example, A-check intervals for the A320 were still at 350 hours in the early 1990s. This climbed to 400 hours in 1993 and then 500 hours in 1998. Airbus is planning on reaching a 600-hour interval this year. The trend is the same for C- and D-check intervals.

Optimizing maintenance check projection should help, too. For example, a 40-man-hour check can be organized so that eight skilled mechanics can perform it jointly and have the aircraft into service after only five hours of elapsed time.

Airbus is also counting on a new sampling rule for A320 inspections. "We are proposing to replace the 20 percent rounding-up rule by a 20 percent rounding-down rule and to limit the sample size to a maximum of five aircraft per aircraft type," Lecomte said.� This would lower grounding time at both small and big operators. Still, as the world fleet of A320s is growing, the number of inspected aircraft would continue to increase.

On the airframes of existing aircraft, Airbus is still improving reparability. For example, the A320 has got new, easily removable cabin and cargo floor panels. A new fuel leak mapping method, using helium, is available as well.

Another way to optimize maintenance costs uses AIRMAN, Lecomte said. The software is fed maintenance data, technical documentation, and postflight reports. From that data, AIRMAN can provide line and hangar maintenance and engineering teams with advice.

Airbus has found several levers to lower component maintenance costs. "Systems enhancement on the A318 will benefit the rest of the A320 family," Lecomte said. For example, a new braking system, inaugurated on the A318, is now available as an option on the A319, A320, and A321. The new bleed-air system has become standard since September 2003. Airbus values the savings from these and other system enhancements at approximately $8 per flight hour.

Suppliers on board

Suppliers have also been asked to improve. For the 331-350 APU Long Range, Honeywell has launched a reliability improvement plan to reach a guaranteed mean time between unscheduled removal (MTBUR) of more than 6,800 operating hours for all operators by the end of 2005. In addition, Airbus and Honeywell have signed an agreement on a maintenance support rate cap.

�Agreements on direct maintenance cost (DMC) guarantees have been signed with around 150 vendors, Lecomte said (Airbus's definition of DMC includes every expenditure to maintain the aircraft, which roughly breaks down 50/50 between man hours and spare parts). These agreements cover equipment warranties, shop processing time, spare delivery lead times, reliability guarantee, and component DMC guarantee.

Engine-related costs top Airbus's priority list to reduce maintenance costs. Hence, engine manufacturers are requested to be at the forefront of these efforts. "We have set up integrated teams with engine manufacturers," Lecomte said. With CFM International (the Snecma-General Electric joint venture), "we expect at least a 20 percent improvement time on-wing for the CFM56-5A in the future," he added. On the CFM56-5B, the scrap rate will be decreased by 10 percent during shop visits within the next few years.

With International Aero Engines (IAE), the other engine provider on the A320 family, Airbus has agreed on the Phoenix modification package for the V2500-A1 turbofan. This should translate into a benefit of 20 percent more time on-wing. On the V2500-A5 version, Airbus expects a 20 percent reduction in cost per engine flight hour, thanks to the formation of a total maintenance cost reduction team in 2000.

To reduce operational costs, Airbus is setting up airline services to have "the customer make the best use of the aircraft." First in this line of services is a one-week training course on maintenance cost optimization. It includes aspects on influencing factors, adjustment methodology, data collection, key performance indicators, and accounting practices.

Software has been developed to assess service bulletin value. This cost-benefit model can evaluate the cost of ownership, prioritize the modifications to be embodied on a fleet, and calculate the return-on-investment period for proposed service bulletins. It can be used by Airbus as part of a service to customers or directly by customers to improve operational costs. This should improve service bulletin implementation as some airlines say that most are pointless, Lecomte acknowledged.

Airbus people also can teach airlines about reliability control programs (RCPs). Operators are offered to learn how to implement a streamlined RCP within a maintenance and engineering organization. The training includes aspects of data collection, performance measurement and display, data analysis, and corrective actions as well as computer system benefits. Airbus wants to show its customers how an RCP can improve dispatch reliability, minimize maintenance costs, and optimize spare inventory costs.

Lecomte then introduced the new Airbus DMC benchmarking toolset with its associated annual DMC report. It was developed to help airlines compare the way they maintain their Airbuses with the way others do. It should also help Airbus gain precious insight on how its aircraft behave in operation and a good basis to continuously improve them. "The active participation of operators is essential. Airbus needs in-service data to identify priorities," Lecomte emphasized. Airlines may just transfer their data. Or Airbus can help them build a data collection system if they do not have one. Lecomte acknowledged in-service data are sensitive information as sometimes the airline's figures can show some internal difficulties. "But the trend is to share more," he said.

Lecomte claimed this policy has already given good results, with a 10 percent reduction in DMC for the A340 since 1999. At the same time, the A320 has enjoyed a 13 percent DMC reduction, he asserted.

New, non-exclusive MRO providers

Airbus's new MRO policy, St�phane Gosselin, senior director maintenance economics and reliability, explained how a long and thorough study has led the European manufacturer to start establishing a network of MRO providers with non-exclusive agreements. "MRO providers are increasingly driving customers' perception of aircraft operations performance," he said. Feedback from both MRO providers and customers was consistent: the former did not want to see Airbus-owned players in the field and the latter did not want to be forced to choose an Airbus-preferred provider.

Nevertheless, existing MRO providers asked for some help in developing Airbus capabilities and expressed a need to get technical support, Gosselin said. Customers, on their side, said they expected Airbus to give maximum support to their selected MRO provider. "This was the basis for our MRO policy," Gosselin explained. The first focus is toward MRO providers. "We give them access to the customer services catalog, specific support packages–with notably a start-up kit–and we guarantee them identical treatment as an airline when selected by an airline," Gosselin explained. This creates an Airbus MRO network.

The second focus is toward operators, with guidelines to establish a request for proposal and technical assistance for identification of solutions action. "But we provide no recommendation!" Gosselin insisted.

Separately, Airbus has set up a scheme to answer some specific operators' needs. Under "Airbus integrated services," an operator can have Airbus as its prime contractor. The manufacturer will in turn purchase the requested services from its MRO network. "Such a scheme is necessary to address the needs of those customers who are used to having all support from the manufacturer, such as business jet operators," Gosselin said. (Airbus offers the Airbus Corporate Jetliner as the business jet variant of the A319.)

Gosselin gave details on the agreements that MRO providers can sign with Airbus to become part of the network. On the one hand, MRO obligations include "demonstrated experience and competence, adequate level of quality and competitiveness, customer satisfaction feedback, agreement on improvement initiatives if necessary, supply of maintenance support proposals on Airbus request as a support to sales campaigns, and management review." Probably most important to Airbus's new support strategy, MRO providers are required to provide data such as man hours, downtime, reliability data, etc.

Airbus also has its own obligations. They include promotion of services from the network, providing access to specific information (draft service bulletins, information on market requirements, advance information on major retrofit programs), and management review. In addition, MRO services subcontracted by Airbus will be purchased from the network.

The new MRO policy is in the launch phase. "We have started talking to MRO providers," Gosselin said. He added that the target is second quarter 2004 for a first round of MRO providers.

New tools, spares policy

When it comes to hardware such as spares and tools, Airbus has another new policy. Pierre Steffen, vice-president, spares support and services, first explained the move to "customized spares logistics." The idea is to take more responsibility. For example, Airbus regularly receives phone calls asking "where is my shipment?" Even though Airbus had handed over the shipment to a customer-selected handler, it is difficult to simply answer "this is your responsibility."

So Airbus has now taken responsibility for the entire supply chain until the parcel reaches the customer's door. This simplifies the process for the customer as it calls for a single point of contact, Steffen said. He added that his company does not want to make money out of this activity, just recoup costs. In other words, the only objective is to have the customer return as a future Airbus buyer. Obviously, better control of spares delivery is a great advantage when talking about improving the perception the customer has of after-sale support.

Three customers have signed up already for the customized spares logistics service: Austrian Airlines, Scandinavian Airlines (SAS), and Aer Lingus. Airbus is now working on guaranteeing delivery times instead of response times. "We will change the paradigm," Steffen claimed.

Again in the hardware field, Airbus is working on a "C-check container" that would contain a number of vendor parts often required for such a maintenance event. Used as consignment stock, it would streamline the process, Airbus people believe. "It would include those parts that have a probability of utilization comprised between 15 and 50 percent," Steffen explained, adding that operators usually have in stock those parts that have a probability of utilization above 50 percent.

"We offer airlines to both eliminate just-in-case stocks and reduce the possibility of spare unavailability," Steffen said. However, Airbus does not want to load the C-check with parts with too low a probability of utilization. Steffen added that the customer will have to pay a handling fee and for consumed parts.

"We have started from the fact that C-check processes can be greatly improved," Steffen explained. According to him, C-checks suffer from unjustified stocks, unplanned layover time–due to material unavailability–unavailable data and intelligence, non-existing planning parameters, and little Airbus commitment. The C-check container is still in the prototype phase. But Airbus already has defined its requirements to the customer who will buy the C-check container service. Again, sharing data is seen as a great benefit for Airbus. Among the required pieces of information are the C-check schedule, its duration, and material consumption.

Insisting on the benefits of shared consumption data, Steffen described four advantages. First, "cost estimates for expendable DMC ease budgeting in advance of checks." Second, it gives "a benchmark with other Airbus operators and MROs." Third, it allows "a fast build-up of consumption expertise on new aircraft." Fourth, larger data samples become available faster for aircraft with a small world fleet size (such as the Airbus Corporate Jet and the A380). "But such a scheme implies that everyone feels involved and acts consequently," Steffen concluded.

Airbus is also offering airlines a way to transfer part of their stock to the manufacturer. The "customized lead time extended range" scheme is mainly aimed at eliminating redundant stocks at Airbus and the customer facility. "Joint planning stops speculation for both the customer and us; the consequence is less stock at both Airbus and the operator," Gavin said.

Under this scheme, Airbus provides the customer with a fleet-based range of Airbus proprietary parts. Individualized spares support is available for high-demand items. As a result, customers can reduce capital costs and storage-related costs thanks to lower stock levels. In addition, Airbus promises an overall reduction in lead time. Once again, Gavin stressed that this service brings more savings than profits to Airbus. Worldwide, 61 customers have signed up for the service so far.

Again to reduce maintenance hardware investment for customers, Airbus has set up a tool-loan scheme. "We realized that our customers often have to cope with a high investment in tools and ground-support equipment; in addition, this is a bound capital for tools that are not in use over a longer period of time," Steffen said. More than 120 customers are already using this service, he noted. They pay on a day-rate basis. "The tools we provide are at the latest technical standard," he added.

For this tool-loan service, Airbus is working on a radio frequency identification (RFID) system to improve tool tracking. Still in the prototype phase, RFID is paradoxically being studied in co-operation with Boeing. "Our objective is to provide customers with an international standard," Steffen said.

Another service Airbus has set up to help customers optimize maintenance costs is the "material management seminar." It consists of training key airline staff from the spares supply and logistics divisions. They follow classroom-style courses and do some case studies. Since July 2001, Airbus has recorded 120 customer participants. Seminars take place in Europe, Asia, and the U.S.

Airbus e-solutions

G�rard Darteyre, head of sales and marketing, flight and ground information services, gave an overview of Airbus's maintenance integrated e-solutions. "We have developed autonomous software tools for on-ground and in-flight use since the early ‘90s. These tools need to be integrated on embedded aircraft platforms and the website. We therefore have created a specific organization, dubbed Flight and Ground Information Services," he explained.

AIRMAN, Airbus's main product when it comes to maintenance software tools, gathers pieces of information such as aircraft status information, current and postflight reports, logbook and maintenance action reports, and the airline's and Airbus's technical documentation. As a result, AIRMAN provides line and hangar maintenance and engineering teams with both synthesis and advice. "It allows troubleshooting in a very short time," Darteyre said. He added that AIRMAN's preventive maintenance diagnoses help airlines avoid costly AOG (aircraft on ground) situations.

�On the ground, maintenance technicians can set up repair actions while the aircraft is still flying. Simultaneously, AIRMAN can avoid unnecessary removals. Darteyre evaluated savings to "more than $4 per hour." Already 31 customers, operating 800 aircraft, have bought AIRMAN. According to Darteyre, AIRMAN's price is close to $6,000 per aircraft per year. An operator buying AIRMAN for a large fleet can get a discount.

Discussions in a users group should help Airbus continue to improve AIRMAN. This is all the more important as AIRMAN is seen as a major tool to ensure a smooth introduction of the A380 in 2006. On Airbus's jumbo, AIRMAN will offer new functionalities.

AFIS–airline inflight information system–is Airbus's newest product in terms of multifunction e-application. It includes flight operations, passenger, cabin crew, and maintenance features. Capabilities in flight operations include performance calculations, electronic manuals, technical logbook, crew e-mail, graphical weather, and charts and maps. On the maintenance side, it includes technical logbook, manuals, maintenance tools, and performance monitoring.

�For passengers, AFIS provides e-mail, web server, frequent flyer information, entertainment, duty free, etc. For cabin crew, AFIS offers electronic manuals, crew e-mail, cabin logbook, cabin management, passenger list, etc. AFIS has just entered service. "We are working closely with Emirates Airlines to adapt the system on their A340-500/600," Darteyre said. Future steps are a cockpit and cabin logbook.

�Airbus has put a lot of effort and hopes into the new support strategy. "We are now implementing things that we were dreaming of for years," Gavin said. The creation of Airbus as a company has allowed things that were not possible before, he concluded.

 

Airbus's Policy Change Welcome News to MROs

News that Airbus is reaching out to MROs is music to this industry's ears. "Of course we want to work with Airbus," said Dale McGlothlin, senior vice president of operations for Genesis Aviation in Greensboro, North Carolina. "Our customers want third-party MROs like Genesis Aviation to do more with everything on their Airbus aircraft," he explained. "If Airbus is sincere in adapting that model with the addition of a new MRO-network concept, it will mark a global economy shift and one that better serves us all."

Among independent MRO providers, Airbus has a reputation for not supporting "any aspect of the maintenance infrastructure other than the operator direct," said Fred Zimbelman, president of the Soundair Repair Group in Snohomish, Washington. "That adds a tremendous burden to the smaller carriers trying to effectively maintain their fleets and often causes the larger carriers to lose interest in outsourcing Airbus components."

In addition, said a source within the MRO sector, "Airbus provides a lot of aftermarket autonomy to their component/major subsystem suppliers. They do this–basically give the aftermarket to their component manufacturers–in order to get favorable production pricing. Thus, the component OEMs have a big incentive to protect their aftermarket revenues."

It is this relationship between Airbus and its suppliers that has historically kept non-Airbus MROs cut out of the market. The reason is that, "in the current model, we're competitors with their [Airbus's] MRO facilities," said Dale McGlothlin. "There is no impetus for us to help them or them us. They make the process for even contacting them with requests difficult. They almost never provide technical drawings, test equipment data, and in some cases, parts or expendables support or pricing. The whole Airbus business/revenue model locks out third-party suppliers."

Soundair's Zimbelman echoes McGlothlin's complaints and adds more of his own. First, he said, "Airbus has put all non-airline customers on COD order basis," Zimbelman said. "If one needs something urgently, it raises costs to have the funds either wired or sent via FedEx so that parts will be released ." Next, "we do not have a standard account representative anymore. No direct contact point makes communications and problem resolution difficult.

"Airbus replacement parts are very expensive for many of the items similar to those from Boeing," Zimbleman continued. And finally, "customer support is not very responsive to urgent requirements. Their focus is more towards serving the operator direct. That is often a problem for smaller operators who outsource maintenance requirements in that Airbus demands that many requirements must run through the operator. That adds a level of effort upon the operator which offsets some of the benefit to outsourcing."

It remains to be seen if Airbus's stated change of heart towards MROs plays out in a freer flow of Airbus service information and technical support to the entire aftermarket. But one thing is certain, McGlothlin said: "The new network of MROs they recently announced is a reaction to the general clamor by airlines for reducing maintenance costs, which are way too high with the old locked-in model."

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